-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PSB1WlsNT08Db5YF4vNkizDNkz3MWHk/aMm9d4J/ZRSEyPkgeK+vZugg7eBOS2jV WvXYxJwA0ooroLVzd/CKBw== 0000950133-98-000639.txt : 19980302 0000950133-98-000639.hdr.sgml : 19980302 ACCESSION NUMBER: 0000950133-98-000639 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980227 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPPENHEIMER INTEGRITY FUNDS CENTRAL INDEX KEY: 0000701265 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 042912220 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-03420 FILM NUMBER: 98552183 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 1 OPPENHEIMER BOND FUND ANNUAL REPORT 1 ANNUAL REPORT DECEMBER 31, 1997 OPPENHEIMER BOND FUND [PHOTO] [OPPENHEIMERFUNDS LOGO] THE RIGHT TO INVEST 2 INTERNET 24-hr access to account information WWW.OPPENHEIMERFUNDS.COM GENERAL INFORMATION Mon-Fri 8:30am-9pm ET Sat 10am-4pm ET 1-800-525-7048 ACCOUNT TRANSACTIONS Mon-Fri 8:30am-9pm ET Sat 10am-4pm ET 1-800-852-8457 PHONELINK 24-hr automated information and automated transactions 1-800-533-3310 TELECOMMUNICATION DEVICE FOR THE DEAF (TDD) Mon-Fri 8:30am-2pm ET 1-800-843-4461 OPPENHEIMERFUNDS INFORMATION HOTLINE 24 hours a day, timely and insightful messages on the economy and issues that affect your investments 1-800-835-3104 INFORMATION and services As an Oppenheimer fund shareholder, you have some special privileges. 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[OPPENHEIMERFUNDS LOGO] 3 CONTENTS 3 President's Letter 4 Fund Performance 6 An Interview with the Fund's Managers 10 Statement of Investments 24 Statement of Assets & Liabilities 26 Statement of Operations 27 Statements of Changes in Net Assets 28 Financial Highlights 30 Notes to Financial Statements 40 Independent Auditors' Report 41 Federal Income Tax Information 42 Officers & Trustees 44 Information & Services REPORT HIGHLIGHTS - - BOND PRICES RALLIED IN 1997 in response to low inflation and declining interest rates. - - U.S. GOVERNMENT SECURITIES AND CORPORATE BONDS, two of the best performing bond market sectors, comprised about 90% of the portfolio. - - IF U.S. ECONOMIC GROWTH SLOWS in 1998, we believe bonds should continue to do well. AVG ANNUAL TOTAL RETURNS For the 1-year period ended 12/31/97 (without sales charges)(1) CLASS A 10.13% Class B 9.41% Class C 9.39% Total returns include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown. IN REVIEWING PERFORMANCE AND RANKINGS, PLEASE REMEMBER THAT PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. 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 THE ORIGINAL COST. 1. Includes changes in net asset value per share without deducting any sales charges. Such performance would have been lower if sales charges were taken into account. 2 Oppenheimer Bond Fund 4 [PHOTO] JAMES C. SWAIN Chairman Oppenheimer Bond Fund [PHOTO] BRIDGET A. MACASKILL President Oppenheimer Bond Fund Dear SHAREHOLDER, - ------------------------------------------------------------------------------- These have been very positive times for many American investors. The U.S. economy has continued to grow at a moderate pace, unemployment has fallen to its lowest level in 30 years and inflation has also fallen to a record low. In fact, long-term interest rates have fallen to their lowest level since the government began issuing 30-year Treasury bonds in 1977. What benefits does this provide to the average American? First, when unemployment levels are low, many individuals tend to feel a greater sense of job security and can command higher wages because there are fewer unemployed workers vying for their jobs. Second, many homeowners are opting to refinance their existing home mortgage loans and take advantage of lower financing rates. And third, because wages are increasing faster than the rate of inflation, a paycheck may stretch further and investors, as consumers, are able to enjoy a higher level of disposable income. This extra income can be put to use in many ways, including allocating more money to investment opportunities. Some industry analysts have tempered such positive news by suggesting that if the rate of inflation falls any lower, it might actually trigger a period of deflation, where we see the prices of American goods and services decline. While lower prices may sound like positive news, in reality it isn't: When prices fall too low, it erodes the value of those goods to the producer. That is, when economic conditions force a decrease in the price of goods, companies have to sell more of those items in order to make the same amount of profit, which translates into greater difficulties for corporations to improve their bottom lines. At OppenheimerFunds, we do not believe we will see a period of deflation in the United States. The fundamental factors that have driven the U.S. market still appear to be in place: an economy that's in its eighth year of expansion with moderate growth, low unemployment, virtually no inflation and low interest rates. However, because of economic uncertainties in other parts of the world, particularly Asia, we expect to see slower growth for stocks in 1998 and a year in which double-digit returns from the equity markets are unlikely. It's also possible that we may continue to see investors favor the fixed, more secure interest payments offered from the bond markets. In closing, we'd like to reassure you that as professional money managers, we continue to keep a watchful eye on these situations and are closely monitoring your fund's investments. In times like these, your financial advisor can be of invaluable assistance to you in helping review your financial plan and guide your investments accordingly. Thank you for your confidence in OppenheimerFunds, The Right Way to Invest. We look forward to helping you reach your investment goals in the future. /s/ JAMES C. SWAIN /s/ BRIDGET A. MACASKILL James C. Swain Bridget A. Macaskill January 23, 1998 3 Oppenheimer Bond Fund 5 AVG ANNUAL TOTAL RETURNS For the Period Ended 12/31/97(1) CLASS A
Since 1 year 5 year Inception 4.90% 6.40% 7.93%
CLASS B
Since 1 year 5 year Inception 4.41% N/A 5.61%
CLASS C
Since 1 year 5 year Inception 8.39% N/A 6.94%
CUMULATIVE TOTAL RETURN For the Period Ended 12/31/97(1) CLASS A 5 year 36.40% $13,640(3) PERFORMANCE UPDATE - -------------------------------------------------------------------------------- Oppenheimer Bond Fund performed well over the past twelve months. In fact, the Fund's Class A shares were in the first quartile, ranking 16 out of 137 Corporate Debt A Rated funds ranked by Lipper Analytical Services for the one-year period ended 12/31/97.(2) GROWTH OF $10,000 Over five years (without sales charges)
Oppenheimer Bond Fund Lehman Aggregate Class A shares Bond Index(3) -------------- ---------------- 10000 10000 10487 10413.9 10759.7 10690.5 11091.5 10969.1 11030.4 10975.1 10681.6 10659.7 10531.6 10550.1 10579.7 10614.6 10603.8 10654.8 11129.4 11192.2 11824.1 11874.1 11933.9 12107.7 12399.6 12623.4 12235.6 12398.2 12296.2 12469 12572.9 12698.5 13002.9 13079.6 12984.1 13006.6 13483.6 13484.2 13965 13932.2 14319.9 14342.4
1. Total returns include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown. Class A returns include the current maximum initial sales charge of 4.75%. Class A shares were first publicly offered on 4/15/88. The Fund's maximum sales charge for Class A shares was lower prior to 3/29/91, so actual performance may have been higher. Class B returns include the applicable contingent deferred sales charge of 5% (1-year) and 2% (since inception on 5/1/93). Class C returns for the one-year result include the contingent deferred sales charge of 1%. Class C shares have an inception date of 7/11/95. An explanation of the different performance calculations is in the Fund's prospectus. Class B and C shares are subject to an annual 0.75% asset-based sales charge. 2. Source: Lipper Analytical Services, Inc., 12/31/97. Based on the comparisons between changes in net asset value without considering sales charges, with dividends and capital gains distributions of the Fund's Class A shares reinvested. The Fund's Class A shares were ranked 16 of 137 (1-year), 25 of 59 (5-year) and 24 of 35 (10-year) among Corporate Debt A Rated funds for the period ended 12/31/97. 4 Oppenheimer Bond Fund 6 CREDIT ALLOCATION(5) Treasury/Agency 42.6% AAA/AA 5.4 A/BBB 29.7 BB/B 16.7 CCC/C 0.1 Other 5.5 Portfolio REVIEW Oppenheimer Bond Fund is for investors looking for solid income potential from a fund emphasizing quality securities. WHAT WE LOOK FOR - - Sectors of the market that offer RELATIVE VALUE. - - Primarily INVESTMENT-GRADE SECURITIES that help reduce credit risk.(4) - - High income potential from different types of GOVERNMENT AND CORPORATE securities. CORPORATE BONDS & NOTES--TOP 10 INDUSTRIES (Percentage of net assets)(4) Diversified Financial 7.3% Capital Goods 2.1% Energy Services & Producers 5.4 Insurance 1.7 Automotive 2.7 Hotel/Gaming 1.6 Information Technology 2.7 Banks & Thrifts 1.4 Aerospace 2.3 Chemicals 1.4
3. Results of a hypothetical $10,000 investment in Class A shares on December 31, 1992. The Lehman Aggregate Bond Index includes a broad range of U.S. government and corporate bonds. It is an unmanaged index including reinvestment of income, and cannot be purchased directly by investors. 4. Portfolio data is as of December 31, 1997 and is based on net assets and is subject to change. 5. Pie chart is based on total market value of investments as of December 31, 1997 and is subject to change. Average credit quality and ratings allocations include rated securities and those not rated by a national rating organization (currently 6.6% of total assets) but to which the ratings given above have been assigned by the Manager for internal purposes as being comparable, in the Manager's judgment, to securities rated by a rating agency in the same category. Under normal market conditions, the Fund invests at least 65% of its assets in investment-grade securities. Securities rated below investment-grade (up to 35% of Fund assets) carry a greater risk of default. While the Fund has generally invested under 10% of its assets in foreign securities, which are subject to exchange rate and political uncertainties, it is not restricted to any amount by prospectus. 5 Oppenheimer Bond Fund 7 "We created a portfolio that was more sensitive to DECLINING INTEREST RATES." AN INTERVIEW WITH YOUR FUND'S MANAGERS - -------------------------------------------------------------------------------- HOW HAS THE FUND PERFORMED DURING THE 12-MONTH PERIOD ENDED DECEMBER 31, 1997? Oppenheimer Bond Fund's Class A shares provided an average annual total return of 10.13% for the one-year period ended December 31, 1997.(1) These results reflect changes in share price, plus reinvested income distributions, but are calculated before sales charges are considered. Class A shares of the Fund also performed well relative to our peers, ranking 16 of 137 funds in the Corporate Debt category, as measured by Lipper Analytical Services.(2) HOW DID THE U.S. BOND MARKET RESPOND TO 1997'S ECONOMY? Early in the year, fixed-income investors became concerned that the economy was growing too rapidly, and they feared that the rate of inflation would accelerate. The Federal Reserve raised a key short-term interest rate in late March in an attempt to forestall this resurgence of inflation. As a result, bond prices fell. Toward mid-year, however, it became apparent that inflation would probably remain low because of improvements in productivity and the need for prices of goods to remain competitive with overseas companies. As investors became more comfortable investing in bonds, interest rates declined steadily during the second half of 1997. Because interest rates and bond prices move in opposite directions, the result was attractive total rates of return for most bonds during 1997. 1. Includes changes in net asset value per share without deducting any sales charges. Such performance would have been lower if sales charges were taken into account. 2. Source: Lipper Analytical Services, Inc., 12/31/97. Based on the comparisons between changes in net asset value without considering sales charges, with dividends and capital gains distributions of the Fund's Class A shares reinvested. The Fund's Class A shares were ranked 16 of 137 (1-year), 25 of 59 (5-year) and 24 of 35 (10-year) among Corporate Debt A Rated funds for the period ended 12/31/97. 6 Oppenheimer Bond Fund 8 [PHOTO] PORTFOLIO MANAGEMENT TEAM (L TO R) Leslie Falconio David Negri (Fund Manager) Gina Palmieri Len Darling HOW WAS THE FUND MANAGED IN THAT ENVIRONMENT? As our view of the interest-rate environment became more positive, we increased the Fund's average duration, a measure of the portfolio's sensitivity to changes in interest rates. By increasing the average duration from about 4.8 years early in the year to a high of 5.3 years, we created a portfolio that was more sensitive to declining interest rates, which helped produce higher rates of capital appreciation. DID THE MIX OF BONDS FROM DIFFERENT MARKET SECTORS CHANGE DURING THE PERIOD? Our allocation of assets among the various types of bonds did not change significantly. Throughout the year, we have kept about 50% of the Fund's assets in U.S. government securities, including U.S. Treasuries and mortgage-backed securities issued and backed by federal agencies. Another 45% of the portfolio was invested in corporate bonds, which performed particularly well. Our corporate bond position was split evenly between high-yield bonds and investment-grade corporate securities. In addition, about 3% of the portfolio was invested in bonds issued by governments and corporations overseas.(3) 3. The Fund invests in below-investment-grade securities, which may entail greater credit risks, as described in the prospectus. The Fund invests in foreign securities which entails special risks, such as currency fluctuations, described in the prospectus. 7 Oppenheimer Bond Fund 9 "Commercial mortgage bonds offered ATTRACTIVELY HIGH YIELDS compared to other bonds..." AN INTERVIEW WITH YOUR FUND'S MANAGERS - ------------------------------------------------------------------------------- WHERE DID YOU FIND THE BEST OPPORTUNITIES IN THE CORPORATE BOND MARKET SECTOR? Our positions in investment-grade corporate bonds were primarily in the cable television, media and commercial banking industries. In the high-yield area, we've emphasized telecommunications companies, including wireless communications, cable television and financial services. These industries are in the midst of deregulation, which we believe will be good for their businesses. On the other hand, we've de-emphasized companies in the metals, paper and retail industries because, at this late stage of the economic cycle, we don't want exposure to companies that are too sensitive to changes in the economy. At the end of the period, about 19% of our corporate bond position was allocated to commercial private mortgage securities, which represent pools of mortgages on hotels, shopping malls, apartment buildings and other enterprises. Commercial mortgage bonds offered attractively high yields compared to other bonds, as well as the relative safety of secured underlying assets. DID THE PROBLEMS IN SOUTHEAST ASIA AFFECT THE FUND'S INVESTMENTS? The impact has been very slight, because the Fund had virtually no exposure to Southeast Asia. However, we do have some positions in bonds issued in New Zealand and Australia. While the bond markets there have recently performed very well, the ripple effect from the Asian economic crisis caused a devaluation of their currencies relative to the U.S. dollar, which offset the returns from the bond market rallies in those countries for U.S. investors. 8 Oppenheimer Bond Fund 10 "...as well as the RELATIVE SAFETY of secured underlying assets." WHAT IS YOUR OUTLOOK FOR THE FORESEEABLE FUTURE? We are optimistic about prospects for the U.S. bond market during 1998. Perhaps most important, we believe economic conditions should remain favorable. We expect economic growth to slow from current levels, in large part in response to declining demand for U.S. products overseas. We believe the rate of inflation should remain at its current low levels as growth moderates. The federal government's progress toward a balanced budget should contribute to less issuance of U.S. Treasury securities. Yet, demand for these bonds should remain high as economic problems overseas cause investors to seek the safety of bonds issued by the most creditworthy government in the world. We expect these factors and others to cause long-term interest rates to decline modestly from current levels. We intend to maintain the Fund's current strategic orientation. We intend to keep the portfolio's average duration relatively long to hold higher yielding securities for as long as possible while interest rates fall. What's more, we plan to continue to allocate assets among those sectors of the bond market that we believe will provide the best yields relative to risk. We believe this strategy should help the Fund to provide a competitive level of income and the opportunity for attractive total returns for its shareholders. 9 Oppenheimer Bond Fund 11 STATEMENT OF INVESTMENTS December 31, 1997
FACE MARKET VALUE AMOUNT(1) SEE NOTE (1) ================================================================================================================================ MORTGAGE-BACKED OBLIGATIONS--55.6% - -------------------------------------------------------------------------------------------------------------------------------- GOVERNMENT AGENCY--36.7% - -------------------------------------------------------------------------------------------------------------------------------- FHLMC/FNMA/SPONSORED--26.7% Federal Home Loan Mortgage Corp.: Certificates of Participation: 9%, 3/1/17 $ 445,202 $ 476,977 Series 17-039, 13.50%, 11/1/10 48,485 57,732 Series 17-094, 12.50%, 4/1/14 27,295 31,974 Collateralized Mtg. Obligations, Gtd. Multiclass Mtg. Participation Certificates: Series 1343, Cl. LA, 8%, 8/15/22 1,600,000 1,751,426 Series 151, Cl. F, 9%, 5/15/21 1,000,000 1,085,287 Series 1712, Cl. B, 6%, 3/15/09 1,000,000 975,000 Series 1714, Cl. M, 7%, 8/15/23 1,000,000 1,005,000 Gtd. Multiclass Mtg. Participation Certificates: Series 1460, Cl. H, 7%, 5/15/07 1,500,000 1,538,430 Series G056, Cl. H, 9%, 7/20/24 2,493,000 2,717,370 Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates, Series 1914, Cl. G, 6.50%, 2/15/24 3,000,000 2,951,250 Interest-Only Stripped Mtg.-Backed Security, Series 177, Cl. B, 9.335%-10.914%, 7/1/26(2) 16,225,514 4,743,428 Principal-Only Stripped Mtg.-Backed Security, Series 1690, Cl. B, 3.748%, 11/15/23(3) 1,892,161 1,052,515 - -------------------------------------------------------------------------------------------------------------------------------- Federal National Mortgage Assn.: 11%, 7/1/16 4,322,515 4,926,317 7%, 1/1/09-11/1/25 956,476 972,909 7%, 1/1/13-1/25/28(4) 22,060,000 22,240,811 7.50%, 2/1/08-3/1/08 621,862 639,256 Collateralized Mtg. Obligations, Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates, Trust 1992-34, Cl. G, 8%, 3/25/22 540,000 584,717 Gtd. Mtg. Pass-Through Certificates, 8%, 8/1/17 484,158 498,369 Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates: Trust 1991-170, Cl. E, 8%, 12/25/06 2,500,000 2,616,991 Trust 1992-162, Cl. C, 7%, 10/25/21 8,400,000 8,486,604 Trust 1995-4, Cl. PC, 8%, 5/25/25 869,210 952,053 Trust 1997-25, Cl. B, 7%, 12/18/22 510,000 516,345 Trust 1997-27, Cl. J, 7.50%, 4/18/27 844,594 898,896 Interest-Only Stripped Mtg.-Backed Security, Trust 249, Cl. 2, 9.958%, 10/25/23(2) 11,029,757 3,367,523 Principal-Only Stripped Mtg.-Backed Security, Trust 277-C1, 8.142%, 4/1/27(3) 1,508,371 1,180,301 ----------- 66,267,481
10 Oppenheimer Bond Fund 12
FACE MARKET VALUE AMOUNT(1) SEE NOTE (1) - -------------------------------------------------------------------------------------------------------------------------------- GNMA/GUARANTEED--10.0% Government National Mortgage Assn.: 7%, 1/1/28(4) $ 9,950,000 $10,021,540 10%, 11/15/09 244,986 271,774 10.50%, 12/15/17-5/15/21 249,447 280,187 11%, 10/20/19 928,361 1,064,710 12%, 1/15/99-5/15/14 9,380 9,701 13%, 12/15/14 27,374 32,789 6%, 7/20/27 248,188 251,718 7%, 1/1/28(4) 2,200,000 2,217,886 7%, 7/15/09-7/20/25 1,617,774 1,657,314 7.50%, 12/1/27(4) 6,900,000 7,068,222 8%, 6/15/05-10/15/06 1,413,602 1,468,716 9%, 2/15/09-6/15/09 422,630 456,835 ----------- 24,801,392 - -------------------------------------------------------------------------------------------------------------------------------- PRIVATE--18.9% - -------------------------------------------------------------------------------------------------------------------------------- COMMERCIAL--15.3% Amresco Commercial Mortgage Funding I Corp., Multiclass Mtg. Pass-Through Certificates, Series 1997-C1, Cl. E, 7%, 6/17/29(5) 150,000 138,656 - -------------------------------------------------------------------------------------------------------------------------------- Asset Securitization Corp.: Commercial Mtg. Pass-Through Certificates: Series 1996-D3, Cl. A5, 8.33%, 10/13/26(5)(6) 800,000 859,250 Series 1996-MD6, Cl. A5, 6.957%, 11/13/26(6) 2,000,000 2,080,000 Series 1997-D4, Cl. B1, 7.525%, 4/14/29(6) 333,000 329,878 Series 1997-D4, Cl. B2, 7.525%, 4/14/29(6) 333,000 321,709 Series 1997-D4, Cl. B3, 7.525%, 4/14/29(6) 334,000 309,524 Series 1997-D5, Cl. A6, 7.184%, 2/14/41 1,500,000 1,503,750 Series 1997-D5, Cl. B1, 6.93%, 2/14/41 2,000,000 1,826,562 Series 1997-MD7, Cl. A6, 8.11%, 1/13/30(6) 200,000 211,219 Interest-Only Stripped Mtg.-Backed Security, Series 1997-D5, Cl. PS1, 1.367%, 2/14/41(2) 6,250,000 678,711 - -------------------------------------------------------------------------------------------------------------------------------- Capital Lease Funding Securitization LP, Interest-Only Corporate-Backed Pass-Through Certificates, Series 1997-CTL1, 9.55%, 6/22/24(2)(5) 13,750,315 657,265 - -------------------------------------------------------------------------------------------------------------------------------- CBA Mortgage Corp., Mtg. Pass-Through Certificates, Series 1993-C1, Cl. E, 7.76%, 12/25/03(6) 250,000 252,675 - -------------------------------------------------------------------------------------------------------------------------------- CMC Securities Corp. I, Collateralized Mtg. Obligation, Series 1993-D, Cl. D-3, 10%, 7/25/23(5) 536,614 565,753 - -------------------------------------------------------------------------------------------------------------------------------- Commercial Mortgage Acceptance Corp., Interest-Only Stripped Mtg.-Backed Security, Series 1996-C1, Cl. X-2, 0.981%, 12/25/20(2)(5) 18,624,900 529,646 - -------------------------------------------------------------------------------------------------------------------------------- FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates, Series 1994-C1: Cl. 2-D, 8.70%, 9/25/25(5) 1,000,000 1,037,500 Cl. 2-E, 8.70%, 9/25/25(5) 1,000,000 1,038,700 - -------------------------------------------------------------------------------------------------------------------------------- First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through Certificates, Series 1997-CHL1: 8.116%, 2/25/11(5)(6) 750,000 638,475 8.116%, 5/25/08(5)(6) 750,000 760,725
11 Oppenheimer Bond Fund 13 STATEMENT OF INVESTMENTS (Continued)
FACE MARKET VALUE AMOUNT(1) SEE NOTE 1 - -------------------------------------------------------------------------------------------------------------------------------- COMMERCIAL (CONTINUED) General Motors Acceptance Corp., Collateralized Mtg. Obligations: Series 1995-C2, Cl. D, 7.192%, 1/15/08 $1,500,000 $ 1,503,750 Series 1997-C2, Cl. F, 6.75%, 4/16/29 1,000,000 857,187 - -------------------------------------------------------------------------------------------------------------------------------- GS Mortgage Securities Corp. II, Commercial Mtg. Pass-Through Certificates, Series 1997-CL1, Cl. F: 7.353%, 7/13/30 1,000,000 1,018,125 7.823%, 7/13/30 1,000,000 1,035,937 - -------------------------------------------------------------------------------------------------------------------------------- Merrill Lynch Mortgage Investors, Inc., Mtg. Pass-Through Certificates: Series 1996-C1, Cl. D, 7.42%, 4/25/28 1,500,000 1,529,648 Series 1997-C2, Cl. D, 7.075%, 12/10/29 1,000,000 997,188 - -------------------------------------------------------------------------------------------------------------------------------- Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates: Series 1996-C1: Cl. D-1, 7.51%, 2/15/28(5)(6) 1,000,000 1,016,563 Cl. E, 7.51%, 2/15/28(5)(6) 1,100,000 1,051,359 Series 1997-HF1, Cl. F, 6.86%, 2/15/10(5) 225,000 205,031 - -------------------------------------------------------------------------------------------------------------------------------- NationsCommercial Corp., NB Commercial Mtg. Pass-Through Certificates, Series-DMC, Cl. B, 8.562%, 8/12/11(5) 3,000,000 3,181,875 - -------------------------------------------------------------------------------------------------------------------------------- Potomac Gurnee Financial Corp., Commercial Mtg. Pass-Through Certificates, Series 1, Cl. D, 7.683%, 12/21/26(5) 1,500,000 1,547,400 - -------------------------------------------------------------------------------------------------------------------------------- Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates: Series 1993-C1, Cl. B, 8.75%, 5/25/24 322,008 321,127 Series 1994-C1, Cl. C, 8%, 6/25/26 1,500,000 1,530,900 Series 1995-C1, Cl. D, 6.90%, 2/25/27 2,500,000 2,489,266 - -------------------------------------------------------------------------------------------------------------------------------- Salomon Brothers Mortgage Securities VII, Series 1996-C1, Cl. E, 9.187%, 1/20/06 700,000 736,094 - -------------------------------------------------------------------------------------------------------------------------------- Structured Asset Securities Corp.: Commercial Mtg. Pass-Through Certificates, Series 1997-LLI, Cl. D, 7.15%, 4/12/12 2,500,000 2,538,281 Multiclass Pass-Through Certificates, Series 1996-C3, Cl. D, 8%, 6/25/30(5) 2,500,000 2,531,641 ------------ 37,831,370 - -------------------------------------------------------------------------------------------------------------------------------- MANUFACTURED HOUSING--0.1% Green Tree Financial Corp., Series 1994-6, Cl. A3, 7.70%, 1/15/20 151,555 152,123 - -------------------------------------------------------------------------------------------------------------------------------- MULTI-FAMILY--1.1% Mortgage Capital Funding, Inc.: Commercial Mtg. Pass-Through Certificates, Series 1997-MC1, Cl. F, 7.452%, 5/20/07(5) 254,890 242,783 Multifamily Mtg. Pass-Through Certificates, Series 1996-MC1, Cl. G, 7.15%, 6/15/06(7) 2,250,000 2,138,203 - -------------------------------------------------------------------------------------------------------------------------------- Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates, Series 1991-M5, Cl. A, 9%, 3/25/17 391,747 396,419 ------------ 2,777,405
12 Oppenheimer Bond Fund 14
FACE MARKET VALUE AMOUNT(1) SEE NOTE (1) - -------------------------------------------------------------------------------------------------------------------------------- OTHER--0.7% GE Capital Mortgage Services, Inc., Series 1994-14, Cl. A1, 6.50%, 4/25/24 $ 47,944 $ 47,780 - -------------------------------------------------------------------------------------------------------------------------------- JHM Mtg. Acceptance Corp., Collateralized Mtg. Obligation Bonds, Series E, Cl. 5, 8.96%, 4/1/19 1,548,082 1,619,682 - -------------------------------------------------------------------------------------------------------------------------------- Salomon Brothers Mortgage Securities VI: Interest-Only Stripped Mtg.-Backed Security, Series 1987-3, Cl. B, 12.50%, 10/23/17(2) 105,837 30,180 Principal-Only Stripped Mtg.-Backed Security, Series 1987-3, Cl. A, 10/23/17(3) 154,135 131,255 ------------ 1,828,897 - -------------------------------------------------------------------------------------------------------------------------------- RESIDENTIAL--1.7% CS First Boston Mortgage Securities Corp., Mtg. Pass-Through Certificates, Series 1997-C1: Cl. E, 7.50%, 3/1/11(5) 1,000,000 1,035,300 Cl. F, 7.50%, 6/20/13(5) 150,000 145,500 Cl. G, 7.50%, 6/20/14(5) 150,000 138,705 Cl. H, 7.50%, 8/20/14(5) 105,000 82,908 - -------------------------------------------------------------------------------------------------------------------------------- NationsBank Trust, Lease Pass-Through Certificates, Series 1997A-1, 7.442%, 1/10/11(6) 500,000 520,938 - -------------------------------------------------------------------------------------------------------------------------------- Residential Funding Corp., Mtg. Pass-Through Certificates, Series 1993-S10, Cl. A9, 8.50%, 2/25/23 490,776 507,340 - -------------------------------------------------------------------------------------------------------------------------------- Ryland Mortgage Securities Corp. III, Sub. Bonds, Series 1992-A, Cl. 1A, 8.268%, 3/29/30(6) 343,559 349,357 - -------------------------------------------------------------------------------------------------------------------------------- Salomon Brothers Mortgage Securities VII, Series 1996-B, Cl. 1, 7.136%, 4/25/26 1,965,016 1,387,793 ------------ 4,167,841 ------------ Total Mortgage-Backed Obligations (Cost $135,028,453) 137,826,509 ================================================================================================================================ U.S. GOVERNMENT OBLIGATIONS--12.5% - -------------------------------------------------------------------------------------------------------------------------------- U.S. Treasury Bonds: 10.375%, 11/15/09 5,500,000 6,876,721 11.625%, 11/15/04 2,375,000 3,151,331 12.75%, 11/15/10 1,000,000 1,427,501 8.875%, 8/15/17(8) 6,000,000 7,963,128 STRIPS, 6.374%, 2/15/07(9) 725,000 427,004 STRIPS, 6.52%, 8/15/22(9) 2,000,000 456,670 - -------------------------------------------------------------------------------------------------------------------------------- U.S. Treasury Nts.: 6%, 8/15/00 1,000,000 1,007,501 6.125%, 8/15/07 6,000,000 6,168,756 7.50%, 10/31/99 3,430,000 3,537,191 ------------ Total U.S. Government Obligations (Cost $29,886,433) 31,015,803
13 Oppenheimer Bond Fund 15 STATEMENT OF INVESTMENTS (Continued)
FACE MARKET VALUE AMOUNT(1) SEE NOTE (1) ================================================================================================================================ CORPORATE BONDS AND NOTES--43.4% - -------------------------------------------------------------------------------------------------------------------------------- BASIC INDUSTRY--2.0% - -------------------------------------------------------------------------------------------------------------------------------- CHEMICALS--1.4% FMC Corp., 8.75% Sr. Nts., 4/1/99 $ 250,000 $ 257,366 - -------------------------------------------------------------------------------------------------------------------------------- Harris Chemical North America, Inc., 10.75% Gtd. Sr. Sub. Nts., 10/15/03 100,000 107,250 - -------------------------------------------------------------------------------------------------------------------------------- Laroche Industries, Inc., 9.50% Sr. Sub. Nts., 9/15/07(7) 150,000 148,500 - -------------------------------------------------------------------------------------------------------------------------------- NL Industries, Inc., 11.75% Sr. Sec. Nts., 10/15/03 492,000 547,350 - -------------------------------------------------------------------------------------------------------------------------------- Pioneer Americas Acquisition Corp., 9.25% Sr. Nts., 6/15/07 200,000 202,500 - -------------------------------------------------------------------------------------------------------------------------------- Quantum Chemical Corp., 10.375% First Mtg. Nts., 6/1/03 900,000 944,395 - -------------------------------------------------------------------------------------------------------------------------------- Rohm & Haas Co., 9.50% Debs., 4/1/21 500,000 572,630 - -------------------------------------------------------------------------------------------------------------------------------- Sovereign Specialty Chemicals, Inc., 9.50% Sr. Sub. Nts., 8/1/07(7) 175,000 180,250 - -------------------------------------------------------------------------------------------------------------------------------- Sterling Chemicals, Inc., 11.75% Sr. Unsec. Sub. Nts., 8/15/06 470,000 481,750 ----------- 3,441,991 - -------------------------------------------------------------------------------------------------------------------------------- CONTAINERS--0.1% U.S. Can Corp., 10.125% Sr. Sub. Nts., Series B, 10/15/06 250,000 266,250 - -------------------------------------------------------------------------------------------------------------------------------- PAPER--0.3% Repap New Brunswick, Inc., 9.063% First Priority Sr. Sec. Nts., 7/15/00(6) 100,000 99,000 - -------------------------------------------------------------------------------------------------------------------------------- Riverwood International Corp., 10.625% Sr. Unsec. Nts., 8/1/07 200,000 204,000 - -------------------------------------------------------------------------------------------------------------------------------- Scotia Pacific Holding Co., 7.95% Timber Collateralized Nts., 7/20/15 415,538 431,251 ----------- 734,251 - -------------------------------------------------------------------------------------------------------------------------------- STEEL--0.2% AK Steel Corp., 9.125% Sr. Nts., 12/15/06 350,000 360,500 - -------------------------------------------------------------------------------------------------------------------------------- Keystone Consolidated Industries, Inc., 9.625% Sr. Nts., 8/1/07(7) 200,000 201,750 ----------- 562,250 - -------------------------------------------------------------------------------------------------------------------------------- CONSUMER RELATED--4.4% - -------------------------------------------------------------------------------------------------------------------------------- CONSUMER PRODUCTS--0.4% Icon Health & Fitness, Inc., 13% Sr. Sub. Nts., Series B, 7/15/02 400,000 449,000 - -------------------------------------------------------------------------------------------------------------------------------- TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(5) 370,000 445,850 ----------- 894,850 - -------------------------------------------------------------------------------------------------------------------------------- FOOD/BEVERAGES/TOBACCO--0.9% B.A.T. Capital Corp., 6.66% Medium-Term Nts., 3/22/00(7) 250,000 251,975 - -------------------------------------------------------------------------------------------------------------------------------- Coca-Cola Enterprises, Inc., 6.95% Debs., 11/15/26 2,000,000 2,030,054 ----------- 2,282,029
14 Oppenheimer Bond Fund 16
FACE MARKET VALUE AMOUNT(1) SEE NOTE (1) - -------------------------------------------------------------------------------------------------------------------------------- HEALTHCARE--0.5% HEALTHSOUTH Corp., 9.50% Sr. Sub. Nts., 4/1/01 $ 500,000 $ 525,000 - -------------------------------------------------------------------------------------------------------------------------------- Imcera Group, Inc., 6% Nts., 10/15/03 500,000 492,542 - -------------------------------------------------------------------------------------------------------------------------------- Integrated Health Services, Inc., 9.50% Sr. Sub. Nts., 9/15/07(7) 30,000 30,900 - -------------------------------------------------------------------------------------------------------------------------------- Sun Healthcare Group, Inc., 9.50% Sr. Sub. Nts., 7/1/07(7) 220,000 226,600 ----------- 1,275,042 - -------------------------------------------------------------------------------------------------------------------------------- HOTEL/GAMING---1.6% Capstar Hotel Co., 8.75% Sr. Sub. Nts., 8/15/07 150,000 155,250 - -------------------------------------------------------------------------------------------------------------------------------- Casino Magic of Louisiana Corp., 13% First Mtg. Nts., Series B, 8/15/03 300,000 289,500 - -------------------------------------------------------------------------------------------------------------------------------- Grand Casinos, Inc., 10.125% Gtd. First Mtg. Nts., 12/1/03 300,000 324,000 - -------------------------------------------------------------------------------------------------------------------------------- Hilton Hotels Corp., 7.95% Sr. Nts., 4/15/07 1,000,000 1,076,652 - -------------------------------------------------------------------------------------------------------------------------------- HMC Acquisition Properties, Inc., 9% Sr. Nts., Series B, 12/15/07 800,000 834,000 - -------------------------------------------------------------------------------------------------------------------------------- HMH Properties, Inc., 8.875% Sr. Nts., 7/15/07 500,000 528,750 - -------------------------------------------------------------------------------------------------------------------------------- Horseshoe Gaming LLC, 9.375% Sr. Sub. Nts., 6/15/07 100,000 105,250 - -------------------------------------------------------------------------------------------------------------------------------- Mohegan Tribal Gaming Authority (Connecticut), 13.50% Sr. Sec. Nts., Series B, 11/15/02 310,000 398,350 - -------------------------------------------------------------------------------------------------------------------------------- Rio Hotel & Casino, Inc., 10.625% Sr. Sub. Nts., 7/15/05 100,000 108,500 - -------------------------------------------------------------------------------------------------------------------------------- Signature Resorts, Inc., 9.75% Sr. Sub. Nts., 10/1/07(7) 150,000 150,750 ----------- 3,971,002 - -------------------------------------------------------------------------------------------------------------------------------- RESTAURANTS--0.7% Ameriking, Inc., 10.75% Sr. Nts., 12/1/06 160,000 168,800 - -------------------------------------------------------------------------------------------------------------------------------- Foodmaker, Inc.: 9.25% Sr. Nts., 3/1/99 689,000 704,502 9.75% Sr. Sub. Nts., 6/1/02 750,000 774,375 ----------- 1,647,677 - -------------------------------------------------------------------------------------------------------------------------------- TEXTILE/APPAREL--0.3% Dan River, Inc., 10.125% Sr. Sub. Nts., 12/15/03 100,000 107,375 - -------------------------------------------------------------------------------------------------------------------------------- Fruit of the Loom, Inc., 7% Debs., 3/15/11 500,000 492,877 - -------------------------------------------------------------------------------------------------------------------------------- William Carter Co., 10.375% Sr. Sub. Nts., Series A, 12/1/06 200,000 211,000 ----------- 811,252 - -------------------------------------------------------------------------------------------------------------------------------- ENERGY--5.4% - -------------------------------------------------------------------------------------------------------------------------------- Belden & Blake Corp., 9.875% Sr. Sub. Nts., 6/15/07 400,000 406,000 - -------------------------------------------------------------------------------------------------------------------------------- Chesapeake Energy Corp., 12% Gtd. Sr. Exchangeable Nts., 3/1/01 675,000 710,437 - -------------------------------------------------------------------------------------------------------------------------------- Clark R&M, Inc., 8.375% Sr. Nts., 11/15/07(7) 200,000 201,750 - -------------------------------------------------------------------------------------------------------------------------------- Cliffs Drilling Co., 10.25% Sr. Nts., 5/15/03 50,000 54,687 - -------------------------------------------------------------------------------------------------------------------------------- Coastal Corp., 8.75% Sr. Nts., 5/15/99 325,000 335,998 - -------------------------------------------------------------------------------------------------------------------------------- Eastern Energy Ltd., 6.75% Sr. Nts., 12/1/06(7) 2,000,000 2,013,104 - -------------------------------------------------------------------------------------------------------------------------------- Enterprise Oil plc, 6.70% Sr. Nts., 9/15/07 1,000,000 1,027,105
15 Oppenheimer Bond Fund 17 STATEMENT OF INVESTMENT (Continued)
FACE MARKET VALUE AMOUNT(1) SEE NOTE (1) - -------------------------------------------------------------------------------------------------------------------------------- ENERGY (CONTINUED) Global Marine, Inc., 7.125% Nts., 9/1/07(5) $2,000,000 $ 2,020,000 - -------------------------------------------------------------------------------------------------------------------------------- Gothic Energy Corp., 12.25% Sr. Nts., 9/1/04(5) 200,000 210,000 - -------------------------------------------------------------------------------------------------------------------------------- J. Ray McDermott SA, 9.375% Sr. Sub. Bonds, 7/15/06 600,000 645,750 - -------------------------------------------------------------------------------------------------------------------------------- McDermott, Inc., 9.375% Nts., 3/15/02 100,000 106,485 - -------------------------------------------------------------------------------------------------------------------------------- Occidental Petroleum Corp., 11.125% Sr. Debs., 6/1/19 2,000,000 2,236,314 - -------------------------------------------------------------------------------------------------------------------------------- Petroleum Heat & Power Co., Inc., 9.375% Sub. Debs., 2/1/06 750,000 678,750 - -------------------------------------------------------------------------------------------------------------------------------- Phillips Petroleum Co., 7.53% Pass-Through Certificates, Series 1994-A1, 9/27/98 198,646 200,689 - -------------------------------------------------------------------------------------------------------------------------------- Stone Energy Corp., 8.75% Sr. Sub. Nts., 9/15/07 400,000 409,000 - -------------------------------------------------------------------------------------------------------------------------------- TransCanada PipeLines Ltd., 9.875% Debs., 1/1/21 1,500,000 1,995,000 - -------------------------------------------------------------------------------------------------------------------------------- Wiser Oil Co., 9.50% Sr. Sub. Nts., 5/15/07 65,000 64,025 ----------- 13,315,094 - -------------------------------------------------------------------------------------------------------------------------------- FINANCIAL SERVICES--10.4% - -------------------------------------------------------------------------------------------------------------------------------- BANKS AND THRIFTS--1.4% Banque Nationale de Paris, 9.875% Debs., 5/25/98 205,000 207,945 - -------------------------------------------------------------------------------------------------------------------------------- Chase Manhattan Corp. (New), 6.625% Sr. Nts., 1/15/98 25,000 25,004 - -------------------------------------------------------------------------------------------------------------------------------- Citicorp Capital I, 7.933% Gtd. Bonds, 2/15/27 1,000,000 1,069,495 - -------------------------------------------------------------------------------------------------------------------------------- First Fidelity Bancorp, 8.50% Sub. Capital Nts., 4/1/98 325,000 326,728 - -------------------------------------------------------------------------------------------------------------------------------- First Nationwide Holdings, Inc.: 10.625% Sr. Sub. Nts., 10/1/03 150,000 168,750 9.125% Sr. Sub. Nts., 1/15/03 500,000 527,500 - -------------------------------------------------------------------------------------------------------------------------------- National Westminster Bank plc, 9.375% Gtd. Capital Nts., 11/15/03 70,000 80,557 Royal Bank of Scotland Group (The) plc, 10.125% Gtd. Sub. - -------------------------------------------------------------------------------------------------------------------------------- Capital Nts., 3/1/04 500,000 591,194 - -------------------------------------------------------------------------------------------------------------------------------- Suntrust Banks, Inc., 8.875% Debs., 2/1/98 500,000 501,029 ----------- 3,498,202 - -------------------------------------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL--7.3% Associates Corp. of North America, 7.40% Medium-Term Nts., 7/7/99 300,000 305,592 - -------------------------------------------------------------------------------------------------------------------------------- Beneficial Corp., 12.875% Debs., 8/1/13 20,000 21,734 - -------------------------------------------------------------------------------------------------------------------------------- BHP Finance (USA) Ltd., 8.50% Gtd. Debs., 12/1/12 1,500,000 1,756,584 - -------------------------------------------------------------------------------------------------------------------------------- Enterprise Rent-A-Car USA Finance Co., 7.875% Nts., 3/15/98(7) 1,500,000 1,505,331 - -------------------------------------------------------------------------------------------------------------------------------- Ford Motor Credit Co., 6.75% Nts., 8/15/08 1,000,000 1,012,842 - -------------------------------------------------------------------------------------------------------------------------------- Merrill Lynch & Co., Inc., 6.875% Nts., 3/1/03 750,000 770,451 - -------------------------------------------------------------------------------------------------------------------------------- Midland American Capital Corp., 12.75% Gtd. Nts., 11/15/03 205,000 215,084 - -------------------------------------------------------------------------------------------------------------------------------- NationsBank Corp., 10.20% Sub. Nts., 7/15/15 1,300,000 1,748,590 - -------------------------------------------------------------------------------------------------------------------------------- Ocwen Capital Trust I, 10.875% Gtd. Bonds, 8/1/27 300,000 327,000 - -------------------------------------------------------------------------------------------------------------------------------- Penske Truck Leasing Co. LP, 7.75% Sr. Nts., 5/15/99 1,825,000 1,868,676 - -------------------------------------------------------------------------------------------------------------------------------- Rank Group Finance plc, 6.75% Gtd. Nts., 11/30/04 1,000,000 1,003,500 - -------------------------------------------------------------------------------------------------------------------------------- Ryder System, Inc., 8.75% Debs., Series J, 3/15/17 1,600,000 1,671,586 - -------------------------------------------------------------------------------------------------------------------------------- Salomon, Inc, 7.30% Nts., 5/15/02 1,000,000 1,035,115
16 Oppenheimer Bond Fund 18 FACE MARKET VALUE AMOUNT(1) SEE NOTE (1) - -------------------------------------------------------------------------------------------------------------------------------- Saul (B.F.) Real Estate Investment Trust, 11.625% Sr. Sec. Nts., Series B, 4/1/02 $1,125,000 $ 1,209,375 - -------------------------------------------------------------------------------------------------------------------------------- Source One Mortgage Services Corp., 9% Debs., 6/1/12 1,250,000 1,379,060 - -------------------------------------------------------------------------------------------------------------------------------- Washington Mutual Capital I, 8.375% Gtd. Bonds, 6/1/27 2,000,000 2,180,952 ----------- 18,011,472 - -------------------------------------------------------------------------------------------------------------------------------- INSURANCE--1.7% Aetna Services, Inc., 8% Debs., 1/15/17 849,000 868,270 - -------------------------------------------------------------------------------------------------------------------------------- Allmerica Capital I, 8.207% Debs., 2/3/27 2,000,000 2,209,596 - -------------------------------------------------------------------------------------------------------------------------------- Liberty Mutual Insurance Co., 7.697% Nts., 10/15/2097(5) 1,000,000 1,051,292 - -------------------------------------------------------------------------------------------------------------------------------- Veritas Holdings, Inc., 9.625% Sr. Nts., 12/15/03 200,000 214,000 ----------- 4,343,158 - -------------------------------------------------------------------------------------------------------------------------------- HOUSING RELATED--0.8% - -------------------------------------------------------------------------------------------------------------------------------- BUILDING MATERIALS--0.1% Nortek, Inc., 9.25% Sr. Nts., Series B, 3/15/07 250,000 256,250 - -------------------------------------------------------------------------------------------------------------------------------- HOMEBUILDERS/REAL ESTATE--0.7% Continental Homes Holding Corp., 10% Gtd. Unsec. Bonds, 4/15/06 50,000 54,750 - -------------------------------------------------------------------------------------------------------------------------------- Greystone Homes, Inc., 10.75% Sr. Gtd. Nts., 3/1/04(5) 50,000 54,750 - -------------------------------------------------------------------------------------------------------------------------------- Nortek, Inc., 9.125% Sr. Nts., Series B, 9/1/07 250,000 255,000 - -------------------------------------------------------------------------------------------------------------------------------- Trizec Hahn Corp., 7.95% Sr. Unsec. Debs., 6/1/07CAD 2,000,000 1,450,435 ----------- 1,814,935 - -------------------------------------------------------------------------------------------------------------------------------- MANUFACTURING--7.1% - -------------------------------------------------------------------------------------------------------------------------------- AEROSPACE--2.3% Amtran, Inc., 10.50% Sr. Nts., 8/1/04(7) 100,000 104,500 - -------------------------------------------------------------------------------------------------------------------------------- Atlas Air, Inc.: 10.75% Sr. Nts., 8/1/05 125,000 132,500 12.25% Pass-Through Certificates, 12/1/02 1,000,000 1,115,000 - -------------------------------------------------------------------------------------------------------------------------------- Boeing Co., 7.50% Debs., 8/15/42 2,000,000 2,254,914 - -------------------------------------------------------------------------------------------------------------------------------- Rolls-Royce Capital, Inc., 7.125% Gtd. Nts., 7/29/03 1,000,000 1,028,125 - -------------------------------------------------------------------------------------------------------------------------------- SC International Services, Inc., 9.25% Sr. Sub. Nts., 9/1/07(7) 250,000 260,000 - -------------------------------------------------------------------------------------------------------------------------------- Southwest Airlines Co., 9.25% Debs., 2/15/98 500,000 501,700 - -------------------------------------------------------------------------------------------------------------------------------- Trans World Airlines, Inc., 11.50% Sr. Sec. Nts., 12/15/04(7) 250,000 252,500 ----------- 5,649,239 - -------------------------------------------------------------------------------------------------------------------------------- AUTOMOTIVE--2.7% Cambridge Industries, Inc., 10.25% Sr. Sub. Nts., 7/15/07(7) 100,000 105,000 - -------------------------------------------------------------------------------------------------------------------------------- Chrysler Corp., 7.40% Debs., 8/1/2097 3,000,000 3,212,247 - -------------------------------------------------------------------------------------------------------------------------------- Ford Motor Co., 8.875% Debs., 11/15/22 2,000,000 2,267,818 - -------------------------------------------------------------------------------------------------------------------------------- Hayes Wheels International, Inc., 11% Sr. Sub. Nts., 7/15/06 200,000 224,000 - -------------------------------------------------------------------------------------------------------------------------------- Johnson Controls, Inc., 7.70% Debs., 3/1/15 500,000 564,073 - -------------------------------------------------------------------------------------------------------------------------------- Key Plastics, Inc., 10.25% Sr. Sub. Nts., Series B, 3/15/07 200,000 213,500 ----------- 6,586,638
17 Oppenheimer Bond Fund 19 STATEMENT OF INVESTMENTS (Continued)
FACE MARKET VALUE AMOUNT(1) SEE NOTE (1) - -------------------------------------------------------------------------------------------------------------------------------- CAPITAL GOODS--2.1% Caterpillar, Inc., 9.75% Debs., 6/1/19 $1,750,000 $1,895,626 - -------------------------------------------------------------------------------------------------------------------------------- Clark-Schwebel, Inc.: 10.50% Sr. Nts., 4/15/06 650,000 711,750 12.50% Debs., 7/15/07(7)(10) 137,982 148,331 - -------------------------------------------------------------------------------------------------------------------------------- Communications & Power Industries, Inc., 12% Sr. Sub. Nts., Series B, 8/1/05 500,000 560,000 - -------------------------------------------------------------------------------------------------------------------------------- Hydrochem Industrial Services, Inc., 10.375% Sr. Sub. Nts., 8/1/07 325,000 337,187 - -------------------------------------------------------------------------------------------------------------------------------- Polymer Group, Inc., 9% Sr. Sub. Nts., 7/1/07 150,000 150,375 - -------------------------------------------------------------------------------------------------------------------------------- Roller Bearing Co. of America, Inc., 9.625% Gtd. Sr. Sub. Nts., 6/15/07(5) 200,000 202,500 - -------------------------------------------------------------------------------------------------------------------------------- Titan Wheel International, Inc., 8.75% Sr. Sub. Nts., 4/1/07 250,000 263,125 - -------------------------------------------------------------------------------------------------------------------------------- Westinghouse Electric Corp., 8.375% Nts., 6/15/02 1,000,000 1,050,813 ----------- 5,319,707 - -------------------------------------------------------------------------------------------------------------------------------- MEDIA--2.9% - -------------------------------------------------------------------------------------------------------------------------------- BROADCASTING--0.9% Allbritton Communications Co., 11.50% Sr. Sub. Debs., 8/15/04 675,000 710,437 - -------------------------------------------------------------------------------------------------------------------------------- Capstar Broadcasting Partners, Inc., 9.25% Sr. Sub. Nts., 7/1/07 175,000 179,812 - -------------------------------------------------------------------------------------------------------------------------------- Paxson Communications Corp., 11.625% Sr. Sub. Nts., 10/1/02 520,000 559,000 - -------------------------------------------------------------------------------------------------------------------------------- Sinclair Broadcast Group, Inc., 10% Sr. Sub. Nts., 9/30/05 200,000 211,500 - -------------------------------------------------------------------------------------------------------------------------------- Young Broadcasting, Inc.: 8.75% Sr. Sub. Debs., 6/15/07 300,000 298,500 9% Sr. Sub. Nts., Series B, 1/15/06 400,000 402,000 ----------- 2,361,249 - -------------------------------------------------------------------------------------------------------------------------------- CABLE TELEVISION--1.2% Adelphia Communications Corp.: 9.25% Sr. Nts., 10/1/02 150,000 153,750 9.875% Sr. Nts., Series B, 3/1/07 200,000 212,500 - -------------------------------------------------------------------------------------------------------------------------------- EchoStar Communications Corp., 0%/12.875% Sr. Disc. Nts., 6/1/04(11) 250,000 230,000 - -------------------------------------------------------------------------------------------------------------------------------- EchoStar DBS Corp., 12.50% Gtd. Nts., 7/1/02 525,000 569,625 - -------------------------------------------------------------------------------------------------------------------------------- Knology Holdings, Inc., Units (each unit consists of $1,000 principal amount of 0%/11.875% sr. disc. nts., 10/15/07 and one warrant to purchase .003734 shares of preferred stock)(5)(11)(12) 200,000 110,000 - -------------------------------------------------------------------------------------------------------------------------------- Optel, Inc., 13% Sr. Nts., Series B, 2/15/05 100,000 106,500 - -------------------------------------------------------------------------------------------------------------------------------- Rogers Communications, Inc., 8.75% Sr. Nts., 7/15/07CAD 600,000 409,445 - -------------------------------------------------------------------------------------------------------------------------------- TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 1,000,000 1,111,644 ----------- 2,903,464
18 Oppenheimer Bond Fund 20
FACE MARKET VALUE AMOUNT(1) SEE NOTE (1) - -------------------------------------------------------------------------------------------------------------------------------- DIVERSIFIED MEDIA--0.6% Heritage Media Corp., 8.75% Sr. Sub. Nts., 2/15/06 $ 500,000 $ 530,000 - -------------------------------------------------------------------------------------------------------------------------------- Hollywood Theaters, Inc., 10.625% Sr. Sub. Nts., 8/1/07(7) 100,000 106,750 - -------------------------------------------------------------------------------------------------------------------------------- Lamar Advertising Co.: 8.625% Sr. Sub. Nts., 9/15/07 400,000 413,000 9.625% Sr. Sub. Nts., 12/1/06 150,000 162,188 - -------------------------------------------------------------------------------------------------------------------------------- Outdoor Systems, Inc., 8.875% Sr. Sub. Nts., 6/15/07 200,000 209,000 ----------- 1,420,938 - -------------------------------------------------------------------------------------------------------------------------------- ENTERTAINMENT/FILM--0.1% Blockbuster Entertainment Corp., 6.625% Sr. Nts., 2/15/98 250,000 250,090 - -------------------------------------------------------------------------------------------------------------------------------- PUBLISHING/PRINTING--0.1% American Lawyer Media Holdings, Inc., 9.75% Sr. Nts., 12/15/07(7) 250,000 255,000 - -------------------------------------------------------------------------------------------------------------------------------- OTHER--1.2% - -------------------------------------------------------------------------------------------------------------------------------- CONGLOMERATES--0.0% Maxxam Group, Inc., 0%/12.25% Sr. Sec. Disc. Nts., 8/1/03(11) 100,000 99,500 - -------------------------------------------------------------------------------------------------------------------------------- SERVICES--1.2% Archer Daniels Midland Co., 7.125% Debs., 3/1/13 750,000 800,963 - -------------------------------------------------------------------------------------------------------------------------------- ENSCO International, Inc.: 6.75% Nts., 11/15/07 1,000,000 1,007,035 7.20% Nts., 11/15/27 1,000,000 1,018,462 - -------------------------------------------------------------------------------------------------------------------------------- Oxford Automotive, Inc., 10.125% Sr. Unsec. Sub. Nts., 6/15/07 200,000 211,250 ----------- 3,037,710 - -------------------------------------------------------------------------------------------------------------------------------- RETAIL--1.7% - -------------------------------------------------------------------------------------------------------------------------------- DEPARTMENT STORES--0.3% Sears Canada, Inc., 11.70% Debs., 7/10/00CAD 500,000 397,807 - -------------------------------------------------------------------------------------------------------------------------------- Sears Roebuck & Co., 8.39% Medium-Term Nts., 3/23/99 300,000 308,082 ----------- 705,889 - -------------------------------------------------------------------------------------------------------------------------------- SPECIALTY RETAILING--0.3% May Department Stores Cos., 10.625% Debs., 11/1/10 405,000 545,305 - -------------------------------------------------------------------------------------------------------------------------------- Specialty Retailers, Inc., 9% Gtd. Unsec. Sr. Sub. Nts., 7/15/07 100,000 102,500 ----------- 647,805 - -------------------------------------------------------------------------------------------------------------------------------- SUPERMARKETS--1.1% Fleming Cos., Inc., 10.625% Sr. Sub. Nts., 7/31/07(7) 550,000 583,000 - -------------------------------------------------------------------------------------------------------------------------------- Kroger Co., 8.50% Sr. Sec. Debs., 6/15/03 1,000,000 1,050,837 - -------------------------------------------------------------------------------------------------------------------------------- Ralph's Grocery Co., 10.45% Sr. Nts., 6/15/04 300,000 337,500 - -------------------------------------------------------------------------------------------------------------------------------- Randall's Food Markets, Inc., 9.375% Sr. Sub. Nts., 7/1/07(7) 500,000 520,000 - -------------------------------------------------------------------------------------------------------------------------------- Stater Brothers Holdings, Inc., 9% Unsec. Sr. Sub. Nts., 7/1/04 150,000 157,500 ----------- 2,648,837
19 Oppenheimer Bond Fund 21 STATEMENT OF INVESTMENTS (Continued)
FACE MARKET VALUE AMOUNT(1) SEE NOTE (1) - -------------------------------------------------------------------------------------------------------------------------------- TECHNOLOGY--3.1% - -------------------------------------------------------------------------------------------------------------------------------- INFORMATION TECHNOLOGY--2.7% Cellular Communications International, Inc., Zero Coupon Sr. Disc. Nts., 11.198%, 8/15/00(9) $1,450,000 $1,167,250 - -------------------------------------------------------------------------------------------------------------------------------- Dial Call Communications, Inc., 0%/12.25% Sr. Disc. Nts., 4/15/04(11) 300,000 287,250 - -------------------------------------------------------------------------------------------------------------------------------- Dyncorp, Inc., 9.50% Sr. Sub. Nts., 3/1/07 250,000 255,000 - -------------------------------------------------------------------------------------------------------------------------------- General Electric Capital Corp., 8.75% Debs., 5/21/07 1,000,000 1,172,150 - -------------------------------------------------------------------------------------------------------------------------------- Metrocall, Inc., 9.75% Sr. Sub. Nts., 11/1/07(7) 50,000 49,625 - -------------------------------------------------------------------------------------------------------------------------------- Nextel Communications, Inc.: 0%/10.65% Sr. Disc. Nts., 9/15/07(7)(11) 50,000 31,750 0%/11.50% Sr. Disc. Nts., 9/1/03(11) 250,000 250,000 - -------------------------------------------------------------------------------------------------------------------------------- Omnipoint Corp., 11.625% Sr. Nts., 8/15/06 70,000 74,200 - -------------------------------------------------------------------------------------------------------------------------------- ORBCOMM Global LP/ORBCOMM Capital Corp., 14% Sr. Nts., 8/15/04 65,000 70,850 - -------------------------------------------------------------------------------------------------------------------------------- Orion Network Systems, Inc., 0%/12.50% Sr. Disc. Nts., 1/15/07(11) 200,000 149,500 - -------------------------------------------------------------------------------------------------------------------------------- PriCellular Wireless Corp.: 0%/12.25% Sr. Sub. Disc. Nts., 10/1/03(11) 200,000 206,000 0%/14% Sr. Sub. Disc. Nts., 11/15/01(11) 1,050,000 1,170,750 10.75% Sr. Nts., 11/1/04 520,000 565,500 - -------------------------------------------------------------------------------------------------------------------------------- Real Time Data, Inc., Units (each unit consists of $1,000 principal amount of 0%/13.50% sub. disc. nts., 8/15/06 and one warrant to purchase six ordinary shares)(5)(11)(12) 1,000,000 380,000 - -------------------------------------------------------------------------------------------------------------------------------- Star Choice Communications, Inc., Units (each unit consists of $1,000 principal amount of 13% sr. sec. nts., 12/15/05 and one warrant to buy common stock)(12) 200,000 206,000 - -------------------------------------------------------------------------------------------------------------------------------- Tracor, Inc., 8.50% Sr. Sub. Nts., 3/1/07 200,000 206,000 - -------------------------------------------------------------------------------------------------------------------------------- Unisys Corp., 11.75% Sr. Nts., 10/15/04 300,000 344,250 - -------------------------------------------------------------------------------------------------------------------------------- USA Mobile Communications, Inc. II, 9.50% Sr. Nts., 2/1/04 100,000 98,000 ----------- 6,684,075 - -------------------------------------------------------------------------------------------------------------------------------- TELECOMMUNICATIONS/TECHNOLOGY--0.4% Brooks Fiber Properties, Inc., 0%/11.875% Sr. Disc. Nts., 11/1/06(11) 145,000 116,725 - -------------------------------------------------------------------------------------------------------------------------------- COLT Telecom Group plc, Units (each unit consists of $1,000 principal amount of 0%/12% sr. disc. nts., 12/15/06 and one warrant to purchase 7.8 ordinary shares)(11)(12) 350,000 273,000 - -------------------------------------------------------------------------------------------------------------------------------- GST Telecommunications, Inc., 0%/13.875% Cv. Sr. Sub. Disc. Nts., 12/15/05(7)(11) 100,000 76,813 - -------------------------------------------------------------------------------------------------------------------------------- McLeodUSA, Inc., 0%/10.50% Sr. Disc. Nts., 3/1/07(11) 65,000 47,125 - -------------------------------------------------------------------------------------------------------------------------------- NEXTLINK Communications, Inc., 9.625% Sr. Nts., 10/1/07 100,000 104,000 - -------------------------------------------------------------------------------------------------------------------------------- NTL, Inc., 10% Sr. Nts., 2/15/07 100,000 105,750 - -------------------------------------------------------------------------------------------------------------------------------- Qwest Communications International, Inc., 0%/9.47% Sr. Disc. Nts., 10/15/07(7)(11) 365,000 248,200 - -------------------------------------------------------------------------------------------------------------------------------- Teleport Communications Group, Inc., 0%/11.125% Sr. Disc. Nts., 7/1/07(11) 150,000 122,625 ----------- 1,094,238
20 Oppenheimer Bond Fund 22
FACE MARKET VALUE AMOUNT(1) SEE NOTE (1) - -------------------------------------------------------------------------------------------------------------------------------- TRANSPORTATION--1.6% - -------------------------------------------------------------------------------------------------------------------------------- RAILROADS--1.3% Canadian Pacific Ltd., 9.45% Debs., 8/1/21 $1,000,000 $ 1,278,950 - -------------------------------------------------------------------------------------------------------------------------------- Kansas City Southern Industries, Inc., 6.625% Nts., 3/1/05 750,000 758,272 - -------------------------------------------------------------------------------------------------------------------------------- Transtar Holdings LP/Transtar Capital Corp., 0%/13.375% Sr. Disc. Nts., Series B, 12/15/03(11) 1,100,000 968,000 - -------------------------------------------------------------------------------------------------------------------------------- Union Pacific Corp., 9.65% Medium-Term Nts., 4/17/00 100,000 107,286 ------------ 3,112,508 - -------------------------------------------------------------------------------------------------------------------------------- SHIPPING--0.2% Navigator Gas Transport plc: 10.50% First Priority Ship Mtg. Nts., 6/30/07(7) 400,000 426,000 Units (each unit consists of $1,000 principal amount of 12% second priority ship mtg. nts., 6/30/07 and 7.66 warrants)(7)(12) 100,000 113,000 ------------ 539,000 - -------------------------------------------------------------------------------------------------------------------------------- TRUCKING--0.1% Coach USA, Inc., 9.375% Gtd. Sr. Sub. Nts., Series B, 7/1/07 350,000 362,250 - -------------------------------------------------------------------------------------------------------------------------------- UTILITIES--2.8% - -------------------------------------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES--0.7% California Energy, Inc., 10.25% Sr. Disc. Nts., 1/15/04 300,000 324,000 - -------------------------------------------------------------------------------------------------------------------------------- Calpine Corp., 8.75% Sr. Nts., 7/15/07(7) 185,000 189,625 - -------------------------------------------------------------------------------------------------------------------------------- Consumers Energy Co., 8.75% First Mtg. Nts., 2/15/98 250,000 250,597 - -------------------------------------------------------------------------------------------------------------------------------- First PV Funding Corp., 10.15% Lease Obligation Bonds, Series 1986B, 1/15/16(5) 197,000 209,063 - -------------------------------------------------------------------------------------------------------------------------------- Public Service Co. of Colorado, 8.75% First Mtg. Bonds, 3/1/22 250,000 276,115 - -------------------------------------------------------------------------------------------------------------------------------- South Carolina Electric & Gas Co., 9% Mtg. Bonds, 7/15/06 500,000 583,366 ------------ 1,832,766 - -------------------------------------------------------------------------------------------------------------------------------- GAS UTILITIES--0.8% Laclede Gas Co., 8.50% First Mtg. Bonds, 11/15/04 500,000 557,739 - -------------------------------------------------------------------------------------------------------------------------------- National Fuel Gas Co., 7.75% Debs., 2/1/04 500,000 532,226 - -------------------------------------------------------------------------------------------------------------------------------- Texas Gas Transmission Corp., 8.625% Nts., 4/1/04 500,000 555,629 - -------------------------------------------------------------------------------------------------------------------------------- Union Gas Ltd., 13% Debs., 6/30/03CAD 464,000 338,197 ------------ 1,983,791 - -------------------------------------------------------------------------------------------------------------------------------- TELEPHONE UTILITIES--1.3% GTE Corp., 8.85% Debs., 3/1/98 300,000 301,217 - -------------------------------------------------------------------------------------------------------------------------------- New York Telephone Co., 9.375% Debs., 7/15/31 2,500,000 2,817,648 ------------ 3,118,865 ------------ Total Corporate Bonds and Notes (Cost $103,314,823) 107,739,264
21 Oppenheimer Bond Fund 23 STATEMENT OF INVESTMENT (Continued)
MARKET VALUE SHARES SEE NOTE (1) ================================================================================================================================ COMMON STOCKS--0.0% - -------------------------------------------------------------------------------------------------------------------------------- Optel, Inc. (Cost $0)(5)(13) 100 $ -- ================================================================================================================================ PREFERRED STOCKS--1.4% - -------------------------------------------------------------------------------------------------------------------------------- Allstate Financing I, 7.95% Gtd. Quarterly Income Preferred Securities, Series A 80,000 2,075,000 - -------------------------------------------------------------------------------------------------------------------------------- CRIIMI MAE, Inc., 10.875% Cum. Cv. Preferred Stock, Series B, Non-Vtg. 13,000 444,437 - -------------------------------------------------------------------------------------------------------------------------------- EchoStar Communications Corp., 12.125% Sr. Redeemable Exchangeable Preferred Stock, Series B(7)(10) 100 104,750 - -------------------------------------------------------------------------------------------------------------------------------- Fresenius Medical Care Trust, 9% Preferred Securities 505,000 530,250 - -------------------------------------------------------------------------------------------------------------------------------- NEXTLINK Communications, Inc., 14% Sr. Exchangeable Preferred(10) 3,381 210,467 - -------------------------------------------------------------------------------------------------------------------------------- SFX Broadcasting, Inc., 12.625% Cum., Series E, Non-Vtg.(10) 53 60,554 ----------- Total Preferred Stocks (Cost $3,165,304) 3,425,458 UNITS ================================================================================================================================ RIGHTS, WARRANTS AND CERTIFICATES--0.0% - -------------------------------------------------------------------------------------------------------------------------------- American Communications Services, Inc. Wts., Exp. 11/05(5) 300 28,650 - -------------------------------------------------------------------------------------------------------------------------------- Cellular Communications International, Inc. Wts., Exp. 8/03(5) 500 8,500 - -------------------------------------------------------------------------------------------------------------------------------- Gothic Energy Corp. Wts., Exp. 9/04 2,800 5,600 - -------------------------------------------------------------------------------------------------------------------------------- ICG Communications, Inc. Wts., Exp. 9/05(5) 1,980 24,750 - -------------------------------------------------------------------------------------------------------------------------------- NEXTLINK Communications, Inc. Wts., Exp. 2/09(5) 3,050 31 Orion Network Systems, Inc. Wts., Exp. 1/07(5) 200 2,500 ----------- Total Rights, Warrants and Certificates (Cost $3,500) 70,031 FACE AMOUNT(1) ================================================================================================================================ STRUCTURED INSTRUMENTS--0.5% - -------------------------------------------------------------------------------------------------------------------------------- Bayerische Landesbank Girozentrale (New York Branch) Lehman Brothers High Yield Bond Index Nts., 12.50%, 2/4/98 $ 500,000 499,200 - -------------------------------------------------------------------------------------------------------------------------------- Shoshone Partners Loan Trust, 7.50% Sr. Nts., 5/31/02(5)(6) 742,000 786,944 ------------ Total Structured Instruments (Cost $1,242,000) 1,286,144 ================================================================================================================================ REPURCHASE AGREEMENTS--2.1% - -------------------------------------------------------------------------------------------------------------------------------- Repurchase agreement with First Chicago Capital Markets, 6.60%, dated 12/31/97, to be repurchased at $5,201,907 on 1/2/98, collateralized by U.S. Treasury Bonds, 8%-10.625%, 8/15/15-11/15/21, with a value of $3,854,252, and U.S. Treasury Nts., 5.875%-7.50%, 9/30/01-12/31/01, with a value of $1,452,554 (Cost $5,200,000) 5,200,000 5,200,000 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $277,840,513) 115.5% 286,563,209 - -------------------------------------------------------------------------------------------------------------------------------- LIABILITIES IN EXCESS OF OTHER ASSETS (15.5) (38,414,567) ----------- ------------ NET ASSETS 100.0% $248,148,642 =========== ============
22 Oppenheimer Bond Fund 24 - -------------------------------------------------------------------------------- 1. Face amount is reported in U.S. Dollars, except for those denoted in the following currency: CAD--Canadian Dollar. 2. Interest-Only Strips represent the right to receive the monthly interest payments on an underlying pool of mortgage loans. These securities typically decline in price as interest rates decline and prepayment rates increase. Most other fixed income securities increase in price when interest rates decline. The principal amount of the underlying pool represents the notional amount on which current interest is calculated. The price of these securities is typically more sensitive to changes in prepayment rates than traditional mortgage-backed securities (for example, GNMA pass-throughs). Interest rates disclosed represent current yields based upon the current cost basis and estimated timing and amount of future cash flows. 3. Principal-Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans. The value of these securities generally increases as interest rates decline and prepayment rates rise. The price of these securities is typically more volatile than that of coupon-bearing bonds of the same maturity. Interest rates disclosed represent current yields based upon the current cost basis and estimated timing of future cash flows. 4. When-issued security to be delivered and settled after December 31, 1997. 5. Identifies issues considered to be illiquid or restricted--See Note 8 of Notes to Financial Statements. 6. Represents the current interest rate for a variable rate security. 7. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $10,623,957 or 4.28% of the Fund's net assets as of December 31, 1997. 8. Securities with an aggregate market value of $929,032 are held in collateralized accounts to cover initial margin requirements on open futures sales contracts. See Note 6 of Notes to Financial Statements. 9. For zero coupon bonds, the interest rate shown is the effective yield on the date of purchase. 10. Interest or dividend is paid in kind. 11. Denotes a step bond: a zero coupon bond that converts to a fixed or variable interest rate at a designated future date. 12. Units may be comprised of several components, such as debt and equity and/or warrants to purchase equity at some point in the future. For units which represent debt securities, face amount disclosed represents total underlying principal. 13. Non-income producing security. See accompanying Notes to Financial Statements. 23 Oppenheimer Bond Fund 25 STATEMENT OF ASSETS AND LIABILITIES December 31, 1997 ==================================================================================================================== ASSETS Investments, at value (cost $277,840,513) $286,563,209 - -------------------------------------------------------------------------------------------------------------------- Cash 390,159 - -------------------------------------------------------------------------------------------------------------------- Unrealized appreciation on forward foreign currency exchange contracts--Note 5 20,641 - -------------------------------------------------------------------------------------------------------------------- Receivables: Investments sold 16,365,960 Interest and principal paydowns 3,656,399 Shares of beneficial interest sold 301,417 Daily variation on futures contracts--Note 6 82,564 - -------------------------------------------------------------------------------------------------------------------- Other 5,691 ------------ Total assets 307,386,040 =================================================================================================================== LIABILITIES Payables and other liabilities: Investments purchased (including $57,811,085 purchased on a when-issued basis)--Note 1 58,014,647 Dividends 631,775 Shares of beneficial interest redeemed 258,531 Distribution and service plan fees 150,358 Transfer and shareholder servicing agent fees 47,292 Other 134,795 ------------ Total liabilities 59,237,398 =================================================================================================================== NET ASSETS $248,148,642 ============ =================================================================================================================== COMPOSITION OF NET ASSETS Paid-in capital $241,988,295 - -------------------------------------------------------------------------------------------------------------------- Undistributed net investment income 6,579 - -------------------------------------------------------------------------------------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (2,819,276) - -------------------------------------------------------------------------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 8,973,044 ------------- Net assets $248,148,642 =============
24 Oppenheimer Bond Fund 26 ======================================================================================================================= NET ASSET VALUE PER SHARE Class A Shares: Net asset value and redemption price per share (based on net assets of $190,705,711 and 17,383,073 shares of beneficial interest outstanding) $10.97 Maximum offering price per share (net asset value plus sales charge of 4.75% of offering price) $11.52 - ----------------------------------------------------------------------------------------------------------------------- Class B Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $48,254,895 and 4,399,924 shares of beneficial interest outstanding) $10.97 - ----------------------------------------------------------------------------------------------------------------------- Class C Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $9,188,036 and 837,017 shares of beneficial interest outstanding) $10.98
See accompanying Notes to Financial Statements. 25 Oppenheimer Bond Fund 27 STATEMENT OF OPERATIONS For the Year Ended December 31, 1997 =============================================================================================================== INVESTMENT INCOME Interest $19,692,749 - --------------------------------------------------------------------------------------------------------------- Dividends 196,995 ----------- Total income 19,889,744 =============================================================================================================== EXPENSES Management fees--Note 4 1,751,986 - --------------------------------------------------------------------------------------------------------------- Distribution and service plan fees--Note 4: Class A 461,146 Class B 414,137 Class C 61,208 - --------------------------------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees--Note 4 412,037 - --------------------------------------------------------------------------------------------------------------- Shareholder reports 154,722 - --------------------------------------------------------------------------------------------------------------- Custodian fees and expenses 49,736 - --------------------------------------------------------------------------------------------------------------- Legal and auditing fees 18,708 - --------------------------------------------------------------------------------------------------------------- Trustees' fees and expenses 6,839 - --------------------------------------------------------------------------------------------------------------- Other 15,848 ----------- Total expenses 3,346,367 =============================================================================================================== NET INVESTMENT INCOME 16,543,377 =============================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments 2,873,379 Closing of futures contracts--Note 6 (688,832) Closing and expiration of options written--Note 7 (29,905) Foreign currency transactions 42,729 ----------- Net realized gain 2,197,371 - --------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation on: Investments 3,870,507 Translation of assets and liabilities denominated in foreign currencies (205,493) ----------- Net change 3,665,014 ----------- Net realized and unrealized gain 5,862,385 =============================================================================================================== NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $22,405,762 ===========
See accompanying Notes to Financial Statements. 26 Oppenheimer Bond Fund 28 STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1997 1996 ============================================================================================================================= OPERATIONS Net investment income $ 16,543,377 $ 15,830,998 - ----------------------------------------------------------------------------------------------------------------------------- Net realized gain 2,197,371 313,209 - ----------------------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation 3,665,014 (5,325,416) ------------ ------------ Net increase in net assets resulting from operations 22,405,762 10,818,791 ============================================================================================================================= DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income: Class A (13,459,796) (12,577,460) Class B (2,655,088) (2,405,982) Class C (389,245) (214,115) - ------------------------------------------------------------------------------------------------------------------------------ Tax return of capital distribution: Class A -- (517,955) Class B -- (103,919) Class C -- (11,567) ============================================================================================================================= BENEFICIAL INTEREST TRANSACTIONS Net increase (decrease) in net assets resulting from beneficial interest transactions--Note 2: Class A (7,491,024) 28,392,776 Class B 8,379,500 659,280 Class C 4,696,745 404,645 ============================================================================================================================= NET ASSETS Total increase 11,486,854 24,444,494 - ----------------------------------------------------------------------------------------------------------------------------- Beginning of period 236,661,788 212,217,294 ------------ ------------ End of period (including undistributed net investment income of $6,579 for the year ended 12/31/97) $248,148,642 $236,661,788 ============ ============
See accompanying Notes to Financial Statements. 27 Oppenheimer Bond Fund 29 FINANCIAL HIGHLIGHTS
CLASS A ----------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 1997 1996 1995 1994 1993 =================================================================================================================================== PER SHARE OPERATING DATA: Net asset value, beginning of period $10.70 $10.98 $10.01 $11.12 $10.74 - ----------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .77 .78 .69 .65 .69 Net realized and unrealized gain (loss) .27 (.28) .96 (1.08) .40 ---- ---- ---- ---- ---- Total income (loss) from investment operations 1.04 .50 1.65 (.43) 1.09 - ----------------------------------------------------------------------------------------------------------------------------------- Dividends and distributions to shareholders: Dividends from net investment income (.77) (.75) (.68) (.65) (.71) Dividends in excess of net investment income -- -- -- (.03) -- Tax return of capital -- (.03) -- -- -- ---- ---- ---- ---- ---- Total dividends and distributions to shareholders (.77) (.78) (.68) (.68) (.71) - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.97 $10.70 $10.98 $10.01 $11.12 ====== ====== ====== ====== ====== =================================================================================================================================== TOTAL RETURN, AT NET ASSET VALUE(3) 10.13% 4.87% 16.94% (3.87)% 10.30% =================================================================================================================================== RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $190,706 $193,515 $169,059 $ 96,640 $110,759 - ----------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $187,458 $178,130 $116,940 $102,168 $111,702 - ----------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income 7.20% 7.35% 6.47% 6.25% 6.20% Expenses, before voluntary reimbursement by the Manager 1.27% 1.30% 1.27% 1.06% 1.06% Expenses, net of voluntary reimbursement by the Manager N/A N/A 1.26% N/A N/A - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(5) 50.5% 53.7% 175.4% 70.3% 110.1%
1. For the period from July 11, 1995 (inception of offering) to December 31, 1995. 2. For the period from May 1, 1993 (inception of offering) to December 31, 1993. 3. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period (or inception of offering), 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 of less than one full year. 4. Annualized. 28 Oppenheimer Bond Fund 30
CLASS B CLASS C -------------------------------------------------------------------------- ------------------------------------------- YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, 1997 1996 1995 1994 1993(2) 1997 1996 1995(1) ================================================================================================================================= $10.69 $10.98 $10.01 $11.11 $11.10 $10.70 $10.99 $10.89 - --------------------------------------------------------------------------------------------------------------------------------- .69 .70 .63 .58 .40 .69 .70 .28 .28 (.29) .94 (1.08) .03 .28 (.29) .10 ---- ---- ----- ---- ---- ---- ---- ---- .97 .41 1.57 (.50) .43 .97 .41 .38 - --------------------------------------------------------------------------------------------------------------------------------- (.69) (.67) (.60) (.57) (.42) (.69) (.67) (.28) -- -- -- (.03) -- -- -- -- -- (.03) -- -- -- -- (.03) -- ---- ---- ---- ---- ---- ---- ---- ---- (.69) (.70) (.60) (.60) (.42) (.69) (.70) (.28) - --------------------------------------------------------------------------------------------------------------------------------- $10.97 $10.69 $10.98 $10.01 $11.11 $10.98 $10.70 $10.99 ====== ====== ====== ====== ====== ====== ====== ====== ================================================================================================================================= 9.41% 3.99% 16.06% (4.53)% 3.91% 9.39% 4.00% 3.76% ================================================================================================================================= $48,255 $38,826 $39,187 $3,451 $1,809 $9,188 $4,322 $3,971 - --------------------------------------------------------------------------------------------------------------------------------- $41,439 $38,068 $12,823 $2,747 $ 922 $6,134 $3,404 $ 979 - --------------------------------------------------------------------------------------------------------------------------------- 6.42% 6.59% 5.84% 5.53% 4.80%(4) 6.36% 6.60% 6.32%(4) 2.02% 2.05% 2.12% 1.78% 1.90%(4) 2.02% 2.05% 2.25%(4) N/A N/A 2.08% N/A N/A N/A N/A 1.96%(4) - --------------------------------------------------------------------------------------------------------------------------------- 50.5% 53.7% 175.4% 70.3% 110.1% 50.5% 53.7% 175.4%
5. The lesser of purchases or sales of portfolio securities for a period, during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities and mortgage $134,090,911, respectively. For the year ended December 31, 1995, purchases and sales of investment securities included mortgage "dollar-rolls." See accompanying Notes to Financial Statements. 29 Oppenheimer Bond Fund 31 NOTES TO FINANCIAL STATEMENTS ================================================================================ 1.SIGNIFICANT ACCOUNTING POLICIES Oppenheimer Bond Fund (the Fund) is a separate fund of Oppenheimer Integrity Funds, a diversified, open-end management investment company registered under is to seek a high level of current income by investing mainly in debt instruments. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund offers Class A, Class B and Class C shares. Class A shares are sold with a front-end sales charge. Class B and Class C shares may be identical rights to earnings, assets and voting privileges, except that each attributable to that class and exclusive voting rights with respect to matters affecting that 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 the close of the New York Stock Exchange on each trading day. Listed and unlisted securities for which such information is regularly reported are valued at the last sale price of the day or, in the absence of sales, at values based on the closing bid or the last sale price on the prior trading day. Long-term and short-term "non-money market" debt securities are valued by a portfolio pricing service approved by the Board of Trustees. Such securities which cannot be valued by an approved portfolio pricing service are valued using dealer-supplied valuations provided the Manager is satisfied that the firm rendering the quotes is reliable and that the quotes reflect current market value, or are valued under consistently applied procedures established by the Board of Trustees to determine fair value in good faith. Short-term "money market type" debt securities having a remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for amortization to maturity of any premium or discount. Forward foreign currency contracts are valued based on the closing prices of the forward currency contract rates in the London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. Options are valued based upon the last sale price on the principal exchange on which the option is traded or, in the absence of any transactions that day, the value is based upon the last sale price on the prior trading date if it is within the spread between the closing bid and asked prices. If the last sale price is outside the spread, the closing bid is used. 30 Oppenheimer Bond Fund 32 ================================================================================ SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. Delivery and payment for securities that have been purchased by the Fund on a forward commitment or when-issued basis can take place a month or more after the transaction date. During this period, such securities do not earn interest, are subject to market fluctuation and may increase or decrease in value prior to their delivery. The Fund maintains, in a segregated account with its custodian, assets with a market value equal to the amount of its purchase commitments. The purchase of securities on a when-issued or forward commitment basis may increase the volatility of the Fund's net asset value to the extent the Fund makes such purchases while remaining substantially fully invested. As of December 31, 1997, the Fund had entered into outstanding when-issued or forward commitments of $57,811,085. In connection with its ability to purchase securities on a when-issued or forward commitment basis, the Fund may enter into mortgage "dollar-rolls" in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar (same type, coupon and maturity) but not identical securities on a specified future date. The Fund records each dollar-roll as a sale and a new purchase transaction. - -------------------------------------------------------------------------------- FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are maintained in U.S. dollars. Prices of securities denominated in foreign currencies are translated into U.S. dollars at the closing rates of exchange. Amounts related to the purchase and sale of foreign securities and investment income are translated at the rates of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund's Statement of Operations. - -------------------------------------------------------------------------------- REPURCHASE AGREEMENTS. The Fund requires the custodian to take possession, to have legally segregated in the Federal Reserve Book Entry System or to have segregated within the custodian's vault, all securities held as collateral for repurchase agreements. The market value of the underlying securities is required to be at least 102% of the resale price at the time of purchase. If the seller of the agreement defaults and the value of the collateral declines, or if the seller enters an insolvency proceeding, realization of the value of the collateral by the Fund may be delayed or limited. - -------------------------------------------------------------------------------- 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. 31 Oppenheimer Bond Fund 33 NOTES TO FINANCIAL STATEMENTS (Continued) ================================================================================ 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) FEDERAL 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 or excise tax provision is required. At December 31, 1997, the Fund had available for federal income tax purposes an unused capital loss carryover of approximately $7,038,000 which expires between 2002 and 2004. - -------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends separately for Class A, Class B and Class C 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. - -------------------------------------------------------------------------------- CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes primarily because of paydown gains and losses and the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes. The character of the distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Also, due to timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain was recorded by the Fund. The Fund adjusts the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, during the year ended December 31, 1997, amounts have been reclassified to reflect a decrease in undistributed net investment income of $32,669, an increase in accumulated net realized loss of $870,459 and an increase in paid-in capital of $903,128. - -------------------------------------------------------------------------------- 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. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 32 Oppenheimer Bond Fund 34 ================================================================================ 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:
YEAR ENDED DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 1996 ----------------------------------- --------------------------------- SHARES AMOUNT SHARES AMOUNT - -------------------------------------------------------------------------------------------------------------------------- Class A: Sold 2,678,397 $ 28,887,221 1,955,093 $ 20,810,615 Dividends reinvested 831,219 8,947,815 815,100 8,651,382 Issued in connection with the acquisition of: Connecticut Mutual Income Account--Note 9 -- -- 3,020,216 31,863,280 Jefferson-Pilot Investment Grade Bond Fund, Inc.--Note 9 -- -- 1,801,334 19,273,967 Redeemed (4,216,384) (45,326,060) (4,901,741) (52,206,468) ----------- ------------- ---------- ------------ Net increase (decrease) (706,768) $ (7,491,024) 2,690,002 $ 28,392,776 =========== ============= ========== ============ - -------------------------------------------------------------------------------------------------------------------------- Class B: Sold 1,711,754 $ 18,512,789 946,117 $ 10,072,138 Dividends reinvested 168,332 1,813,048 163,467 1,735,740 Issued in connection with the acquisition of Connecticut Mutual Income Account--Note 9 -- -- 8,156 86,045 Redeemed (1,110,660) (11,946,337) (1,057,712) (11,234,643) ----------- ------------- ---------- ------------ Net increase 769,426 $ 8,379,500 60,028 $ 659,280 =========== ============= ========== ============ - -------------------------------------------------------------------------------------------------------------------------- Class C: Sold 536,735 $ 5,809,737 279,925 $ 2,989,461 Dividends reinvested 25,947 280,265 17,112 181,810 Redeemed (129,410) (1,393,257) (254,743) (2,766,626) ----------- ------------- ---------- ------------ Net increase 433,272 $ 4,696,745 42,294 $ 404,645 =========== ============= ========== ============
================================================================================ 3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS At December 31, 1997, net unrealized appreciation on investments of $8,722,696 was composed of gross appreciation of $10,899,814, and gross depreciation of $2,177,118. 33 Oppenheimer Bond Fund 35 NOTES TO FINANCIAL STATEMENTS (Continued) ================================================================================ 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 a fee of 0.75% of the first $200 million of the Fund's average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $200 million, and 0.50% of average annual net assets in excess of $1 billion. For the year ended December 31, 1997, commissions (sales charges paid by investors) on sales of Class A shares totaled $346,782, of which $134,951 was retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the Manager, as general distributor, and by an affiliated broker/dealer. Sales charges advanced to broker/dealers by OFDI on sales of the Fund's Class B shares and C totaled $591,879 and $49,753, respectively, of which $39,149 and $1,770, respectively, was paid to an affiliated broker/dealer. During the year ended December 31, 1997, OFDI received contingent deferred sales charges of $156,781 and $1,757, respectively, upon redemption of Class B and Class C shares as reimbursement for sales commissions advanced by OFDI at the time of sale of such shares. OppenheimerFunds Services (OFS), a division of the Manager, is the transfer and shareholder servicing agent for the Fund and for other registered investment companies. OFS's total costs of providing such services are allocated ratably to these companies. The Fund has adopted a Service Plan for Class A shares to reimburse OFDI for a portion of its costs incurred in connection with the personal service and maintenance of shareholder accounts that hold Class A shares. Reimbursement is made quarterly at an annual rate that may not exceed 0.25% of the average annual net assets of Class A shares of the Fund. OFDI uses the service fee to reimburse brokers, dealers, banks and other financial institutions quarterly for providing personal service and maintenance of accounts of their customers that hold Class A shares. During the year ended December 31, 1997, OFDI paid $153,632 to an affiliated broker/dealer as reimbursement for Class A personal service and maintenance expenses. The Fund has adopted Distribution and Service Plans for Class B and Class C shares to compensate OFDI for its costs in distributing Class B and Class C shares and servicing accounts. Under the Plans, the Fund pays OFDI an annual asset-based sales charge of 0.75% per year on Class B and Class C shares for its services rendered in distributing Class B and Class C shares. OFDI also receives a service fee of 0.25% per year to compensate dealers for providing personal services for accounts that hold Class B and Class C shares. Each fee is computed on the average annual net assets of Class B and Class C shares, determined as of the close of each regular business day. 34 Oppenheimer Bond Fund 36 ================================================================================ During the year ended December 31, 1997, OFDI paid $5,726 to an affiliated broker/dealer as compensation for Class B personal service and maintenance expenses and retained $333,996 and $31,990, respectively, as compensation for Class B and Class C sales commissions and service fee advances, as well as financing costs. If either Plan is terminated by the Fund, the Board of Trustees may allow the Fund to continue payments of the asset-based sales charge to OFDI distributing shares before the Plan was terminated. At December 31, 1997, OFDI had incurred unreimbursed expenses of $1,268,141 for Class B and $120,021 for Class C. ================================================================================ 5. FORWARD CONTRACTS A forward foreign currency exchange contract (forward contract) is a commitment to purchase or sell a foreign currency at a future date, at a negotiated rate. The Fund uses forward contracts to seek to manage foreign currency risks. They may also be used to tactically shift portfolio currency risk. The Fund generally enters into forward contracts as a hedge upon the purchase or sale of a security denominated in a foreign currency. In addition, the Fund may enter into such contracts as a hedge against changes in foreign currency exchange rates on portfolio positions. Forward contracts are valued based on the closing prices of the forward currency contract rates in the London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. The Fund will realize a gain or loss upon the closing or settlement of the forward transaction. Securities held in segregated accounts to cover net exposure on outstanding forward contracts are noted in the Statement of Investments where applicable. Unrealized appreciation or depreciation on forward contracts is reported in the Statement of Assets and Liabilities. Realized gains and losses are reported with all other foreign currency gains and losses in the Fund's Statement of Operations. Risks include the potential inability of the counterparty to meet the terms of the contract and unanticipated movements in the value of a foreign currency relative to the U.S. dollar. At December 31, 1997, the Fund had outstanding forward contracts as follows:
EXPIRATION CONTRACT AMOUNT VALUATION AS OF UNREALIZED DATE (000S) DECEMBER 31, 1997 APPRECIATION - ------------------------------------------------------------------------------------------------------------------------ CONTRACTS TO SELL Canadian Dollar (CAD) 1/21/98 600 CAD $419,758 $20,641
35 Oppenheimer Bond Fund 37 NOTES TO FINANCIAL STATEMENTS (Continued) ================================================================================ 6. FUTURES CONTRACTS The Fund may buy and sell interest rate futures contracts in order to gain exposure to or protect against changes in interest rates. The Fund may also buy or write put or call options on these futures contracts. The Fund generally sells futures contracts to hedge against increases in interest rates and the resulting negative effect on the value of fixed rate portfolio securities. The Fund may also purchase futures contracts to gain exposure to changes in interest rates as it may be more efficient or cost effective than actually buying fixed income securities. Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin) in an amount equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. The Statement of Assets and Liabilities reflects a receivable or payable for the daily mark to market for variation margin. Risks of entering into futures contracts (and related options) include the possibility that there may be an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. At December 31, 1997, the Fund had outstanding futures contracts as follows:
VALUATION AS OF UNREALIZED EXPIRATION NUMBER OF DECEMBER 31, APPRECIATION DATE CONTRACTS 1997 (DEPRECIATION) - -------------------------------------------------------------------------------------------------------------------------- CONTRACTS TO PURCHASE - --------------------- U.S. Treasury Bonds, 30 yr. 3/98 233 $28,069,219 $ 347,438 ---------- CONTRACTS TO SELL - ----------------- U.S. Treasury Nts., 2 yr. 3/98 10 2,077,500 (4,531) U.S. Treasury Nts., 5 yr. 3/98 222 24,114,750 (109,406) U.S. Treasury Nts., 10 yr. 3/98 5 560,781 (2,969) ---------- (116,906) ---------- $ 230,532 ==========
36 Oppenheimer Bond Fund 38 ================================================================================ 7. OPTION ACTIVITY The Fund may buy and sell put and call options, or write put and covered call options on portfolio securities in order to produce incremental earnings or protect against changes in the value of portfolio securities. The Fund generally purchases put options or writes covered call options to hedge against adverse movements in the value of portfolio holdings. When an option is written, the Fund receives a premium and becomes obligated to sell or purchase the underlying securities at a fixed price, upon exercise of the option. Options are valued daily based upon the last sale price on the principal exchange on which the option is traded and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss upon the expiration or closing of the option transaction. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of the security for a purchased put or call option is adjusted by the amount of premium received or paid. Securities designated to cover outstanding call options are noted in the Statement of Investments where applicable. Shares subject to call, expiration date, exercise price, premium received and market value are detailed in a footnote to the Statement of Investments. Options written are reported as a liability in the Statement of Assets and Liabilities. Gains and losses are reported in the Statement of Operations. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. Written option activity for the year ended December 31, 1997 was as follows:
CALL OPTIONS PUT OPTIONS ---------------------------- --------------------------- NUMBER OF AMOUNT OF NUMBER OF AMOUNT OF OPTIONS PREMIUMS OPTIONS PREMIUMS - ------------------------------------------------------------------------------------------------------------------------- Options outstanding at December 31, 1996 -- $ -- -- $ -- Options written 10,100 59,063 9 2,618 Options closed or expired (10,100) (59,063) (9) (2,618) -------- -------- --------- ------- Options outstanding at December 31, 1997 -- $ -- -- $ -- ======== ======== ========= =======
37 Oppenheimer Bond Fund 39 NOTES TO FINANCIAL STATEMENTS (Continued) ================================================================================ 8. ILLIQUID AND RESTRICTED SECURITIES At December 31, 1997, investments in securities included issues that are illiquid or restricted. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and are valued under methods approved by the Board of Trustees as reflecting fair value. A security may be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. The Fund intends to invest no more than 10% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid or restricted securities. Certain restricted securities, eligible for resale to qualified institutional investors, are not subject to that limit. The aggregate value of illiquid or restricted securities subject to this limitation at December 31, 1997 was $22,939,865, which represents 9.24% of the Fund's net assets. ================================================================================ 9. ACQUISITION OF CONNECTICUT MUTUAL INCOME ACCOUNT AND JEFFERSON-PILOT INVESTMENT GRADE BOND FUND, INC. On April 26, 1996, the Fund acquired all the net assets of Connecticut Mutual Income Account, pursuant to an agreement and plan of reorganization approved by the Connecticut Mutual Income Account shareholders on March 18, 1996. The Fund issued 3,020,216 and 8,156 shares of beneficial interest for Class A and Class B, respectively, valued at $31,863,280 and $86,045, in exchange for the net assets, resulting in combined Class A net assets of $189,629,984 and Class B net assets of $6,106,676 on April 26, 1996. The net assets acquired included net unrealized depreciation of $633,177. The exchange qualified as a tax-free reorganization for federal income tax purposes. On December 20, 1996, the Fund acquired all the net assets of Jefferson-Pilot Investment Grade Bond Fund, Inc. pursuant to an agreement and plan of reorganization approved by the Jefferson-Pilot Investment Grade Bond Fund, Inc. shareholders on December 3, 1996. The Fund issued 1,801,334 shares of beneficial interest for Class A, valued at $19,273,967, in exchange for the net assets, resulting in combined Class A net assets of $202,088,473 on December 20, 1996. The net assets acquired included net unrealized appreciation of $1,288,511. The exchange qualified as a tax-free reorganization for federal income tax purposes. 38 Oppenheimer Bond Fund 40 ================================================================================ 10. BANK BORROWINGS The Fund may borrow from a bank for temporary or emergency purposes including, without limitation, funding of shareholder redemptions provided asset coverage for borrowings exceeds 300%. The Fund has entered into an agreement which enables it to participate with other Oppenheimer funds in an unsecured line of credit with a bank, which permits borrowings up to $400 million, collectively. Interest is charged to each fund, based on its borrowings, at a rate equal to the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the average unutilized amount of the credit facility at a rate of 0.0575% per annum. The Fund had no borrowings outstanding during the year ended December 31, 1997. 39 Oppenheimer Bond Fund 41 INDEPENDENT AUDITORS' REPORT ================================================================================ The Board of Trustees and Shareholders of Oppenheimer Bond Fund: We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Oppenheimer Bond Fund as of December 31, 1997, the related statement of operations for the year then ended, the statements of changes in net assets for the years ended December 31, 1997 and 1996, and the financial highlights for the period January 1, 1993 to December 31, 1997. 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 generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned at December 31, 1997 by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Oppenheimer Bond Fund at December 31, 1997, the results of its operations, the changes in its net assets, and the financial highlights for the respective stated periods, in conformity with generally accepted accounting principles. Deloitte & Touche LLP Denver, Colorado January 23, 1998 40 Oppenheimer Bond Fund 42 FEDERAL INCOME TAX INFORMATION (Unaudited) ================================================================================ In early 1998, shareholders will receive information regarding all dividends and distributions paid to them by the Fund during calendar year 1997. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service. Dividends paid by the Fund during the fiscal year ended December 31, 1997 which are not designated as capital gain distributions should be multiplied by 1.21% to arrive at the net amount eligible for the corporate dividend-received deduction. 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 the state and local tax regulations, we recommend that you consult your tax advisor for specific guidance. 41 Oppenheimer Bond Fund 43 OPPENHEIMER BOND FUND ================================================================================ OFFICERS AND TRUSTEES James C. Swain, Chairman and Chief Executive Officer Bridget A. Macaskill, President Robert G. Avis, Trustee William A. Baker, Trustee Charles Conrad, Jr., Trustee Raymond J. Kalinowski, Trustee C. Howard Kast, Trustee Robert M. Kirchner, Trustee Ned M. Steel, Trustee George C. Bowen, Vice President, Treasurer and Assistant Secretary Andrew J. Donohue, Vice President and Secretary David P. Negri, Vice President Jerry Webman, Vice President Robert J. Bishop, Assistant Treasurer Scott T. Farrar, Assistant Treasurer Robert G. Zack, Assistant Secretary ================================================================================ INVESTMENT ADVISOR OppenheimerFunds, Inc. ================================================================================ DISTRIBUTOR OppenheimerFunds Distributor, Inc. ================================================================================ TRANSFER AND SHAREHOLDER OppenheimerFunds Services SERVICING AGENT ================================================================================ CUSTODIAN OF The Bank of New York PORTFOLIO SECURITIES ================================================================================ INDEPENDENT AUDITORS Deloitte & Touche LLP ================================================================================ LEGAL COUNSEL Myer, Swanson, Adams & Wolf, P.C. This is a copy of a report to shareholders of Oppenheimer Bond Fund. This report must be preceded by a Prospectus of Oppenheimer Bond Fund. For material information concerning the Fund, see the Prospectus. Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, and are not insured by the FDIC or any other agency, and involve investment risks, including possible loss of the principal amount invested. 42 Oppenheimer Bond Fund 44 OPPENHEIMERFUNDS FAMILY ================================================================================================================================== REAL ASSET FUNDS - ---------------------------------------------------------------------------------------------------------------------------------- Real Asset Fund Gold & Special Minerals Fund ================================================================================================================================== STOCK FUNDS - ---------------------------------------------------------------------------------------------------------------------------------- Developing Markets Fund Discovery Fund Growth Fund International Small Quest Small Cap Value Fund Global Fund Company Fund MidCap Fund Quest Global Value Fund Enterprise Fund Capital Appreciation Fund(1) Disciplined Value Fund International Growth Fund Quest Capital Value Fund Quest Value Fund ================================================================================================================================== STOCK & BOND FUNDS - ---------------------------------------------------------------------------------------------------------------------------------- Main Street Income & Quest Growth & Income Disciplined Allocation Fund Growth Fund Value Fund Multiple Strategies Fund(2) Quest Opportunity Value Fund Global Growth & Income Fund Bond Fund for Growth Total Return Fund Equity Income Fund ================================================================================================================================== BOND FUNDS - ---------------------------------------------------------------------------------------------------------------------------------- International Bond Fund Champion Income Fund U.S. Government Trust High Yield Fund Strategic Income Fund Limited-Term Government Fund Bond Fund ================================================================================================================================== MUNICIPAL FUNDS - ---------------------------------------------------------------------------------------------------------------------------------- California Municipal Fund(3) Pennsylvania Municipal Fund(3) Rochester Division: Florida Municipal Fund(3) Municipal Bond Fund Rochester Fund Municipals New Jersey Municipal Fund(3) Insured Municipal Fund Limited Term New York New York Municipal Fund(3) Intermediate Municipal Fund Municipal Fund ================================================================================================================================== MONEY MARKET FUNDS(4) - ---------------------------------------------------------------------------------------------------------------------------------- Money Market Fund Cash Reserves ================================================================================================================================== LIFESPAN - ---------------------------------------------------------------------------------------------------------------------------------- Growth Fund Balanced Fund Income Fund
1. On 12/18/96, the Fund's name was changed from "Target Fund." 2. On 3/16/97, the Fund's name was changed from "Asset Allocation Fund." 3. Available only to investors in certain states. 4. An investment in money market funds is neither insured nor guaranteed by the U.S. government and there can be no assurance that a money market fund will be able to maintain a stable net asset value of $1.00 per share. Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc., Two World Trade Center, New York, NY 10048-0203. (C) Copyright 1998 OppenheimerFunds, Inc. All rights reserved. 43 Oppenheimer Bond Fund -----END PRIVACY-ENHANCED MESSAGE-----