-----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, Nu3BHMDiSrkf7dpPCmLKM2sP1JkXE0f9u6xQLHlUhfDg8Nm7UMoxMSYCbRAiJ1/R R2PQ0sISons0rKVv3sMZjQ== 0000950146-96-001486.txt : 19960827 0000950146-96-001486.hdr.sgml : 19960827 ACCESSION NUMBER: 0000950146-96-001486 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960826 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: 1940 Act SEC FILE NUMBER: 811-03420 FILM NUMBER: 96620581 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 1735319 [FRONT COVER] Oppenheimer Bond Fund Semiannual Report June 30, 1996 [Picture of Pool Party] "To help pay for extras, I count on the money I get from my investments." [Oppenheimer Logo] Yield Standardized Yields For the 30 Days Ended 6/30/96:(3) Class A 6.57% Class B 6.15% Class C 6.15% This Fund is for people who want solid income and feel most comfortable getting it from an investment that emphasizes quality securities. How your Fund is Managed Oppenheimer Bond Fund's portfolio seeks high income by investing primarily in corporate bonds and government securities. The portfolio managers may invest in different types of corporate and government securities to seek to reduce exposure to market volatility. The Fund will, under normal market conditions, invest at least 65% of its total assets in a diversified portfolio of investment-grade securities, which may help reduce credit risk. Performance Total return, without considering sales charges, for the six months ended 6/30/96 for Class A, B and C shares were (0.83)%, (1.21)% and (1.28)%, respectively.(1) Your Fund's average annual total returns at maximum offering price for Class A shares for the 1- and 5-year periods ended 6/30/96 and since inception of the Class on 4/15/88 were (0.95)%, 7.07% and 7.44%, respectively. For Class B shares, average annual total returns for the 1-year period ended 6/30/96 and since inception of the Class on 5/1/93 were (1.65)% and 3.60%, respectively. For Class C shares, cumulative total return since inception on 7/11/95 was 1.46%.(2) Outlook "Because of its strategic positioning, we think the Fund will continue to do well. Currently, we expect that economic growth in the U.S. will continue, though it may not necessarily accelerate. With this economic outlook, we will continue to position the portfolio around income opportunities and avoid taking on unnecessary interest rate risk." David Rosenberg and David Negri Portfolio Managers June 30, 1996 Total returns include change in share price and reinvestment of dividends and capital gains distributions. 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. For more complete information, please review the prospectus carefully before you invest. 1. Based on the change in net asset value per share for the period shown, without deducting any sales charges. Such performance would have been lower if sales charges were taken into account. 2. Class A returns show results of hypothetical investments on 6/30/95, 6/30/91 and 4/15/88 (since inception), after deducting the current maximum initial sales charge of 4.75%. The Fund's maximum sales charge rate for Class A shares was lower during a portion of some of the periods shown, and actual investment results will be different as a result of the change. Class B returns show results of hypothetical investments on 6/30/95 and 5/1/93 (inception of class), and after the deduction of the applicable contingent deferred sales charge of 5% (1-year) and 3% (since inception). Class C return is cumulative and shows results of a hypothetical investment on 7/11/95 after the deduction of the applicable 1% contingent deferred sales charge. An explanation of the different performance calculations is in the Fund's prospectus. 3. Standardized yield is net investment income calculated on a yield-to-maturity basis for the 30-day period ended 6/30/96, divided by the maximum offering price at the end of the period, compounded semiannually and then annualized. Falling net asset values will tend to artificially raise yields. 2 Oppenheimer Bond Fund [Picture of James C. Swain] [Caption] James C. Swain Chairman Oppenheimer Bond Fund [Picture of Bridget A. Macaskill] [Caption] Bridget A. Macaskill President Oppenheimer Bond Fund Dear Shareholder, Because of rising interest rates, the bond market has been volatile during the first half of 1996. But we believe inflation fears have been somewhat overblown and for this reason the future remains bright for bonds. Let's review the immediate past. During the first half of the year, interest rates rose sharply, as investors became concerned about renewed inflation. Why was inflation a worry? First, economic growth appeared to accelerate, catching many by surprise. Second, gasoline and food prices increased sharply. As a result, the yield on the benchmark 30-year U.S. Treasury bond moved from 6% in January to 7% by mid-year. Even though an increase of one percentage point may seem modest, to bond market investors it means a significant reduction in the value of their bonds. And the longer the bond's maturity, the larger its decline in value. As the Fund's investment advisor, it's our job to seek to minimize and possibly avoid the decline in bond values in a rising interest rate environment. We accomplish this by monitoring interest rates and strategically allocating the Fund's assets in favorable investments. Our current outlook is that interest rates will ease by the end of the year. There are two primary reasons for our forecast. First, the economy appears to be growing less rapidly than it did in the second half of 1995. Retail sales, for example, have slowed from their faster first-quarter clip. And, a slower growing economy also suggests lower inflation and interest rates. Second, because there is no shortage of crude oil, the rise in gasoline prices appears to be temporary. Indeed, excluding energy and food prices, inflation is virtually nonexistent. With the yield on the 30-year Treasuries over 7%, bonds offer significant value--providing investors with substantial income. Typically, the yield on a bond is compared to the current inflation rate, which is currently about 3%. This "spread" of approximately 4 percentage points between bond yields and inflation is considered very generous, historically. In addition to receiving higher income, the value of bonds would appreciate if interest rates were to fall as we expect. The reason: if you're getting 7% and other investors have to settle with 6.5% or 6%, then your bond is more valuable in the marketplace. It's the mirror image of what happened during the first half of 1996. Recently, the stock market volatility has captured the attention of investors and given bonds an even more attractive place in the portfolios of many investors, particularly those who are nearing retirement. Given the current circumstances, diversifying into other asset classes, rather than relying solely on equities, may make more sense now than ever before. Your portfolio managers discuss the outlook for your Fund in light of these broad issues on the following pages. Thank you for your confidence in OppenheimerFunds. 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 July 22, 1996 3 Oppenheimer Bond Fund [Pictures of David Negri, Portfolio Manager, with Mark Frank, Member of Fixed Income Investment Team (top left) and of David Rosenberg, Portfolio Manager (top right)] Q+A An interview with your Fund's managers. Q What is your outlook for the Fund? How has the Fund performed over the past six months? The Fund's performance was very strong compared to other domestic bond funds. During a six month period when many fixed-income investments lost a lot of ground due to rising interest rates, our performance was among the best of funds that focus primarily on domestic bonds.(1) What investments made a positive contribution to performance? The single biggest factor responsible for the Fund's performance over the period was keeping the average maturity of the bonds in our portfolio shorter than many of our competitors. Because shorter average maturities tend to be less sensitive to interest rate changes, as rates began to rise and bond prices started to decline, the portfolio was somewhat insulated. This defensive positioning not only helped our performance overall, but also contributed to the Fund's relative outperformance. Beyond our advantageous positioning in short average maturities, the diversified structure of the portfolio helped the risk-adjusted performance. The Fund's overweight in high yield corporate bonds--currently about 18% of the Fund--was also a significant factor driving performance. Over the last six months high yield bonds--aided by the increase in economic growth- outperformed all other categories of bonds. As rates began to decline, our holdings in high yield bonds helped to offset the declines from other bond sector holdings. The final factor in our strong relative performance was our decision to overweight mortgage-backed securities, relative to Treasuries in the U.S. Government sector. In general, mortgages [Picture of Len Darling] 1. Source: Lipper Analytical Services 6/30/96. This comparison does not take sales charges into account. 4 Oppenheimer Bond Fund [Captions) Facing page Top left: David Negri, Portfolio Manager, with Mark Frank, Member of Fixed Income Investments Team Top right: David Rosenberg, Portfolio Manager Bottom: Len Darling, Executive VP, Director of Fixed Income Investments This page Top: David Negri and Mark Frank Bottom: David Rosenberg with Leslie Falconio and Gina Palmieri, Members of Fixed Income Investments Team [Picture of David Negri and Mark Frank] A The Fund will continue to do well because of its strategic positioning. perform well when interest rates rise because the chance of early prepayment through homeowner refinancing activity diminishes. Over the past six months, mortgages also paid higher income than Treasuries, thus benefiting the Fund.(2) Did any investments negatively impact the portfolio? Not really. The bonds in our portfolio reacted to changes in the fixed-income market as we expected. The Fund's short average maturity and high degree of current income helped to offset the negative price performance of the general bond market. What areas are you currently targeting? We think the economy is relatively healthy, which suggests that many high-yield corporate bonds are worth the increased credit risk. So, we plan to maintain our allocation in that high growth potential sector of the market.(3) Our focus continues to be on companies we expect will grow faster than the economy. Recently, many of the companies that fit this profile have been in the telecommunications, media and cable businesses. In investment-grade bonds, we're focusing on financial services firms, where we expect ongoing consolidations to improve balance sheets and profitability. We're also concentrating on oil- and gas-related businesses, where technology is improving profits. Finally, we continue to favor mortgage-related securities over Treasuries. In particular, we like private label mortgages, which represent loans underwritten by banks rather than the federal government and thus tend to offer higher yields than U.S. government-backed securities. Private label mortgages are an attractive investment because they are benefiting from the improvement in the U.S. commercial real estate market. What is your outlook for the Fund? Because of its strategic positioning, we think the Fund will continue to do well. Currently, we expect that economic growth in the U.S. will continue, though it may not necessarily accelerate. With this economic outlook, we will continue to position the portfolio around income opportunities and avoid taking on unnecessary interest rate risk. [solid box] [Picture of David Rosenberg with Leslie Falconio and Gina Palmieri] 2. The Fund's portfolio is subject to change. 3. Investors in high yield bonds are subject to a greater risk that the issuer will default in its principal or interest payments. 5 Oppenheimer Bond Fund Financials Contents Statement of Investments 7 Statement of Assets and Liabilities 15 Statement of Operations 16 Statements of Changes in Net Assets 17 Financial Highlights 18 Notes to Financial Statements 19 6 Oppenheimer Bond Fund Statement of Investments June 30, 1996 (Unaudited)
Face Market Value Amount(1) See Note 1 =================================================================================================================================== Mortgage-Backed Obligations--34.1% - ---------------------------------------------------------------------------------------------------------------------------------- Government Agency--26.6% - ---------------------------------------------------------------------------------------------------------------------------------- FHLMC/FNMA/Sponsored--20.2% Federal Home Loan Mortgage Corp.: Certificates of Participation, 9%, 3/1/17 $ 598,020 $ 628,316 Certificates of Participation, Series 17-039, 13.50%, 11/1/10 67,157 79,370 Certificates of Participation, Series 17-094, 12.50%, 4/1/14 35,879 41,587 Collateralized Mtg. Obligations, Series 1548, Cl. C, 7%, 4/15/21 4,000,000 3,787,480 Gtd. Multiclass Mtg. Participation Certificates, Series 1460, Cl. H, 7%, 5/15/07 1,500,000 1,497,180 ---------------------------------------------------------------------------------------------------- Federal National Mortgage Assn.: 11%, 7/1/16 6,130,048 6,810,101 7%, 1/1/09 388,681 385,358 7%, 11/1/25 4,855,001 4,672,162 7%, 2/1/09 381,802 378,538 7.50%, 2/1/08 308,288 310,811 7.50%, 3/1/08 466,924 470,744 8%, 7/1/26(2) 10,000,000 10,075,000 Gtd. Mtg. Pass-Through Certificates, 8%, 8/1/17 743,801 763,892 ---------------------------------------------------------------------------------------------------- Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates: Series 1991-170, Cl. E, 8%, 12/25/06 2,500,000 2,604,675 Series 1992-169, Cl. L, 7%, 9/25/22 5,965,000 5,506,411 Interest-Only Stripped Mtg.-Backed Security, Trust 240, Cl. 2, 10.955%--14.895%, 9/1/23(3) 22,206,099 7,647,225 ----------- 45,658,850 - ---------------------------------------------------------------------------------------------------------------------------------- GNMA/Guaranteed--6.4% Government National Mortgage Assn.: 6%, 7/15/26(2) 4,000,000 3,967,500 6%, 7/20/25 1,913,494 1,897,948 7%, 7/15/09--5/15/26 5,423,673 5,216,025 8%, 6/15/05--10/15/06 1,995,209 2,051,731 9%, 2/15/09--6/15/09 540,322 573,966 10%, 11/15/09 300,733 330,819 10.50%, 12/15/17--5/15/21 353,122 389,844 12%, 1/15/99 73,389 42,544 12.75%, 6/15/15 4,114 4,839 13%, 12/15/14 40,455 47,573 ----------- 14,522,789 - ---------------------------------------------------------------------------------------------------------------------------------- Private--7.5% - ---------------------------------------------------------------------------------------------------------------------------------- Commercial--5.0% CMC Securities Corp. I, Collateralized Mtg. Obligation, Series 1993-D, Cl. D-3, 10%, 7/25/23(4) 678,860 708,985 ---------------------------------------------------------------------------------------------------- DLJ Mortgage Acceptance Corp., Sub. Collateralized Mtg. Obligations, Series X-Q13B, Cl. 3B1, 8.75%, 11/25/24 1,711,948 1,645,075 ---------------------------------------------------------------------------------------------------- FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates, Series 1994-C1: Cl. 2-D, 8.70%, 9/25/25(4) 1,000,000 1,033,125 Cl. 2-E, 8.70%, 9/25/25(4) 1,000,000 1,024,687 ---------------------------------------------------------------------------------------------------- Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates, Series 1996-C1: Cl. D-1, 7.51%, 2/15/06(4)(5) 1,000,000 951,250 Cl. E, 7.51%, 2/1/28(4)(5) 1,100,000 860,063 ---------------------------------------------------------------------------------------------------- Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates: Series 1993-C1, Cl. B, 8.75%, 5/25/24 700,000 718,375 7 Oppenheimer Bond Fund Statement of Investments (Unaudited) (Continued) Face Market Value Amount(1) See Note 1 =================================================================================================================================== Commercial Series 1994-C1, Cl. C, 8%, 6/25/26 $1,500,000 $ 1,505,625 (continued) Series 1995-C1, Cl. D, 6.90%, 2/25/27 2,500,000 2,271,094 ---------------------------------------------------------------------------------------------------- Salomon Brothers Mortgage Securities VII, Series 1996-C1, Cl. E, 9.18%, 1/20/06 700,000 597,625 ---------- 11,315,904 - ---------------------------------------------------------------------------------------------------------------------------------- Manufactured Housing--0.1% Green Tree Financial Corp., Series 1994-6. Cl. A3, 7.70%, 1/15/20 250,000 254,295 - ---------------------------------------------------------------------------------------------------------------------------------- Multi-Family--0.3% Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates: Series 1991-M5, Cl. A, 9%, 3/25/17 668,456 687,675 Series 1991-M6, Cl. B4, 7.145%, 6/25/21(5) 76,002 73,247 ---------- 760,922 - ---------------------------------------------------------------------------------------------------------------------------------- Other--0.9% GE Capital Mortgage Services, Inc., Series 1994-14, Cl. A1, 6.50%, 4/25/24 118,225 117,671 ---------------------------------------------------------------------------------------------------- JHM Mtg. Acceptance Corp., 8.96% Collateralized Mtg. Obligation Bonds, Series E, Cl. 5, 4/1/19 1,690,483 1,744,359 ---------------------------------------------------------------------------------------------------- Salomon Brothers Mortgage Securities VI: Interest-Only Stripped Mtg.-Backed Security, Series 1987-3, Cl. B, 2.101%, 10/23/17(3) 148,684 38,379 Principal-Only Stripped Mtg.-Backed Security, Series 1987-3, Cl. A, Zero Coupon, 8.903%, 10/23/17(6) 216,798 143,900 ---------- 2,044,309 - ---------------------------------------------------------------------------------------------------------------------------------- Residential--1.2% Mortgage Capital Funding, Inc., Multifamily Mortgage Pass-Through Certificates, Series 1996-MC1, Cl. G, 7.15%, 6/15/06(2)(4) 2,250,000 1,681,875 ---------------------------------------------------------------------------------------------------- Residential Funding Corp., Mtg. Pass-Through Certificates, Series 1993-S10, Cl. A9, 8.50%, 2/25/23 692,214 701,296 ---------------------------------------------------------------------------------------------------- Ryland Mortgage Securities Corp. III, Sub. Bonds, Series 1992-A, Cl. 1A, 7.17%, 3/29/30(5) 397,597 394,989 ---------- 2,778,160 ---------- Total Mortgage-Backed Obligations (Cost $77,441,849) 77,335,229 ================================================================================================================================== U.S. Government Obligations--16.5% - ---------------------------------------------------------------------------------------------------------------------------------- U.S. Treasury Bonds: 11.625%, 11/15/02 2,600,000 3,274,375 11.625%, 11/15/04 5,500,000 7,215,313 8.75%, 5/15/20 5,000,000 5,976,559 8.875%, 8/15/17 7,500,000 9,002,339 ---------------------------------------------------------------------------------------------------- U.S. Treasury Nts.: 6.75%, 6/30/99 3,350,000 3,390,826 7.375%, 2/15/98 3,400,000 3,461,625 7.75%, 1/31/00 1,800,000 1,877,061 7.75%, 12/31/99 2,950,000 3,075,375 Total U.S. Government Obligations (Cost $38,563,844) 37,273,473 ---------- ================================================================================================================================== Foreign Government Obligations--0.5% - ---------------------------------------------------------------------------------------------------------------------------------- Colombia (Republic of) Nts., Empresa Colombiana de Petroleos, 7.25%, 7/8/98 250,000 249,375 ---------------------------------------------------------------------------------------------------- International Bank for Reconstruction & Development Bonds, 12.50%, 7/25/97 NZD 800,000 563,843 ---------------------------------------------------------------------------------------------------- New Zealand (Republic of) Bonds, 10%, 7/15/97 NZD 390,000 268,397 ---------- Total Foreign Government Obligations (Cost $1,015,978) 1,081,615 8 Oppenheimer Bond Fund Face Market Value Amount(1) See Note 1 ================================================================================================================================== Loan Participation--0.3% - ---------------------------------------------------------------------------------------------------------------------------------- Pulsar Internacional SA de CV, 11.80% Nts., 9/19/96 (Cost $750,000)(7) $ 750,000 $ 753,750 ================================================================================================================================== Corporate Bonds and Notes--53.5% - ---------------------------------------------------------------------------------------------------------------------------------- Basic Industry--3.8% - ---------------------------------------------------------------------------------------------------------------------------------- Chemicals--1.4% Burmah Castrol PLC, 7% Gtd. Medium-Term Nts., 12/15/97 500,000 505,745 ---------------------------------------------------------------------------------------------------- FMC Corp., 8.75% Sr. Nts., 4/1/99 250,000 261,305 ---------------------------------------------------------------------------------------------------- Lyondell Petrochemical Co., 8.25% Nts., 3/15/97 400,000 405,442 ---------------------------------------------------------------------------------------------------- NL Industries, Inc., 0%/13% Sr. Sec. Disc. Nts., 10/15/05(8) 500,000 392,500 ---------------------------------------------------------------------------------------------------- Quantum Chemical Corp., 10.375% First Mtg. Nts., 6/1/03 900,000 988,248 ---------------------------------------------------------------------------------------------------- Rohm & Haas Co., 9.50% Debs., 4/1/21 500,000 560,307 ---------- 3,113,547 - ---------------------------------------------------------------------------------------------------------------------------------- Metals/Mining--1.7% AMAX, Inc., 9.875% Nts., 6/13/01 1,000,000 1,082,838 - ---------------------------------------------------------------------------------------------------------------------------------- Newmont Mining Corp., 8.625% Nts., 4/1/02 1,000,000 1,050,217 ---------------------------------------------------------------------------------------------------- Teck Corp., 8.70% Debs., 5/1/02 1,500,000 1,603,402 ----------- 3,736,457 - ---------------------------------------------------------------------------------------------------------------------------------- Paper--0.7% - ---------------------------------------------------------------------------------------------------------------------------------- Celulosa Arauco y Constitucion SA, 7.25% Debs., 6/11/98 350,000 352,625 ---------------------------------------------------------------------------------------------------- Georgia-Pacific Corp., 9.85% Credit Sensitive Nts., 6/15/97 300,000 309,956 ---------------------------------------------------------------------------------------------------- Repap Wisconsin, Inc., 9.25% First Priority Sr. Sec. Nts., 2/1/02 500,000 473,750 ---------------------------------------------------------------------------------------------------- Scotia Pacific Holding Co., 7.95% Timber Collateralized Nts., 7/20/15 443,818 436,660 ---------- 1,572,991 - ---------------------------------------------------------------------------------------------------------------------------------- Consumer Related--6.2% - ---------------------------------------------------------------------------------------------------------------------------------- Consumer Products--0.7% TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(4) 550,000 576,125 ---------------------------------------------------------------------------------------------------- Toro Co. (The), 11% Debs., 8/1/17 1,000,000 1,064,321 ---------- 1,640,446 - ---------------------------------------------------------------------------------------------------------------------------------- Food/Beverages/Tobacco--0.7% B.A.T. Capital Corp., 6.66% Medium-Term Nts., 3/22/00(4) 250,000 247,175 ---------------------------------------------------------------------------------------------------- ConAgra, Inc.: 7.40% Sub. Nts., 9/15/04 250,000 246,580 9.75% Sr. Nts., 11/1/97 500,000 520,772 ---------------------------------------------------------------------------------------------------- Nabisco, Inc., 8% Nts., 1/15/00 325,000 336,484 ---------------------------------------------------------------------------------------------------- Philip Morris Cos., Inc., 8.75% Debs., 12/1/96 300,000 303,453 ---------- 1,654,464 - ---------------------------------------------------------------------------------------------------------------------------------- Healthcare--2.3% Grace (W.R.) & Co., 7.25% Medium-Term Nts., 7/15/97 2,000,000 2,014,772 ---------------------------------------------------------------------------------------------------- HEALTHSOUTH Corp., 9.50% Sr. Sub. Nts., 4/1/01 500,000 518,125 ---------------------------------------------------------------------------------------------------- Imcera Group, Inc., 6% Nts., 10/15/03 500,000 467,978 ---------------------------------------------------------------------------------------------------- R.P. Scherer Corp., 6.75% Sr. Nts., 2/1/04 500,000 478,125 ---------------------------------------------------------------------------------------------------- Service Corp. International, 7% Sr. Nts., 6/1/15 1,000,000 1,005,662 ---------------------------------------------------------------------------------------------------- Total Renal Care, Inc., 0%/12% Sr. Sub. Disc. Nts., 8/15/04(8) 649,000 636,020 ---------- 5,120,682 9 Oppenheimer Bond Fund Statement of Investments (Unaudited) (Continued) Face Market Value Amount(1) See Note 1 =================================================================================================================================== Hotel/Gaming--1.0% Grand Casinos, Inc., 10.125% Gtd. First Mtg. Nts., 12/1/03 $ 750,000 $ 776,250 ----------------------------------------------------------------------------------------------------- HMC Acquisition Properties, Inc., 9% Sr. Nts., 12/15/07 800,000 738,000 ----------------------------------------------------------------------------------------------------- Trump Atlantic City Associates/Trump Atlantic City Funding, Inc., 11.25% First Mtg. Nts., 5/1/06 750,000 757,500 ---------- 2,271,750 - ----------------------------------------------------------------------------------------------------------------------------------- Restaurants--1.0% Foodmaker, Inc., 9.25% Sr. Nts., 3/1/99 1,000,000 987,500 9.75% Sr. Sub. Nts., 6/1/02 1,250,000 1,206,250 ---------- 2,193,750 - ----------------------------------------------------------------------------------------------------------------------------------- Textile/Apparel--0.5% Clark-Schwebel, Inc., 10.50% Sr. Nts., 4/15/06(4) 650,000 666,250 ----------------------------------------------------------------------------------------------------- Fruit of the Loom, Inc., 7% Debs., 3/15/11 500,000 449,138 ---------- 1,115,388 - ----------------------------------------------------------------------------------------------------------------------------------- Energy--4.2% - ----------------------------------------------------------------------------------------------------------------------------------- Coastal Corp., 8.75% Sr. Nts., 5/15/99 325,000 341,797 ----------------------------------------------------------------------------------------------------- Enron Corp., 8.10% Nts., 12/15/96 1,500,000 1,514,541 ----------------------------------------------------------------------------------------------------- McDermott, Inc., 9.375% Nts., 3/15/02 100,000 106,512 ----------------------------------------------------------------------------------------------------- Mesa Operating Co., 10.625% Gtd. Sr. Sub. Nts., 7/1/06(2) 1,240,000 1,259,375 ----------------------------------------------------------------------------------------------------- Occidental Petroleum Corp., 11.125% Sr. Debs., 6/1/19 2,000,000 2,305,866 ----------------------------------------------------------------------------------------------------- Petroleum Heat & Power Co., Inc., 9.375% Sub. Debs., 2/1/06 750,000 708,750 ----------------------------------------------------------------------------------------------------- Phillips Petroleum Co., 7.53% Pass-Through Certificates, Series 1994--A1, 9/27/98 388,735 393,517 ----------------------------------------------------------------------------------------------------- Southwest Gas Corp., 9.75% Debs., Series F, 6/15/02 275,000 302,310 ----------------------------------------------------------------------------------------------------- TransCanada PipeLines Ltd., 9.875% Debs., 1/1/21 1,500,000 1,841,400 ----------------------------------------------------------------------------------------------------- Transcontinental Gas Pipeline Corp., 9% Debs., 11/15/96 150,000 151,703 ----------------------------------------------------------------------------------------------------- United Meridian Corp., 10.375% Sr. Sub. Nts., 10/15/05 500,000 514,375 ---------- 9,440,146 - ----------------------------------------------------------------------------------------------------------------------------------- Financial Services--13.2% - ----------------------------------------------------------------------------------------------------------------------------------- Banks & Thrifts--2.6% BankAmerica Corp., 7.50% Sr. Nts., 3/15/97 200,000 202,120 ----------------------------------------------------------------------------------------------------- Banque Nationale de Paris, 9.875% Debs., 5/25/98 205,000 215,260 ----------------------------------------------------------------------------------------------------- Chase Manhattan Corp. (New), 6.625% Sr. Nts., 1/15/98 25,000 25,105 ----------------------------------------------------------------------------------------------------- First Fidelity Bancorporation, 8.50% Sub. Capital Nts., 4/1/98 325,000 335,665 ----------------------------------------------------------------------------------------------------- First Nationwide (Parent) Holdings, Inc., 12.50% Sr. Nts., 4/15/03 900,000 942,750 ----------------------------------------------------------------------------------------------------- First Nationwide Holdings, Inc., 9.125% Sr. Sub. Nts., 1/15/03 1,000,000 965,000 ----------------------------------------------------------------------------------------------------- First Union Corp., 6.75% Sr. Nts., 1/15/98 325,000 327,183 ----------------------------------------------------------------------------------------------------- Mellon Financial Bank Corp., 6.50% Gtd. Sr. Nts., 12/1/97 325,000 326,098 ----------------------------------------------------------------------------------------------------- National Westminster Bank PLC, 9.375% Gtd. Capital Nts., 11/15/03 70,000 78,951 ----------------------------------------------------------------------------------------------------- Royal Bank of Scotland Group (The) PLC, 10.125% Sub. Gtd. Capital Nts., 3/1/04 500,000 578,500 ----------------------------------------------------------------------------------------------------- Security Pacific Corp., 7.75% Nts., 12/1/96 325,000 327,549 ----------------------------------------------------------------------------------------------------- Westpac Banking Corp., 9.125% Sub. Debs., 8/15/01 1,500,000 1,637,121 ---------- 5,961,302 10 Oppenheimer Bond Fund Face Market Value Amount(1) See Note 1 =================================================================================================================================== Diversified Financial--8.3% American Car Line Co., 8.25% Equipment Trust Certificates, Series 1993-A, 4/15/08 $ 228,000 $ 230,763 ----------------------------------------------------------------------------------------------------- American General Finance Corp., 8.50% Sr. Nts., 8/15/98 300,000 312,419 ----------------------------------------------------------------------------------------------------- Associates Corp. of North America, 7.40% Medium-Term Nts., 7/7/99 300,000 306,809 ----------------------------------------------------------------------------------------------------- AVCO Financial Services Asia Ltd., 5.875% Sr. Nts., 10/15/97 500,000 498,162 ----------------------------------------------------------------------------------------------------- Beneficial Corp., 12.875% Debs., 8/1/13 20,000 23,258 ---------------------------------------------------------------------------------------------------- BHP Finance (USA) Ltd., 8.50% Gtd. Debs., 12/1/12 1,500,000 1,640,089 ----------------------------------------------------------------------------------------------------- Countrywide Funding Corp., 6.57% Gtd. Medium-Term Nts., Series A, 8/4/97 300,000 301,281 ----------------------------------------------------------------------------------------------------- Enterprise Rent-A-Car USA Finance Co., 7.875% Nts., 3/15/98(4) 1,500,000 1,535,151 ----------------------------------------------------------------------------------------------------- Ford Motor Credit Co., 9.90% Medium-Term Nts., 11/6/97 2,000,000 2,041,786 ----------------------------------------------------------------------------------------------------- General Motors Acceptance Corp., 5.65% Medium-Term Nts., 12/15/97 500,000 495,788 ----------------------------------------------------------------------------------------------------- Golden West Financial Corp., 8.625% Sub. Nts., 8/30/98 325,000 338,110 ----------------------------------------------------------------------------------------------------- Grand Metropolitan PLC, 8.125% Gtd. Nts., 8/15/96 325,000 325,938 ----------------------------------------------------------------------------------------------------- Household Finance Corp. Ltd., 6% Gtd. Sr. Nts., 6/30/98 250,000 247,286 ----------------------------------------------------------------------------------------------------- Household International, BV, 6% Gtd. Sr. Nts., 3/15/99 250,000 245,352 ----------------------------------------------------------------------------------------------------- Leucadia National Corp., 7.75% Sr. Nts., 8/15/13 2,000,000 1,838,786 ----------------------------------------------------------------------------------------------------- Midland American Capital Corp., 12.75% Gtd. Nts., 11/15/03 205,000 231,069 ----------------------------------------------------------------------------------------------------- NationsBank Corp., 10.20% Sub. Nts., 7/15/15 1,300,000 1,609,695 ----------------------------------------------------------------------------------------------------- Norwest Financial, Inc., 6.50% Sr. Nts., 11/15/97 325,000 326,285 ----------------------------------------------------------------------------------------------------- Penske Truck Leasing Co. LP, 7.75% Sr. Nts., 5/15/99 1,825,000 1,882,801 ----------------------------------------------------------------------------------------------------- Ryder System, Inc., 8.75% Debs., Series J, 3/15/17 1,600,000 1,656,952 ----------------------------------------------------------------------------------------------------- Source One Mortgage Services Corp., 9% Debs., 6/1/12 1,250,000 1,301,391 ----------------------------------------------------------------------------------------------------- SunAmerica, Inc., 9% Sr. Nts., 1/15/99 370,000 388,468 ---------------------------------------------------------------------------------------------------- TransAmerican Financial Corp., 7.42% Medium-Term Nts., 2/9/98 500,000 508,075 ----------------------------------------------------------------------------------------------------- U.S. Leasing International, 7% Nts., 11/1/97 500,000 504,757 ----------- 18,790,471 - ----------------------------------------------------------------------------------------------------------------------------------- Insurance--2.3% Aetna Life & Casualty Co., 8% Debs., 1/15/17 1,000,000 962,063 ----------------------------------------------------------------------------------------------------- Capital Holding Corp., 8.75% Debs., 1/15/17 1,200,000 1,259,160 ----------------------------------------------------------------------------------------------------- Torchmark Corp., 7.875% Nts., 5/15/23 3,000,000 2,906,418 ----------- 5,127,641 - ----------------------------------------------------------------------------------------------------------------------------------- Housing Related--0.5% - ----------------------------------------------------------------------------------------------------------------------------------- Homebuilders/ Saul (B.F.) Real Estate Investment Trust, Real Estate--0.5% 11.625% Sr. Sec. Nts., Series B, 4/1/02 1,125,000 1,158,750 - ----------------------------------------------------------------------------------------------------------------------------------- Manufacturing--6.3% - ----------------------------------------------------------------------------------------------------------------------------------- Aerospace/Electronics/ Boeing Co., 7.50% Debs., 8/15/42 2,000,000 1,966,750 Computers--3.2% ----------------------------------------------------------------------------------------------------- British Aerospace PLC, 8% Debs., 5/27/97 300,000 304,125 ----------------------------------------------------------------------------------------------------- Communications & Power Industries, Inc., 12% Sr. Sub. Nts., 8/1/05 500,000 531,250 ----------------------------------------------------------------------------------------------------- General Electric Capital Corp., 8.75% Debs., 5/21/07 1,000,000 1,112,245 ----------------------------------------------------------------------------------------------------- McDonnell Douglas Corp., 9.25% Nts., 4/1/02 1,500,000 1,654,162 ----------------------------------------------------------------------------------------------------- Rolls-Royce Capital, Inc., 7.125% Gtd. Nts., 7/29/03 1,000,000 980,625 ----------------------------------------------------------------------------------------------------- Tracor, Inc., 10.875% Sr. Sub. Nts., 8/15/01 500,000 535,000 ----------------------------------------------------------------------------------------------------- Xerox Corp., 9.20% Debs., 7/15/99 270,000 270,000 ----------- 7,354,157 11 Oppenheimer Bond Fund Statement of Investments (Unaudited) (Continued) Face Market Value Amount(1) See Note 1 =================================================================================================================================== Automotive--1.2% Chrysler Corp., 10.95% Debs., 8/1/17 $ 200,000 $ 219,230 ----------------------------------------------------------------------------------------------------- Ford Motor Co., 6.27% Pass-Through Certificates, 1/2/00 283,890 283,891 ----------------------------------------------------------------------------------------------------- Ford Motor Co., 8.875% Debs., 11/15/22 2,000,000 2,123,896 ----------- 2,627,017 - ----------------------------------------------------------------------------------------------------------------------------------- Capital Goods--1.9% Caterpillar, Inc., 9.75% Debs., 6/1/19 1,750,000 1,911,189 ----------------------------------------------------------------------------------------------------- Tenneco, Inc., 10% Debs., 8/1/98 375,000 399,502 ----------------------------------------------------------------------------------------------------- Thomas & Betts Corp., 8.25% Sr. Nts., 1/15/04 1,000,000 1,040,472 ----------------------------------------------------------------------------------------------------- Westinghouse Electric Corp., 8.375% Nts., 6/15/02 1,000,000 991,877 ----------- 4,343,040 - ----------------------------------------------------------------------------------------------------------------------------------- Media--5.1% - ----------------------------------------------------------------------------------------------------------------------------------- Broadcasting--2.1% American Radio Systems Corp., 9% Sr. Sub. Nts., 2/1/06 700,000 665,000 ----------------------------------------------------------------------------------------------------- Argyle Television, Inc., 9.75% Sr. Sub. Nts., 11/1/05 750,000 706,875 ----------------------------------------------------------------------------------------------------- Paxson Communications Corp., 11.625% Sr. Sub. Nts., 10/1/02 750,000 783,750 ----------------------------------------------------------------------------------------------------- Sinclair Broadcast Group, Inc., 10% Sr. Sub. Nts., 9/30/05 500,000 487,500 ----------------------------------------------------------------------------------------------------- Tele-Communications, Inc., 5.28% Medium-Term Nts., 8/20/96 1,315,000 1,314,148 ----------------------------------------------------------------------------------------------------- Young Broadcasting, Inc., 9% Sr. Sub. Nts., 1/15/06 1,000,000 895,000 ----------- 4,852,273 - ----------------------------------------------------------------------------------------------------------------------------------- Cable Television--1.8% EchoStar Communications Corp., 0%/12.875% Sr. Disc. Nts., 6/1/04(8) 1,000,000 730,000 ----------------------------------------------------------------------------------------------------- International CableTel, Inc., 0%/11.50% Sr. Deferred Coupon Nts., Series A, 2/1/06(8) 1,000,000 565,000 ----------------------------------------------------------------------------------------------------- Rogers Cablesystems Ltd., 10% Sr. Sec. Second Priority Debs., 12/1/07 1,000,000 977,500 ----------------------------------------------------------------------------------------------------- TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 1,000,000 1,113,348 ----------------------------------------------------------------------------------------------------- United International Holdings, Inc., Zero Coupon Sr. Sec. Disc. Nts., 12.434%, 11/15/99(9) 1,000,000 660,000 ----------- 4,045,848 - ----------------------------------------------------------------------------------------------------------------------------------- Diversified Media--1.0% Heritage Media Corp., 8.75% Sr. Sub. Nts., 2/15/06 500,000 467,500 ----------------------------------------------------------------------------------------------------- Panamsat LP/Panamsat Capital Corp., 0%/11.375% Sr. Sub. Disc. Nts., 8/1/03(8) 1,500,000 1,312,500 ----------------------------------------------------------------------------------------------------- Time Warner, Inc., 7.45% Nts., 2/1/98 500,000 503,104 ----------- 2,283,104 - ----------------------------------------------------------------------------------------------------------------------------------- Entertainment/Film--0.1% Blockbuster Entertainment Group, 6.625% Sr. Nts., 2/15/98 250,000 249,860 - ----------------------------------------------------------------------------------------------------------------------------------- Publishing/Printing--0.1% Reed Publishing (USA), Inc., 7.24% Gtd. Medium-Term Nts., 2/10/97 250,000 251,820 - ----------------------------------------------------------------------------------------------------------------------------------- Retail--2.0% - ----------------------------------------------------------------------------------------------------------------------------------- Auto Parts Distribution--0.1% First Brands Corp., 9.125% Sr. Sub. Nts., 4/1/99 265,000 267,650 - ----------------------------------------------------------------------------------------------------------------------------------- Department Stores--0.2% Sears Canada, Inc., 11.70% Debs., 7/10/00 CAD 500,000 416,906 - ----------------------------------------------------------------------------------------------------------------------------------- Drug Stores--0.3% Hook-SupeRx, Inc., 10.125% Sr. Nts., 6/1/02 400,000 427,513 ----------------------------------------------------------------------------------------------------- Sears Roebuck & Co., 8.39% Medium-Term Nts., 3/23/99 300,000 313,218 ----------- 740,731 - ----------------------------------------------------------------------------------------------------------------------------------- Specialty Retailing--0.3% May Department Stores Cos.: 10.625% Debs., 11/1/10 405,000 509,040 9.875% Debs., 6/1/17 250,000 264,163 ----------- 773,203 12 Oppenheimer Bond Fund Face Market Value Amount(1) See Note 1 =================================================================================================================================== Supermarkets--1.1% Grand Union Co., 12% Sr. Nts., 9/1/04 $ 1,150,000 $ 1,079,562 ----------------------------------------------------------------------------------------------------- Kroger Co., 8.50% Sr. Sec. Debs., 6/15/03 1,000,000 1,010,000 ----------------------------------------------------------------------------------------------------- Penn Traffic Co., 10.25% Sr. Nts., 2/15/02 500,000 457,500 ----------- 2,547,062 - ----------------------------------------------------------------------------------------------------------------------------------- Transportation--1.6% - ----------------------------------------------------------------------------------------------------------------------------------- Air Transportation--0.7% Atlas Air, Inc., 12.25% Pass-Through Certificates, 12/1/02 1,000,000 1,092,500 ----------------------------------------------------------------------------------------------------- Southwest Airlines Co., 9.25% Debs., 2/15/98 500,000 521,325 ----------- 1,613,825 - ----------------------------------------------------------------------------------------------------------------------------------- Railroads--0.9% Canadian Pacific Ltd., 9.45% Debs., 8/1/21 1,000,000 1,147,400 ----------------------------------------------------------------------------------------------------- Transtar Holdings LP/Transtar Capital Corp., 0%/13.375% Sr. Disc. Nts., Series B, 12/15/03(8) 1,100,000 759,000 ----------------------------------------------------------------------------------------------------- Union Pacific Corp., 9.65% Medium-Term Nts., 4/17/00 100,000 108,878 ----------- 2,015,278 - ----------------------------------------------------------------------------------------------------------------------------------- Utilities--10.6% - ----------------------------------------------------------------------------------------------------------------------------------- Electric Utilities--3.4% Arkla, Inc., 9.875% Nts., 4/15/97 505,000 518,646 ----------------------------------------------------------------------------------------------------- Centragas Natural Gas Transmission System, 10.65% Sec. Sr. Bonds, 12/1/10(4) 2,413,170 2,491,599 ----------------------------------------------------------------------------------------------------- Commonwealth Edison Co., 6.50% Nts., 7/15/97 225,000 224,473 ----------------------------------------------------------------------------------------------------- Consumers Power Co., 8.75% Mtg. Nts., 2/15/98 250,000 256,967 ----------------------------------------------------------------------------------------------------- El Paso Electric Co., 9.40% First Mtg. Bonds, Series E, 5/1/11 1,000,000 997,500 ----------------------------------------------------------------------------------------------------- First PV Funding Corp., 10.15% Lease Obligation Bonds, Series 1986B, 1/15/16 500,000 526,250 ----------------------------------------------------------------------------------------------------- Florida Gas Transmission Environmental Corp., 7.75% Sr. Nts., 11/1/97(4) 500,000 508,469 ----------------------------------------------------------------------------------------------------- MidAmerican Energy Co., 6.25% Mtg. Nts., 2/1/98 500,000 499,178 ----------------------------------------------------------------------------------------------------- Public Service Co. of Colorado, 8.75% First Mtg. Bonds, 3/1/22 250,000 264,166 ----------------------------------------------------------------------------------------------------- Tenaga Nasional Berhad, 7.875% Nts., 6/15/04(4) 1,000,000 1,040,875 ----------------------------------------------------------------------------------------------------- Union Gas Ltd., 13% Debs., 6/30/03 CAD 572,000 464,094 ----------- 7,792,217 - ----------------------------------------------------------------------------------------------------------------------------------- Telecommunications--7.2% A+ Network, Inc., 11.875% Sr. Sub. Nts., 11/1/05 1,000,000 1,040,000 ----------------------------------------------------------------------------------------------------- Allbritton Communications Co., 11.50% Sr. Sub. Debs., 8/15/04 875,000 894,687 ----------------------------------------------------------------------------------------------------- American Communications Services, Inc.: 0%/12.75% Sr. Disc. Nts., 4/1/06(8) 500,000 262,500 0%/13% Sr. Disc. Nts., 11/1/05(8) 300,000 168,000 ----------------------------------------------------------------------------------------------------- Cellular Communications International, Inc., Zero Coupon Sr. Disc. Nts., 11.401%, 8/15/00(9) 1,700,000 1,062,500 ----------------------------------------------------------------------------------------------------- GST Telecommunications, Inc., 0%/13.875% Cv. Sr. Sub. Disc. Nts., 12/15/05(4)(8) 100,000 99,125 ----------------------------------------------------------------------------------------------------- GST USA, Inc., 0%/13.875% Bonds, 12/15/05(8) 800,000 464,000 ----------------------------------------------------------------------------------------------------- GTE Corp., 8.85% Debs., 3/1/98 300,000 311,343 ----------------------------------------------------------------------------------------------------- Horizon Cellular Telephone LP/Horizon Finance Corp., 0%/11.375% Sr. Sub. Disc. Nts., 10/1/00(8) 1,250,000 1,178,125 ----------------------------------------------------------------------------------------------------- IntelCom Group (USA), Inc.: 0%/12.50% Gtd. Sr. Disc. Nts., 5/1/06(4)(8) 735,000 402,413 0%/13.50% Sr. Disc. Nts., 9/15/05(8) 600,000 361,500 ----------------------------------------------------------------------------------------------------- MFS Communications Co., Inc.: 0%/8.875% Sr. Disc. Nts., 1/15/06(8) 2,000,000 1,215,000 0%/9.375% Sr. Disc. Nts., 1/15/04(8) 350,000 266,000 13 Oppenheimer Bond Fund Statement of Investments (Unaudited) (Continued) Face Market Value Amount(1) See Note 1 =================================================================================================================================== Telecommunications New York Telephone Co., 9.375% Debs., 7/15/31 $ 2,500,000 $ 2,767,632 (continued) ----------------------------------------------------------------------------------------------------- Pacific Bell, 8.50% Debs., 8/15/31 2,000,000 2,080,144 ----------------------------------------------------------------------------------------------------- PriCellular Wireless Corp., 0%/14% Sr. Sub. Disc. Nts., 11/15/01(8) 1,200,000 1,092,000 ----------------------------------------------------------------------------------------------------- Southern New England Telephone Co., 8.70% Medium-Term Nts., 8/15/31 2,000,000 2,053,304 ----------------------------------------------------------------------------------------------------- Teleport Communications Group, Inc., 0%/11.125% Sr. Disc. Nts., 7/1/07(2)(8) 50,000 29,125 ----------------------------------------------------------------------------------------------------- USA Mobile Communications, Inc. II, 9.50% Sr. Nts., 2/1/04 500,000 465,000 ----------- 16,212,398 ----------- Total Corporate Bonds and Notes (Cost $120,558,893) 121,284,174 Shares =================================================================================================================================== Preferred Stock--0.2% - ----------------------------------------------------------------------------------------------------------------------------------- BankAmerica Corp., 8.375%, Series K (Cost $528,975) 20,300 517,650 Units =================================================================================================================================== Rights, Warrants and Certificates--0.1% - ----------------------------------------------------------------------------------------------------------------------------------- American Communications Services, Inc. Wts., Exp. 11/05(4) 300 30,000 ----------------------------------------------------------------------------------------------------- Cellular Communications International, Inc. Wts., Exp. 8/03 500 7,500 ----------------------------------------------------------------------------------------------------- IntelCom Group, Inc. Wts., Exp. 9/05(4) 1,980 38,115 ----------- Total Rights, Warrants and Certificates (Cost $0) 75,615 Face Amount(1) =================================================================================================================================== Repurchase Agreement--0.9% - ----------------------------------------------------------------------------------------------------------------------------------- Repurchase agreement with First Chicago Capital Markets, 5.45%, dated 6/28/96, to be repurchased at $2,100,954 on 7/1/96, collateralized by U.S. Treasury Bonds, 6.25%--11.25%, 2/15/07--8/15/23, with a value of $1,407,827, and U.S. Treasury Nts., 4.75%--7.875%, 9/30/97--2/15/05 with a value of $734,685 (Cost $2,100,000) $2,100,000 2,100,000 - ----------------------------------------------------------------------------------------------------------------------------------- Total Investments, at Value (Cost $240,959,539) 106.1% 240,421,506 - ----------------------------------------------------------------------------------------------------------------------------------- Liabilities in Excess of Other Assets (6.1) (13,828,127) ----------- ------------ Net Assets 100.0% $226,593,379 =========== ============
1. Face amount is reported in U.S. Dollars, except for those denoted in the following currencies: CAD--Canadian Dollar NZD--New Zealand Dollar 2. When-issued security to be delivered and settled after June 30, 1996. 3. Interest-Only Strips represent the right to receive the monthly interest payments on an underlying pool of mortgage loans. These securities typically decline in price as interest rates decline. Most other fixed-income securities increase in price when interest rates decline. The principal amount of the underlying pool represents the notional amount on which current interest is calculated. The price of these securities is typically more sensitive to changes in prepayment rates than traditional mortgage-backed securities (for example, GNMA pass-throughs). Interest rates disclosed represent current yields based upon the current cost basis and estimated timing and amount of future cash flows. 4. Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $13,895,282 or 6.13% of the Fund's net assets, at June 30, 1996. 5. Represents the current interest rate for a variable rate security. 6. 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. 7. Identifies issues considered to be illiquid--See Note 6 of Notes to Financial Statements. 8. Denotes a step bond: a zero coupon bond that converts to a fixed rate of interest at a designated future date. 9. For zero coupon bonds, the interest rate shown is the effective yield on the date of purchase. See accompanying Notes to Financial Statements. 14 Oppenheimer Bond Fund
Statement of Assets and Liabilities June 30, 1996 (Unaudited) =================================================================================================================================== Assets Investments, at value (cost $240,959,539)--see accompanying statement $240,421,506 ----------------------------------------------------------------------------------------------------- Cash 20,059 ----------------------------------------------------------------------------------------------------- Receivables: Interest, dividends and principal paydowns 3,837,248 Investments sold 838,361 Shares of beneficial interest sold 251,740 ----------------------------------------------------------------------------------------------------- Other 9,406 ----------- Total assets 245,378,320 - ----------------------------------------------------------------------------------------------------------------------------------- Liabilities Payables and other liabilities: Investments purchased (including $16,942,816 purchased on a when-issued basis)--Note 1 17,497,816 Dividends 657,200 Shares of beneficial interest redeemed 407,337 Distribution and service plan fees 136,269 Daily variation on futures contracts--Note 5 46,406 Transfer and shareholder servicing agent fees 10,909 Other 29,004 ----------- Total liabilities 18,784,941 =================================================================================================================================== Net Assets $226,593,379 ============ =================================================================================================================================== Composition of Paid-in capital $230,498,809 Net Assets ----------------------------------------------------------------------------------------------------- Undistributed net investment income 116,937 ----------------------------------------------------------------------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (3,372,204) ----------------------------------------------------------------------------------------------------- Net unrealized depreciation on investments and translation of assets and liabilities denominated in foreign currencies (650,163) ----------- Net assets $226,593,379 =================================================================================================================================== Net Asset Value Class A Shares: Per Share Net asset value and redemption price per share (based on net assets of $185,953,610 and 17,713,731 shares of beneficial interest outstanding) $10.50 Maximum offering price per share (net asset value plus sales charge of 4.75% of offering price) $11.02 ----------------------------------------------------------------------------------------------------- Class B Shares: Net asset value, redemption price and offering price per share (based on net assets of $37,353,716 and 3,559,164 shares of beneficial interest outstanding) $10.50 ----------------------------------------------------------------------------------------------------- Class C Shares: Net asset value, redemption price and offering price per share (based on net assets of $3,286,053 and 312,817 shares of beneficial interest outstanding) $10.50 See accompanying Notes to Financial Statements. 15 Oppenheimer Bond Fund Statement of Operations For the Six Months Ended June 30, 1996 (Unaudited) =================================================================================================================================== Investment Income Interest (net of foreign withholding taxes of $1,379) $ 9,065,473 ----------------------------------------------------------------------------------------------------- Dividends 21,251 ----------- Total income 9,086,724 =================================================================================================================================== Expenses Management fees--Note 4 792,003 ----------------------------------------------------------------------------------------------------- Distribution and service plan fees--Note 4: Class A 210,922 Class B 190,591 Class C 15,113 ----------------------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees--Note 4 167,434 ----------------------------------------------------------------------------------------------------- Shareholder reports 78,844 ----------------------------------------------------------------------------------------------------- Custodian fees and expenses 28,634 ----------------------------------------------------------------------------------------------------- Legal and auditing fees 8,377 ----------------------------------------------------------------------------------------------------- Insurance expenses 3,724 ----------------------------------------------------------------------------------------------------- Trustees' fees and expenses 3,146 ----------------------------------------------------------------------------------------------------- Other 10,066 ----------- Total expenses 1,508,854 =================================================================================================================================== Net Investment Income 7,577,870 =================================================================================================================================== Realized and Net realized gain (loss) on: Unrealized Gain (Loss) Investments 713,084 Closing of futures contracts 69,829 Foreign currency transactions (25,772) ----------- Net realized gain 757,141 ----------------------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation on: Investments (10,067,208) Translation of assets and liabilities denominated in foreign currencies 72,109 ----------- Net change (9,995,099) ----------- Net realized and unrealized loss (9,237,958) =================================================================================================================================== Net Decrease in Net Assets Resulting From Operations $(1,660,088) ===========
See accompanying Notes to Financial Statements. 16 Oppenheimer Bond Fund Statements of Changes in Net Assets
Six Months Ended Year Ended June 30, 1996 December 31 (Unaudited) 1995 =================================================================================================================================== Operations Net investment income $ 7,577,870 $ 8,346,267 ----------------------------------------------------------------------------------------------------- Net realized gain (loss) 757,141 (300,777) ----------------------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation (9,995,099) 12,065,900 ----------- ----------- Net increase (decrease) in net assets resulting from operations (1,660,088) 20,111,390 =================================================================================================================================== Dividends and Distributions Dividends from net investment income: To Shareholders Class A (6,232,922) (7,564,945) Class B (1,245,326) (751,223) Class C (99,622) (29,746) =================================================================================================================================== Beneficial Interest Net increase (decrease) in net assets resulting from beneficial Transactions interest transactions--Note 2: Class A 24,280,014 61,827,603 Class B (105,240) 34,622,947 Class C (560,731) 3,910,520 =================================================================================================================================== Net Assets Total increase 14,376,085 112,126,546 ----------------------------------------------------------------------------------------------------- Beginning of period 212,217,294 100,090,748 ------------ ------------ End of period (including undistributed net investment income of $116,937 and $116,937, respectively) $226,593,379 $212,217,294 ============ ============ See accompanying Notes to Financial Statements.
17 Oppenheimer Bond Fund Financial Highlights
Class A ---------------------------------------------------------------------------------- Six Months Ended June 30, 1996 Year Ended December 31, (Unaudited) 1995 1994 1993 1992 1991(3) - ----------------------------------------------------------------------------------------------------------------------------------- Per Share Operating Data: Net asset value, beginning of period $10.98 $10.01 $11.12 $10.74 $10.80 $ 9.86 - ----------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .40 .69 .65 .69 .75 .82 Net realized and unrealized gain (loss) (.49) .96 (1.08) .40 (.05) .90 -------- -------- ------- -------- -------- ------- Total income (loss) from investment operations (.09) 1.65 (.43) 1.09 .70 1.72 - ----------------------------------------------------------------------------------------------------------------------------------- Dividends and distributions to shareholders: Dividends from net investment income (.39) (.68) (.65) (.71) (.76) (.78) Dividends in excess of net investment income -- -- (.03) -- -- -- -------- -------- ------- -------- -------- ------- Total dividends and distributions to shareholders (.39) (.68) (.68) (.71) (.76) (.78) - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.50 $10.98 $10.01 $11.12 $10.74 $10.80 ======== ======== ======== ======== ======== ======= =================================================================================================================================== Total Return, at Net Asset Value(4) (0.83)% 16.94% (3.87)% 10.30% 6.77% 18.28% =================================================================================================================================== Ratios/Supplemental Data: Net assets, end of period (in thousands) $185,954 $169,059 $ 96,640 $110,759 $106,290 $90,623 - ------------------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $171,653 $116,940 $102,168 $111,702 $ 98,672 $86,471 - ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net investment income 7.30%(5) 6.47% 6.25% 6.20% 7.00% 8.02% Expenses, before voluntary reimbursement by the Manager 1.28%(5) 1.27% 1.06% 1.06% 1.10% 1.23% Expenses, net of voluntary reimbursement by the Manager N/A 1.26% N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate(6) 79.2% 175.4% 70.3% 110.1% 116.4% 97.1%
(re-stub table)
Class B Class C ------------------------------------------------ ----------------------------- Six Six Months Months Ended Ended Period June 30, June 30, Ended 1996 Year Ended December 31, 1996 Dec. 31, (Unaudited) 1995 1994 1993(2) (Unaudited) 1995(1) - ----------------------------------------------------------------------------------------------------------------------------------- Per Share Operating Data: Net asset value, beginning of period $10.98 $10.01 $11.11 $11.10 $10.99 $10.89 - ----------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .37 .63 .58 .40 .36 .28 Net realized and unrealized gain (loss) (.50) .94 (1.08) .03 (.50) .10 ------- ------- ------ ------ ------ ------ Total income (loss) from investment operations (.13) 1.57 (.50) .43 (.14) .38 - ----------------------------------------------------------------------------------------------------------------------------------- Dividends and distributions to shareholders: Dividends from net investment income (.35) (.60) (.57) (.42) (.35) (.28) Dividends in excess of net investment income -- -- (.03) -- -- -- ------- ------- ------ ------ ------ ------ Total dividends and distributions to shareholders (.35) (.60) (.60) (.42) (.35) (.28) - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.50 $10.98 $10.01 $11.11 $10.50 $10.99 ======= ======= ====== ==== ====== ==== =================================================================================================================================== Total Return, at Net Asset Value(4) (1.21)% 16.06% (4.53)% 3.91% (1.28)% 3.76% - ----------------------------------------------------------------------------------------------------------------------------------- Ratios/Supplemental Data: Net assets, end of period (in thousands) $37,354 $39,187 $3,451 $1,809 $3,286 $3,971 - ----------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $38,304 $12,823 $2,747 $922 $3,024 $979 - ----------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income 6.53%(5) 5.84% 5.53% 4.80%(5) 6.59%(5) 6.32%(5) Expenses, before voluntary reimbursement by the Manager 2.04%(5) 2.12% 1.78% 1.90%(5) 2.04%(5) 2.25%(5) Expenses, net of voluntary reimbursement by the Manager N/A 2.08% N/A N/A N/A 1.96%(5) - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(6) 79.2% 175.4% 70.3% 110.1% 79.2% 175.4%
(end re-stub table) 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. On March 28, 1991, OppenheimerFunds, Inc. became the investment advisor to the Fund. 4. 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. 5. Annualized. 6. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the period ended June 30, 1996 were $175,519,460 and $176,129,113, respectively. See accompanying Notes to Financial Statements. 18 Oppenheimer Bond Fund Notes to Financial Statements (Unaudited) ================================================================================ 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 the Investment Company Act of 1940, as amended. The Fund's investment objective 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 subject to a contingent deferred sales charge. All three classes of shares have identical rights to earnings, assets and voting privileges, except that each class has its own distribution and/or service plan, expenses directly attributable to a particular class and exclusive voting rights with respect to matters affecting a single class. Class B shares will automatically convert to Class A shares six years after the date of purchase. The following is a summary of significant accounting policies consistently followed by the Fund. - -------------------------------------------------------------------------------- Investment Valuation. Portfolio securities are valued at 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 asked price or the last sale price on the prior trading day. Long-term and short-term ``non-money market'' debt securities are valued by a portfolio pricing service approved by the Board of Trustees. Such securities which cannot be valued by the approved portfolio pricing service are valued using dealer-supplied valuations provided the Manager is satisfied that the firm rendering the quotes is reliable and that the quotes reflect current market value, or are valued under consistently applied procedures established by the Board of Trustees to determine fair value in good faith. Short-term ``money market type'' debt securities having a remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for amortization to maturity of any premium or discount. - -------------------------------------------------------------------------------- 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 June 30, 1996, the Fund had entered into outstanding when-issued or forward commitments of $16,942,816. 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. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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 securities and investment income are translated at the rates of exchange prevailing on the respective dates of such transactions. 19 Oppenheimer Bond Fund Notes to Financial Statements (Unaudited) (continued) ================================================================================ 1. Significant Accounting Policies (continued) 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. - -------------------------------------------------------------------------------- Classification of Distributions to Shareholders. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes primarily because of paydown gains and losses and the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes. The character of the distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gain (loss) was recorded by the Fund. - -------------------------------------------------------------------------------- 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 income and expenses during the reporting period. Actual results could differ from those estimates. ================================================================================ 2. Shares of Beneficial Interest The Fund has authorized an unlimited number of no par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
Six Months Ended June 30, 1996 Year Ended December 31, 1995(1) ------------------------------- ------------------------------- Shares Amount Shares Amount - ----------------------------------------------------------------------------------------------------------------------------------- Class A: Sold 997,446 $10,649,050 3,592,604 $37,958,201 Dividends reinvested 381,025 4,052,825 401,453 4,283,086 Issued in connection with the acquisition of: Oppenheimer Strategic Investment Grade Bond Fund--Note 7 -- -- 2,101,654 22,529,733 Quest Investment Quality Income Fund--Note 7 -- -- 3,900,357 42,201,864 Connecticut Mutual Income Account--Note 7 3,020,216 31,863,280 Redeemed (2,084,795) (22,285,141) (4,249,502) (45,145,281) --------- ----------- ---------- ------------ Net increase 2,313,892 $24,280,014 5,746,566 $61,827,603 ========= =========== ========== ============ - ----------------------------------------------------------------------------------------------------------------------------------- Class B: Sold 574,079 $ 6,136,963 1,038,290 $11,014,073 Dividends reinvested 81,035 862,539 45,815 494,471 Issued in connection with the acquisition of: Oppenheimer Strategic Investment Grade Bond Fund--Note 7 -- -- 1,474,533 15,806,991 Quest Investment Quality Income Fund--Note 7 -- -- 1,236,995 13,384,283 Connecticut Mutual Income Account--Note 7 8,156 86,045 -- -- Redeemed (674,576) (7,190,787) (569,823) (6,076,871) --------- ----------- ---------- ----------- Net increase (decrease) (11,306) $ (105,240) 3,225,810 $34,622,947 ========= =========== ========== ============ - ------------------------------------------------------------------------------------------------------------------------------------ Class C: Sold 136,804 $ 1,474,891 47,725 $516,952 Dividends reinvested 7,678 81,695 1,625 17,809 Issued in connection with the acquisition of: Quest Investment Quality Income Fund--Note 7 -- -- 362,821 3,929,348 Redeemed (193,116) (2,117,317) (50,720) (553,589) --------- ----------- ---------- ----------- Net increase (decrease) (48,634) $ (560,731) 361,451 $ 3,910,520 ========= =========== ========== ===========
1. For the year ended December 31, 1995 for Class A and Class B shares and for the period from July 11, 1995 (inception of offering) to December 31, 1995 for Class C shares. 20 Oppenheimer Bond Fund ================================================================================ 3. Unrealized Gains and Losses on Investments At June 30, 1996, net unrealized depreciation of investments of $538,033 was composed of gross appreciation of $4,342,060, and gross depreciation of $4,880,093. ================================================================================ 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 aggregate net assets over $1 billion. The Manager has agreed to reimburse the Fund if aggregate expenses (with specified exceptions) exceed the most stringent applicable regulatory limit on Fund expenses. For the six months ended June 30, 1996, commissions (sales charges paid by investors) on sales of Class A shares totaled $171,715, of which $66,376 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 and Class C shares totaled $178,187 and $13,095, of which $11,039 was paid to an affiliated broker/dealer for Class B shares. During the six months ended June 30, 1996, OFDI received contingent deferred sales charges of $57,931 upon redemption of Class B 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 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 six months ended June 30, 1996, OFDI paid $82,225 to an affiliated broker/dealer as reimbursement for Class A personal service and maintenance expenses. The Fund has adopted compensation type Distribution and Service Plans for Class B and Class C shares to compensate OFDI for its services and 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 shares that are outstanding for 6 years or less and on Class C shares, as compensation for sales commissions paid from its own resources at the time of sale and associated financing costs. If the Plans are terminated by the Fund, the Board of Trustees may allow the Fund to continue payments of the asset-based sales charge to OFDI for certain expenses it incurred before the Plans were terminated. OFDI also receives a service fee of 0.25% per year as compensation for costs incurred in connection with the personal service and maintenance of accounts that hold shares of the Fund, including amounts paid to brokers, dealers, banks and other financial institutions. Both fees are computed on the average annual net assets of Class B and Class C shares, determined as of the close of each regular business day. During the six months ended June 30, 1996, OFDI paid $2,847 to an affiliated broker/dealer as compensation for Class B personal service and maintenance expenses and retained $157,177 and $15,133, respectively, as compensation for Class B and Class C sales commissions and service fee advances, as well as financing costs. At June 30, 1996, OFDI had incurred unreimbursed expenses of $1,171,082 for Class B and $41,410 for Class C. ================================================================================ 5. 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 in an amount (initial margin) 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. 21 Oppenheimer Bond Fund Notes to Financial Statements (Unaudited) (continued) ================================================================================ 5. Futures Contracts (continued) 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 June 30, 1996, the Fund had outstanding futures contracts to sell debt securities as follows: Expiration Number of Valuation as of Unrealized Contracts to Sell Date Futures Contracts June 30, 1996 Depreciation - -------------------------------------------------------------------------------- U.S. Treasury Nts. 9/96 90 $9,517,500 $112,500 ================================================================================ 6. Illiquid and Restricted Securities At June 30, 1996, investments in securities included issues that are illiquid or restricted. The 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 also be considered illiquid 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 from time to time) in illiquid or restricted securities. The aggregate value of these securities subject to this limitation at June 30, 1996 was $753,750 which represents 0.33% of the Fund's net assets. Information concerning these securities is as follows:
Valuation Per Unit as of Security Acquisition Date Cost Per Unit June 30, 1996 - ---------------------------------------------------------------------------------------------------------- Pulsar International SA de CV, 11.80% Nts., 9/19/96 9/14/95 $100.00 $100.50
Pursuant to guidelines adopted by the Board of Trustees, certain unregistered securities are determined to be liquid and are not included within the 10% limitation specified above. ================================================================================ 7. Acquisition of Oppenheimer Strategic Investment Grade Bond Fund, Quest Investment Quality Income Fund and Connecticut Mutual Income Account On September 22, 1995, the Fund acquired all the net assets of Oppenheimer Strategic Investment Grade Bond Fund, pursuant to an Agreement and Plan of Reorganization approved by the Oppenheimer Strategic Investment Grade Bond Fund shareholders on September 20, 1995. The Fund issued 2,101,654 and 1,474,533 shares of beneficial interest for Class A and Class B, respectively, valued at $22,529,733 and $15,806,991 in exchange for the net assets, resulting in combined Class A net assets of $125,283,258 and Class B net assets of $24,206,043 on September 22, 1995. The net assets acquired included net unrealized appreciation of $772,151. The exchange qualifies as a tax-free reorganization for federal income tax purposes. On November 24, 1995, the Fund acquired all the net assets of Quest Investment Quality Income Fund, pursuant to an Agreement and Plan of Reorganization approved by the Quest Investment Quality Income Fund sharehold ers on November 16, 1995. The Fund issued 3,900,357, 1,236,995 and 362,821 shares of beneficial interest for Class A, Class B and Class C, respectively, valued at $42,201,864, $13,384,283 and $3,929,348 in exchange for the net assets, resulting in combined Class A net assets of $168,776,907, Class B net assets of $38,281,909 and Class C net assets of $4,265,500 on November 24, 1995. The net assets acquired included net unrealized appreciation of $2,983,610. The exchange qualifies as a tax-free reorganization for federal income tax purposes. 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 $633,176. The exchange qualifies as a tax-free reorganization for federal income tax purposes. 22 Oppenheimer Bond Fund Oppenheimer Bond Fund A Series of Oppenheimer Integrity Funds =============================================================================== 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 David Rosenberg, 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 Servicing Agent OppenheimerFunds Services =============================================================================== Custodian of Portfolio Securities The Bank of New York =============================================================================== Independent Auditors Deloitte & Touche LLP =============================================================================== Legal Counsel Myer, Swanson, Adams & Wolf, P.C. The financial statements included herein have been taken from the records of the Fund without examination by the independent auditors. This is a copy of a report to shareholders of Oppenheimer 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. 23 Oppenheimer Bond Fund [BACK COVER] Information General Information Monday-Friday 8:30 a.m.-9 p.m. ET Saturday 10 a.m.-2 p.m. ET 1-800-525-7048 Telephone Transactions Monday-Friday 8:30 a.m.-8 p.m. ET 1-800-852-8457 PhoneLink 24 hours a day, automated information and transactions 1-800-533-3310 Telecommunications Device for the Deaf (TDD) Monday-Friday 8:30 a.m.-8 p.m. 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 RS0285.001.0696 August 31, 1996 [Picture of Jennifer Leonard] [Caption] Jennifer Leonard, Customer Service Representative OppenheimerFunds Services "How may I help you?" As an Oppenheimer fund shareholder, you have some special privileges. Whether it's automatic investment plans, informative newsletters and hotlines, or ready account access, you can benefit from services designed to make investing simple. And when you need help, our Customer Service Representatives are only a toll-free phone call away. They can provide information about your account and handle administrative requests. You can reach them at our General Information number. When you want to make a transaction, you can do it easily by calling our toll-free Telephone Transactions number. And, by enrolling in AccountLink, a convenient service that "links" your Oppenheimer funds accounts and your bank checking or savings account, you can use the Telephone Transactions number to make investments. For added convenience, you can get automated information with OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week. PhoneLink gives you access to a variety of fund, account, and market information. Of course, you can always speak with a Customer Service Representative during the General Information hours shown at the left. You can count on us whenever you need assistance. That's why the International Customer Service Association, an independent, nonprofit organization made up of over 3,200 customer service management professionals from around the country, honored the Oppenheimer funds' transfer agent, OppenheimerFunds Services, with their Award of Excellence in 1993. So call us today--we're here to help. [Oppenheimer Logo] OppenheimerFunds Distributor, Inc. P.O. Box 5270 Denver, CO 80217-5270 - --------------------------------------------- Bulk Rate U.S. Postage PAID Permit No. 314 Farmingdale, NY - --------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----