N-30D 1 ra0880_5969vef.txt RA0880_5969VEF Oppenheimer International Bond Fund ANNUAL REPORT September 30, 2002 ================================================================================ Fund Highlights Performance Update Investment Strategy Discussion Listing of Individual Investments "Oppenheimer International Bond Fund has recently benefited from its investments in emerging-market bonds in Latin America and Eastern Europe and developed-market bonds in Europe. During the reporting period, the Fund successfully avoided most of the problems related to Argentina's default and Brazil's recent financial crisis, while participating in Russia's emergence as a major oil producer." [LOGO] OPPENHEIMERFUNDS[R] The Right Way to Invest REPORT HIGHLIGHTS Fund Objective Oppenheimer International Bond Fund seeks total return. As a secondary objective, the Fund seeks income when consistent with total return. Fund Highlight According to Lipper, Inc., the Fund's Class A shares ranked first (1 of 45) of all international income funds for the one-year period ended September 30, 2002. The Fund's three-year ranking for the same period was also in the first quartile, 3 of 43.(1) CONTENTS 1 Letter to Shareholders 3 An Interview with Your Fund's Managers 7 Fund Performance 11 Financial Statements 39 Independent Auditors' Report 40 Federal Income Tax Information 41 Trustees and Officers 48 Privacy Policy Notice Average Annual Total Returns* For the 1-Year Period Ended 9/30/02 Without With Sales Chg. Sales Chg. --------------------------------- Class A 16.78% 11.23% --------------------------------- Class B 15.90 10.90 --------------------------------- Class C 15.90 14.90 --------------------------------- Class N 16.23 15.23 --------------------------------- Standardized Yields(2) For the 30 Days Ended 9/30/02 --------------------------------- Class A 5.04% Class B 4.48 Class C 4.49 Class N 5.53 Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested. 1. Source: Lipper, Inc. Lipper rankings are based on total returns, but do not consider sales charges. The Fund's 5-year ranking for the period ended 9/30/02 was 15 of 36. Past performance is no guarantee of future results. 2. Standardized yield is based on net investment income for the 30-day period ended September 30, 2002. Falling share prices will tend to artificially raise yields. *See Notes on page 10 for further details. LETTER TO SHAREHOLDERS Dear Shareholder, As we near the end of 2002, global tensions and economic challenges that began in 2001 continue to impact events around the world and in the financial markets. When it comes to investing, words like trust, experience and consistency have never been more meaningful. Recently, accounting scandals and an overall lack of investor confidence in corporate America have weakened the stock market and caused the prices of many individual securities to drop sharply during the period. On the other hand, the overall bond market has provided some positive returns and stability, helping to provide investors with a safe haven from the equity markets. Not surprisingly, many investors are unsure what their next step should be and where they should turn to invest their money. Despite the continued challenges, there are signs of a moderate recovery in the U.S. economy. Rooted in a combination of low inflation and little pressure on the Federal Reserve Board to raise interest rates, business conditions are slowly improving, and we believe the prospects for long-term investors look bright. With that said, we expect the economy and markets to return to historical levels and not the exaggerated growth levels that typified the late 1990s and early 2000s. Now more than ever, investors can see on two levels the fundamental advantage of mutual funds: diversification. Investors can diversify their portfolios by investing among several types of funds to reduce short-term risks. The right asset allocation among equity and fixed-income funds can help cushion an PHOTO OF JAMES C. SWAIN James C. Swain Chairman Oppenheimer International Bond Fund PHOTO OF JOHN V. MURPHY John V. Murphy President Oppenheimer International Bond Fund 1 | OPPENHEIMER INTERNATIONAL BOND FUND LETTER TO SHAREHOLDERS investor's portfolio from tough market conditions. Secondly, mutual funds, while certainly not immune to volatility and declines in either the equity or fixed-income markets, offer clear-cut advantages over direct ownership of individual securities. Because fund portfolios often contain a number of different investments, one security's poor performance usually does not have a dramatic effect on the fund as a whole. Your financial advisor is also an equally important player on your team of investment professionals. Even if you consult with your advisor on a regular basis, now may be a good time to make sure that your portfolio still reflects the right mix of investments to help you reach your long-term goals. We at OppenheimerFunds appreciate and thank you for your continued trust as we strive toward our ongoing goal of investment excellence. To us, this is not a phrase uttered lightly. It's a commitment to providing shareholders with world-class asset management, top-quality service and strong fund performance over time. In other words, it's what makes OppenheimerFunds The Right Way to Invest. Sincerely, /S/ SIGNATURE /S/ SIGNATURE -------------------------------- James C. Swain John V. Murphy October 21, 2002 These general market views represent opinions of OppenheimerFunds, Inc. and are not intended to predict performance of the securities markets or any particular fund. Specific information that applies to your Fund is contained in the pages that follow. 2 | OPPENHEIMER INTERNATIONAL BOND FUND AN INTERVIEW WITH YOUR FUND'S MANAGERS Q How did Oppenheimer International Bond Fund perform during the 12-month period that ended September 30, 2002? A. We are very pleased with the Fund's performance, which exceeded the average of all funds in its peer group, the Lipper International Income Fund category, during the 12-month reporting period.(3) We attribute the Fund's strong returns to its investments in the emerging markets of certain Latin American countries and Eastern Europe throughout the reporting period, and to currency-related gains in the Fund's developed-market holdings in Europe during the period's second half. How did changes in the global economy affect the Fund's performance? When the reporting period began, the U.S. economy was in recession, and economic weakness prevailed in most international markets. These conditions had been intensified by the September 11 attacks, which caused economic activity to decline sharply worldwide. In that environment, we identified a number of bonds that we believed represented compelling values. This was particularly true in many emerging markets, where economic weakness had eroded export activity to the U.S. and Europe. In addition, economic troubles in Argentina, which soon led to that nation's default on its debt, adversely affected bond prices of other Latin American issuers. As a result, we found opportunities to invest in bonds with highly competitive yields, and in our view, unwarranted low prices. The Fund benefited from price appreciation among these holdings when the global bond markets began to recover in the aftermath of September 11th. Many emerging market countries rallied especially strong as investors began to anticipate the beginning of a global economic recovery, which many believed would improve the prospects of exporters in developing nations. [SIDEBAR] Portfolio Management Team Art Steinmetz Ruggiero de'Rossi 3. The Fund's performance is compared to average annual returns of the 45 funds in the Lipper International Income Fund category, which was 10.75% for the one-year period ended 9/30/02. 3 | OPPENHEIMER INTERNATIONAL BOND FUND AN INTERVIEW WITH YOUR FUND'S MANAGERS Bonds from many Latin American issuers also recovered during the final months of 2001, when it became apparent that Argentina's problems were not likely to spread to neighboring countries. The economic recovery finally began in the United States early in 2002, however, it was weaker and more uneven than many analysts had expected. Although emerging-market bonds were volatile against this backdrop of heightened economic uncertainty among exporters' key customers, many generally held onto their previous gains. At the same time, the Fund began to benefit from many of its holdings of developed- market bonds, principally from issuers in Europe. Although developed-market bond prices were generally unchanged, a weakening U.S. dollar increased their value significantly for U.S. investors. In what regions of the world did the Fund find the most compelling investment opportunities? Russia, the country to which we have allocated the single largest percentage of the Fund's assets, also ranked among the top performing nations during the reporting period. As we mentioned in our report to shareholders six months ago, Russia has emerged as one of the world's leading oil producers. In fact, according to recent statistics, Russia now produces as much crude oil as Saudi Arabia. However, unlike Saudi Arabia, Russia is not a member of OPEC and is not bound by its production limits. As a result, Russia benefited greatly from rising oil prices during much of the 12-month period. We de-emphasized bonds from Japan, where yields remained at unattractively low levels and debt levels remained high. Similarly, we maintained relatively light exposure to emerging markets in Southeast Asia. Although we occasionally invested opportunistically in the region to seek to capture the benefits of strengthening currencies, these trades contributed little to the Fund's overall performance. [SIDEBAR] Strong returns from the emerging markets helped drive the Fund's returns higher over the past 12 months, principally from investments in certain Latin American countries and Russia. 4 | OPPENHEIMER INTERNATIONAL BOND FUND Has Brazil's recent fiscal problems affected the Fund? Yes. Although we have concentrated many of the Fund's emerging-market investments in the Latin American region, returns generally have been muted because of recent turmoil in Brazil. Investor sentiment toward Brazilian bonds turned negative when a candidate for elective office offered a controversial proposal to restructure the nation's debt. This created a crisis of confidence among lenders, and Brazil was unable to satisfy its short-term obligations until the International Monetary Fund intervened. We believe that Brazil's problems are temporary, and their bonds should recover as the nation's economy improves and its political situation becomes resolved. Accordingly, we have maintained the Fund's investments there. What is your outlook for the foreseeable future? We remain optimistic about the prospects of international bonds. In the emerging markets, in our view prices remain relatively low compared to historical norms. We believe that this is particularly true in Latin America, where Brazil's problems have affected investor sentiment toward the entire region. As Brazil's problems ease, we believe that the entire region's bonds will rebound. At the same time, we have continued to find attractive opportunities in Eastern Europe, where we expect economic activity to increase as former socialist and communist countries continue to export goods and services to the developed nations of Western Europe. Finally, while we believe that the bulk of currency-related gains from developed-market bonds have already been realized, falling interest rates should help support bond prices in Western Europe. Average Annual Total Returns with Sales Charge For the Periods Ended 9/30/02(4) Class A Since 1-Year 5-Year Inception -------------------------------- 11.23% 3.52% 7.14% Class B Since 1-Year 5-Year Inception -------------------------------- 10.90% 3.49% 7.18% Class C Since 1-Year 5-Year Inception -------------------------------- 14.90% 3.77% 7.04% Class N Since 1-Year 5-Year Inception -------------------------------- 15.23% N/A 7.96% 4. See Notes on page 10 for further details. 5 | OPPENHEIMER INTERNATIONAL BOND FUND AN INTERVIEW WITH YOUR FUND'S MANAGERS Of course, the world's local and regional economies can change rapidly. Accordingly, we are prepared to change the Fund's composition and country allocation strategies as market conditions evolve, making Oppenheimer International Bond Fund, part of The Right Way to Invest. Top Ten Geographic Diversification Holdings(5) --------------------------------------------------------------- United States 16.3% --------------------------------------------------------------- Russia 9.5 --------------------------------------------------------------- Spain 5.9 --------------------------------------------------------------- Mexico 5.0 --------------------------------------------------------------- The Netherlands 4.8 --------------------------------------------------------------- Philippines 4.1 --------------------------------------------------------------- Italy 3.7 --------------------------------------------------------------- Supranational 3.6 --------------------------------------------------------------- Brazil 3.5 --------------------------------------------------------------- Belgium 3.4 Regional Allocation(5) [PIE CHART] o Europe 34.3% o Latin America 20.0 o United States/ Canada 17.3 o Emerging Europe 12.2 o Asia 7.9 o Middle East/ Africa 4.7 o Supranational 3.6 5. Portfolio's holdings and allocations are subject to change. Percentages are as of September 30, 2002, and are based on total market value of investments. 6 | OPPENHEIMER INTERNATIONAL BOND FUND FUND PERFORMANCE How Has the Fund Performed? Below is a discussion by OppenheimerFunds, Inc., of the Fund's performance during its fiscal year ended September 30, 2002, followed by a graphical comparison of the Fund's performance to an appropriate broad-based market index. Management's Discussion of Performance. During the Fund's fiscal year that ended September 30, 2002, Oppenheimer International Bond Fund's performance was strongly influenced by changing global economic and market conditions. Bond prices in the emerging markets were especially volatile, rising and falling in response to such international pressures as the war on terrorism, global economic weakness, Argentina's default on its debt, fiscal problems in Brazil, economic weakness in Japan and generally high oil prices. Nonetheless, the Fund benefited from the portfolio managers' decisions to allocate the Fund's assets primarily to emerging markets in many Latin American countries and Eastern Europe, as well as developed markets in Western Europe, Canada and the Pacific Rim. Returns from the emerging markets were driven primarily by higher prices as the regions' export markets strengthened, even though the Fund did feel the impact of Brazil's economic woes. Performance contributions from developed markets were mainly produced by currency effects, which caused the value of many other currencies to appreciate relative to the U.S. dollar. The Fund's portfolio holdings and allocations are subject to change. Comparing the Fund's Performance to the Market. The graphs that follow show the performance of a hypothetical $10,000 investment in each class of shares of the Fund held from the inception date of all the share classes on June 15, 1995 until September 30, 2002, except Class N shares. In the case of Class N shares, performance is measured from inception of the class on March 1, 2001. The Fund's performance reflects the deduction of the maximum initial sales charge on Class A shares, the applicable contingent deferred sales charge on Class B, Class C and Class N shares, and reinvestments of all dividends and capital gains distributions. The performance of each class of the Fund's shares is compared to two indices because the Fund invests in debt securities issued by governments in both developed countries and emerging market countries and in debt securities issued by companies located in those countries. In the Manager's view, no single index adequately combines both types of investments. Performance is compared to the Salomon Brothers Non-US Dollar World Government Bond Index, a subset of the Salomon Brothers World Government Bond Index. The Salomon Brothers Non-US Dollar World Government Bond Index is a market capitalization weighted benchmark that tracks the performance of 13 government bond markets including Australia, Canada, Japan and 10 European countries. Thus, the index does not reflect the performance of the fixed income markets in either the United States or in any emerging market countries. In addition, it is comprised of only government bonds and does not reflect the performance of corporate bonds. Performance is also compared to the Salomon Brothers Brady Bond Index, which provides a total return benchmark for emerging market country bonds. It is designed to allow direct comparison of the developing country debt market with other markets. A Brady Bond is a bond that is exchanged for debt or new money under the debt-restructuring program initiated in 1990 by the U.S. Department of the Treasury. Index performance reflects the reinvestment of dividends but does not consider the effect of capital gains or transaction costs, and none of the data in the graphs that follow shows the effect of taxes. Indices may not be purchased directly by investors and indices performance does not depict or predict actual Fund performance. The Fund's performance reflects the effects of Fund business and operating expenses. While index comparisons may be useful to provide a benchmark for the Fund's performance, it must be noted that the Fund's investments are not limited to the securities or countries in the indices. 7 | OPPENHEIMER INTERNATIONAL BOND FUND FUND PERFORMANCE Class A Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: [LINE CHART] Oppenheimer International Salomon Brothers Non-US Dollar Salomon Brothers Bond Fund (Class A) World Government Bond Index Brady Bond Index 06/15/1995 9,525 10,000 10,000 06/30/1995 9,570 10,050 10,225 09/30/1995 10,014 9,806 10,898 12/31/1995 10,473 10,009 11,913 03/31/1996 10,860 9,840 12,444 06/30/1996 11,362 9,879 13,584 09/30/1996 11,898 10,201 14,997 12/31/1996 12,492 10,418 16,032 03/31/1997 12,584 9,815 16,227 06/30/1997 12,934 10,092 17,889 09/30/1997 13,246 10,114 19,130 12/31/1997 12,799 9,974 18,734 03/31/1998 12,978 10,015 19,758 06/30/1998 12,850 10,182 18,892 09/30/1998 11,591 11,160 16,045 12/31/1998 12,242 11,748 17,430 03/31/1999 12,216 11,179 18,382 06/30/1999 12,635 10,678 18,564 09/30/1999 12,818 11,331 18,865 12/31/1999 13,589 11,152 21,079 03/31/2000 14,150 11,023 22,267 06/30/2000 13,986 10,935 22,275 09/30/2000 13,962 10,441 23,610 12/31/2000 14,519 10,858 24,035 03/31/2001 14,144 10,326 24,267 06/30/2001 14,206 10,122 24,735 09/30/2001 14,157 10,907 24,015 12/31/2001 14,830 10,474 24,496 03/31/2002 15,149 10,279 25,862 06/30/2002 16,368 11,715 23,831 09/30/2002 16,532 12,047 22,917 Average Annual Total Returns of Class A Shares of the Fund at 9/30/02(1) 1-Year 11.23% 5-Year 3.52% Since Inception 7.14% Class B Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: [LINE CHART] Oppenheimer International Salomon Brothers Non-US Dollar Salomon Brothers Bond Fund (Class B) World Government Bond Index Brady Bond Index 06/15/1995 10,000 10,000 10,000 06/30/1995 10,045 10,050 10,225 09/30/1995 10,492 9,806 10,898 12/31/1995 10,929 10,009 11,913 03/31/1996 11,312 9,840 12,444 06/30/1996 11,837 9,879 13,584 09/30/1996 12,350 10,201 14,997 12/31/1996 12,943 10,418 16,032 03/31/1997 13,014 9,815 16,227 06/30/1997 13,352 10,092 17,889 09/30/1997 13,649 10,114 19,130 12/31/1997 13,165 9,974 18,734 03/31/1998 13,324 10,015 19,758 06/30/1998 13,168 10,182 18,892 09/30/1998 11,852 11,160 16,045 12/31/1998 12,496 11,748 17,430 03/31/1999 12,447 11,179 18,382 06/30/1999 12,850 10,678 18,564 09/30/1999 13,013 11,331 18,865 12/31/1999 13,773 11,152 21,079 03/31/2000 14,318 11,023 22,267 06/30/2000 14,094 10,935 22,275 09/30/2000 14,046 10,441 23,610 12/31/2000 14,614 10,858 24,035 03/31/2001 14,208 10,326 24,267 06/30/2001 14,252 10,122 24,735 09/30/2001 14,203 10,907 24,015 12/31/2001 14,878 10,474 24,496 03/31/2002 15,198 10,279 25,862 06/30/2002 16,421 11,715 23,831 09/30/2002 16,585 12,047 22,917 Average Annual Total Returns of Class B Shares of the Fund at 9/30/02(1) 1-Year 10.90% 5-Year 3.49% Since Inception 7.18% 1. See Notes on page 10 for further details. The performance information for both indices in the graphs begins on 5/31/95 for Class A, B and C and 2/28/01 for Class N. Past performance cannot guarantee future results. Graphs are not drawn to same scale. 8 | OPPENHEIMER INTERNATIONAL BOND FUND Class C Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: [LINE CHART] Oppenheimer International Salomon Brothers Non-US Dollar Salomon Brothers Bond Fund (Class C) World Government Bond Index Brady Bond Index 06/15/1995 10,000 10,000 10,000 06/30/1995 10,045 10,050 10,225 09/30/1995 10,473 9,806 10,898 12/31/1995 10,929 10,009 11,913 03/31/1996 11,311 9,840 12,444 06/30/1996 11,814 9,879 13,584 09/30/1996 12,350 10,201 14,997 12/31/1996 12,943 10,418 16,032 03/31/1997 12,990 9,815 16,227 06/30/1997 13,352 10,092 17,889 09/30/1997 13,649 10,114 19,130 12/31/1997 13,165 9,974 18,734 03/31/1998 13,324 10,015 19,758 06/30/1998 13,169 10,182 18,892 09/30/1998 11,853 11,160 16,045 12/31/1998 12,497 11,748 17,430 03/31/1999 12,448 11,179 18,382 06/30/1999 12,852 10,678 18,564 09/30/1999 13,014 11,331 18,865 12/31/1999 13,774 11,152 21,079 03/31/2000 14,319 11,023 22,267 06/30/2000 14,097 10,935 22,275 09/30/2000 14,049 10,441 23,610 12/31/2000 14,617 10,858 24,035 03/31/2001 14,210 10,326 24,267 06/30/2001 14,246 10,122 24,735 09/30/2001 14,169 10,907 24,015 12/31/2001 14,779 10,474 24,496 03/31/2002 15,105 10,279 25,862 06/30/2002 16,292 11,715 23,831 09/30/2002 16,422 12,047 22,917 Average Annual Total Returns of Class C Shares of the Fund at 9/30/02(1) 1-Year 14.90% 5-Year 3.77% Since Inception 7.04% Class N Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: [LINE CHART] Oppenheimer International Salomon Brothers Non-US Dollar Salomon Brothers Bond Fund (Class N) World Government Bond Index Brady Bond Index 03/01/2001 10,000 10,000 10,000 03/31/2001 9,706 9,598 9,907 06/30/2001 9,747 9,409 10,098 09/30/2001 9,712 10,139 9,804 12/31/2001 10,144 9,736 10,001 03/31/2002 10,380 9,554 10,559 06/30/2002 11,208 10,889 9,729 09/30/2002 11,287 11,198 9,356 Average Annual Total Returns of Class N Shares of the Fund at 9/30/02(1) 1-Year 15.23% Since Inception 7.96% 9 | OPPENHEIMER INTERNATIONAL BOND FUND NOTES In reviewing performance and rankings, please remember that past performance cannot 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. Because of ongoing market volatility, the Fund's performance may be subject to substantial fluctuations, and current performance may be more or less than the results shown. For updates on the Fund's performance, visit our website at www.oppenheimerfunds.com. Total returns and the ending account values in the graphs include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown. The Fund's total returns shown do not reflect the deduction of income taxes on an individual's investment. Taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares. For more complete information about the Fund, including charges, expenses and risks, please refer to the prospectus. To obtain a copy, call your financial advisor, call OppenheimerFunds Distributor, Inc. at 1.800.CALL.OPP (1.800.225.5677) or visit the OppenheimerFunds website at www.oppenheimerfunds.com. Read the prospectus carefully before you invest or send money. Class A shares of the Fund were first publicly offered on 6/15/95. Unless otherwise noted, Class A returns include the current maximum initial sales charge of 4.75%. Class B shares of the Fund were first publicly offered on 6/15/95. Unless otherwise noted, Class B returns include the applicable contingent deferred sales charge of 5% (1-year) and 2% (5-year). Because Class B shares convert to Class A shares 72 months after purchase, the "since inception" return for Class B uses Class A performance for the period after conversion. Class B shares are subject to an annual 0.75% asset-based sales charge. Class C shares of the Fund were first publicly offered on 6/15/95. Unless otherwise noted, Class C returns include the contingent deferred sales charge of 1% for the 1-year period. Class C shares are subject to an annual 0.75% asset-based sales charge. Class N shares of the Fund were first publicly offered on 3/1/01. Class N shares are offered only through retirement plans. Unless otherwise noted, Class N returns include the contingent deferred sales charge of 1% for the one-year period. Class N shares are subject to an annual 0.25% asset-based sales charge. An explanation of the calculation of performance is in the Fund's Statement of Additional Information. 10 | OPPENHEIMER INTERNATIONAL BOND FUND
STATEMENT OF INVESTMENTS September 30, 2002 Principal Market Value Amount See Note 1 ------------------------------------------------------------------------------------ U.S. Government Obligations--6.6% ------------------------------------------------------------------------------------ Federal Home Loan Mortgage Corp., 4.75%, 1/15/13 [EUR] 5,990,000 $ 5,921,693 ------------------------------------------------------------------------------------ Federal National Mortgage Assn. Sr. Unsec. Nts., 2.125%, 10/9/07 [JPY] 905,000,000 7,957,964 Federal National Mortgage Assn. Unsec. Nts., 1.75%, 3/26/08(1) [JPY] 830,000,000 7,284,828 ------------- Total U.S. Government Obligations (Cost $20,643,146) 21,164,485 ------------------------------------------------------------------------------------ Foreign Government Obligations--69.7% ------------------------------------------------------------------------------------ Argentina--0.7% Argentina (Republic of) Bonds: 11.75%, 6/15/15(3) 105,000 22,575 Series 2008, 7%, 12/19/08(3) 1,279,000 278,182 Series 2018, 3.063%, 6/19/18(3) 3,793,969 701,884 ------------------------------------------------------------------------------------ Argentina (Republic of) Global Unsec. Unsub. Bonds, Series BGL5, 11.375%, 1/30/17(3,4) 200,000 43,000 ------------------------------------------------------------------------------------ Argentina (Republic of) Unsec. Bonds, 12.375%, 2/21/12(3,4) 490,000 100,450 ------------------------------------------------------------------------------------ Argentina (Republic of) Unsec. Unsub. Bonds, 11.75%, 4/7/09(3,4,5) 1,165,000 250,475 ------------------------------------------------------------------------------------ Argentina (Republic of) Unsub. Bonds, Series 2031, 2.79%, 6/19/31(3) 3,500,120 647,522 ------------------------------------------------------------------------------------ Buenos Aires (Province of) Bonds, Bonos de Consolidacion de Deudas, Series PBA1, 3.257%, 4/1/07(3,5) [ARP] 2,307,630 277,617 ------------- 2,321,705 ------------------------------------------------------------------------------------ Australia--1.0% Australia (Commonwealth of) Bonds, Series 808, 8.75%, 8/15/08 [AUD] 4,870,000 3,120,850 ------------------------------------------------------------------------------------ Austria--2.1% Austria (Republic of) Bonds: 3.40%, 10/20/04 [EUR] 1,580,000 1,570,102 4.30%, 7/15/03 [EUR] 940,000 935,970 6.25%, 7/15/27 [EUR] 723,000 836,727 ------------------------------------------------------------------------------------ Austria (Republic of) Nts., 5.50%, 10/20/07 [EUR] 3,330,000 3,540,911 ------------- 6,883,710 ------------------------------------------------------------------------------------ Belgium--3.4% Belgium (Kingdom of) Bonds: 5%, 9/28/11 [EUR] 1,020,000 1,049,497 5.50%, 3/28/28 [EUR] 1,362,000 1,434,097 Series 26, 6.25%, 3/28/07 [EUR] 5,285,000 5,756,451 ------------------------------------------------------------------------------------ Belgium (Kingdom of) Debs., 7.25%, 4/29/04 [EUR] 2,510,000 2,635,673 ------------- 10,875,718 ------------------------------------------------------------------------------------ Belize--0.1% Belize (Government of) Bonds, 9.50%, 8/15/12 450,000 446,625 ------------------------------------------------------------------------------------ Brazil--2.6% Brazil (Federal Republic of) Bonds: 8.875%, 4/15/24 3,390,000 1,364,475 Series 15 yr., 3.125%, 4/15/09(6) 1,161,176 606,715
11 | OPPENHEIMER INTERNATIONAL BOND FUND
STATEMENT OF INVESTMENTS Continued Principal Market Value Amount See Note 1 ------------------------------------------------------------------------------------ Brazil Continued Brazil (Federal Republic of) Debt Capitalization Bonds, Series 20 yr., 8%, 4/15/14 $ 1,973,950 $ 977,105 ------------------------------------------------------------------------------------ Brazil (Federal Republic of) Debt Conversion Bonds: Series 18 yr., 3.125%, 4/15/12(6) 5,570,000 2,207,112 Series D, 3.125%, 4/15/12(6) 2,070,000 820,238 ------------------------------------------------------------------------------------ Brazil (Federal Republic of) Unsec. Unsub. Bonds, 11%, 8/17/40 5,529,200 2,446,671 ------------- 8,422,316 ------------------------------------------------------------------------------------ Bulgaria--0.2% Bulgaria (Republic of) Interest Arrears Debs., Series PDI, 2.688%, 7/28/11(6) 897,250 791,823 ------------------------------------------------------------------------------------ Canada--1.0% Canada (Government of) Bonds, 5.50%, 6/1/09 [CAD] 4,625,000 3,084,334 ------------------------------------------------------------------------------------ Chile--0.6% Chile (Republic of) Nts., 7.125%, 1/11/12 1,650,000 1,799,949 ------------------------------------------------------------------------------------ Colombia--1.8% Colombia (Republic of) Bonds: 9.75%, 4/23/09 1,500,000 1,218,750 10%, 1/23/12 1,186,000 963,625 ------------------------------------------------------------------------------------ Colombia (Republic of) Nts., 8.625%, 4/1/08 2,040,000 1,637,100 ------------------------------------------------------------------------------------ Colombia (Republic of) Unsec. Unsub. Bonds: 8.375%, 2/15/27 475,000 290,937 11.75%, 2/25/20 213,000 174,128 ------------------------------------------------------------------------------------ Colombia (Republic of) Unsec. Unsub. Nts.: 11.375%, 1/31/08 [EUR] 990,000 791,295 11.50%, 5/31/11 [EUR] 900,000 694,676 ------------- 5,770,511 ------------------------------------------------------------------------------------ Dominican Republic--0.4% Dominican Republic Unsec. Unsub. Bonds, 9.50%, 9/27/06 1,340,000 1,410,350 ------------------------------------------------------------------------------------ Ecuador--1.3% Ecuador (Republic of) Unsec. Bonds, 6%, 8/15/30(6) 11,070,000 4,095,900 ------------------------------------------------------------------------------------ El Salvador--0.3% El Salvador (Republic of) Unsec. Nts., 8.50%, 7/25/11(7) 760,000 822,700 ------------------------------------------------------------------------------------ France--2.7% France (Government of) Obligations Assimilables du Tresor Bonds: 5%, 7/25/12 [EUR] 510,000 528,731 5.75%, 10/25/32 [EUR] 1,320,000 1,474,514 ------------------------------------------------------------------------------------ France (Government of) Treasury Nts.: 3.50%, 7/12/04 [EUR] 2,535,000 2,525,052 3.75%, 1/12/07 [EUR] 4,210,000 4,190,180 ------------- 8,718,477
12 | OPPENHEIMER INTERNATIONAL BOND FUND
Principal Market Value Amount See Note 1 ------------------------------------------------------------------------------------ Germany--3.2% Germany (Republic of) Bonds: 5.50%, 1/4/31 [EUR] 1,371,000 $ 1,480,970 Series 01, 5%, 7/4/11 [EUR] 1,010,000 1,052,185 Series 139, 4%, 2/16/07 [EUR] 4,960,000 4,978,439 ------------------------------------------------------------------------------------ Treuhandanstalt Gtd. Nts., 6.75%, 5/13/04 [EUR] 2,740,000 2,860,670 ------------- 10,372,264 ------------------------------------------------------------------------------------ Great Britain--3.2% United Kingdom Treasury Bonds, 5.75%, 12/7/09 [GBP] 6,105,000 10,458,068 ------------------------------------------------------------------------------------ Greece--2.8% Greece (Republic of) Bonds, 5.35%, 5/18/11 [EUR] 7,170,000 7,475,443 ------------------------------------------------------------------------------------ Greece (Republic of) Sr. Unsub. Bonds, 4.65%, 4/19/07 [EUR] 1,550,000 1,590,352 ------------- 9,065,795 ------------------------------------------------------------------------------------ Guatemala--0.1% Guatemala (Republic of) Nts., 10.25%, 11/8/11(5) 160,000 184,400 ------------------------------------------------------------------------------------ Italy--3.7% Italy (Republic of) Treasury Bonds, Buoni del Tesoro Poliennali: 0.375%, 10/10/06 [JPY] 59,000,000 487,402 4.50%, 7/1/04 [EUR] 2,050,000 2,075,247 5%, 10/15/07 [EUR] 4,345,000 4,531,953 5.25%, 8/1/11 [EUR] 2,045,000 2,143,146 6%, 5/1/31 [EUR] 990,000 1,114,417 ------------------------------------------------------------------------------------ Italy (Republic of) Treasury Nts., Cert Di Credito Del Tesoro, 4.20%, 10/1/02(6) [EUR] 1,545,000 1,526,466 ------------- 11,878,631 ------------------------------------------------------------------------------------ Ivory Coast--0.2% Ivory Coast (Government of) Past Due Interest Bonds, Series F, 1.905%, 3/29/18(3,4,5) [FRF] 16,007,500 521,546 ------------------------------------------------------------------------------------ Mexico--3.3% United Mexican States Bonds: 8.30%, 8/15/31 2,995,000 2,912,637 11.50%, 5/15/26(8) 2,755,000 3,478,188 ------------------------------------------------------------------------------------ United Mexican States Nts.: 7.50%, 1/14/12 2,589,000 2,624,599 8.375%, 1/14/11 1,595,000 1,682,725 ------------- 10,698,149 ------------------------------------------------------------------------------------ Nigeria--0.2% Nigeria (Federal Republic of) Promissory Nts., Series RC, 5.092%, 1/5/10(3,4) 1,510,734 727,431 ------------------------------------------------------------------------------------ Norway--0.5% Norway (Government of) Bonds, 5.50%, 5/15/09 [NOK] 12,070,000 1,586,358
13 | OPPENHEIMER INTERNATIONAL BOND FUND
STATEMENT OF INVESTMENTS Continued Principal Market Value Amount See Note 1 ------------------------------------------------------------------------------------ Panama--1.5% Panama (Republic of) Bonds: 9.375%, 4/1/29 $ 1,062,000 $ 1,080,585 10.75%, 5/15/20 740,000 745,550 ------------------------------------------------------------------------------------ Panama (Republic of) Interest Reduction Bonds, 5%, 7/17/14(6) 1,626,657 1,354,192 ------------------------------------------------------------------------------------ Panama (Republic of) Past Due Interest Debs., 2.75%, 7/17/16(6) 2,456,947 1,726,005 ------------- 4,906,332 ------------------------------------------------------------------------------------ Peru--1.5% Peru (Republic of) Sr. Nts., Zero Coupon, 4.53%, 2/28/16(2) 10,058,878 4,758,855 ------------------------------------------------------------------------------------ Philippines--3.4% Philippines (Republic of) Nts., 10.625%, 3/16/25 4,500,000 4,691,250 ------------------------------------------------------------------------------------ Philippines (Republic of) Unsec. Bonds, 9.875%, 1/15/19 6,309,000 6,277,455 ------------- 10,968,705 ------------------------------------------------------------------------------------ Portugal--1.4% Portugal (Republic of) Obrig Do Tes Medio Prazo Unsec. Unsub. Bonds, 5.85%, 5/20/10 [EUR] 4,135,000 4,496,856 ------------------------------------------------------------------------------------ Russia--8.4% Russian Federation Unsec. Unsub. Nts.: 8.75%, 7/24/05 640,000 681,600 10%, 6/26/07 4,815,000 5,224,275 12.75%, 6/24/28 1,372,000 1,670,716 ------------------------------------------------------------------------------------ Russian Federation Unsub. Nts., 5%, 3/31/30(6) 25,616,000 18,075,290 ------------------------------------------------------------------------------------ Russian Ministry of Finance Debs., Series V, 3%, 5/14/08 1,920,000 1,347,456 ------------- 26,999,337 ------------------------------------------------------------------------------------ South Africa--1.1% South Africa (Republic of) Unsec. Nts.: 7.375%, 4/25/12 3,065,000 3,237,406 8.50%, 6/23/17 280,000 302,050 9.125%, 5/19/09 20,000 23,300 ------------- 3,562,756 ------------------------------------------------------------------------------------ Spain--5.9% Spain (Kingdom of) Bonds, Bonos y Obligacion del Estado: 4.65%, 10/31/04(5) [EUR] 4,155,000 4,230,235 4.80%, 10/31/06 [EUR] 8,805,000 9,134,035 5.75%, 7/30/32 [EUR] 2,245,000 2,476,129 ------------------------------------------------------------------------------------ Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado, 5.40%, 7/30/11 [EUR] 2,840,000 3,010,698 ------------- 18,851,097
14 | OPPENHEIMER INTERNATIONAL BOND FUND
Principal Market Value Amount See Note 1 ------------------------------------------------------------------------------------ Supranational--1.0% European Investment Bank Nts., 2.125%, 9/20/07 [JPY] 348,000,000 $ 3,115,249 ------------------------------------------------------------------------------------ Sweden--0.5% Sweden (Kingdom of) Debs., Series 1040, 6.50%, 5/5/08 [SEK] 13,350,000 1,571,449 ------------------------------------------------------------------------------------ The Netherlands--4.8% The Netherlands (Government of) Bonds: 5%, 7/15/11 [EUR] 3,450,000 3,575,684 5.50%, 1/15/28 [EUR] 1,820,000 1,947,459 5.75%, 1/15/04 [EUR] 3,010,000 3,075,331 Series 1, 5.75%, 2/15/07 [EUR] 6,410,000 6,861,442 ------------- 15,459,916 ------------------------------------------------------------------------------------ Turkey--1.0% Turkey (Republic of) Bonds, 11.75%, 6/15/10 1,710,000 1,534,725 ------------------------------------------------------------------------------------ Turkey (Republic of) Sr. Unsec. Unsub. Nts., 11.875%, 1/15/30 1,035,000 869,400 ------------------------------------------------------------------------------------ Turkey (Republic of) Sr. Unsub. Bonds, 12.375%, 6/15/09 1,015,000 936,337 ------------- 3,340,462 ------------------------------------------------------------------------------------ Ukraine--1.0% Ukraine (Republic of) Sr. Unsec. Nts., 11%, 3/15/07 2,966,880 3,114,853 ------------------------------------------------------------------------------------ Uruguay--0.1% Banco Central Del Uruguay Nts., Series A, 6.75%, 2/19/21(5) 315,000 194,512 ------------------------------------------------------------------------------------ Venezuela--2.7% Venezuela (Republic of) Bonds, 9.25%, 9/15/27 7,715,000 5,149,762 ------------------------------------------------------------------------------------ Venezuela (Republic of) Collateralized Par Bonds, Series W-B, 6.75%, 3/31/20 159,000 127,598 ------------------------------------------------------------------------------------ Venezuela (Republic of) Debs., Series DL, 2.875%, 12/18/07(6) 3,771,368 2,856,811 ------------------------------------------------------------------------------------ Venezuela (Republic of) Front-Loaded Interest Reduction Bonds: Series A, 2.688%, 3/31/07(6) 842,839 625,808 Series B, 2.688%, 3/31/07(6) 76,189 56,570 ------------- 8,816,549 ------------- Total Foreign Government Obligations (Cost $220,555,680) 224,214,538 ------------------------------------------------------------------------------------ Loan Participations--2.1% ------------------------------------------------------------------------------------ Algeria (Republic of) Loan Participation Nts., 2.625%, 3/4/10(5,6) 3,236,250 2,849,923 ------------------------------------------------------------------------------------ Deutsche Bank AG, Indonesia Rupiah Loan Participation Nts.: 2.636%, 5/21/04(3) 360,000 185,400 2.636%, 3/25/05(3) 165,000 86,625 2.636%, 12/14/13(3,5) 495,000 222,750 ------------------------------------------------------------------------------------ Deutsche Bank AG, OAO Gazprom Loan Participation Nts., 10%, 12/9/02(5) 1,400,000 1,408,820 ------------------------------------------------------------------------------------ Russia (Government of) Debs., Series VI, 3%, 5/14/06 2,320,000 1,912,118 ------------- Total Loan Participations (Cost $6,650,684) 6,665,636
15 | OPPENHEIMER INTERNATIONAL BOND FUND
STATEMENT OF INVESTMENTS Continued Principal Market Value Amount See Note 1 ------------------------------------------------------------------------------------ Corporate Bonds and Notes--8.6% ------------------------------------------------------------------------------------ Capital Gaming International, Inc., 11.50% Promissory Nts., 8/1/1995(3,4,5) $ 2,000 $ -- ------------------------------------------------------------------------------------ Chohung Bank, 11.875% Sub. Nts., 4/1/10(6) 145,000 170,208 ------------------------------------------------------------------------------------ European Investment Bank, 3% Eligible Interest Nts., 9/20/06 [JPY] 938,000,000 8,546,325 ------------------------------------------------------------------------------------ Fuji JGB Investment LLC: 9.87% Non-Cum. Bonds, Series A, 12/31/49(6) 1,140,000 1,037,513 9.87% Non-Cum. Bonds, Series A, 12/31/49(7) 10,981,000 9,993,797 ------------------------------------------------------------------------------------ Hanvit Bank, 12.75% Unsec. Sub. Nts., 3/1/10(6) 2,337,000 2,776,961 ------------------------------------------------------------------------------------ IBJ Preferred Capital Co. (The) LLC, 8.79% Non-Cum. Bonds, Series A, 12/29/49(6) 380,000 318,037 ------------------------------------------------------------------------------------ Mexican Williams Sr. Nts., 2.076%, 11/15/08(5,6) 500,000 514,610 ------------------------------------------------------------------------------------ Ongko International Finance Co. BV, 10.50% Sec. Nts., 3/29/04(3,4,5) 550,000 8,250 ------------------------------------------------------------------------------------ Petronas Capital Ltd.: 7.875% Nts., 5/22/22 1,385,000 1,541,526 7.875% Nts., 5/22/22(7) 875,000 961,107 ------------------------------------------------------------------------------------ Pfizer, Inc., 0.80% Unsec. Bonds, Series INTL, 3/18/08 [JPY] 131,000,000 1,090,806 ------------------------------------------------------------------------------------ Tokai Preferred Capital Co. LLC, 9.98% Non-Cum. Bonds, Series A, 12/29/49(7) 695,000 634,290 ------------- Total Corporate Bonds and Notes (Cost $28,091,611) 27,593,430 Shares ------------------------------------------------------------------------------------ Common Stocks--0.0% ------------------------------------------------------------------------------------ i Shares MSCI Hong Kong Index Fund(4) (Cost $2,284) 225 1,604 Units ------------------------------------------------------------------------------------ Rights, Warrants and Certificates--1.0% ------------------------------------------------------------------------------------ Banco Central Del Uruguay Rts., Exp. 1/2/21(4,5) 315,000 -- ------------------------------------------------------------------------------------ Chesapeake Energy Corp. Wts.: Exp. 1/23/03(4,5) 326 -- Exp. 9/1/04(4,5) 350 -- ------------------------------------------------------------------------------------ ICG Communications, Inc. Wts., Exp. 9/15/05(4,5) 495 5 ------------------------------------------------------------------------------------ Loral Space & Communications Ltd. Wts., Exp. 1/15/07(4,5) 50 -- ------------------------------------------------------------------------------------ Mexico Value Rts., Exp. 6/30/03(4) 70,000 21 ------------------------------------------------------------------------------------ Microcell Telecommunications, Inc. Wts., Exp. 6/1/06(4,7) 100 19 ------------------------------------------------------------------------------------ Morgan Stanley Wts., Exp. 6/5/03(4) 357,965 3,078,714 ------------------------------------------------------------------------------------ Protection One, Inc. Wts., Exp. 6/30/05(4,5) 640 -- ------------- Total Rights, Warrants and Certificates (Cost $3,771,364) 3,078,759
16 | OPPENHEIMER INTERNATIONAL BOND FUND
Principal Market Value Amount See Note 1 ------------------------------------------------------------------------------------ Structured Notes--7.8% ------------------------------------------------------------------------------------ Credit Suisse First Boston Corp. (Nassau Branch), U.S. Dollar/Philippine Peso Linked Nts., 12.50%, 3/15/12(6) [PHP] 119,085,000 $ 2,258,810 ------------------------------------------------------------------------------------ Credit Suisse First Boston International, U.S. Dollar/South African Rand Linked Nts., 1.965%, 5/23/22(5,6) 2,100,000 2,087,400 ------------------------------------------------------------------------------------ Deutsche Bank AG: Brazilian Real Linked Nts., 22%, 2/8/04 3,475,000 2,611,810 Colombian Peso Linked Nts., 2.201%, 4/22/04(6) 810,000 757,269 Columbian Peso Linked Nts., 14.61%, 8/8/04(5,6) 595,000 579,292 Mexican Peso Linked Nts., 1.66%, 4/9/12(6) 3,000,000 2,692,800 ------------------------------------------------------------------------------------ JPMorgan Chase Bank: EMBI Plus Linked CD, 0.54%, 2/6/03 2,480,000 2,443,536 EMBI Plus/EMBI Global Linked Bonds, 1.02%, 3/11/03 1,130,000 1,001,862 EMBI Plus/EMBI Global Linked Bonds, 1.20%, 4/4/03 740,000 644,536 Hungarian Forint/Euro Linked Bonds, 2%, 7/14/03 2,780,000 2,757,204 Hungarian Forint/Euro Linked Nts., 1.82%, 8/6/03 2,010,000 1,966,383 ------------------------------------------------------------------------------------ Salomon Smith Barney, Inc., Mexican Peso Linked Nts., 1.78%, 12/6/02 [MXN] 23,808,000 2,231,033 ------------------------------------------------------------------------------------ Standard Chartered Bank, Indonesian Rupiah Linked Nts., 12.86%, 10/21/02 [IDR] 26,733,350,000 2,970,214 ------------- Total Structured Notes (Cost $26,194,778) 25,002,149 Date Strike Contracts ------------------------------------------------------------------------------------ Options Purchased--0.0% ------------------------------------------------------------------------------------ Brazilian Real Call(4,5) 10/11/02 3.335brr 32,144 1,420 ------------------------------------------------------------------------------------ Chiliean Peso Call(4,5) 10/11/02 719.50clp 10,496 5,904 ------------------------------------------------------------------------------------ Japanese Yen Call(4,5) 2/18/03 116.33jpy 408,780 147,628 ------------------------------------------------------------------------------------ Qatar (State of) Sr. Unsec. Unsub. Bonds, 9.75%, 6/15/30 Put(4,5) 3/19/03 114% 155,236 17,730 ------------- Total Options Purchased (Cost $606,656) 172,682 Principal Amount ------------------------------------------------------------------------------------ Joint Repurchase Agreements--3.8% ------------------------------------------------------------------------------------ Undivided interest of 4.10% in joint repurchase agreement with BNP Paribas Securities Corp., 1.85%, dated 9/30/02, to be repurchased at $12,313,633 on 10/1/02, collateralized by U.S. Treasury Bonds, 7.25%-- 10.375%, 11/15/12--2/15/20, with a value of $308,594,118 (Cost $12,313,000) $12,313,000 12,313,000 ------------------------------------------------------------------------------------ Total Investments, at Value (Cost $318,829,203) 99.6% 320,206,283 ------------------------------------------------------------------------------------ Other Assets Net of Liabilities 0.4 1,444,713 ---------------------------- Net Assets 100.0% $321,650,996 ============================
17 | OPPENHEIMER INTERNATIONAL BOND FUND STATEMENT OF INVESTMENTS Continued Footnotes to Statement of Investments Principal amount is reported in U.S. Dollars, except for those denoted in the following currencies: ARP Argentine Peso AUD Australian Dollar BRR Brazilian Real CAD Canadian Dollar CLP Chilean Peso EUR Euro FRF French Franc GBP British Pound Sterling IDR Indonesian Rupiah JPY Japanese Yen MXN Mexican Nuevo Peso NOK Norwegian Krone PHP Philippines Peso SEK Swedish Krona 1. A sufficient amount of securities has been designated to cover outstanding foreign currency contracts. See Note 5 of Notes to Financial Statements. 2. Zero coupon bond reflects effective yield on the date of purchase. 3. Issuer is in default. 4. Non-income producing security. 5. Identifies issues considered to be illiquid or restricted--See Note 9 of Notes to Financial Statements. 6. Represents the current interest rate for a variable or increasing rate security. 7. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $12,411,913 or 3.86% of the Fund's net assets as of September 30, 2002. 8. A sufficient amount of liquid assets has been designated to cover outstanding written options, as follows:
Principal (000s) Expiration Exercise Premium Market Value Subject to Put Date Price Received See Note 1 ------------------------------------------------------------------------------------ United Mexican States Bonds, 11.50%, 5/15/26 $1,970 3/19/03 0.013% $175,330 $184,195
18 | OPPENHEIMER INTERNATIONAL BOND FUND Distribution of investments representing geographic diversification, as a percentage of total investments at value, is as follows: Geographic Diversification Market Value Percent ----------------------------------------------------------------------------- United States $ 52,229,135 16.3% Russia 30,320,275 9.5 Spain 18,851,097 5.9 Mexico 16,136,613 5.0 The Netherlands 15,459,916 4.8 Philippines 13,227,515 4.1 Italy 11,878,631 3.7 Supranational 11,661,574 3.6 Brazil 11,034,126 3.5 Belgium 10,875,718 3.4 Great Britain 10,458,068 3.3 Germany 10,372,264 3.2 Greece 9,065,795 2.8 Venezuela 8,816,549 2.8 France 8,718,477 2.7 Colombia 7,107,072 2.2 Austria 6,883,710 2.1 South Africa 5,650,156 1.8 Panama 4,906,332 1.5 Peru 4,758,855 1.5 Hungary 4,723,587 1.5 Portugal 4,496,856 1.4 Ecuador 4,095,900 1.3 Indonesia 3,473,239 1.1 Turkey 3,340,462 1.0 Australia 3,120,850 1.0 Ukraine 3,114,853 1.0 Canada 3,084,353 1.0 Korea, Republic of South 2,947,169 0.9 Algeria 2,849,923 0.9 Malaysia 2,502,633 0.8 Argentina 2,321,705 0.7 Chile 1,799,949 0.6 Egypt 1,646,398 0.5 Norway 1,586,358 0.5 Sweden 1,571,449 0.5 Dominican Republic 1,410,350 0.4 El Salvador 822,700 0.3 Bulgaria 791,823 0.2 Nigeria 727,431 0.2 Ivory Coast 521,546 0.2 Belize 446,625 0.1 Uruguay 194,512 0.1 Guatemala 184,400 0.1 Qatar 17,730 -- Hong Kong 1,604 -- ----------------------------- Total $320,206,283 100.0% ============================= See accompanying Notes to Financial Statements. 19 | OPPENHEIMER INTERNATIONAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES September 30, 2002 ----------------------------------------------------------------------------------- Assets ----------------------------------------------------------------------------------- Investments, at value (cost $318,829,203)-- see accompanying statement $320,206,283 ----------------------------------------------------------------------------------- Cash 280,826 ----------------------------------------------------------------------------------- Cash--foreign currencies (cost $57,960) 34,370 ----------------------------------------------------------------------------------- Cash used for collateral on futures, forwards and put options 1,482,000 ----------------------------------------------------------------------------------- Unrealized appreciation on foreign currency contracts 72,667 ----------------------------------------------------------------------------------- Receivables and other assets: Investments sold (including $8,073 sold on a when-issued basis) 10,805,149 Interest, dividends and principal paydowns 5,549,585 Shares of beneficial interest sold 2,942,058 Swap contract 24,402 Other 2,003 ------------- Total assets 341,399,343 ----------------------------------------------------------------------------------- Liabilities ----------------------------------------------------------------------------------- Unrealized depreciation on foreign currency contracts 27,677 ----------------------------------------------------------------------------------- Options written, at value (premiums received $175,330)-- see accompanying statement 184,195 ----------------------------------------------------------------------------------- Payables and other liabilities: Investments purchased 11,165,848 Shares of beneficial interest redeemed 5,719,680 Closed foreign currency contracts 1,857,013 Dividends 338,880 Distribution and service plan fees 184,849 Shareholder reports 122,626 Transfer and shareholder servicing agent fees 55,705 Daily variation on futures contracts 48,732 Trustees' compensation 561 Other 42,581 ------------- Total liabilities 19,748,347 ----------------------------------------------------------------------------------- Net Assets $321,650,996 ============= ----------------------------------------------------------------------------------- Composition of Net Assets ----------------------------------------------------------------------------------- Par value of shares of beneficial interest $ 73,530 ----------------------------------------------------------------------------------- Additional paid-in capital 354,813,493 ----------------------------------------------------------------------------------- Overdistributed net investment income (896,072) ----------------------------------------------------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (33,864,554) ----------------------------------------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 1,524,599 ------------- Net Assets $321,650,996 =============
20 | OPPENHEIMER INTERNATIONAL BOND FUND
---------------------------------------------------------------------------------- Net Asset Value Per Share ---------------------------------------------------------------------------------- Class A Shares: Net asset value and redemption price per share (based on net assets of $181,456,110 and 41,427,996 shares of beneficial interest outstanding) $4.38 Maximum offering price per share (net asset value plus sales charge of 4.75% of offering price) $4.60 ---------------------------------------------------------------------------------- Class B Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $100,049,144 and 22,905,683 shares of beneficial interest outstanding) $4.37 ---------------------------------------------------------------------------------- Class C Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $38,865,249 and 8,903,178 shares of beneficial interest outstanding) $4.37 ---------------------------------------------------------------------------------- Class N Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $1,280,493 and 292,966 shares of beneficial interest outstanding) $4.37
See accompanying Notes to Financial Statements. 21 | OPPENHEIMER INTERNATIONAL BOND FUND
STATEMENT OF OPERATIONS For the Year Ended September 30, 2002 ----------------------------------------------------------------------------------- Investment Income ----------------------------------------------------------------------------------- Interest (net of foreign withholding taxes of $7,794) $16,275,556 ----------------------------------------------------------------------------------- Dividends 929 ------------ Total investment income 16,276,485 ----------------------------------------------------------------------------------- Expenses ----------------------------------------------------------------------------------- Management fees 1,851,525 ----------------------------------------------------------------------------------- Distribution and service plan fees: Class A 313,178 Class B 851,975 Class C 285,981 Class N 1,444 ----------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees: Class A 332,663 Class B 214,823 Class C 72,417 Class N 566 ----------------------------------------------------------------------------------- Shareholder reports 199,424 ----------------------------------------------------------------------------------- Custodian fees and expenses 101,941 ----------------------------------------------------------------------------------- Trustees' compensation 9,385 ----------------------------------------------------------------------------------- Other 60,643 ------------ Total expenses 4,295,965 Less reduction to custodian expenses (8,013) ------------ Net expenses 4,287,952 ----------------------------------------------------------------------------------- Net Investment Income 11,988,533 ----------------------------------------------------------------------------------- Realized and Unrealized Gain (Loss) ----------------------------------------------------------------------------------- Net realized gain (loss) on: Investments (including premiums on options exercised) 9,290,822 Closing of futures contracts (406,037) Closing and expiration of option contracts written 178,461 Foreign currency transactions 7,156,017 ------------ Net realized gain 16,219,263 ----------------------------------------------------------------------------------- Net change in unrealized appreciation on: Investments 4,381,613 Translation of assets and liabilities denominated in foreign currencies 2,335,373 ------------ Net change 6,716,986 ------------ Net realized and unrealized gain 22,936,249 ----------------------------------------------------------------------------------- Net Increase in Net Assets Resulting from Operations $34,924,782 ============
See accompanying Notes to Financial Statements. 22 | OPPENHEIMER INTERNATIONAL BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS Year Ended September 30, 2002 2001 ----------------------------------------------------------------------------------- Operations ----------------------------------------------------------------------------------- Net investment income $ 11,988,533 $ 16,024,101 ----------------------------------------------------------------------------------- Net realized gain (loss) 16,219,263 (18,499,271) ----------------------------------------------------------------------------------- Net change in unrealized appreciation 6,716,986 2,722,710 --------------------------- Net increase in net assets resulting from operations 34,924,782 247,540 ----------------------------------------------------------------------------------- Dividends and/or Distributions to Shareholders ----------------------------------------------------------------------------------- Dividends from net investment income: Class A (5,960,008) -- Class B (3,128,518) -- Class C (1,038,402) -- Class N (12,245) -- ----------------------------------------------------------------------------------- Tax return of capital distribution: Class A (1,001,844) (8,487,688) Class B (633,014) (6,076,453) Class C (212,641) (1,760,643) Class N (2,205) (1,308) ----------------------------------------------------------------------------------- Beneficial Interest Transactions ----------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from beneficial interest transactions: Class A 50,685,955 26,717,450 Class B 7,421,458 (8,296,328) Class C 10,958,666 (825,212) Class N 1,158,705 110,344 ----------------------------------------------------------------------------------- Net Assets ----------------------------------------------------------------------------------- Total increase 93,160,689 1,627,702 ----------------------------------------------------------------------------------- Beginning of period 228,490,307 226,862,605 --------------------------- End of period [including overdistributed net investment income of $896,072 and $436,204, respectively] $321,650,996 $228,490,307 ===========================
See accompanying Notes to Financial Statements. 23 | OPPENHEIMER INTERNATIONAL BOND FUND
FINANCIAL HIGHLIGHTS Class A Year ended September 30, 2002 2001 2000 1999 1998 ---------------------------------------------------------------------------------------------- Per Share Operating Data ---------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 3.95 $ 4.19 $ 4.23 $ 4.32 $ 5.51 ---------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .24 .30 .45 .58 .56 Net realized and unrealized gain (loss) .41 (.24) (.08) (.14) (1.20) ----------------------------------------------- Total from investment operations .65 .06 .37 .44 (.64) ---------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.19) -- (.21) (.53) (.53) Tax return of capital distribution (.03) (.30) (.20) -- -- Distributions from net realized gain -- -- -- -- (.02) ----------------------------------------------- Total dividends and/or distributions to shareholders (.22) (.30) (.41) (.53) (.55) ---------------------------------------------------------------------------------------------- Net asset value, end of period $4.38 $3.95 $4.19 $4.23 $4.32 =============================================== ---------------------------------------------------------------------------------------------- Total Return, at Net Asset Value(1) 16.78% 1.40% 8.93% 10.58% (12.50)% ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- Ratios/Supplemental Data ---------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $181,456 $118,733 $100,928 $102,236 $ 97,404 ---------------------------------------------------------------------------------------------- Average net assets (in thousands) $134,912 $117,000 $110,968 $101,948 $108,264 ---------------------------------------------------------------------------------------------- Ratios to average net assets:(2) Net investment income 5.16% 7.10% 10.23% 13.47% 11.09% Expenses 1.37% 1.38% 1.31% 1.26% 1.24%(3) Expenses, net of reduction to custodian and/or voluntary waiver of transfer agent fees 1.37% 1.38% 1.29% 1.25% 1.24% ---------------------------------------------------------------------------------------------- Portfolio turnover rate 372% 377% 288% 285% 446%
1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. 2. Annualized for periods of less than one full year. 3. Expense ratio has been calculated without adjustment for the reduction to custodian expenses. See accompanying Notes to Financial Statements. 24 | OPPENHEIMER INTERNATIONAL BOND FUND
Class B Year ended September 30, 2002 2001 2000 1999 1998 ---------------------------------------------------------------------------------------------- Per Share Operating Data ---------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 3.94 $ 4.17 $ 4.22 $ 4.31 $ 5.50 ---------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .21 .26 .42 .55 .52 Net realized and unrealized gain (loss) .40 (.22) (.09) (.14) (1.20) ----------------------------------------------- Total from investment operations .61 .04 .33 .41 (.68) ---------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.15) -- (.20) (.50) (.49) Tax return of capital distribution (.03) (.27) (.18) -- -- Distributions from net realized gain -- -- -- -- (.02) ----------------------------------------------- Total dividends and/or distributions to shareholders (.18) (.27) (.38) (.50) (.51) ---------------------------------------------------------------------------------------------- Net asset value, end of period $4.37 $3.94 $4.17 $4.22 $4.31 =============================================== ---------------------------------------------------------------------------------------------- Total Return, at Net Asset Value(1) 15.90% 0.85% 7.94% 9.79% (13.16)% ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- Ratios/Supplemental Data ---------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $100,049 $84,427 $ 98,272 $118,632 $119,998 ---------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 85,244 $93,455 $115,116 $122,878 $128,789 ---------------------------------------------------------------------------------------------- Ratios to average net assets:(2) Net investment income 4.41% 6.40% 9.63% 12.70% 10.33% Expenses 2.14% 2.14% 2.05% 2.02% 2.00%(3) Expenses, net of reduction to custodian and/or voluntary waiver of transfer agent fees 2.14% 2.14% 2.03% 2.01% 2.00% ---------------------------------------------------------------------------------------------- Portfolio turnover rate 372% 377% 288% 285% 446%
1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. 2. Annualized for periods of less than one full year. 3. Expense ratio has been calculated without adjustment for the reduction to custodian expenses. See accompanying Notes to Financial Statements. 25 | OPPENHEIMER INTERNATIONAL BOND FUND
FINANCIAL HIGHLIGHTS Continued Class C Year ended September 30, 2002 2001 2000 1999 1998 ---------------------------------------------------------------------------------------------- Per Share Operating Data ---------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 3.94 $ 4.17 $ 4.22 $ 4.31 $ 5.50 ---------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .21 .26 .41 .55 .52 Net realized and unrealized gain (loss) .40 (.22) (.08) (.14) (1.20) ----------------------------------------------- Total from investment operations .61 .04 .33 .41 (.68) ---------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders Dividends from net investment income (.15) -- (.19) (.50) (.49) Tax return of capital distribution (.03) (.27) (.19) -- -- Distributions from net realized gain -- -- -- -- (.02) ----------------------------------------------- Total dividends and/or distributions to shareholders (.18) (.27) (.38) (.50) (.51) ---------------------------------------------------------------------------------------------- Net asset value, end of period $4.37 $3.94 $4.17 $4.22 $4.31 =============================================== ---------------------------------------------------------------------------------------------- Total Return, at Net Asset Value(1) 15.90% 0.85% 7.95% 9.80% (13.16)% ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- Ratios/Supplemental Data ---------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $38,865 $25,221 $27,663 $29,456 $27,636 ---------------------------------------------------------------------------------------------- Average net assets (in thousands) $28,635 $27,125 $30,710 $28,918 $29,336 ---------------------------------------------------------------------------------------------- Ratios to average net assets:(2) Net investment income 4.37% 6.39% 9.55% 12.76% 10.33% Expenses 2.14% 2.14% 2.05% 2.02% 2.00%(3) Expenses, net of reduction to custodian and/or voluntary waiver of transfer agent fees 2.14% 2.14% 2.03% 2.01% 2.00% ---------------------------------------------------------------------------------------------- Portfolio turnover rate 372% 377% 288% 285% 446%
1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. 2. Annualized for periods of less than one full year. 3. Expense ratio has been calculated without adjustment for the reduction to custodian expenses. See accompanying Notes to Financial Statements. 26 | OPPENHEIMER INTERNATIONAL BOND FUND
Class N Year ended September 30, 2002 2001(1) --------------------------------------------------------------------------------------- Per Share Operating Data --------------------------------------------------------------------------------------- Net asset value, beginning of period $ 3.95 $ 4.23 --------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .21 .16 Net realized and unrealized gain (loss) .42 (.28) ------------------- Total from investment operations .63 (.12) --------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.18) -- Tax return of capital distribution (.03) (.16) Distributions from net realized gain -- -- ------------------- Total dividends and/or distributions to shareholders (.21) (.16) --------------------------------------------------------------------------------------- Net asset value, end of period $4.37 $3.95 =================== --------------------------------------------------------------------------------------- Total Return, at Net Asset Value(2) 16.23% (2.88)% --------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- Ratios/Supplemental Data --------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $1,280 $109 --------------------------------------------------------------------------------------- Average net assets (in thousands) $ 297 $ 34 --------------------------------------------------------------------------------------- Ratios to average net assets:(3) Net investment income 4.87% 6.56% Expenses 1.57% 1.39% Expenses, net of reduction to custodian and/or voluntary waiver of transfer agent fees 1.57% 1.39% --------------------------------------------------------------------------------------- Portfolio turnover rate 372% 377%
1. For the period from March 1, 2001 (inception of offering) to September 30, 2001. 2. Assumes an 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. 3. Annualized for periods of less than one full year. See accompanying Notes to Financial Statements. 27 | OPPENHEIMER INTERNATIONAL BOND FUND NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 1. Significant Accounting Policies Oppenheimer International Bond Fund (the Fund) is a registered investment company organized as a Massachusetts Business Trust. The Fund is registered as an open-end management investment company under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek total return. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund offers Class A, Class B, Class C and Class N shares. Class A shares are sold at their offering price, which is normally net asset value plus a front-end sales charge. Class B, Class C and Class N shares are sold without a front-end sales charge but may be subject to a contingent deferred sales charge (CDSC). Class N shares are sold only through retirement plans. Retirement plans that offer Class N shares may impose charges on those accounts. All classes of shares have identical rights and voting privileges. Earnings, net assets and net asset value per share may differ by minor amounts due to each class having its own expenses directly attributable to that class. Classes A, B, C and N have separate distribution and/or service plans. Class B shares will automatically convert to Class A shares six years after the date of purchase. The following is a summary of significant accounting policies consistently followed by the Fund. -------------------------------------------------------------------------------- Securities Valuation. Securities listed or traded on National Stock Exchanges or other domestic or foreign exchanges are valued based on the last sale price of the security traded on that exchange prior to the time when the Fund's assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the closing bid and asked prices, and if not, at the closing bid price. Securities (including restricted securities) for which quotations are not readily available are valued primarily using dealer-supplied valuations, a portfolio pricing service authorized by the Board of Trustees, or at their fair value. Fair value is determined in good faith under consistently applied procedures under the supervision of the Board of Trustees. Short-term "money market type" debt securities with remaining maturities of sixty days or less are valued at amortized cost (which approximates market value). -------------------------------------------------------------------------------- Structured Notes. The Fund invests in foreign currency-linked structured notes whose market values and redemption prices are linked to foreign currency exchange rates. The structured notes are leveraged, which increases the volatility of each note's market value relative to the change in the underlying foreign currency exchange rate. Fluctuations in value of these securities are recorded as unrealized gains and losses in the accompanying financial statements. The Fund records a realized gain or loss when a structured note is sold or matures. As of September 30, 2002, the market value of these securities comprised 7.8% of the Fund's net assets and resulted in unrealized losses in the current period of $1,192,630. The Fund also hedges a portion of the foreign currency exposure generated by these securities, as discussed in Note 5. 28 | OPPENHEIMER INTERNATIONAL BOND FUND -------------------------------------------------------------------------------- Securities Purchased on a When-Issued Basis. Delivery and payment for securities that have been purchased by the Fund on a when-issued basis can take place a month or more after the trade date. Normally the settlement date occurs within six months after the trade date; however, the Fund may, from time to time, purchase securities whose settlement date extends six months or more beyond trade 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 segregated assets with a market value equal to or greater than the amount of its commitments. These transactions of securities on a when-issued basis may increase the volatility of the Fund's net asset value to the extent the Fund executes such transactions while remaining substantially fully invested. As of September 30, 2002, the Fund had entered into when-issued sale commitments of $8,073. -------------------------------------------------------------------------------- Security Credit Risk. The Fund invests in high-yield securities, which may be subject to a greater degree of credit risk, greater market fluctuations and risk of loss of income and principal, and may be more sensitive to economic conditions than lower-yielding, higher-rated fixed-income securities. The Fund may acquire securities in default, and is not obligated to dispose of securities whose issuers subsequently default. As of September 30, 2002, securities with an aggregate market value of $4,073,708, representing 1.27% of the Fund's net assets, were in default. -------------------------------------------------------------------------------- Foreign Currency Translation. The accounting records of the Fund are maintained in U.S. dollars. Prices of securities denominated in foreign currencies are translated into U.S. dollars at the closing rates of exchange. Amounts related to the purchase and sale of foreign securities and investment income are translated at the rates of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund's Statement of Operations. -------------------------------------------------------------------------------- Joint Repurchase Agreements. The Fund, along with other affiliated funds of the Manager, may transfer uninvested cash balances into one or more joint repurchase agreement accounts. These balances are invested in one or more repurchase agreements, secured by U.S. government securities. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal; however, in the event of default by the other party to the agreement, retention of the collateral may be subject to legal proceedings. 29 | OPPENHEIMER INTERNATIONAL BOND FUND NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- 1. Significant Accounting Policies Continued Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than those attributable to a specific class), 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 to shareholders. Therefore, no federal income or excise tax provision is required. As of September 30, 2002, the Fund had available for federal income tax purposes unused capital loss carryforwards as follows: Expiring ----------------------- 2002 $ 3,670,346 2003 449,603 2006 3,413,515 2007 24,055,190 2008 4,438,059 2009 1,299,082 ----------- Total $37,325,795(1) =========== 1. Includes $4,119,949 of the $8,187,009 unused capital loss carryforward acquired in the February 15, 2001 merger with Oppenheimer World Bond Fund which is no longer subject to limitation under IRS Sections 382 or 384. -------------------------------------------------------------------------------- Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. -------------------------------------------------------------------------------- Classification of Dividends and Distributions to Shareholders. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes primarily because of the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Fund. 30 | OPPENHEIMER INTERNATIONAL BOND FUND -------------------------------------------------------------------------------- The Fund adjusts the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, during the year ended September 30, 2002, amounts have been reclassified to reflect a decrease in paid-in capital of $1,816,973, a decrease in undistributed net investment income of $459,524, and a decrease in accumulated net realized loss on investments of $2,276,497. As noted in the Statement of Changes in Net Assets for federal income tax purposes, the Fund realized a return of capital of $1,849,704. Net assets of the Fund were unaffected by the reclassifications. The tax character of distributions paid during the years ended September 30, 2002 and September 30, 2001 was as follows: Year Ended Year Ended September 30, 2002 September 30, 2001 -------------------------------------------------------- Distributions paid from: Ordinary income $10,139,173 $ -- Long-term capital gain -- -- Return of capital 1,849,704 16,326,092 ------------------------------- Total $11,988,877 $16,326,092 =============================== As of September 30, 2002, the components of distributable earnings on a tax basis were as follows: Overdistributed net investment income $ (896,072) Accumulated net realized loss (33,864,554) Net unrealized appreciation 1,524,599 ------------ Total $(33,236,027) ============ -------------------------------------------------------------------------------- Investment Income. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, which includes accretion of discount and amortization of premium, is accrued as earned. -------------------------------------------------------------------------------- Security Transactions. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost. -------------------------------------------------------------------------------- Other. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. 31 | OPPENHEIMER INTERNATIONAL BOND FUND NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- 2. Shares of Beneficial Interest The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
Year Ended Year Ended September 30, 2002 September 30, 2001(1) Shares Amount Shares Amount ----------------------------------------------------------------------------------- Class A Sold 29,697,373 $129,350,915 11,475,782 $ 47,469,618 Dividends and/or distributions reinvested 1,145,883 4,834,797 1,365,106 5,584,489 Acquisition--Note 11 -- -- 9,099,764 38,855,992 Redeemed (19,476,112) (83,499,757) (15,986,371) (65,192,649) -------------------------------------------------------- Net increase 11,367,144 $ 50,685,955 5,954,281 $ 26,717,450 ======================================================== ----------------------------------------------------------------------------------- Class B Sold 9,030,170 $ 39,252,375 2,577,998 $ 10,449,838 Dividends and/or distributions reinvested 515,987 2,162,691 765,041 3,126,381 Acquisition--Note 11 -- -- 2,119,613 9,008,355 Redeemed (8,090,580) (33,993,608) (7,563,989) (30,880,902) -------------------------------------------------------- Net increase (decrease) 1,455,577 $ 7,421,458 (2,101,337) $ (8,296,328) ======================================================== ----------------------------------------------------------------------------------- Class C Sold 4,734,148 $ 20,471,644 2,442,689 $ 10,125,425 Dividends and/or distributions reinvested 180,877 759,597 228,472 933,199 Acquisition--Note 11 -- -- 389,518 1,655,452 Redeemed (2,420,774) (10,272,575) (3,283,543) (13,539,288) -------------------------------------------------------- Net increase (decrease) 2,494,251 $ 10,958,666 (222,864) $ (825,212) ======================================================== ----------------------------------------------------------------------------------- Class N Sold 292,426 $ 1,277,397 27,136 $ 109,074 Dividends and/or distributions reinvested 2,942 12,571 426 1,270 Redeemed (29,964) (131,263) -- -- -------------------------------------------------------- Net increase 265,404 $ 1,158,705 27,562 $ 110,344 ========================================================
1. For the year ended September 30, 2001, for Class A, B and C shares and for the period from March 1, 2001 (inception of offering) to September 30, 2001, for Class N shares. -------------------------------------------------------------------------------- 3. Purchases and Sales of Securities The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the year ended September 30, 2002, were $817,788,025 and $785,530,575, respectively. 32 | OPPENHEIMER INTERNATIONAL BOND FUND As of September 30, 2002, unrealized appreciation (depreciation) based on cost of securities for federal income tax purposes of $319,807,053 was composed of: Gross unrealized appreciation $10,536,781 Gross unrealized depreciation (10,137,551) ----------- Net unrealized appreciation $ 399,230 =========== The difference between book-basis and tax-basis unrealized appreciation and depreciation, if applicable, is attributable primarily to the tax deferral of losses on wash sales, or return of capital dividends, and the realization for tax purposes of unrealized gain (loss) on certain futures contracts, investments in passive foreign investment companies, and forward foreign currency exchange contracts. -------------------------------------------------------------------------------- 4. Fees and Other Transactions with Affiliates Management Fees. Management fees paid to the Manager were in accordance with the investment advisory agreement with the Fund which provides for an annual fee of 0.75% of the first $200 million of average annual net assets of the Fund, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $200 million and 0.50% of average annual net assets in excess of $1 billion. -------------------------------------------------------------------------------- Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. The Fund pays OFS a $22.50 per account fee. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees for all classes, up to an annual rate of 0.35% of average net assets per class. This undertaking may be amended or withdrawn at any time. -------------------------------------------------------------------------------- Distribution and Service Plan (12b-1) Fees. Under its General Distributor's Agreement with the Manager, OppenheimerFunds Distributor, Inc. (the Distributor) acts as the Fund's principal underwriter in the continuous public offering of the different classes of shares of the Fund. The compensation paid to (or retained by) the Distributor from the sale of shares or on the redemption of shares is shown in the table below for the period indicated.
Aggregate Class A Concessions Concessions Concessions Concessions Front-End Front-End on Class A on Class B on Class C on Class N Sales Charges Sales Charges Shares Shares Shares Shares on Class A Retained by Advanced by Advanced by Advanced by Advanced by Year Ended Shares Distributor Distributor(1) Distributor(1) Distributor(1) Distributor(1) ------------------------------------------------------------------------------------------------------- September 30, 2002 $452,569 $98,260 $115,077 $549,159 $128,269 $6,626
1. The Distributor advances concession payments to dealers for certain sales of Class A shares and for sales of Class B, Class C and Class N shares from its own resources at the time of sale. Class A Class B Class C Class N Contingent Contingent Contingent Contingent Deferred Deferred Deferred Deferred Sales Charges Sales Charges Sales Charges Sales Charges Retained by Retained by Retained by Retained by Year Ended Distributor Distributor Distributor Distributor ------------------------------------------------------------------------------- September 30, 2002 $11,854 $276,434 $7,123 $1,255 33 | OPPENHEIMER INTERNATIONAL BOND FUND NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- 4. Fees and Other Transactions with Affiliates Continued Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A Shares. It reimburses the Distributor for a portion of its costs incurred for services provided to accounts that hold Class A shares. Reimbursement is made quarterly at an annual rate of up to 0.25% of the average annual net assets of Class A shares of the Fund. For the year ended September 30, 2002, payments under the Class A Plan totaled $313,178, all of which were paid by the Distributor to recipients, and included $13,551 paid to an affiliate of the Manager. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent years. -------------------------------------------------------------------------------- Distribution and Service Plans for Class B, Class C and Class N Shares. The Fund has adopted Distribution and Service Plans for Class B, Class C and Class N shares. Under the plans, the Fund pays the Distributor an annual asset-based sales charge of 0.75% per year on Class B shares and on Class C shares and the Fund pays the Distributor an annual asset-based sales charge of 0.25% per year on Class N shares. The Distributor also receives a service fee of 0.25% per year under each plan. Distribution fees paid to the Distributor for the year ended September 30, 2002, were as follows: Distributor's Distributor's Aggregate Aggregate Unreimbursed Unreimbursed Expenses as % Total Payments Amount Retained Expenses of Net Assets Under Plan by Distributor Under Plan of Class ------------------------------------------------------------------------------ Class B Plan $851,975 $656,771 $4,991,285 4.99% Class C Plan 285,981 52,083 1,079,070 2.78 Class N Plan 1,444 859 12,754 1.00 -------------------------------------------------------------------------------- 5. Foreign Currency Contracts A foreign currency contract is a commitment to purchase or sell a foreign currency at a future date, at a negotiated rate. The Fund may enter into foreign currency contracts for operational purposes and to seek to protect against adverse exchange rate fluctuations. Risks to the Fund include the potential inability of the counterparty to meet the terms of the contract. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates as provided by a reliable bank, dealer or pricing service. Unrealized appreciation and depreciation on foreign currency contracts are reported in the Statement of Assets and Liabilities as a receivable or payable and in the Statement of Operations with the change in unrealized appreciation or depreciation. The Fund may realize a gain or loss upon the closing or settlement of the foreign currency transactions. Such realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations. 34 | OPPENHEIMER INTERNATIONAL BOND FUND As of September 30, 2002, the Fund had outstanding foreign currency contracts as follows:
Expiration Contract Valuation as of Unrealized Unrealized Contract Description Dates Amount (000s) Sept. 30, 2002 Appreciation Depreciation ---------------------------------------------------------------------------------------------------- Contracts to Purchase Canadian Dollar (CAD) 11/27/02 4,945CAD $3,111,934 $ -- $18,211 Euro (EUR) 10/16/02- 12/27/02 8,880EUR 8,753,784 72,667 -- --------------------- 72,667 18,211 --------------------- Contracts to Sell Australian Dollar (AUD) 11/27/02 5,760AUD 3,114,305 -- 621 British Pound Sterling (GBP) 10/1/02 23GBP 36,218 -- 472 Euro (EUR) 5/5/03 665EUR 651,429 -- 8,373 --------------------- -- 9,466 --------------------- Total Unrealized Appreciation and Depreciation $72,667 $27,677 =====================
-------------------------------------------------------------------------------- 6. Futures Contracts A futures contract is a commitment to buy or sell a specific amount of a commodity or financial instrument at a particular price on a stipulated future date at a negotiated price. Futures contracts are traded on a commodity exchange. The Fund may buy and sell futures contracts that relate to broadly based securities indices "financial futures" or debt securities "interest rate futures" in order to gain exposure to or to seek to protect against changes in market value of stock and bonds or 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 decreases in market value of portfolio securities. The Fund may also purchase futures contracts to gain exposure to market changes as it may be more efficient or cost effective than actually buying fixed income securities. Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin) in an amount equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. The Statement of Assets and Liabilities reflects a receivable and/or payable for the daily mark to market for variation margin. Realized gains and losses are reported on the Statement of Operations as closing and expiration of futures contracts. 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. 35 | OPPENHEIMER INTERNATIONAL BOND FUND NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- 6. Futures Contracts Continued As of September 30, 2002, the Fund had outstanding futures contracts as follows:
Unrealized Expiration Number of Valuation as of Appreciation Contract Description Dates Contracts September 30, 2002 (Depreciation) -------------------------------------------------------------------------------------------- Contracts to Purchase Euro-Bobl 12/6/02 782 $84,974,924 $294,535 --------- Contracts to Sell Euro-Bundesobligation 12/6/02 160 17,828,932 (41,113) Euro-Schatz 12/6/02 241 25,051,804 (50,018) Japan (Government of) Bonds, 10 yr.12/11/02 20 23,065,550 118,285 U.S. Treasury Nts., 5 yr. 12/19/02 357 40,798,406 (306,797) --------- (279,643) --------- $ 14,892 =========
-------------------------------------------------------------------------------- 7. Option Activity The Fund may buy and sell put and call options, or write put and covered call options on portfolio securities in order to produce incremental earnings or protect against changes in the value of portfolio securities. The Fund generally purchases put options or writes covered call options to hedge against adverse movements in the value of portfolio holdings. When an option is written, the Fund receives a premium and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of the option. Options are valued daily based upon the last sale price on the principal exchange on which the option is traded and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss upon the expiration or closing of the option transaction. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of the security for a purchased put or call option is adjusted by the amount of premium received or paid. Securities designated to cover outstanding call options are noted in the Statement of Investments where applicable. Shares subject to call, expiration date, exercise price, premium received and market value are detailed in a note to the Statement of Investments. Options written are reported as a liability in the Statement of Assets and Liabilities. Realized gains and losses are reported in the Statement of Operations. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. 36 | OPPENHEIMER INTERNATIONAL BOND FUND Written option activity for the year ended September 30, 2002 was as follows:
Call Options Put Options ------------------------------- --------------------------------- Principal (000s)/ Principal (000s)/ Number of Amount of Number of Amount of Contracts Premiums Contracts Premiums ------------------------------------------------------------------------------------------ Options outstanding as of September 30, 2001 -- $ -- 280,537,595 $ 147,278 Options written 3,624 607,801 3,702,770 242,025 Options closed or expired (3,605) (139,860) (284,237,595) (175,953) Options exercised (19) (467,941) (800) (38,020) --------------------------------------------------------------------- Options outstanding as of September 30, 2002 -- $ -- 1,970 $175,330 =====================================================================
-------------------------------------------------------------------------------- 8. Credit Swap Transactions The Fund may enter into a credit swap transaction to seek to maintain a total return on a particular investment or portion of its portfolio, or for other non-speculative purposes. Because the principal amount is not exchanged, it represents neither an asset nor a liability to either counterparty, and is referred to as a notional principal amount. The Fund records an increase or decrease to interest income, in the amount due to or owed by the Fund at termination or settlement on a daily basis. The Fund enters into swaps only on securities it owns. Credit swaps are subject to credit risks (if the counterparty fails to meet its obligations). The Fund segregates liquid assets to cover any amounts it could owe under swaps that exceed the amounts it is entitled to receive. As of September 30, 2002, the Fund had entered into the following credit swap agreements:
Expiration Notional Valuation as of Unrealized Contract Description Date Amount September 30, 2002 Appreciation ----------------------------------------------------------------------------------------- J.P. Morgan Chase Bank, Jordon (Kingdom of ) Credit Nts. 6/6/06 390,000 $24,402 $24,402
-------------------------------------------------------------------------------- 9. Illiquid or Restricted Securities As of September 30, 2002, investments in securities included issues that are illiquid or restricted. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and are valued under methods approved by the Board of Trustees as reflecting fair value. A security may also be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. The Fund intends to invest no more than 10% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid or restricted securities. Certain restricted securities, eligible for resale to qualified institutional investors, are not subject to that limitation. The aggregate value of illiquid or restricted securities subject to this limitation as of September 30, 2002 was 37 | OPPENHEIMER INTERNATIONAL BOND FUND NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- 9. Illiquid or Restricted Securities Continued $13,536,889, which represents 4.20% of the Fund's net assets, of which $34,370 is considered restricted. Information concerning restricted securities is as follows: Acquisition Valuation as of Unrealized Security Date Cost September 30, 2002 Depreciation ----------------------------------------------------------------------------- Currency Argentine Peso 1/15/02 $57,960 $34,370 $23,590 -------------------------------------------------------------------------------- 10. Bank Borrowings The Fund may borrow from a bank for temporary or emergency purposes including, without limitation, funding of shareholder redemptions provided asset coverage for borrowings exceeds 300%. The Fund has entered into an agreement which enables it to participate with other Oppenheimer funds in an unsecured line of credit with a bank, which permits borrowings up to $400 million, collectively. Interest is charged to each fund, based on its borrowings, at a rate equal to the Federal Funds Rate plus 0.45%. Borrowings are payable within 30 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the average unutilized amount of the credit facility at a rate of 0.08% per annum. The Fund had no borrowings outstanding during the year ended or at September 30, 2002. -------------------------------------------------------------------------------- 11. Acquisition of Oppenheimer World Bond Fund On February 16, 2001, the Fund acquired all of the net assets of Oppenheimer World Bond Fund, pursuant to an Agreement and Plan of Reorganization approved by the Oppenheimer World Bond Fund shareholders on February 9, 2001. The Fund issued (at an exchange ratio of 1.663545 for Class A, 1.671579 for Class B and 1.668707 for Class C of the Fund to one share of Oppenheimer International Bond Fund) 9,099,764; 2,119,613; and 389,518 shares of beneficial interest for Class A, Class B and Class C, respectively, valued at $38,855,992, $9,008,355 and $1,655,452 in exchange for the net assets, resulting in combined Class A net assets of $141,638,099, Class B net assets of $103,839,460 and Class C net assets of $29,637,104 on February 16, 2001. The net assets acquired included net unrealized appreciation of $432,989 and unused capital loss carryforward of $8,187,009. The exchange qualified as a tax-free reorganization for federal income tax purposes. 38 | OPPENHEIMER INTERNATIONAL BOND FUND INDEPENDENT AUDITORS' REPORT -------------------------------------------------------------------------------- To the Board of Trustees and Shareholders of Oppenheimer International Bond Fund: We have audited the accompanying statement of assets and liabilities of Oppenheimer International Bond Fund, including the statement of investments, as of September 30, 2002, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2002, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer International Bond Fund as of September 30, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Denver, Colorado October 25, 2002 39 | OPPENHEIMER INTERNATIONAL BOND FUND FEDERAL INCOME TAX INFORMATION Unaudited -------------------------------------------------------------------------------- In early 2003, shareholders of record will receive information regarding all dividends and distributions paid to them by the Fund during calendar year 2002. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service. None of the dividends paid by the Fund during the year ended September 30, 2002 are eligible for the corporate dividend-received deduction. The foregoing information is presented to assist shareholders in reporting distributions received from the Fund to the Internal Revenue Service. Because of the complexity of the federal regulations which may affect your individual tax return and the many variations in state and local tax regulations, we recommend that you consult your tax advisor for specific guidance. 40 | OPPENHEIMER INTERNATIONAL BOND FUND TRUSTEES AND OFFICERS -------------------------------------------------------------------------------- Name, Address, Age, Principal Occupation(s) During Past 5 Years / Position(s) Held with Fund Other Trusteeships/Directorships Held by and Length of Service Trustee / Number of Portfolios in Fund Complex Currently Overseen by Trustee INDEPENDENT TRUSTEES The address of each Trustee in the chart below is 6803 S. Tucson Way, Centennial, CO 80112-3924. Each Trustee serves for an indefinite term, until his or her resignation, retirement, death or removal. James C. Swain, Chairman Formerly Chief Executive Officer (until August and Trustee (since 1995) 27, 2002) of the Funds, Vice Chairman (until Age: 68 January 2, 2002) of OppenheimerFunds, Inc. (the Manager) and President and a director (until 1997) of Centennial Asset Management Corporation (a wholly-owned investment advisory subsidiary of the Manager). Oversees 41 portfolios in the OppenheimerFunds complex. William L. Armstrong, Chairman of the following private mortgage Trustee (since 1999) banking companies: Cherry Creek Mortgage Company Age: 65 (since 1991), Centennial State Mortgage Company (since 1994), The El Paso Mortgage Company (since 1993), Transland Financial Services, Inc. (since 1997); Chairman of the following private companies: Great Frontier Insurance (insurance agency) (since 1995) and Ambassador Media Corporation (since 1984); a director of the following public companies: Storage Technology Corporation (computer equipment company) (since 1991), Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992), UNUMProvident (insurance company) (since 1991). Formerly Director of International Family Entertainment (television channel) (1992-1997) and Natec Resources, Inc. (air pollution control equipment and services company) (1991-1995), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-1999), and Frontier Title (title insurance agency) (1995-June 1999); a U.S. Senator (January 1979-January 1991). Oversees 41 portfolios in the OppenheimerFunds complex. Robert G. Avis, Formerly Mr. Avis held the following positions: Trustee (since 1995) Director and President of A.G. Edwards Capital, Age: 71 Inc. (General Partner of private equity funds) (until February 2001); Chairman, President and Chief Executive Officer of A.G. Edwards Capital, Inc. (until March 2000); Vice Chairman and Director of A.G. Edwards, Inc. and Vice Chairman of A.G. Edwards & Sons, Inc. (its brokerage company subsidiary) (until March 1999); Chairman of A.G. Edwards Trust Company and A.G.E. Asset Management (investment advisor) (until March 1999); and a Director (until March 2000) of A.G. Edwards & Sons and A.G. Edwards Trust Company. Oversees 41 portfolios in the OppenheimerFunds complex. George C. Bowen, Formerly (until April 1999) Mr. Bowen held the Trustee (since 1995) following positions: Senior Vice President (from Age: 66 September 1987) and Treasurer (from March 1985) of the Manager; Vice President (from June 1983) and Treasurer (since March 1985) of OppenheimerFunds Distributor, Inc. (a subsidiary of the Manager); Senior Vice President (since February 1992), Treasurer (since July 1991) Assistant Secretary and a director (since December 1991) of Centennial Asset Management Corporation; Vice President (since October 1989) and Treasurer (since April 1986) of HarbourView Asset Management Corporation (an investment advisory subsidiary of the Manager); President, Treasurer and a director (June 1989-January 1990) of Centennial Capital Corporation (an investment advisory subsidiary of the Manager); Vice President and Treasurer (since August 1978) and Secretary (since April 1981) of Shareholder Services, Inc. (a transfer agent subsidiary of the Manager); Vice President, Treasurer and Secretary (since November 1989) of Shareholder Financial Services, Inc. (a transfer agent subsidiary of the Manager); Assistant Treasurer (since March 1998) of Oppenheimer Acquisition Corp. (the Manager's parent corporation); Treasurer (since November 1989) of Oppenheimer Partnership Holdings, Inc. (a holding company subsidiary of the 41 | OPPENHEIMER INTERNATIONAL BOND FUND TRUSTEES AND OFFICERS Continued George C. Bowen, Manager); Vice President and Treasurer (since Continued July 1996) of Oppenheimer Real Asset Management, Inc. (an investment advisory subsidiary of the Manager); Chief Executive Officer and director (since March 1996) of MultiSource Services, Inc. (a broker-dealer subsidiary of the Manager); Treasurer (since October 1997) of OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc (offshore fund management subsidiaries of the Manager). Oversees 41 portfolios in the OppenheimerFunds complex. Edward L. Cameron, A member of The Life Guard of Mount Vernon, Trustee (since 1995) George Washington's home (since June 2000). Age: 64 Formerly (March 2001-May 2002) Director of Genetic ID, Inc. and its subsidiaries (a privately held biotech company); a partner with PricewaterhouseCoopers LLP (from 1974-1999) (an accounting firm) and Chairman (from 1994-1998), Price Waterhouse LLP Global Investment Management Industry Services Group. Oversees 41 portfolios in the OppenheimerFunds complex. Jon S. Fossel, Chairman and Director (since 1998) of Rocky Trustee (since 1995) Mountain Elk Foundation (a not-for-profit Age: 60 foundation); and a director (since October 1999) of P.R. Pharmaceuticals (a privately held company) and UNUMProvident (an insurance company) (since June 1, 2002). Oversees 41 portfolios in the OppenheimerFunds complex. Sam Freedman, Trustee A trustee or director of other Oppenheimer (since 1996) funds. Formerly (until October 1994) Mr. Age: 61 Freedman held several positions in subsidiary or affiliated companies of the Manager. Oversees 41 portfolios in the OppenheimerFunds complex. Beverly L. Hamilton, Trustee (since 1996) of MassMutual Institutional Trustee (since 2002) Funds and of MML Series Investment Fund Age: 55 (open-end investment companies); Director of MML Services (since April 1987) and America Funds Emerging Markets Growth Fund (since October 1991) (both are investment companies), The California Endowment (a philanthropy organization) (since April 2002), and Community Hospital of Monterey Peninsula, (since February 2002); a trustee (since February 2000) of Monterey International Studies (an educational organization), and an advisor to Unilever (Holland)'s pension fund and to Credit Suisse First Boston's Sprout venture capital unit. Mrs. Hamilton also is a member of the investment committees of the Rockefeller Foundation, the University of Michigan and Hartford Hospital. Formerly, Mrs. Hamilton held the following position: President (February 1991-April 2000) ARCO Investment Management Company. Oversees 40 portfolios in the OppenheimerFunds complex. Robert J. Malone, Director (since 2001) of Jones Knowledge, Inc. Trustee (since 2002) (a privately held company), U.S. Exploration, Age: 58 Inc., (since 1997), Colorado UpLIFT (a non-profit organization) (since 1986) and a trustee of the Gallagher Family Foundation (since 2000). Formerly, Mr. Malone held the following positions: Chairman of U.S. Bank (a subsidiary of U.S. Bancorp and formerly Colorado National Bank,) (July 1996-April 1, 1999) and a director of Commercial Assets, Inc. (1993-2000). Oversees 40 portfolios in the OppenheimerFunds complex. F. William Marshall, Jr., Trustee (since 1996) of MassMutual Institutional Trustee (since 2000) Funds and of MML Series Investment Fund Age: 60 (open-end investment companies); Trustee and Chairman (since May 1987) of the investment committee for the Worcester Polytech Institute; President and Treasurer (since January 1999) of the SIS Fund (a private not for profit charitable organization); Trustee (since 1995) of the Springfield Library and Museum Association; Trustee (since 1996) of the Community Music School of Springfield; Member of the investment committee of the Community Foundation of Western Massachusetts (since 1998). Formerly, Chairman (January 42 | OPPENHEIMER INTERNATIONAL BOND FUND F. William Marshall, Jr., 1999-July 1999) of SIS & Family Bank, F.S.B. Continued (formerly SIS Bank); President, Chief Executive Officer and Director (May 1993-December 1998) of SIS Bankcorp, Inc. and SIS Bank (formerly Springfield Institution for Savings) and Executive Vice President (January 1999-July 1999) of Peoples Heritage Financial Group, Inc. Oversees 41 portfolios in the OppenheimerFunds complex. -------------------------------------------------------------------------------- INTERESTED TRUSTEE The address of Mr. Murphy in the chart below is AND OFFICER 498 Seventh Avenue, New York, NY 10018. Mr. Murphy serves for an indefinite term, until his resignation, death or removal. John V. Murphy, President Chairman, Chief Executive Officer and director and Trustee (since June 2001) and President (since September (since October 2001) 2000) of the Manager; President and a director Age: 53 or trustee of other Oppenheimer funds; President and a director (since July 2001) of Oppenheimer Acquisition Corp. and of Oppenheimer Partnership Holdings, Inc.; a director (since November 2001) of OppenheimerFunds Distributor, Inc.; Chairman and a director (since July 2001) of Shareholder Services, Inc. and of Shareholder Financial Services, Inc.; President and a director (since July 2001) of OppenheimerFunds Legacy Program (a charitable trust program established by the Manager); a director of the following investment advisory subsidiaries of OppenheimerFunds, Inc.: OFI Institutional Asset Management, Inc. and Centennial Asset Management Corporation (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 1, 2001) and a director (since July 2001) of Oppenheimer Real Asset Management, Inc.; a director (since November 2001) of Trinity Investment Management Corp. and Tremont Advisers, Inc. (investment advisory affiliates of the Manager); Executive Vice President (since February 1997) of Massachusetts Mutual Life Insurance Company (the Manager's parent company); a director (since June 1995) of DBL Acquisition Corporation; formerly, Chief Operating Officer (September 2000-June 2001) of the Manager; President and trustee (November 1999-November 2001) of MML Series Investment Fund and MassMutual Institutional Funds (open-end investment companies); a director (September 1999-August 2000) of C.M. Life Insurance Company; President, Chief Executive Officer and director (September 1999-August 2000) of MML Bay State Life Insurance Company; a director (June 1989-June 1998) of Emerald Isle Bancorp and Hibernia Savings Bank (a wholly-owned subsidiary of Emerald Isle Bancorp). Oversees 69 portfolios in the OppenheimerFunds complex. -------------------------------------------------------------------------------- OFFICERS The address of the Officers in the chart below is as follows: Messrs. Molleur, Steinmetz, de Rossi and Zack and Ms. Feld is 498 Seventh Avenue, New York, NY 10018, Messrs. Masterson, Vottiero and Wixted and Mses. Bechtolt and Ives is 6803 S. Tucson Way, Centennial, CO 80112-3924. Each Officer serves for an annual term or until his or her resignation, death or removal. Arthur P. Steinmetz, Senior Vice President of the Manager (since Vice President March 1993) and of HarbourView Asset Management (since 1999) Corporation (since March 2000); an officer of 6 Age: 43 portfolios in the OppenheimerFunds complex. 43 | OPPENHEIMER INTERNATIONAL BOND FUND TRUSTEES AND OFFICERS Continued Ruggero de'Rossi, Vice Vice President of the Manager (since March President (since 2000) 2000). Prior to joining the Manager he was a Age: 39 Senior Vice President and Chief Emerging Markets Debt and Currency Strategist of ING Barings, a global investment bank (July 1998-March 2000); before that he was a Vice President, head of emerging markets trading strategies at Citicorp Securities, after having run the bank's proprietary trading activity on international fixed income and foreign exchange derivatives (May 1995-July 1998). An officer of 1 portfolio in the OppenheimerFunds complex. Brian W. Wixted, Treasurer, Senior Vice President and Treasurer (since March Principal Financial and 1999) of the Manager; Treasurer (since March Accounting Officer 1999) of HarbourView Asset Management (since April 1999) Corporation, Shareholder Services, Inc., Age: 43 Oppenheimer Real Asset Management Corporation, Shareholder Financial Services, Inc., Oppenheimer Partnership Holdings, Inc., OFI Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc (since May 2000) and OFI Institutional Asset Management, Inc. (since November 2000); Treasurer and Chief Financial Officer (since May 2000) of Oppenheimer Trust Company (a trust company subsidiary of the Manager); Assistant Treasurer (since March 1999) of Oppenheimer Acquisition Corp. and OppenheimerFunds Legacy Program (since April 2000); formerly Principal and Chief Operating Officer (March 1995-March 1999), Bankers Trust Company--Mutual Fund Services Division. An officer of 85 portfolios in the OppenheimerFunds complex. Connie Bechtolt, Assistant Vice President of the Manager (since Assistant Treasurer September 1998); formerly Manager/Fund (since October 2002) Accounting of the Manager (September Age: 39 1994-September 1998). An officer of 85 portfolios in the OppenheimerFunds complex. Philip F. Vottiero, Vice President/Fund Accounting of the Manager Assistant Treasurer (since March 2002); formerly Vice (since August 27, 2002) President/Corporate Accounting of the Manager Age: 39 (July 1999-March 2002) prior to which he was Chief Financial Officer at Sovlink Corporation (April 1996-June 1999). An officer of 72 portfolios in the OppenheimerFunds complex. Robert G. Zack, Senior Vice President (since May 1985) and Vice President & Secretary General Counsel (since February 2002) of the (since November 1, 2001) Manager; General Counsel and a director (since Age: 54 November 2001) of OppenheimerFunds Distributor, Inc.; Senior Vice President and General Counsel (since November 2001) of HarbourView Asset Management Corporation; Vice President and a director (since November 2000) of Oppenheimer Partnership Holdings, Inc.; Senior Vice President, General Counsel and a director (since November 2001) of Shareholder Services, Inc., Shareholder Financial Services, Inc., OFI Private Investments, Inc., Oppenheimer Trust Company and OFI Institutional Asset Management, Inc.; General Counsel (since November 2001) of Centennial Asset Management Corporation; a director (since November 2001) of Oppenheimer Real Asset Management, Inc.; Assistant Secretary and a director (since November 2001) of OppenheimerFunds International Ltd.; Vice President (since November 2001) of OppenheimerFunds Legacy Program; Secretary (since November 2001) of Oppenheimer Acquisition Corp.; formerly Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001); OppenheimerFunds International Ltd. And Oppenheimer Millennium Funds plc (October 1997-November 2001). An officer of 85 portfolios in the OppenheimerFunds complex. 44 | OPPENHEIMER INTERNATIONAL BOND FUND Philip T. Masterson, Vice President and Assistant Counsel of the Assistant Secretary Manager (since July 1998); formerly, an (since August 27, 2002) associate with Davis, Graham, & Stubbs LLP Age: 38 (January 1997-June 1998). An officer of 72 portfolios in the OppenheimerFunds complex. Denis R. Molleur, Vice President and Senior Counsel of the Manager Assistant Secretary (since July 1999); formerly a Vice President and (since November 1, 2001) Associate Counsel of the Manager (September Age: 45 1995-July 1999). An officer of 82 portfolios in the OppenheimerFunds complex. Katherine P. Feld, Vice President and Senior Counsel (since July Assistant Secretary 1999) of the Manager; Vice President (since June (since November 1, 2001) 1990) of OppenheimerFunds Distributor, Inc.; Age: 44 Director, Vice President and Assistant Secretary (since June 1999) of Centennial Asset Management Corporation; Vice President (since 1997) of Oppenheimer Real Asset Management, Inc.; formerly Vice President and Associate Counsel of the Manager (June 1990-July 1999). An officer of 85 portfolios in the OppenheimerFunds complex. Kathleen T. Ives, Vice President and Assistant Counsel (since June Assistant Secretary 1998) of the Manager; Vice President (since (since November 1, 2001) 1999) of OppenheimerFunds Distributor, Inc.; Age: 37 Vice President and Assistant Secretary (since 1999) of Shareholder Services, Inc.; Assistant Secretary (since December 2001) of OppenheimerFunds Legacy Program and Shareholder Financial Services, Inc.; formerly Assistant Vice President and Assistant Counsel of the Manager (August 1997-June 1998); Assistant Counsel of the Manager (August 1994-August 1997). An officer of 85 portfolios in the OppenheimerFunds complex. The Fund's Statement of Additional Information contains additional information about the Fund's Trustees and is available without charge upon request. 45 | OPPENHEIMER INTERNATIONAL BOND FUND OPPENHEIMER INTERNATIONAL BOND FUND -------------------------------------------------------------------------------- Investment Advisor OppenheimerFunds, Inc. -------------------------------------------------------------------------------- Distributor OppenheimerFunds Distributor, Inc. -------------------------------------------------------------------------------- Transfer and Shareholder OppenheimerFunds Services Servicing Agent -------------------------------------------------------------------------------- Independent Auditors Deloitte & Touche llp -------------------------------------------------------------------------------- Legal Counsel to the Myer, Swanson, Adams & Wolf, P.C. Fund -------------------------------------------------------------------------------- Legal Counsel to the Mayer Brown Rowe & Maw Independent Trustees Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc., 498 Seventh Avenue, New York, NY 10018. (COPYRIGHT)Copyright 2002 OppenheimerFunds, Inc. All rights reserved. 46 | OPPENHEIMER INTERNATIONAL BOND FUND OPPENHEIMERFUNDS FAMILY
------------------------------------------------------------------------------------------------------------------------ Global Equity Developing Markets Fund Global Fund International Small Company Fund Quest Global Value Fund Europe Fund Global Growth & Income Fund International Growth Fund ------------------------------------------------------------------------------------------------------------------------ Equity Stock Stock & Bond Emerging Technologies Fund Quest Opportunity Value Fund Emerging Growth Fund Total Return Fund Enterprise Fund Quest Balanced Value Fund Discovery Fund Capital Income Fund Main Street(REGISTRATION MARK) Small Cap Fund Multiple Strategies Fund Small Cap Value Fund Disciplined Allocation Fund MidCap Fund Convertible Securities Fund Main Street(REGISTRATION MARK) Opportunity Fund Specialty Growth Fund Real Asset Fund(REGISTRATION MARK) Capital Appreciation Fund Gold & Special Minerals Fund Main Street(REGISTRATION MARK) Growth & Income Fund Tremont Market Neutral Fund, LLC(1) Value Fund Tremont Opportunity Fund, LLC(1) Quest Capital Value Fund Quest Value Fund Trinity Large Cap Growth Fund Trinity Core Fund Trinity Value Fund ------------------------------------------------------------------------------------------------------------------------ Income Taxable Rochester Division International Bond Fund California Municipal Fund(3) High Yield Fund New Jersey Municipal Fund(3) Champion Income Fund New York Municipal Fund(3) Strategic Income Fund Municipal Bond Fund Bond Fund Limited Term Municipal Fund(4) Senior Floating Rate Fund Rochester National Municipals U.S. Government Trust Rochester Fund Municipals Limited-Term Government Fund Limited Term New York Municipal Fund Capital Preservation Fund(2) Pennsylvania Municipal Fund(3) ------------------------------------------------------------------------------------------------------------------------ Select Managers Stock Stock & Bond Mercury Advisors Focus Growth Fund QM Active Balanced Fund(2) Gartmore Millennium Growth Fund II Jennison Growth Fund Salomon Brothers All Cap Fund(5) Mercury Advisors S&P 500(REGISTRATION MARK) Index Fund(2) ------------------------------------------------------------------------------------------------------------------------ Money Market(6) Money Market Fund Cash Reserves
1. Special investor qualification and minimum investment requirements apply. See the prospectus for details. 2. Available only through qualified retirement plans. 3. Available to investors only in certain states. 4. The Fund's name was changed from "Oppenheimer Intermediate Municipal Fund" on September 30, 2002. 5. The Fund's name was changed from "Oppenheimer Select Managers Salomon Brothers Capital Fund" on May 1, 2002. 6. An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although these funds may seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in these funds. 47 | OPPENHEIMER INTERNATIONAL BOND FUND PRIVACY POLICY NOTICE As an Oppenheimer fund shareholder, you are entitled to know how we protect your personal information and how we limit its disclosure. Information Sources We obtain nonpublic personal information about our shareholders from the following sources: o Applications or other forms o When you create a user ID and password for online account access o When you enroll in eDocs Direct o Your transactions with us, our affiliates or others o A software program on our website, often referred to as a "cookie," which indicates which parts of our site you've visited If you visit www.oppenheimerfunds.com and do not log on to the secure account information areas, we do not obtain any personal information about you. When you do log on to a secure area, we do obtain your user ID and password to identify you. We also use this information to provide you with products and services you have requested, to inform you about products and services that you may be interested in and to assist you in other ways. Protection of Information We do not disclose any nonpublic personal information (such as names on a customer list) about current or former customers to anyone, except as permitted by law. Disclosure of Information We send your financial advisor (as designated by you) copies of confirmations, account statements and other documents reporting activity in your fund accounts. We may also use details about you and your investments to help us, our financial service affiliates or firms that jointly market their financial products and services with ours, to better serve your investment needs or suggest financial services or educational material that may be of interest to you. Right of Refusal We will not disclose your personal information to unaffiliated third parties (except as permitted by law), unless we first offer you a reasonable opportunity to refuse or "opt out" of such disclosure. Security In the coming months, an Internet browser that supports 128-bit encryption will be required to view the secure pages of www.oppenheimerfunds.com. These areas include: o Account access o Create a user ID and profile o User profile o eDocs Direct, our electronic document delivery service 48 | OPPENHEIMER INTERNATIONAL BOND FUND To find out if your Internet browser supports 128-bit encryption, or for instructions on how to upgrade your browser, visit the Help section of www.oppenheimerfunds.com. Emails and Encryption As a security measure, we do not include personal or account information in nonsecure emails, and we advise you not to send such information to us in nonsecure emails. Instead, you may take advantage of the secure features of our website to encrypt your email correspondence. To do this, you will need to use an Internet browser that supports 128-bit encryption. If you are not sure if your Internet browser supports 128-bit encryption, or need instructions on how to upgrade your browser, visit the Help section of www.oppenheimerfunds.com for assistance. o All transactions, including redemptions, exchanges and purchases are secured by Secure Socket Layers (SSL) and encryption. SSL is used to establish a secure connection between your PC and OppenheimerFunds' server. It transmits information in an encrypted and scrambled format. o Encryption is achieved through an electronic scrambling technology that uses a "key" to code and then decode the data. Encryption acts like the cable converter box you may have on your television set. It scrambles data with secret code so that no one can make sense of it while it is being transmitted. When the data reaches its destination, the same software unscrambles the data. o You can exit the secure area by either closing your browser, or for added security, you can use the Log Out of Account Area button before you close your browser. Other Security Measures We maintain physical, electronic and procedural safeguards to protect your personal account information. Our employees and agents have access to that information only so that they may offer you products or provide services to you, for example, when responding to your account questions. How You Can Help You can also do your part to keep your account information private, and to prevent unauthorized transactions. If you obtain a user ID and password for your account, do not allow it to be used by anyone else. Also, take special precautions when accessing your account on a computer used by others. -------------------------------------------------------------------------------- This joint notice describes the privacy policies of Oppenheimer funds, OppenheimerFunds Distributor, Inc., the trustee of OppenheimerFunds Individual Retirement Accounts (IRAs) and the custodian of the OppenheimerFunds 403(b)(7) tax-sheltered custodial accounts. It applies to all Oppenheimer fund accounts you presently have, or may open in the future, using your Social Security number--whether or not you remain a shareholder of our funds. If you have any questions about these privacy policies, write to us at P.O. Box 5270, Denver CO 80217-5270, email us by clicking on the Contact Us section of our website at www.oppenheimerfunds.com or call us at 1.800.CALL.OPP (1.800.225.5677). 49 | OPPENHEIMER INTERNATIONAL BOND FUND INFORMATION AND SERVICES [EDOCS DIRECT GRAPHIC OMITTED] Get This Report Online! You can quickly view, download and print this report at your convenience. It's EASY, FAST, CONVENIENT, and FREE! With OppenheimerFunds eDocs Direct, you'll receive email notification when shareholder reports, prospectuses or prospectus supplements for your fund(s) become available online, instead of receiving them through the mail. You'll cut down on paper mail and help reduce fund expenses! Sign up for eDocs Direct today at www.oppenheimerfunds.com -------------------------------------------------------------------------------- Internet 24-hr access to account information and transactions(1) www.oppenheimerfunds.com -------------------------------------------------------------------------------- PhoneLink(1) and General Information 24-hr automated information and automated transactions Representatives also available Mon-Fri 8am-9pm ET Sat (January-April): 10am-4pm ET 1.800.CALL OPP (1.800.225.5677) -------------------------------------------------------------------------------- Written Correspondence and Transaction Requests OppenheimerFunds Services P.O. Box 5270, Denver, CO 80217-5270 For Overnight Delivery OppenheimerFunds Services 10200 East Girard Avenue, Building D Denver, CO 80231 -------------------------------------------------------------------------------- Ticker Symbols Class A: OIBAX Class B: OIBBX Class C: OIBCX Class N: OIBNX -------------------------------------------------------------------------------- 1. At times the website or PhoneLink may be inaccessible or their transaction features may be unavailable. [GRAPHIC OMITTED] OPPENHEIMERFUNDS [R] Distributor, Inc. RA0880.001.0902 November 29, 2002