-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UFr33FKc5u+wspKzcec6WUkrwDTKqfIpW1AE8jDyg51uyiMrKr+5BxKHk/QeGINI /cESxpfPdC5Cw8jpFyC87g== 0000950123-96-007195.txt : 19961209 0000950123-96-007195.hdr.sgml : 19961209 ACCESSION NUMBER: 0000950123-96-007195 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961206 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPPENHEIMER INTERNATIONAL BOND FUND CENTRAL INDEX KEY: 0000939800 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-07255 FILM NUMBER: 96677117 BUSINESS ADDRESS: STREET 1: 3410 SOUTH GALENA STREET CITY: DENVER STATE: CO ZIP: 80231 BUSINESS PHONE: 3036713200 MAIL ADDRESS: STREET 1: 3410 SOUTH GALENA STREET CITY: DENVER STATE: CO ZIP: 80231 N-30D 1 OPPENHEIMER INTERNATIONAL BOND FUND 1 OPPENHEIMER INTERNATIONAL BOND FUND Annual Report September 30, 1996 [PHOTO] "We want our money to work as hard as it can." [OPPENHEIMERFUNDS LOGO] 2 YIELD STANDARDIZED YIELDS For the 30 Days Ended 9/30/96:(3) Class A 8.27% Class B 7.89% Class C 7.90% BEAT THE AVERAGE Cumulative Total Return for the 1-Year Period Ended 9/30/96: Oppenheimer International Bond Fund Class A (at net asset value)(1) 18.82% Lipper International Income Funds Average for 42 Funds for the 1-Year Period Ended 9/30/96(4) 9.27% THIS FUND IS FOR PEOPLE WHO WANT TO TAKE ADVANTAGE OF INTERNATIONAL OPPORTUNITIES OFFERING THE POTENTIAL FOR GROWTH ALONG WITH INCOME. HOW YOUR FUND IS MANAGED Oppenheimer International Bond Fund seeks high total return by investing primarily in foreign debt securities. The Fund currently emphasizes investments in government debt securities issued by developed countries such as Germany and Switzerland as well as emerging market countries such as Malaysia and Brazil. PERFORMANCE Total returns at net asset value for the 12 months ended 9/30/96 for Class A, B and C shares were 18.82%, 17.71% and 17.92%, respectively.(1) Your Fund's average annual total returns at maximum offering price for Class A shares for the 1-year period ended 9/30/96 and since inception on 6/15/95 were 13.18% and 14.40%, respectively. For Class B shares, average annual total returns for the 1-year period ended 9/30/96 and since inception on 6/15/95 were 12.71% and 14.79%, respectively. For Class C shares, average annual total returns for the 1-year period ended 9/30/96 and since inception on 6/15/95 were 16.92% and 17.75%, respectively.(2) OUTLOOK "Our outlook is very positive. We believe the com-ing year will offer many excellent investment opportunities in the Far East, Latin America and the core markets of Europe, such as Germany, Denmark and Norway." Ashwin Vasan, Portfolio Manager September 30, 1996 Total returns include change in share price and reinvestment of dividends and capital gains distributions. In reviewing the notes that follow on performance and rankings, please be aware that past performance does not guarantee future results. Investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. 1. Based on the change in net asset value per share for the period shown, without deducting any sales charges. Such performance would have been lower if sales charges were taken into account. 2. Class A returns show results of hypothetical investments on 9/30/95 and 6/15/95 (inception of class), after deducting the maximum initial sales charge of 4.75%. Class B returns show results of hypothetical investments on 9/30/95 and 6/15/95 (inception of class), after the deduction of the applicable contingent deferred sales charge of 5% (1-year) and 4% (since inception). Class C returns show results of hypothetical investments on 9/30/95 and 6/15/95 (inception of class), after the deduction of the 1% contingent deferred sales charge for the 1-year result. An explanation of the different returns is in the Fund's prospectus. 3. Standardized yield is net investment income calculated on a yield-to-maturity basis for the 30-day period ended 9/30/96, divided by the maximum offering price at the end of the period, compounded semiannually and then annualized. Falling net asset values will tend to artificially raise yields. 4. Source: Lipper Analytical Services. The average is shown for comparative purposes only. Oppenheimer International Bond Fund is characterized as an international income fund. Lipper performance does not take sales charges into consideration. 2 Oppenheimer International Bond Fund 3 [PHOTO] James C. Swain Chairman Oppenheimer International Bond Fund [PHOTO] Bridget A. Macaskill President Oppenheimer International Bond Fund DEAR SHAREHOLDER, Today more than ever, people are seeking investments that can offer them greater opportunities for higher income and capital appreciation. After a record six-year expansion in the U.S. stock market, many experts are now predicting that an economic slowdown is inevitable. With uncertainties surrounding the U.S. market, the idea of investing overseas is particularly attractive. This has been an exciting year for the international fixed-income market. We've seen the economies of emerging market countries strengthen as the pace of growth accelerated across the industrialized world. Countries that only a few short years ago were struggling with major crises--currency devaluations, large government deficits, high inflation and unemployment rates--have since taken important steps toward rebuilding their economies. For example, Mexico, one of the main drivers of growth in Latin America, managed to rebound from its currency problems of 1994-1995, and has since begun to expand its economy. The most recent indicator of this rebound is the stunning gain in Mexico City's bolsa over the past year. Today, a number of European leaders are preparing their countries' 1997 fiscal budgets and moving to align each of the economies. This move is being done primarily to meet the criteria established for a European union currency system which is scheduled to begin in 1998. These strict criteria, which are beneficial to the bond market, consist of keeping inflation under control, deficits down and GDP at sustainable levels. While some countries may be fully prepared to embrace the new system, many others have a long road ahead of them before their fiscal policies are in place. While investing in foreign countries does involve greater risks and expenses, such as political and economic uncertainties, currency rate fluctuations and liquidity restrictions, these investments can produce excellent returns provided they are made with long-term objectives in mind. We remain optimistic that the foreign fixed-income markets will continue to offer the potential for higher yields, as well as for capital appreciation. And we're confident that by diversifying investments throughout the world, we will be positioned to participate in any economic environment. Your portfolio managers discuss the outlook for your Fund in light of these broad issues on the following pages. Thank your for your confidence in OppenheimerFunds. We look forward to helping you reach your investment goals in the future. /s/ JAMES C. SWAIN /s/ BRIDGET A. MACASKILL - ----------------------- ----------------------------- James C. Swain Bridget A. Macaskill October 21, 1996 3 Oppenheimer International Bond Fund 4 ASHWIN VASAN Portfolio Manager Q + A AN INTERVIEW WITH YOUR FUND'S MANAGERS. HOW HAS THE FUND PERFORMED OVER THE PAST YEAR? The Fund performed very well, ending the period in the top quartile of its peer group according to Lipper Analytical Services. International Bond Fund was ranked 3rd out of 42 funds in its category for the 1-year period ended 9/30/96.(1) The Fund's success can be attributed to several key factors: our overweight positions in emerging markets and European high yielding markets, which both performed exceptionally well over the past six months; our ability to use the strength of the U.S. dollar to hedge European exposures; and our underweighted allocation to the Japanese government bond market over the past 12 months. WHAT CHANGES HAVE YOU MADE TO THE PORTFOLIO OVER THE PAST YEAR? While we continue to maintain an overweighted allocation to emerging markets, over the last quarter we have begun to restructure that exposure somewhat by gradually reducing the amount of foreign bonds that are U.S. dollar-denominated in the portfolio. We've made this change in favor of shorter-maturity European bonds and local currency instruments in emerging markets. However, international investments subject the Fund to greater expenses and risks, such as adverse currency fluctuations, but by diversifying investments across many countries and industries, we're able to reduce some of those risks. We have also been reducing our exposure to the higher-yielding European markets, specifically Italy, Spain, Sweden, and Portugal. As these markets have rallied, we've been taking profits in those investments that have done very well.(2) WHAT AREAS ARE YOU CURRENTLY TARGETING? Going forward, we are watching three areas very carefully. First, because interest rate movements in the U.S. generally set the pace for interest rates within foreign economies, we have been keeping a watchful eye on the U.S. market. In addition, because Canadian inflation rates tend to be closely related to those of the U.S., we have purchased some Canadian inflation index bonds. Second, as mentioned earlier, we've had great results in emerging markets this past year and we have modified our exposure so the Fund can continue to take advantage of the strong potential performance in this sector. Finally, as the dollar starts to move higher and as market conditions permit, we will begin to re-establish our Yen exposure in Japan, as we have been underweight in this market for most of 1996. WHAT IS YOUR OUTLOOK FOR THE FUND? Our outlook is very positive. We believe the coming year will offer many excellent investment opportunities in the Far East, Latin America and the core markets of Europe, such as Germany, Denmark and Norway. By identifying these key issues and positioning ourselves accordingly, we feel we should be able to take advantage of these opportunities as they occur. 1. Source: Lipper Analytical Services, 9/30/96. Oppenheimer International Bond Fund is characterized by Lipper as an international income fund. Lipper does not take sales charges into consideration. 2. The Fund's portfolio is subject to change. 4 Oppenheimer International Bond Fund 5 STATEMENT OF INVESTMENTS September 30, 1996
FACE MARKET VALUE AMOUNT(1) SEE NOTE 1 =============================================================================================================================== MORTGAGE-BACKED OBLIGATIONS--0.5% - ------------------------------------------------------------------------------------------------------------------------------- Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security, Trust 240, Cl. 2, 12.405%--14.552%, 9/1/23 (Cost $452,041)(2) $ 1,631,521 $ 563,640 =============================================================================================================================== FOREIGN GOVERNMENT OBLIGATIONS--60.6% - ------------------------------------------------------------------------------------------------------------------------------- ARGENTINA--7.8% Argentina (Republic of): New Money Bonds, 6.50%, 10/25/99(3) 583,333 565,834 Sr. Unsec. Unsub. Bonds, 7.625%, 7/5/99 NLG 2,350,000 1,387,241 Treasury Bills, Zero Coupon, 12.117%, 1/17/97(4) ARP 1,000,000 979,375 Treasury Bills, Zero Coupon, 10.156%, 11/15/96(4) ARP 1,000,000 992,189 Unsec. Unsub. Bonds, 11.50%, 8/14/01 GBP 1,710,000 2,691,792 Banco Hipotecario Nacional (Argentina) Medium-Term Nts., 10.625%, 8/7/06(5) 600,000 607,500 ------------------------------------------------------------------------------------------------------------------------ Buenos Aires (Province of): Bonds, 10%, 3/5/01 DEM 1,680,000 1,148,810 Sr. Unsec. Unsub. Medium-Term Nts., 11.50%, 10/19/98 50,000 51,906 ---------- 8,424,647 - ------------------------------------------------------------------------------------------------------------------------------- AUSTRALIA--2.8% New South Wales Treasury Corp. Gtd. Bonds, 12%, 12/1/01 AUD 3,230,000 3,042,878 - ------------------------------------------------------------------------------------------------------------------------------- BRAZIL--6.2% Banco Estado Minas Gerais, 8.25%, 2/10/00 650,000 612,625 ------------------------------------------------------------------------------------------------------------------------ Banco Nacional de Desenvolvimento Economico e Social Bonds, 9%, 3/12/01 DEM 2,130,000 1,422,313 ------------------------------------------------------------------------------------------------------------------------ Brazil (Federal Republic of) Nts., Banco Estado Minas Gerais, 7.875%, 2/10/99 850,000 809,625 ------------------------------------------------------------------------------------------------------------------------ Cia Energetica de Sao Paulo Gtd. Unsec. Bonds, 9.25%, 5/10/01 DEM 1,754,000 1,179,576 ------------------------------------------------------------------------------------------------------------------------ Comtel Brasileira Ltd. Nts., 10.75%, 9/26/04(6) 100,000 102,375 ------------------------------------------------------------------------------------------------------------------------ Telecomunicacoes Brasileiras SA: Bonds, 13%, 2/5/99 ITL 3,340,000,000 2,297,272 Medium-Term Nts., 11.30%, 12/9/99(3) 200,000 205,750 ---------- 6,629,536 - ------------------------------------------------------------------------------------------------------------------------------- BULGARIA--4.1% Bulgaria (Republic of): Front-Loaded Interest Reduction Bearer Bonds, Tranche A, 2.25%, 7/28/12(5) 3,590,000 1,181,334 Interest Arrears Bonds, 6.688%, 7/28/11(5) 7,110,000 3,270,600 ---------- 4,451,934 - ------------------------------------------------------------------------------------------------------------------------------- CANADA--5.5% Canada (Government of) Real Return Debs., 4.517%, 12/1/21(3)(7) CAD 7,810,000 5,919,042 - ------------------------------------------------------------------------------------------------------------------------------- COSTA RICA--0.5% Central Bank of Costa Rica Interest Claim Bonds: Series A, 6.344%, 5/21/05(3) 386,773 373,237 Series B, 6.344%, 5/21/05(3) 187,452 180,891 ---------- 554,128 - ------------------------------------------------------------------------------------------------------------------------------- DENMARK--2.2% Denmark (Kingdom of) Bonds: 8%, 11/15/01 DKK 3,085,000 576,489 8%, 3/15/06 DKK 9,810,000 1,793,982 ---------- 2,370,471 - ------------------------------------------------------------------------------------------------------------------------------- FINLAND--0.9% Finland (Republic of) Bonds, 7.25%, 4/18/06 FIM 4,000,000 909,942 - ------------------------------------------------------------------------------------------------------------------------------- GREAT BRITAIN--4.5% United Kingdom Treasury Nts., 13%, 7/14/00 GBP 2,565,000 4,807,129
5 Oppenheimer International Bond Fund 6 STATEMENT OF INVESTMENTS (Continued)
FACE MARKET VALUE AMOUNT(1) SEE NOTE 1 - ------------------------------------------------------------------------------------------------------------------------------- INDONESIA--0.7% PT Hutama Karya, Zero Coupon Medium-Term Nts.: 17.514%, 3/19/97(4) IDR 1,000,000,000 $ 399,005 17.668%, 3/26/97(4) IDR 1,000,000,000 398,019 ---------- 797,024 - ------------------------------------------------------------------------------------------------------------------------------- IRELAND--2.5% Ireland (Government of) Bonds, 9.25%, 7/11/03 IEP 1,445,000 2,649,750 - ------------------------------------------------------------------------------------------------------------------------------- ITALY--2.8% Italy (Republic of): Sr. Unsec. Unsub. Global Bonds, 0.777%, 7/26/99(3) JPY 165,000,000 1,489,259 Treasury Bonds, Buoni del Tesoro Poliennali, 10.50%, 7/15/00 ITL 2,100,000,000 1,497,684 ---------- 2,986,943 - ------------------------------------------------------------------------------------------------------------------------------- JORDAN--2.3% Hashemite Kingdom of Jordan: Disc. Bonds, 6.625%, 12/23/23(3) 500,000 386,250 Interest Arrears Bonds, 6.625%, 12/23/05(3) 2,335,000 2,072,313 ---------- 2,458,563 - ------------------------------------------------------------------------------------------------------------------------------- MEXICO--5.3% Banco Nacional de Comercio Exterior SNC International Finance BV Gtd. Nts., 8%, 8/5/03 900,000 805,500 ------------------------------------------------------------------------------------------------------------------------ Mexican Williams Bonds, 6.631%, 11/15/08(3) 500,000 435,000 ------------------------------------------------------------------------------------------------------------------------ United Mexican States Bonds, 10.375%, 1/29/03 DEM 6,460,000 4,472,508 ---------- 5,713,008 - ------------------------------------------------------------------------------------------------------------------------------- NORWAY--1.7% Norwegian Government Bonds, 9.50%, 10/31/02(8) NOK 10,405,000 1,842,210 - ------------------------------------------------------------------------------------------------------------------------------- PANAMA--1.7% Panama (Republic of): Debs., 6.629%, 5/10/02(3) 886,154 850,709 Interest Reduction Bonds, 3.50%, 7/17/14(9) 1,500,000 943,125 ---------- 1,793,834 - ------------------------------------------------------------------------------------------------------------------------------- POLAND--1.3% Poland (Republic of) Treasury Bills, Zero Coupon: 21.464%, 10/16/96(4) PLZ 1,000,000 353,419 21.655%, 10/2/96(4) PLZ 570,000 202,620 21.417%, 11/6/96(4) PLZ 1,100,000 384,600 21.294%, 12/18/96(4) PLZ 180,000 61,592 20.376%, 3/19/97(4) PLZ 1,250,000 408,878 ---------- 1,411,109 - ------------------------------------------------------------------------------------------------------------------------------- PORTUGAL--1.5% Portugal (Republic of) Gtd. Bonds, Obrigicion do tes Medio Prazo, 11.875%, 2/23/00 PTE 224,000,000 1,636,403 - ------------------------------------------------------------------------------------------------------------------------------- RUSSIA--1.0% Russia (Government of) Interest Nts., 6.547%, 12/29/49(3)(10) 1,600,000 1,029,500 - ------------------------------------------------------------------------------------------------------------------------------- SUPRANATIONAL--0.9% European Bank for Reconstruction & Development Sr. Unsec. Medium-Term Nts., 10%, 12/20/96 CZK 27,050,000 997,238 - ------------------------------------------------------------------------------------------------------------------------------- SWEDEN--2.6% Sweden (Kingdom of) Bonds, Series 1030, 13%, 6/15/01 SEK 15,100,000 2,842,326 - ------------------------------------------------------------------------------------------------------------------------------- VENEZUELA--1.8% Venezuela (Republic of): Collateralized Par Bonds, Series W-A, 6.75%, 3/31/20 790,000 550,038 Front-Loaded Interest Reduction Bonds, Series A, 6.375%, 3/31/07(3) 960,000 809,400 New Money Bonds, Series A, 6.75%, 12/18/05(3) 750,000 625,313 ---------- 1,984,751 ---------- Total Foreign Government Obligations (Cost $63,963,544) 65,252,366
6 Oppenheimer International Bond Fund 7
FACE MARKET VALUE AMOUNT(1) SEE NOTE 1 =============================================================================================================================== LOAN PARTICIPATIONS--5.9% - ------------------------------------------------------------------------------------------------------------------------------- Algeria (Republic of) Reprofiled Debt Loan Participation, Tranche A: 1.375%, 9/4/06(3)(11) JPY 104,400,000 $ 529,616 6.625%, 9/4/06(3)(11) 2,500,000 1,740,625 ------------------------------------------------------------------------------------------------------------------------ Colombia (Republic of) Concorde Loan Participation, 8.625%, 1/31/98(3)(11) 84,000 83,160 ------------------------------------------------------------------------------------------------------------------------ Jamaica (Government of) 1990 Refinancing Agreement Nts.: Tranche A, 6.50%, 10/16/00(3)(11) 219,999 212,300 Tranche B, 6.312%, 11/15/04(3)(11) 1,500,000 1,252,500 ------------------------------------------------------------------------------------------------------------------------ Morocco (Kingdom of) Loan Participation Agreement, Tranche A, 6.437%, 1/1/09(3) 2,025,000 1,592,789 ------------------------------------------------------------------------------------------------------------------------ Trinidad & Tobago Loan Participation Agreement: Tranche A, 1.772%, 9/30/00(3)(11) JPY 21,600,000 172,606 Tranche B, 1.772%, 9/30/00(3)(11) JPY 89,183,523 712,667 ---------- Total Loan Participations (Cost $5,766,456) 6,296,263 =============================================================================================================================== CORPORATE BONDS AND NOTES--12.0% - ------------------------------------------------------------------------------------------------------------------------------- BASIC INDUSTRY--4.6% - ------------------------------------------------------------------------------------------------------------------------------- METALS/MINING--0.2% Royal Oak Mines, Inc., 11% Sr. Sub. Nts., 8/15/06(6) 200,000 207,000 - ------------------------------------------------------------------------------------------------------------------------------- PAPER--4.4% Asia Pulp & Paper International Finance Co., Zero Coupon Asian Currency Nts.: 16.559%, 5/1/97(4) IDR 1,000,000,000 390,078 16.551%, 5/15/97(4) IDR 550,000,000 213,175 ------------------------------------------------------------------------------------------------------------------------ Grupo Industrial Durango SA de CV, 12.625% Nts., 8/1/03 1,000,000 1,066,250 ------------------------------------------------------------------------------------------------------------------------ Indah Kiat International Finance Co. BV, 12.50% Sr. Sec. Gtd. Nts., Series C, 6/15/06 1,300,000 1,410,500 ------------------------------------------------------------------------------------------------------------------------ PT Inti Indorayon Utama, Zero Coupon Promissory Nts., 17.234%, 2/12/97(4) IDR 800,000,000 324,419 ------------------------------------------------------------------------------------------------------------------------ Tjiwi Kimia International Finance Co. BV, 13.25% Sr. Gtd. Nts., 8/1/01 1,160,000 1,302,100 ---------- 4,706,522 - ------------------------------------------------------------------------------------------------------------------------------- CONSUMER RELATED--0.5% - ------------------------------------------------------------------------------------------------------------------------------- CONSUMER PRODUCTS--0.1% TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(6) 150,000 169,875 - ------------------------------------------------------------------------------------------------------------------------------- FOOD/BEVERAGES/TOBACCO--0.2% Unilever CR spol. s.r.o., guaranteed by Unilever NV, Rotterdam, The Netherlands, Zero Coupon Promissory Nts., 11.184%, 10/11/96(4) CZK 5,600,000 207,241 - ------------------------------------------------------------------------------------------------------------------------------- TEXTILE/APPAREL--0.2% PT Polysindo Eka Perkasa: 13% Sr. Nts., 6/15/01 185,000 203,962 Zero Coupon Promissory Nts., 19.111%, 2/28/97(4) IDR 50,000,000 20,054 ---------- 224,016 - ------------------------------------------------------------------------------------------------------------------------------- FINANCIAL SERVICES--3.3% - ------------------------------------------------------------------------------------------------------------------------------- BANKS & THRIFTS--3.3% Banco Bamerindus do Brasil SA: 10.50% Debs., 6/23/97 105,000 103,688 9% Unsec. Unsub. Bonds, 10/29/98 240,000 223,200 9.258% Unsub. Nts., 12/22/97(3) 700,000 687,313 ------------------------------------------------------------------------------------------------------------------------ Banco de Colombia, 5.20% Cv. Jr. Sub. Unsec. Nts., 2/1/99 1,150,000 1,069,500 ------------------------------------------------------------------------------------------------------------------------ Banco Itamarati SA: 10.50% Medium-Term Nts., 11/29/96 50,000 50,125 11.625% Sr. Unsec. Debs., 11/23/97 350,000 360,500
7 Oppenheimer International Bond Fund 8 STATEMENT OF INVESTMENTS (Continued)
FACE MARKET VALUE AMOUNT(1) SEE NOTE 1 - ------------------------------------------------------------------------------------------------------------------------------- BANKS & THRIFTS (CONTINUED) Banco Mexicano SA, 8% Sr. Unsec. Unsub. Exchangeable Medium-Term Nts., 11/4/98 $ 60,000 $ 58,425 ------------------------------------------------------------------------------------------------------------------------ Siam City Bank Co. Ltd., Zero Coupon Debs., 11.084%, 10/31/96(4)(10) THB 5,000,000 194,952 ------------------------------------------------------------------------------------------------------------------------ Siam Commercial Bank Public Ltd., Zero Coupon Debs., 10.581%, 11/18/96(4)(10) THB 20,500,000 795,031 ----------- 3,542,734 - ------------------------------------------------------------------------------------------------------------------------------- MEDIA--0.2% - ------------------------------------------------------------------------------------------------------------------------------- CABLE TELEVISION--0.2% Rogers Cablesystems Ltd., 10% Sr. Sec. Second Priority Debs., 12/1/07 150,000 150,750 ------------------------------------------------------------------------------------------------------------------------ United International Holdings, Inc., Zero Coupon Sr. Sec. Disc. Nts., 12.495%, 11/15/99(4) 75,000 52,500 ---------- 203,250 - ------------------------------------------------------------------------------------------------------------------------------- OTHER--2.4% - ------------------------------------------------------------------------------------------------------------------------------- SERVICES--2.4% CE Casecnan Water & Energy, Inc.: 11.45% Sr. Nts., Series A, 11/15/05 500,000 538,750 11.95% Sr. Nts., Series B, 11/15/10 200,000 217,000 ------------------------------------------------------------------------------------------------------------------------ Grupo Elektra SA de CV, 12.75% Sr. Nts., 5/15/01(6) 1,000,000 1,050,000 ------------------------------------------------------------------------------------------------------------------------ Sociedad Comercial del Plata SA: 11.50% Medium-Term Nts., 5/9/00 560,000 568,750 11.50% Medium-Term Nts., 5/9/00(11) 200,000 203,000 ---------- 2,577,500 - ------------------------------------------------------------------------------------------------------------------------------- TRANSPORTATION--0.1% - ------------------------------------------------------------------------------------------------------------------------------- SHIPPING--0.1% Gearbulk Holding Ltd., 11.25% Sr. Nts., 12/1/04 150,000 161,250 - ------------------------------------------------------------------------------------------------------------------------------- UTILITIES--0.9% - ------------------------------------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES--0.6% Centragas Natural Gas Transmission System, 10.65% Sr. Sec. Bonds, 12/1/10(6) 579,160 613,730 ------------------------------------------------------------------------------------------------------------------------ TELECOMMUNICATIONS--0.3% Celcaribe SA, 0%/13.50% Sr. Sec. Nts., 3/15/04(11)(12) 75,000 60,563 ------------------------------------------------------------------------------------------------------------------------ Comunicacion Celular SA, 0%/13.125% Sr. Deferred Coupon Bonds, 11/15/03(12) 400,000 248,000 ---------- 308,563 ---------- Total Corporate Bonds and Notes (Cost $12,744,033) 12,921,681
UNITS =============================================================================================================================== RIGHTS, WARRANTS AND CERTIFICATES--0.0% - ------------------------------------------------------------------------------------------------------------------------------- Comunicacion Celular SA Wts., Exp. 11/03(11) 400 2,000 ------------------------------------------------------------------------------------------------------------------------ Venezuela Government Wts., Exp. 4/20 3,950 -- ---------- Total Rights, Warrants and Certificates (Cost $0) 2,000
FACE AMOUNT(1) =============================================================================================================================== STRUCTURED INSTRUMENTS--17.2% - ------------------------------------------------------------------------------------------------------------------------------- Bayerische Landesbank Girozentrale, New York Branch: 6.28% Deutsche Mark Currency Protected Yield Curve CD, 7/25/97 $ 300,000 294,075 14% CD Linked Nts., 12/17/96 (indexed to the cross currency rates of Greek Drachma and European Currency Unit) 450,000 442,980
8 Oppenheimer International Bond Fund 9
FACE MARKET VALUE AMOUNT(1) SEE NOTE 1 - ------------------------------------------------------------------------------------------------------------------------------- STRUCTURED INSTRUMENTS (CONTINUED) Canadian Imperial Bank of Commerce, New York Branch: 14% CD Linked Nts., 11/25/96 (indexed to the cross currency rates of Greek Drachma and European Currency Unit) $ 800,000 $ 789,920 16.75% CD Linked Nts., 4/16/97 (indexed to the Federation GKO, Zero Coupon, 4/9/97) 3,000,000 2,982,000 17% CD Linked Nts., 2/26/97 (indexed to the Federation GKO, Zero Coupon, 2/19/97) 750,000 747,000 17% CD Linked Nts., 4/2/97 (indexed to the Russian Federation GKO, Zero Coupon, 3/26/97) 500,000 497,000 17.30% CD Linked Nts., 2/26/97 (indexed to the Federation GKO, Zero Coupon, 2/19/97) 1,200,000 1,195,200 ------------------------------------------------------------------------------------------------------------------------ Internationale Nederlanden Bank NV, Prague Branch, Zero Coupon Promissory Nts., 10.516%, 4/28/97(4) CZK 6,150,000 214,896 ------------------------------------------------------------------------------------------------------------------------ Internationale Nederlanden (U.S.) Capital Holdings Corp.: Zero Coupon Chilean Peso Linked Nts., 11.122%, 12/11/96(4) 980,000 952,756 Zero Coupon Chilean Peso Linked Nts., 11.813%, 6/23/97(4) 600,000 544,860 Zero Coupon Chilean Peso Linked Nts., 11.741%, 6/24/97(4) 600,000 544,680 Zero Coupon Czech Crown Linked Nts., 11.911%, 6/26/97(4) 600,000 563,220 Zero Coupon Indian Rupee Linked Nts., 15.675%, 12/20/96(4) 1,000,000 965,100 ------------------------------------------------------------------------------------------------------------------------ Morgan Guaranty Trust Co. of New York, Nassau Branch, Zero Coupon Indian Rupee Currency Linked Nts., 17.392%, 11/27/96(4) 900,000 881,479 ------------------------------------------------------------------------------------------------------------------------ Salomon Brothers, Inc., Zero Coupon Brazilian Credit Linked Nts.: 12.384%, 1/3/97 (indexed to the Brazilian National Treasury Nts., Zero Coupon, 1/2/97)(4) 200,000 194,420 12.38%, 1/3/97 (indexed to the Brazilian National Treasury Nts., Zero Coupon, 1/2/97)(4) 200,000 194,420 12.638%, 1/3/97 (indexed to the Brazilian National Treasury Nts., Zero Coupon, 1/2/97)(4) 120,000 116,652 12.886%, 1/3/97 (indexed to the Brazilian National Treasury Nts., Zero Coupon, 1/2/97)(4) 100,000 97,210 9.896%, 5/2/97 (indexed to the Brazilian National Treasury Nts., Zero Coupon, 5/3/97)(4) 450,000 421,515 ------------------------------------------------------------------------------------------------------------------------ Salomon Brothers, Inc., Zero Coupon Chilean Peso Indexed Enhanced Access Nts.: 11.792%, 12/11/96(4) 1,000,000 974,200 12.145%, 12/11/96(4) 1,000,000 974,000 11.406%, 12/13/96(4) 1,000,000 969,800 11.381%, 12/20/96(4) 1,000,000 972,000 ------------------------------------------------------------------------------------------------------------------------ Swiss Bank Corp., New York Branch, 6.05% CD Linked Nts., 6/20/97 (indexed to the closing Nikkei 225 Index on 1/23/97, 5 yr. & 3 mos. Japanese Yen Swap rate & New Zealand Dollar) 400,000 395,940 ------------------------------------------------------------------------------------------------------------------------ United Mexican States Linked Nts., 11/27/96 (indexed to the greater of Cetes Option Amount or USD LIBOR Option Amount, 11/27/96) 1,300,000 1,583,292 ----------- Total Structured Instruments (Cost $18,469,070) 18,508,615
9 Oppenheimer International Bond Fund 10 STATEMENT OF INVESTMENTS (Continued)
MARKET VALUE DATE STRIKE CONTRACTS SEE NOTE 1 ============================================================================================================================== PUT OPTIONS PURCHASED--0.2% - ------------------------------------------------------------------------------------------------------------------------------ Bulgaria (Republic of): Front-Loaded Interest Reduction Bearer Bonds, Tranche A, 2.25%, 7/28/12 Put Opt. 10/96 $28.125 1,750 $ 5,250 Front-Loaded Interest Reduction Bearer Bonds, Tranche A, 2.25%, 7/28/12 Put Opt. 10/96 $28.75 1,750 4,375 Interest Arrears Bonds, 6.688%, 7/28/11 Put Opt. 10/96 $40.875 3,400 1 Interest Arrears Bonds, 6.688%, 7/28/11 Put Opt. 10/96 $41.375 3,400 13 ----------------------------------------------------------------------------------------------------------------------- Italy (Republic of) Treasury Bonds, Buoni del Tesoro Poliennali, 9.50%, 5/1/01 Put Opt. 7/97 99.96 ITL 1,842 12,714 ----------------------------------------------------------------------------------------------------------------------- Swiss Franc Put Opt. 10/96 1.22 CHF 7,639,344 203,902 ----------- Total Put Options Purchased (Cost $351,770) 226,255
FACE AMOUNT(1) =============================================================================================================================== REPURCHASE AGREEMENT--3.3% - ------------------------------------------------------------------------------------------------------------------------------- Repurchase agreement with Goldman, Sachs & Co., 5.62%, dated 9/30/96, to be repurchased at $3,500,546 on 10/1/96, collateralized by U.S. Treasury Bonds, 8.875%--11.125%, 8/15/03--8/15/17, with a value of $3,574,041 (Cost $3,500,000) $3,500,000 3,500,000 - ------------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $105,246,914) 99.7% 107,270,820 - ------------------------------------------------------------------------------------------------------------------------------- OTHER ASSETS NET OF LIABILITIES 0.3 347,051 ---------- ------------ NET ASSETS 100.0% $107,617,871 ========== ============
1. Face amount is reported in U.S. Dollars, except for those denoted in the following currencies: ARP --Argentine Peso IEP--Irish Punt AUD --Australian Dollar ITL--Italian Lira CAD --Canadian Dollar JPY--Japanese Yen CHF --Swiss Franc NLG--Netherlands Guilder CZK --Czech Koruna NOK--Norwegian Krone DEM--German Deutsche Mark PLZ--Polish Zloty DKK --Danish Krone PTE--Portuguese Escudo FIM --Finnish Markka SEK--Swedish Krona GBP --British Pound Sterling THB--Thai Baht IDR --Indonesian Rupiah 2. Interest-Only Strips represent the right to receive the monthly interest payments on an underlying pool of mortgage loans. These securities typically decline in price as interest rates decline. Most other fixed-income securities increase in price when interest rates decline. The principal amount of the underlying pool represents the notional amount on which current interest is calculated. The price of these securities is typically more sensitive to changes in prepayment rates than traditional mortgage-backed securities (for example, GNMA pass-throughs). Interest rates disclosed represent current yields based upon the current cost basis and estimated timing and amount of future cash flows. 3. Represents the current interest rate for a variable rate security. 4. For zero coupon bonds, the interest rate shown is the effective yield on the date of purchase. 10 Oppenheimer International Bond Fund 11 5. A sufficient amount of securities has been designated to cover outstanding written call options, as follows:
FACE SUBJECT EXPIRATION EXERCISE PREMIUM MARKET VALUE TO CALL DATE PRICE RECEIVED SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------ Call Option on Banco Hipotecario Nacional (Argentina) Medium-Term Nts., 10.625%, 8/7/06 600,000 8/00 $100.00 $ 5,520 $ 9,600 ------------------------------------------------------------------------------------------------------------------------ Call Option on Bulgaria (Republic of) Front-Loaded Interest Reduction Bearer Bonds, Tranche A, 2.25%, 7/28/12 1,750,000 12/96 32.75 13,125 44,625 ------------------------------------------------------------------------------------------------------------------------ Call Option on Bulgaria (Republic of) Front-Loaded Interest Reduction Bearer Bonds, Tranche A, 2.25%, 7/28/12 1,750,000 12/96 32.125 9,975 47,250 ------------------------------------------------------------------------------------------------------------------------ Call Option on Bulgaria (Republic of) Interest Arrears Bonds, 6.688%, 7/28/11 3,400,000 11/96 45.375 22,100 39,100 ------------------------------------------------------------------------------------------------------------------------ Call Option on Bulgaria (Republic of) Interest Arrears Bonds, 6.688%, 7/28/11 3,400,000 11/96 45.188 22,100 42,500 ------- -------- $72,820 $183,075 ======= ========
6. Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $2,142,980 or 1.99% of the Fund's net assets, at September 30, 1996. 7. Indexed instrument for which the principal amount and/or interest due at maturity is affected by the relative value of a foreign index. 8. A sufficient amount of securities has been designated to cover outstanding forward foreign currency exchange contracts. See Note 5 of Notes to Financial Statements. 9. Represents the current interest rate for an increasing rate security. 10. When-issued security to be delivered and settled after September 30, 1996. 11. Identifies issues considered to be illiquid--See Note 7 of Notes to Financial Statements. 12. Denotes a step bond: a zero coupon bond that converts to a fixed rate of interest at a designated future date. See accompanying Notes to Financial Statements. 11 Oppenheimer International Bond Fund 12 STATEMENT OF ASSETS AND LIABILITIES September 30, 1996 ================================================================================================================================ ASSETS Investments, at value (cost $105,246,914)--see accompanying statement $107,270,820 ------------------------------------------------------------------------------------------------------------------------ Cash 615,444 ------------------------------------------------------------------------------------------------------------------------ Unrealized appreciation on forward foreign currency exchange contracts--Note 5 27,610 ------------------------------------------------------------------------------------------------------------------------ Receivables: Investments sold 3,236,083 Interest 2,585,546 Shares of beneficial interest sold 1,312,326 Closed forward foreign currency exchange contracts 112,082 ------------------------------------------------------------------------------------------------------------------------ Deferred organization costs--Note 1 11,338 ------------------------------------------------------------------------------------------------------------------------ Other 1,862 ------------ Total assets 115,173,111 ================================================================================================================================ LIABILITIES Unrealized depreciation on forward foreign currency exchange contracts--Note 5 8,744 ------------------------------------------------------------------------------------------------------------------------ Options written, at value (premiums received $72,820)-- see accompanying statement--Note 6 183,075 ------------------------------------------------------------------------------------------------------------------------ Payables and other liabilities: Investments purchased 6,611,001 Dividends 267,700 Shares of beneficial interest redeemed 245,867 Closed forward foreign currency exchange contracts 85,378 Distribution and service plan fees 51,307 Transfer and shareholder servicing agent fees 11,276 Other 90,892 ------------ Total liabilities 7,555,240 ================================================================================================================================ NET ASSETS $107,617,871 ============ ================================================================================================================================ COMPOSITION OF NET ASSETS Paid-in capital $104,210,304 ------------------------------------------------------------------------------------------------------------------------ Accumulated net realized gain on investments and foreign currency transactions 1,480,266 ------------------------------------------------------------------------------------------------------------------------ Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 1,927,301 ------------ Net assets $107,617,871 ============ ================================================================================================================================ NET ASSET VALUE PER SHARE Class A Shares: Net asset value and redemption price per share (based on net assets of $52,128,047 and 9,494,568 shares of beneficial interest outstanding) $5.49 Maximum offering price per share (net asset value plus sales charge of 4.75% of offering price) $5.76 ------------------------------------------------------------------------------------------------------------------------ Class B Shares: Net asset value, redemption price and offering price per share (based on net assets of $45,207,455 and 8,246,151 shares of beneficial interest outstanding) $5.48 ------------------------------------------------------------------------------------------------------------------------ Class C Shares: Net asset value, redemption price and offering price per share (based on net assets of $10,282,369 and 1,876,082 shares of beneficial interest outstanding) $5.48
See accompanying Notes to Financial Statements. 12 Oppenheimer International Bond Fund 13 STATEMENT OF OPERATIONS For the Year Ended September 30, 1996 ================================================================================================================================ INVESTMENT INCOME Interest (net of foreign withholding taxes of $5,130) $4,624,080 ================================================================================================================================ EXPENSES Management fees--Note 4 311,128 ------------------------------------------------------------------------------------------------------------------------ Distribution and service plan fees--Note 4: Class A 43,913 Class B 178,039 Class C 40,141 ------------------------------------------------------------------------------------------------------------------------ Transfer and shareholder servicing agent fees--Note 4 78,316 ------------------------------------------------------------------------------------------------------------------------ Shareholder reports 61,884 ------------------------------------------------------------------------------------------------------------------------ Custodian fees and expenses 57,326 ------------------------------------------------------------------------------------------------------------------------ Registration and filing fees: Class A 15,821 Class B 14,817 Class C 3,412 ------------------------------------------------------------------------------------------------------------------------ Legal and auditing fees 15,402 ------------------------------------------------------------------------------------------------------------------------ Trustees' fees and expenses 1,957 ------------------------------------------------------------------------------------------------------------------------ Other 11,068 ---------- Total expenses 833,224 Less reimbursement of expenses by OppenheimerFunds, Inc.--Note 4 (41,927) ---------- Net expenses 791,297 ================================================================================================================================ NET INVESTMENT INCOME 3,832,783 ================================================================================================================================ REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments and options written (including premiums on options exercised) 1,466,199 Closing and expiration of options written 102,322 Foreign currency transactions (18,625) ---------- Net realized gain 1,549,896 ------------------------------------------------------------------------------------------------------------------------ Net change in unrealized appreciation or depreciation on: Investments 2,138,504 Translation of assets and liabilities denominated in foreign currencies (299,254) ---------- Net change 1,839,250 ---------- Net realized and unrealized gain 3,389,146 ================================================================================================================================ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $7,221,929 ==========
See accompanying Notes to Financial Statements. 13 Oppenheimer International Bond Fund 14 STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED PERIOD ENDED SEPTEMBER 30, SEPTEMBER 30, 1996 1995(1) =============================================================================================================================== OPERATIONS Net investment income $ 3,832,783 $ 108,803 ------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) 1,549,896 (189) ------------------------------------------------------------------------------------------------------------------------ Net change in unrealized appreciation or depreciation 1,839,250 88,051 ------------ ---------- Net increase in net assets resulting from operations 7,221,929 196,665 =============================================================================================================================== DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income: Class A (1,931,780) (76,404) Class B (1,609,969) (29,790) Class C (360,475) (2,609) =============================================================================================================================== BENEFICIAL INTEREST TRANSACTIONS Net increase in net assets resulting from beneficial interest transactions--Note 2: Class A 46,551,563 3,923,812 Class B 40,565,844 3,212,495 Class C 9,758,157 198,433 =============================================================================================================================== NET ASSETS Total increase 100,195,269 7,422,602 ------------------------------------------------------------------------------------------------------------------------ Beginning of period 7,422,602 -- ------------ ---------- End of period $107,617,871 $7,422,602 ============ ==========
1. For the period from June 15, 1995 (commencement of operations) to September 30, 1995. See accompanying Notes to Financial Statements. 14 Oppenheimer International Bond Fund 15 FINANCIAL HIGHLIGHTS
CLASS A CLASS B CLASS C ------------------------ ------------------------ ------------------------ YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, 1996 1995(1) 1996 1995(1) 1996 1995(1) ================================================================================================================================ PER SHARE OPERATING DATA: Net asset value, beginning of period $5.10 $5.00 $5.10 $5.00 $5.09 $5.00 - ----------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income .52 .15 .48 .14 .48 .14 Net realized and unrealized gain .40 .10 .39 .10 .39 .09 ------- ------- ------- ------- ------- ------- Total income from investment operations .92 .25 .87 .24 .87 .23 - ----------------------------------------------------------------------------------------------------------------------------- Dividends to shareholders from net investment income (.53) (.15) (.49) (.14) (.48) (.14) - ----------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.49 $5.10 $5.48 $5.10 $5.48 $5.09 ======= ======= ======= ======= ======= ======= ============================================================================================================================= TOTAL RETURN, AT NET ASSET VALUE(2) 18.82% 5.13% 17.71% 4.92% 17.92% 4.73% ============================================================================================================================= RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $52,128 $3,984 $45,207 $3,238 $10,282 $201 - ----------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $19,817 $2,566 $17,891 $1,125 $4,039 $ 97 - ----------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income 9.60% 9.94%(3) 8.81% 9.20%(3) 8.76% 9.36%(3) Expenses, before voluntary reimbursement by the Manager 1.59% 1.59%(3) 2.36% 2.21%(3) 2.36% 2.26%(3) Expenses, net of voluntary reimbursement by the Manager 1.49% 0.41%(3) 2.26% 0.89%(3) 2.25% 0.85%(3) - ------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate(4) 273.3% 122.0% 273.3% 122.0% 273.3% 122.0%
1. For the period from June 15, 1995 (commencement of operations) to September 30, 1995. 2. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period (or commencement of operations), 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. 4. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the period ended September 30, 1996 were $161,923,766 and $93,759,294, respectively. See accompanying Notes to Financial Statements. 15 Oppenheimer International Bond Fund 16 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 with a single series of the same name. The Fund is registered as a diversified, open-end management investment company under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek high total return (which includes current income and capital appreciation in the value of its shares) primarily from foreign debt securities. The Fund's investment adviser is OppenheimerFunds, Inc. (the Manager). The Fund offers Class A, Class B and Class C shares. Class B and Class C shares may be subject to a contingent deferred sales charge. All three classes of shares have identical rights to earnings, assets and voting privileges, except that each class has its own distribution and/or service plan, expenses directly attributable to a particular class and exclusive voting rights with respect to matters affecting a single class. Class B shares will automatically convert to Class A shares six years after the date of purchase. The following is a summary of significant accounting policies consistently followed by the Fund. ----------------------------------------------------------------------- INVESTMENT VALUATION. Portfolio securities are valued at the close of the New York Stock Exchange on each trading day. Listed and unlisted securities for which such information is regularly reported are valued at the last sale price of the day or, in the absence of sales, at values based on the closing bid or the last sale price on the prior trading day. Long-term and short-term "non-money market" debt securities are valued by a portfolio pricing service approved by the Board of Trustees. Such securities which cannot be valued by the approved portfolio pricing service are valued using dealer-supplied valuations provided the Manager is satisfied that the firm rendering the quotes is reliable and that the quotes reflect current market value, or are valued under consistently applied procedures established by the Board of Trustees to determine fair value in good faith. Short-term "money market type" debt securities having a remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for amortization to maturity of any premium or discount. Forward foreign currency exchange contracts are valued based on the closing prices of the forward currency contract rates in the London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. Options are valued based upon the last sale price on the principal exchange on which the option is traded or, in the absence of any transactions that day, the value is based upon the last sale price on the prior trading date if it is within the spread between the closing bid and asked prices. If the last sale price is outside the spread, the closing bid is used. ----------------------------------------------------------------------- FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are maintained in U.S. dollars. Prices of securities denominated in foreign currencies are translated into U.S. dollars at the closing rates of exchange. Amounts related to the purchase and sale of securities and investment income are translated at the rates of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund's Statement of Operations. ----------------------------------------------------------------------- REPURCHASE AGREEMENTS. The Fund requires the custodian to take possession, to have legally segregated in the Federal Reserve Book Entry System or to have segregated within the custodian's vault, all securities held as collateral for repurchase agreements. The market value of the underlying securities is required to be at least 102% of the resale price at the time of purchase. If the seller of the agreement defaults and the value of the collateral declines, or if the seller enters into an insolvency proceeding, realization of the value of the collateral by the Fund may be delayed or limited. ----------------------------------------------------------------------- ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income, expenses (other than those attributable to a specific class) and gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class. ----------------------------------------------------------------------- FEDERAL TAXES. The Fund intends to continue to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income, including any net realized gain on investments not offset by loss carryovers, to shareholders. Therefore, no federal income or excise tax provision is required. ----------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends separately for Class A, Class B and Class C shares from net investment income each day the New York Stock Exchange is open for business and pay such dividends monthly. Distributions from net realized gains on investments, if any, will be declared at least once each year. 16 Oppenheimer International Bond Fund 17 ============================================================================== 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ORGANIZATION COSTS. The Manager advanced $14,488 for organization and start-up costs of the Fund. Such expenses are being amortized over a five-year period from the date operations commenced. In the event that all or part of the Manager's initial investment in shares of the Fund is withdrawn during the amortization period, the redemption proceeds will be reduced to reimburse the Fund for any unamortized expenses, in the same ratio as the number of shares redeemed bears to the number of initial shares outstanding at the time of such redemption. ----------------------------------------------------------------------- CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of the distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gain (loss) was recorded by the Fund. During the year ended September 30, 1996, the Fund adjusted 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, 1996, amounts have been reclassified to reflect a decrease in overdistributed net investment income of $13,482. Accumulated net realized gain on investments was decreased by the same amount. In addition, to properly reflect foreign currency gain in the components of capital, $55,959 of foreign exchange gain determined accord- ing to U.S. federal income tax rules has been reclassified from net realized gain to net investment income. ----------------------------------------------------------------------- OTHER. Investment transactions are accounted for on the date the investments are purchased or sold (trade date) and dividend income is recorded on the ex-dividend date. Discount on securities purchased is amortized over the life of the respective securities, in accordance with federal income tax requirements. Realized gains and losses on investments and options written and unrealized appreciation and depreciation are determined on an identified cost basis, which is the same basis used for federal income tax purposes. Interest on payment-in-kind debt instruments is accrued as income at the coupon rate and a market adjustment is made on the ex-date. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. ============================================================================== 2. SHARES OF BENEFICIAL INTEREST The Fund has authorized an unlimited number of no par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
YEAR ENDED SEPTEMBER 30, 1996 PERIOD ENDED SEPTEMBER 30, 1995(1) ----------------------------- ---------------------------------- SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------------------------------------------------------------- Class A: Sold 9,721,751 $51,914,821 909,822 $4,576,888 Dividends reinvested 246,015 1,320,886 6,117 30,991 Redeemed (1,254,497) (6,684,144) (134,640) (684,067) ---------- ----------- -------- ---------- Net increase 8,713,269 $46,551,563 781,299 $3,923,812 ========== =========== ======== ========== ---------------------------------------------------------------------------------------------------------------------------- Class B: Sold 8,129,566 $43,322,204 633,620 $3,203,816 Dividends reinvested 172,750 925,063 4,019 20,381 Redeemed (691,490) (3,681,423) (2,314) (11,702) ---------- ----------- -------- ---------- Net increase 7,610,826 $40,565,844 635,325 $3,212,495 ========== =========== ======== ========== --------------------------------------------------------------------------------------------------------------------------- Class C: Sold 1,915,475 $10,177,624 39,665 $ 199,624 Dividends reinvested 35,740 192,431 392 1,981 Redeemed (114,564) (611,898) (626) (3,172) ---------- ------------ -------- ---------- Net increase 1,836,651 $ 9,758,157 39,431 $ 198,433 ========== ============ ======== ==========
1. For the period from June 15, 1995 (commencement of operations) to September 30, 1995. 17 Oppenheimer International Bond Fund 18 NOTES TO FINANCIAL STATEMENTS (Continued) ============================================================================== 3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS At September 30, 1996, net unrealized appreciation on investments and options written of $1,913,651 was composed of gross appreciation of $2,723,838, and gross depreciation of $810,187. ============================================================================== 4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES Management fees paid to the Manager were in accordance with the investment advisory agreement with the Fund which provides for an annual fee of 0.75% of the first $200 million of average net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $200 million and 0.50% of net assets in excess of $1 billion. The Manager has agreed to reimburse the Fund if aggregate expenses (with specified exceptions) exceed the most stringent applicable regulatory limit on Fund expenses. Effective September 20, 1996, the Manager discontinued its voluntary undertaking to reimburse Fund expenses to the level needed to maintain a stable dividend. For the year ended September 30, 1996, commissions (sales charges paid by investors) on sales of Class A shares totaled $455,830, of which $126,085 was retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the Manager, as general distributor, and by an affiliated broker/dealer. Sales charges advanced to broker/dealers by OFDI on sales of the Fund's Class B and Class C shares totaled $1,115,490 and $77,326, of which $26,260 and $1,600, respectively, was paid to an affiliated broker/dealer. During the period ended September 30, 1996, OFDI received contingent deferred sales charges of $32,060 and $3,260, respectively, upon redemption of Class B and Class C shares as reimbursement for sales commissions advanced by OFDI at the time of sale of such shares. OppenheimerFunds Services (OFS), a division of the Manager, is the transfer and shareholder servicing agent for the Fund, and for other registered investment companies. OFS's total costs of providing such services are allocated ratably to these companies. The Fund has adopted a Service Plan for Class A shares to reimburse OFDI for a portion of its costs incurred in connection with the personal service and maintenance of accounts that hold Class A shares. Reimbursement is made quarterly at an annual rate that may not exceed 0.25% of the average annual net assets of Class A shares of the Fund. OFDI uses the service fee to reimburse brokers, dealers, banks and other financial institutions quarterly for providing personal service and maintenance of accounts of their customers that hold Class A shares. During the year ended September 30, 1996, OFDI paid $2,532 to an affiliated broker/dealer as reimbursement for Class A personal service and maintenance expenses. The Fund has adopted compensation type Distribution and Service Plans for Class B and Class C shares to compensate OFDI for its services and costs in distributing Class B and Class C shares and servicing accounts. Under the Plans, the Fund pays OFDI an annual asset-based sales charge of 0.75% per year on Class B shares and on Class C shares, as compensation for sales commissions paid from its own resources at the time of sale and associated financing costs. If the Plans are terminated by the Fund, the Board of Trustees may allow the Fund to continue payments of the asset-based sales charge to OFDI for certain expenses it incurred before the Plans were terminated. OFDI also receives a service fee of 0.25% per year as compensation for costs incurred in connection with the personal service and maintenance of accounts that hold shares of the Fund, including amounts paid to brokers, dealers, banks and other financial institutions. Both fees are computed on the average annual net assets of Class B and Class C shares, determined as of the close of each regular business day. During the year ended September 30, 1996, OFDI retained $168,499 and $36,849, respectively, as compensation for Class B and Class C sales commissions and service fee advances, as well as financing costs. At September 30, 1996, OFDI had incurred unreimbursed expenses of $1,331,917 for Class B and $119,763 for Class C. 18 Oppenheimer International Bond Fund 19 ============================================================================== 5. FORWARD CONTRACTS A forward foreign currency exchange contract (forward contract) is a commitment to purchase or sell a foreign currency at a future date, at a negotiated rate. The Fund uses forward contracts to seek to manage foreign currency risks. They may also be used to tactically shift portfolio currency risk. The Fund generally enters into forward contracts as a hedge upon the purchase or sale of a security denominated in a foreign currency. In addition, the Fund may enter into such contracts as a hedge against changes in foreign currency exchange rates on portfolio positions. Forward contracts are valued based on the closing prices of the forward currency contract rates in the London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. The Fund will realize a gain or loss upon the closing or settlement of the forward transaction. Securities held in designated accounts to cover net exposure on outstanding forward contracts are noted in the Statement of Investments where applicable. Unrealized appreciation or depreciation on forward contracts is reported in the Statement of Assets and Liabilities. Realized gains and losses are reported with all other foreign currency gains and losses in the Fund's Statement of Operations. Risks include the potential inability of the counterparty to meet the terms of the contract and unanticipated movements in the value of a foreign currency relative to the U.S. dollar. At September 30, 1996, the Fund had outstanding forward contracts to purchase and sell foreign currencies as follows:
CONTRACT AMOUNT VALUATION AS OF UNREALIZED UNREALIZED CONTRACTS TO PURCHASE EXPIRATION DATE (000S) SEPTEMBER 30, 1996 APPRECIATION DEPRECIATION --------------------------------------------------------------------------------------------------------------------------- Danish Krone (DKK) 10/2/96 5,511 DKK $ 941,077 $ -- $1,212 Italian Lira (ITL) 10/1/96 3,854 ITL 2,532 6 -- Japanese Yen (JPY) 10/2/96 60,030 JPY 538,990 -- 7,532 ---------- ------- ------ $1,482,599 6 8,744 ========== ------- ------ Contracts to Sell --------------------------------------------------------------------------------------------------------------------------- Finnish Markka (FIM) 10/2/96--12/2/96 16,245 FIM $3,562,197 $14,083 $ -- Japanese Yen (JPY) 10/28/96 28,000 JPY 252,068 8,334 -- Swedish Krona (SEK) 11/1/96 9,260 SEK 1,397,244 4,640 -- Swiss Franc (CHF) 1/3/97 1,630 CHF 1,313,111 547 -- ---------- ------- ------ $6,524,620 27,604 -- ========== ------- ------ Total Unrealized Appreciation and Depreciation $27,610 $8,744 ======= ======
19 Oppenheimer International Bond Fund 20 NOTES TO FINANCIAL STATEMENTS (Continued) ============================================================================== 6. 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 footnote to the Statement of Investments. Options written are reported as a liability in the Statement of Assets and Liabilities. Gains and losses are reported in the Statement of Operations. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. Written option activity for the year ended September 30, 1996 was as follows:
CALL OPTIONS PUT OPTIONS --------------------------------- ------------------------- NUMBER OF AMOUNT OF NUMBER OF AMOUNT OF OPTIONS PREMIUMS OPTIONS PREMIUMS --------------------------------------------------------------------------------------------------------------- Options outstanding at September 30, 1995 245 $ 1,350 -- $ -- Options written 13,149,735 200,591 1,575 54,483 Options closed or expired (12,635,736) (124,987) (1,575) (54,483) Options exercised (503,344) (4,134) -- -- ----------- ---------- ------- --------- Options outstanding at September 30, 1996 10,900 $ 72,820 -- $ -- =========== ========== ======= =========
============================================================================== 7. ILLIQUID AND RESTRICTED SECURITIES At September 30, 1996, investments in securities included issues that are illiquid or restricted. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and are valued under methods approved by the Board of Trustees as reflecting fair value. A security may be considered illiquid if it lacks a readily-available market or if its valuation has not changed for a certain period of time. The Fund intends to invest no more than 10% of its net assets (determined at the time of purchase and reviewed from time to time) in illiquid or restricted securities. Certain restricted securities, eligible for resale to qualified institutional investors, are not subject to that limit. The aggregate value of illiquid or restricted securities subject to this limitation at September 30, 1996 was $4,969,037, which represents 4.62% of the Fund's net assets. 20 Oppenheimer International Bond Fund 21 INDEPENDENT AUDITORS' REPORT ============================================================================== The Board of Trustees and Shareholders of Oppenheimer International Bond Fund: We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Oppenheimer International Bond Fund as of September 30, 1996, the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of 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 generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned at September 30, 1996 by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Oppenheimer International Bond Fund at September 30, 1996, the results of its operations, the changes in its net assets, and the financial highlights for the respective stated periods, in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Denver, Colorado October 21, 1996 21 Oppenheimer International Bond Fund 22 FEDERAL INCOME TAX INFORMATION (Unaudited) ============================================================================== In early 1997, shareholders will receive information regarding all dividends and distributions paid to them by the Fund during calendar year 1996. 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 fiscal year ended September 30, 1996 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 adviser for specific guidance. SHAREHOLDER MEETING (Unaudited) ============================================================================== On September 26, 1996, a special shareholder meeting was held at which the eleven Trustees identified below were elected, the selection of Deloitte & Touche LLP as the independent certified public accountants and auditors of the Fund for the fiscal year beginning October 1, 1995 was ratified (Proposal No. 1), the approval of a new investment advisory agreement with OppenheimerFunds, Inc. (Proposal No. 2), the Fund's amended Class A 12b-1 Distribution and Service Plan was approved by Class A shareholders (Proposal No. 3), the Fund's amended Class B 12b-1 Distribution and Service Plan was approved by Class B shareholders (Proposal No. 4) and the Fund's amended Class C 12b-1 Distribution and Service Plan was approved by Class C shareholders (Proposal No. 5). The following is a report of the votes cast:
NOMINEE/PROPOSAL FOR AGAINST WITHHELD/ABSTAIN TOTAL ------------------------------------------------------------------------------------------------------------------------ Robert G. Avis 8,268,105.956 94,830.312 -- 8,362,936.268 William A. Baker 8,284,580.597 78,355.671 -- 8,362,936.268 Charles Conrad, Jr. 8,288,023.846 74,912.422 -- 8,362,936.268 Jon S. Fossel 8,287,101.937 75,834.331 -- 8,362,936.268 Sam Freedman 8,280,155.813 82,780.455 -- 8,362,936.268 Raymond J. Kalinowski 8,287,005.853 75,930.415 -- 8,362,936.268 C. Howard Kast 8,281,408.293 81,527.975 -- 8,362,936.268 Robert M. Kirchner 8,286,171.994 76,764.274 -- 8,362,936.268 Bridget A. Macaskill 8,287,466.702 75,469.566 -- 8,362,936.268 Ned M. Steel 8,284,676.127 78,260.141 -- 8,362,936.268 James C. Swain 8,267,184.047 95,752.221 -- 8,362,936.268 ------------------------------------------------------------------------------------------------------------------------ Proposal No. 1 8,181,936.836 23,362.450 177,077.150 8,382,376.436 Proposal No. 2 7,970,833.153 22,855.799 388,687.484 8,382,376.436 Proposal No. 3 3,381,168.164 16,893.996 134,106.169 3,532,168.329 Proposal No. 4 3,606,436.610 48,770.655 285,833.731 3,941,040.996 Proposal No. 5 885,251.055 -- 23,916.056 909,167.111
22 Oppenheimer International Bond Fund 23 OPPENHEIMER INTERNATIONAL BOND FUND A Series of Oppenheimer International Bond Fund ============================================================================== OFFICERS AND TRUSTEES James C. Swain, Chairman and Chief Executive Officer Bridget A. Macaskill, Trustee and President Robert G. Avis, Trustee William A. Baker, Trustee Charles Conrad, Jr., Trustee Jon S. Fossel, Trustee Sam Freedman, Trustee Raymond J. Kalinowski, Trustee C. Howard Kast, Trustee Robert M. Kirchner, Trustee Ned M. Steel, Trustee George C. Bowen, Vice President, Treasurer and Assistant Secretary Andrew J. Donohue, Vice President and Secretary Ashwin K. Vasan, Vice President Robert J. Bishop, Assistant Treasurer Scott T. Farrar, Assistant Treasurer Robert G. Zack, Assistant Secretary ============================================================================== INVESTMENT ADVISER OppenheimerFunds, Inc. ============================================================================== DISTRIBUTOR OppenheimerFunds Distributor, Inc. ============================================================================== TRANSFER AND SHAREHOLDER SERVICING AGENT OppenheimerFunds Services ============================================================================== CUSTODIAN OF PORTFOLIO SECURITIES The Bank of New York ============================================================================== INDEPENDENT AUDITORS Deloitte & Touche LLP ============================================================================== LEGAL COUNSEL Myer, Swanson, Adams & Wolf, P.C. This is a copy of a report to shareholders of Oppenheimer International Bond Fund. This report must be preceded or accompanied by a Prospectus of Oppenheimer International Bond Fund. For material information concerning the Fund, see the Prospectus. Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, and are not insured by the FDIC or any other agency, and involve investment risks, including possible loss of the principal amount invested. 23 Oppenheimer International Bond Fund 24 INFORMATION GENERAL INFORMATION Monday-Friday 8:30 a.m.-9 p.m. ET Saturday 10 a.m.-2 p.m. ET 1-800-525-7048 TELEPHONE TRANSACTIONS Monday-Friday 8:30 a.m.-8 p.m. ET 1-800-852-8457 PHONELINK 24 hours a day, automated information and transactions 1-800-533-3310 TELECOMMUNICATIONS DEVICE FOR THE DEAF (TDD) Monday-Friday 8:30 a.m.-8 p.m. ET 1-800-843-4461 OPPENHEIMERFUNDS INFORMATION HOTLINE 24 hours a day, timely and insightful messages on the economy and issues that affect your investments 1-800-835-3104 RA0880.001.0996 November 30, 1996 [PHOTO] Customer Service Representative OppenheimerFunds Services "How may I help you?" As an Oppenheimer fund shareholder, you have some special privileges. Whether it's automatic investment plans, informative newsletters and hotlines, or ready account access, you can benefit from services designed to make investing simple. And when you need help, our Customer Service Representatives are only a toll-free phone call away. They can provide information about your account and handle administrative requests. You can reach them at our General Information number. When you want to make a transaction, you can do it easily by calling our toll-free Telephone Transactions number. And, by enrolling in AccountLink, a convenient service that "links" your Oppenheimer funds accounts and your bank checking or savings account, you can use the Telephone Transactions number to make investments. For added convenience, you can get automated information with OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week. PhoneLink gives you access to a variety of fund, account, and market information. Of course, you can always speak with a Customer Service Representative during the General Information hours shown at the left. You can count on us whenever you need assistance. That's why the International Customer Service Association, an independent, nonprofit organization made up of over 3,200 customer service management professionals from around the country, honored the Oppenheimer funds' transfer agent, OppenheimerFunds Services, with their Award of Excellence in 1993. So call us today--we're here to help. [OPPENHEIMERFUNDS LOGO] OppenheimerFunds Distributor, Inc. P.O. Box 5270 Denver, CO 80217-5270 Bulk Rate U.S. Postage PAID Permit No. 469 Denver, CO -----END PRIVACY-ENHANCED MESSAGE-----