<PAGE> 1
ANNUAL REPORT AUGUST 31, 1998
OPPENHEIMER
DEVELOPING
MARKETS FUND
[PHOTO]
[OPPENHEIMERFUNDS LOGO]
THE RIGHT WAY TO INVEST
<PAGE> 2
CONTENTS
3 President's Letter
4 An Interview
with Your Fund's
Managers
9 Fund Performance
13 Financial
Statements
31 Independent
Auditors' Report
32 Federal
Income Tax
Information
33 Officers and
Trustees
36 Information and
Services
REPORT HIGHLIGHTS
- --------------------------------------------------------------------------------
- - STOCK MARKETS DECLINED throughout the world's developing markets during the
period.
- - THE FUND ADHERED TO ITS LONGSTANDING INVESTMENT APPROACH in these volatile
markets:seeking good companies in good businesses at good prices.
- - THE FUND IS FINDING ATTRACTIVE OPPORTUNITIES in well-run businesses that we
believe were punished unfairly in the recent sell-off.
AVG ANNUAL TOTAL RETURNS
For the 1-Year Period
Ended 8/31/98
CLASS A
Without With
Sales Chg.(1) Sales Chg.(2)
(36.33)% (39.99)%
CLASS B
Without With
Sales Chg.(1) Sales Chg.(2)
(36.85)% (39.87)%
CLASS C
Without With
Sales Chg.(1) Sales Chg.(2)
(36.88)% (37.48)%
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
IN REVIEWING PERFORMANCE AND RANKINGS, PLEASE REMEMBER THAT PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. BECAUSE OF ONGOING
MARKET VOLATILITY, THE FUND'S PERFORMANCE MAY BE SUBJECT TO SUBSTANTIAL
SHORT-TERM CHANGES. FOR UPDATES ON THE FUND'S PERFORMANCE, PLEASE CONTACT YOUR
FINANCIAL ADVISOR, CALL US AT 1-800-525-7048 OR VISIT OUR WEBSITE,
WWW.OPPENHEIMERFUNDS.COM.
1. Includes changes in net asset value per share without deducting any sales
charges. Such performance would have been lower if sales charges were taken into
account.
2. Class A return includes the current maximum initial sales charge of 5.75%.
Class B return includes the applicable contingent deferred sales charge of 5%.
Class C return includes the contingent deferred sales charge of 1%. Class B and
C shares are subject to a 0.75% asset-based sales charge. An explanation of the
different performance calculations is in the Fund's prospectus.
2 Oppenheimer Developing Markets Fund
<PAGE> 3
[PHOTO]
BRIDGET A. MACASKILL
President
Oppenheimer
Developing
Markets Fund
DEAR SHAREHOLDER,
- --------------------------------------------------------------------------------
The performance of the financial markets over the past several months could be
viewed as "A Tale of Two Markets." Until mid-July, the excitement surrounding
the stock market's continued ascent to new record highs overshadowed the
favorable economic environment that existed for bonds: low inflation and
declining interest rates. However, since that time, stocks have declined sharply
amid heightened volatility. Yet, the bond market remains poised to benefit from
the same positive economic conditions that existed earlier in the year.
Why have stocks faltered lately? The financial crises in Asia and Russia
have negatively affected the earnings of some large U.S. corporations and have
contributed to a slow-down in U.S. economic growth. Although slower economic
growth has been negative for stocks, it should not adversely impact bonds.
That's because slower economic growth generally means fewer inflationary
pressures and less likelihood that interest rates will rise.
What should you do during this period of relative uncertainty? If you have
well-defined long-term financial goals and an investment strategy designed to
achieve them, we encourage you to stay the course. However, if you feel your
financial plan is out-of-date or incomplete, now is the time to make
improvements. The best way to cope with short-term volatility is to adhere to a
long-term plan that contains proven strategies, such as diversification among
various financial markets, geographic regions, investment styles and individual
securities. A long-term plan will give you the focus and perspective you need to
put short-term volatility in its proper context.
As longstanding advocates of financial planning, we have been encouraged
by our shareholders' rational responses to the latest market events. Many of you
tell us that you have a long-term strategy in place, which includes diversifying
your investment portfolio among a number of different asset classes in
accordance with your tolerance for risk. At OppenheimerFunds, our portfolio
management teams include seasoned professionals who have encountered extreme
market volatility in the past, giving them the perspective required to address
risks and take advantage of opportunities in turbulent markets. In our view,
having a well-defined set of financial goals, a disciplined long-term strategy
and the help of experienced investment professionals are all fundamental parts
of The Right Way to Invest.
Sincerely,
/s/ BRIDGET A. MACASKILL
Bridget A. Macaskill
September 22, 1998
3 Oppenheimer Developing Markets Fund
<PAGE> 4
"IN OUR OPINION, MANY STOCKS IN EMERGING MARKET COUNTRIES ARE AT THEIR MOST
ATTRACTIVE PRICES IN OVER A DECADE."
AN INTERVIEW WITH YOUR FUND'S MANAGERS
- --------------------------------------------------------------------------------
HOW DID OPPENHEIMER DEVELOPING MARKETS FUND PERFORM?
The Fund's performance over the fiscal year that ended August 31, 1998, reflects
the difficult conditions that have characterized the world's emerging markets.
However, relative to its peers, the Fund fared significantly better than most of
its competitors. The Fund's Class A shares were in the first quartile, ranking
14 out of 153 in the emerging-markets equity fund category during the 12 months
ended September 30, 1998, as measured by Lipper Analytical Services.(1)
EMERGING MARKETS EXPERIENCED SHARP DECLINES OVER THE PAST YEAR. WHY DID THIS
OCCUR?
Back in the summer and fall of 1997, a banking crisis caused a sharp decline in
East Asian stock markets. This banking crisis was precipitated by defaults on
unhedged borrowing by companies whose profits were declining. These defaults
were caused by a significant devaluation in the local currencies of Asia against
the U.S. dollar.
However, Asia's 1997 stock market declines represented only the first wave
of falling securities prices in the world's emerging markets. As the fear of
economic instability surfaced, investors began to pull their capital out of
virtually all developing markets, including those with relatively sound
economies. As a result, businesses, even established profitable ones, were
unable to raise the capital required to run their operations. The belief of
investors worldwide seemed to be that all developing markets
1. Source: Lipper Analytical Services, Inc., 9/30/98. Based on the comparisons
between changes in net asset value without considering sales charges, with
dividends and capital gains distributions of the Fund's Class A shares
reinvested. The Fund's Class A shares were ranked 14 of 153 (one-year) among
emerging Markets Fund for the period ended 9/30/98. Past performance does not
guarantee future results.
4 Oppenheimer Developing Markets Fund
<PAGE> 5
[PHOTO]
PORTFOLIO MANAGEMENT
TEAM (L TO R)
Frank Jennings
Rajeev Bhaman
were subject to the same economic problems as those confronting southeast Asia.
The aftershocks of the Asian crisis soon spread to other parts of the world,
including southern Asia, eastern Europe and Latin America, with little regard to
these regions' actual business fundamentals.
WHAT HAS BEEN YOUR STRATEGY IN THIS DIFFICULT INVESTMENT ENVIRONMENT?
We continue to adhere to the investment philosophy that governs our decisions in
good times and bad: we seek to build a diversified portfolio of good companies
in good businesses at good prices. We believe that our portfolio of high-quality
companies helped us avoid some of the worst of the emerging markets' declines
over the past year. In fact, the Fund may actually benefit from these declines.
We continue to find attractive opportunities in well-managed companies with
strong businesses that, in our view, have been unfairly punished in the recent
sell-off.
WHAT TYPES OF COMPANIES ARE PROVIDING APPEALING OPPORTUNITIES?
We've identified a few industries that we believe have good long-term
opportunities. Among them are the media business, which includes
well-established broadcasters and program content developers.
5 Oppenheimer Developing Markets Fund
<PAGE> 6
AVG ANNUAL TOTAL RETURNS
For the Period Ended 9/30/98(2)
CLASS A
Since
1-year Inception
(38.30)% (9.94)%
CLASS B
Since
1-year Inception
(38.76)% (10.67)%
CLASS C
Since
1-year Inception
(38.79)% (10.65)%
AN INTERVIEW WITH YOUR FUND'S MANAGERS
- --------------------------------------------------------------------------------
We have found that these companies tend to be attractive, relatively stable
investments, because high start-up costs and similar obstacles discourage new
competition. Therefore, we have invested in those media businesses around the
world that we regard as quality companies selling at significant discounts to
their true value.(3)
Another industry that we find particularly attractive is healthcare. The
reason is that the need for medical services remains regardless of economic
conditions. People will reduce spending in other discretionary areas in order to
pay for necessary health services. The same is true of food. Food costs tend to
account for a higher proportion of household budgets in difficult times. We have
owned supermarket stocks in southeast Asia throughout the Asian economic crisis,
and the values of some of those stocks have actually gone up significantly.
ARE SOME REGIONS OF THE DEVELOPING WORLD MORE ATTRACTIVE THAN OTHERS?
Yes. In Latin America, some countries, such as Brazil, remain committed to
market-based economic reforms, such as privatization of government-run
monopolies, that should make local business conditions more favorable.
2. Total returns include changes in share price and reinvestment of dividends
and capital gains distributions in a hypothetical investment for the periods
shown. Class A returns include the current maximum initial sales charge of
5.75%. Class A, B and C shares were first publicly offered on 11/18/96. Class B
returns include the applicable contingent deferred sales charge of 5% for the
1-year period, and 4% since inception. Class C returns include the contingent
deferred sales charge of 1% for the 1-year period. An explanation of the
different performance calculations is in the Fund's prospectus. Class B and C
shares are subject to an annual 0.75% asset-based sales charge.
3. The Fund's portfolio is subject to change.
6 Oppenheimer Developing Markets Fund
<PAGE> 7
In addition, high-quality companies in Brazil are available at lower valuations
than in other parts of the world. Similarly, Argentina's sound monetary policy
has fostered economic conditions that are necessary to help promote business
growth. In our opinion, this creates an environment that could be a precursor to
positive stock market performance.
In Eastern Europe, we're optimistic about Poland. The Polish economy has
been growing, and companies there are restructuring and consolidating in a way
that places greater emphasis on shareholder value. Furthermore, Polish companies
conduct a substantial portion of their trade with Western Europe, and Poland
could be an entrant into the European Union in the next few years. As the cost
of capital comes down in Poland, stock prices there should benefit.
We also continue to favor Southern Europe, including Portugal. These
markets have benefited from the decision to adopt a single currency as part of
the European Union.
WHAT IS YOUR OUTLOOK FOR THE COMING YEAR?
We believe that in the short term, news from the emerging markets will continue
to be unsettling. However, we also believe that market volatility in the
emerging markets offers great opportunities for those investing for the
long-term. In our opinion, many stocks in emerging market countries are at their
most attractive prices in over a decade.
7 Oppenheimer Developing Markets Fund
<PAGE> 8
REGIONAL ALLOCATION(4)
- - Latin America 35.3%
- - Asia 26.1
- - Emerging Europe 20.4
- - Middle East/Africa 12.1
- - U.S. 6.1
Hence, we will take advantage of the opportunity offered by the current market
environment to increase our focus and strengthen our portfolio in those
businesses that we continue to believe offer excellent long-term value. It's
important to remember that maintaining a long-term perspective in volatile
markets is a fundamental part of The Right Way to Invest.
<TABLE>
<CAPTION>
TOP 5 INDUSTRIES(4)
- ---------------------------------------------
<S> <C>
Banks 18.1%
- ---------------------------------------------
Media 14.5
- ---------------------------------------------
Diversified Financial 11.0
- ---------------------------------------------
Food 8.8
- ---------------------------------------------
Autos & Housing 8.4
</TABLE>
<TABLE>
<CAPTION>
TOP TEN STOCK HOLDINGS(4)
- ------------------------------------------------------
<S> <C>
Lusomundo SGPS AS 5.4%
- ------------------------------------------------------
ICICI Ltd. 5.1
- ------------------------------------------------------
Banco Pinto & Sotto Mayor SA 4.8
- ------------------------------------------------------
Grupo Televisa SA, Sponsored GDR 3.2
- ------------------------------------------------------
Dairy Farm International Holdings Ltd. 3.0
- ------------------------------------------------------
Banco BHIF, Sponsored ADR 2.5
- ------------------------------------------------------
Telecommunicascoes Brasileiras SA 2.5
- ------------------------------------------------------
Pliva d.d., Sponsored GDR 2.4
- ------------------------------------------------------
Cia Paranaense Energia, Sponsored ADR 2.3
- ------------------------------------------------------
Solidere, GDR 2.1
</TABLE>
4. Portfolio is subject to change. Percentages are as of August 31, 1998, and
are based on total market value of investments.
8 Oppenheimer Developing Markets Fund
<PAGE> 9
FUND PERFORMANCE
- --------------------------------------------------------------------------------
HOW HAS THE FUND PERFORMED? Below is a discussion by the Manager of the Fund's
performance during its fiscal year ended August 31, 1998, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index.
- MANAGEMENT'S DISCUSSION OF PERFORMANCE. During the fiscal year that
ended August 31, 1998, Oppenheimer Developing Markets Fund's performance was
negatively affected by several economic and market factors. Widespread declines
in emerging markets worldwide were triggered by the financial crisis in
Southeast Asia, after which investors pulled capital out of developing markets
without regard to the economic fundamentals of individual nations or companies.
The Fund's strategy of holding a diversified portfolio of high-quality companies
enabled it to avoid the brunt of the markets' declines, and, in the opinion of
the Fund's managers, should position the Fund well when capital once again
becomes more readily available to developing-market businesses.
- COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow
show the performance of a hypothetical $10,000 investment in Class A, Class B
and Class C shares of the Fund held from the inception date of November 18, 1996
until August 31, 1998. The graphs assume that all dividends and capital gains
distributions were reinvested in additional shares. The Fund's performance
reflects the deduction of the 5.75% maximum initial sales charge on Class A
shares, the 5% (1-year) and 4% (since inception) applicable contingent deferred
sales charge for Class B and the 1% contingent deferred sales charge for Class C
shares.
The Fund's performance is compared to the performance of the Morgan
Stanley Capital International ("MSCI") Emerging Markets Free Index, an unmanaged
capitalization-weighted equity index of issuers located in more than 25
developing countries. Certain countries within this index are included at less
than 100% of their market capitalization weight due to onerous foreign
investment restrictions not present in other developing markets. The MSCI
Emerging Markets Free Index is widely recognized as a performance measure of
developing markets available to foreign investors.
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 shows the effect of taxes. 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
MSCI Emerging Markets Free Index.
9 Oppenheimer Developing Markets Fund
<PAGE> 10
FUND PERFORMANCE
- --------------------------------------------------------------------------------
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenhiemer Developing Markets Fund (Class A) and Morgan Stanley Capital
International Emerging Markets Free Index
[The following chart was represented as a line graph in the printed material.]
<TABLE>
<CAPTION>
Date Oppenheimer Developing Morgan Stanley Capital
Markets Fund Class A International Emerging
Markets Free Index
<S> <C> <C>
11/18/96 $9,425 $10,000
8/31/97 $12,083 $10,306
8/31/98 $7,693 $5,062
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS A SHARES OF THE FUND AT 8/31/98(1)
1 YEAR -39.99% LIFE -13.66%
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenhiemer Developing Markets Fund (Class B) and Morgan Stanley Capital
International Emerging Markets Free Index
[The following chart was represented as a line graph in the printed material.]
<TABLE>
<CAPTION>
Date Oppenheimer Developing Morgan Stanley Capital
Markets Fund Class B International Emerging
Markets Free Index
<S> <C> <C>
11/18/96 $10,000 $10,000
8/31/97 $12,730 $10,306
8/31/98 $7,731 $5,062
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS B SHARES OF THE FUND AT 8/31/98(2)
1 YEAR -39.87% LIFE -13.42%
10 Oppenheimer Developing Markets Fund
<PAGE> 11
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenhiemer Developing Markets Fund (Class C) and Morgan Stanley Capital
International Emerging Markets Free Index
[The following chart was represented as a line graph in the printed material.]
<TABLE>
<CAPTION>
Date Oppenheimer Developing Morgan Stanley Capital
Markets Fund Class C International Emerging
Markets Free Index
<S> <C> <C>
11/18/96 $10,000 $10,000
8/31/97 $12,740 $10,306
8/31/98 $8,042 $5,062
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS C SHARES OF THE FUND AT 8/31/98(3)
1 YEAR -37.48% LIFE -11.49%
The returns and the ending account values in the graphs show change in share
value and include reinvestment of all dividends and capital gains distributions.
The performance information in the graphs for the MSCI Emerging Markets Free
Index begins on 11/30/96.
1. The inception date of the Fund's Class A shares was 11/18/96. The average
annual total returns are shown net of the applicable 5.75% maximum initial sales
charge.
2. Class B shares of the Fund were first publicly offered on 11/18/96. The
average annual total returns are shown net of the applicable 5% and 4%
contingent deferred sales charge respectively, for the 1-year period and the
life of the class. The ending account value in the graph is net of the
applicable 4% contingent deferred sales charge.
3. Class C shares of the Fund were first publicly offered on 11/18/96. The
average annual total returns are shown net of the applicable 1% contingent
deferred sales charge for one-year period.
Past performance is not predictive of future performance.
11 Oppenheimer Developing Markets Fund
<PAGE> 12
FINANCIALS
- --------------------------------------------------------------------------------
12 Oppenheimer Developing Markets Fund
<PAGE> 13
STATEMENT OF INVESTMENTS August 31, 1998
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--95.9%
- ------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--23.3%
- ------------------------------------------------------------------------------------------------------
AUTOS & HOUSING--8.4%
Art Marketing Syndicate SA(1) 28,380 $ 177,515
- ------------------------------------------------------------------------------------------------------
Brazil Realty SA, GDR(2) 38,800 626,364
- ------------------------------------------------------------------------------------------------------
Corporacion GEO, SA de CV, Series B(1) 66,000 165,504
- ------------------------------------------------------------------------------------------------------
Courts (Singapore) Ltd. 3,226,000 454,097
- ------------------------------------------------------------------------------------------------------
Ellerine Holdings Ltd. 88,000 180,786
- ------------------------------------------------------------------------------------------------------
Grupo Accion SA de CV, Series B(1) 730,000 278,247
- ------------------------------------------------------------------------------------------------------
IRSA Inversiones y Representaciones SA, Sponsored GDR 25,332 601,635
- ------------------------------------------------------------------------------------------------------
Solidere, GDR(2) 79,800 837,900
----------
3,322,048
- ------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT--0.5%
CDL Hotels International Ltd. 878,000 190,348
- ------------------------------------------------------------------------------------------------------
MEDIA--14.4%
Grupo Radio Centro SA de CV, Sponsored ADR 73,100 461,444
- ------------------------------------------------------------------------------------------------------
Grupo Televisa SA, Sponsored GDR(1) (2) 72,600 1,252,350
- ------------------------------------------------------------------------------------------------------
Lusomundo SGPS SA 152,000 2,120,578
- ------------------------------------------------------------------------------------------------------
Singapore Press Holdings Ltd. 85,000 598,237
- ------------------------------------------------------------------------------------------------------
Television Broadcasts Ltd. 333,000 717,637
- ------------------------------------------------------------------------------------------------------
Times Publishing Ltd. 510,000 545,592
----------
5,695,838
- ------------------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS--20.2%
- ------------------------------------------------------------------------------------------------------
BEVERAGES--1.0%
Serm Suk Public Co. Ltd. (1) 71,800 404,410
- ------------------------------------------------------------------------------------------------------
FOOD--8.7%
Cresud SA(1) 482,050 684,634
- ------------------------------------------------------------------------------------------------------
Dairy Farm International Holdings Ltd. 1,244,000 1,181,800
- ------------------------------------------------------------------------------------------------------
Makro Atacadista SA 104,000 733,418
- ------------------------------------------------------------------------------------------------------
PT Hero Supermarket(1) 4,466,500 388,823
- ------------------------------------------------------------------------------------------------------
Rolimpex SA(1) 350,000 460,396
----------
3,449,071
- ------------------------------------------------------------------------------------------------------
HEALTHCARE/DRUGS--4.3%
Cheminor Drugs Ltd. 171,050 494,806
- ------------------------------------------------------------------------------------------------------
Dr. Reddy's Laboratories Ltd. 57,000 554,985
- ------------------------------------------------------------------------------------------------------
Glaxo (India) Ltd. 207 1,935
- ------------------------------------------------------------------------------------------------------
Lavipharm, SA 102,300 650,219
- ------------------------------------------------------------------------------------------------------
Pfizer Ltd. (1) 85 1,194
----------
1,703,139
</TABLE>
13 Oppenheimer Developing Markets Fund
<PAGE> 14
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES--3.2%
Parkway Holdings Ltd. 330,000 $ 314,011
- ------------------------------------------------------------------------------------------------------
Pliva d.d., Sponsored GDR(2) 110,400 951,836
----------
1,265,847
- ------------------------------------------------------------------------------------------------------
HOUSEHOLD GOODS--1.2%
Grupo Casa Autrey SA ADR 83,000 456,500
- ------------------------------------------------------------------------------------------------------
Pond's (India) Ltd. 228 6,504
----------
463,004
- ------------------------------------------------------------------------------------------------------
TOBACCO--1.8%
Eastern Tobacco 24,500 545,801
- ------------------------------------------------------------------------------------------------------
Papastratos Cigarettes SA 8,800 161,712
----------
707,513
- ------------------------------------------------------------------------------------------------------
ENERGY--3.8%
- ------------------------------------------------------------------------------------------------------
ENERGY SERVICES & PRODUCERS--1.5%
Cia de Eletricidade do Estado da Bahia, Preference 19,250,000 588,648
- ------------------------------------------------------------------------------------------------------
OIL-INTEGRATED--2.3%
Energy Africa Ltd. (1) 155,000 337,729
- ------------------------------------------------------------------------------------------------------
Petroleo Brasileiro SA, ADR 17,650 184,455
- ------------------------------------------------------------------------------------------------------
Petroleo Brasileiro SA, Preference 3,560,000 372,047
----------
894,231
- ------------------------------------------------------------------------------------------------------
FINANCIAL--34.5%
- ------------------------------------------------------------------------------------------------------
BANKS--18.1%
Amalgamated Banks of South Africa Ltd. 80,000 223,493
- ------------------------------------------------------------------------------------------------------
Banco Bradesco SA, Preference 46,000,000 270,462
- ------------------------------------------------------------------------------------------------------
Banco de Galicia y Buenos Aires SA de CV, Sponsored ADR 17,977 206,741
- ------------------------------------------------------------------------------------------------------
Banco Pinto & Sotto Mayor SA 98,560 1,886,843
- ------------------------------------------------------------------------------------------------------
Bank Leumi Le-Israel 465,000 743,688
- ------------------------------------------------------------------------------------------------------
Banque Libanaise Pour Le Commercial, GDR 30,500 539,850
- ------------------------------------------------------------------------------------------------------
Commercial International Bank, Sponsored GDR 58,750 425,938
- ------------------------------------------------------------------------------------------------------
Espirito Santo Financial Group, ADR 41,700 688,050
- ------------------------------------------------------------------------------------------------------
Grupo Financiero Banorte SA de CV, Series B(1) 1,018,000 530,977
- ------------------------------------------------------------------------------------------------------
Grupo Financiero Inbursa SA de CV, Series B 165,000 268,448
- ------------------------------------------------------------------------------------------------------
Hansabank Ltd. (1) 130,000 799,360
- ------------------------------------------------------------------------------------------------------
Industrial Finance Corp. of Thailand (The) 1,479,799 180,119
- ------------------------------------------------------------------------------------------------------
PT Pan Indonesia Bank 1,100,000 22,098
- ------------------------------------------------------------------------------------------------------
Unibanco-Uniao de Bancos Brasileiros SA, Sponsored GDR 23,000 345,000
----------
7,131,067
</TABLE>
14 Oppenheimer Developing Markets Fund
<PAGE> 15
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
DIVERSIFIED FINANCIAL--10.9%
Banco BHIF, Sponsored ADR 73,500 $ 983,063
- ------------------------------------------------------------------------------------------------------
Haci Omer Sabanci Holding AS ADR 119,000 467,075
- ------------------------------------------------------------------------------------------------------
Housing Development Finance Corp. Ltd. (1) 5,000 301,123
- ------------------------------------------------------------------------------------------------------
Industrial Credit & Investment Corp. of India Ltd. 6,200 10,142
- ------------------------------------------------------------------------------------------------------
Industrial Credit & Investment Corp. of India Ltd., GDR(2) 221,625 2,000,166
- ------------------------------------------------------------------------------------------------------
Marico Industries Ltd. 87,000 558,584
----------
4,320,153
- ------------------------------------------------------------------------------------------------------
INSURANCE--5.5%
Adamjee Insurance Co. Ltd. 691,250 628,942
- ------------------------------------------------------------------------------------------------------
Aksigorta AS 17,983,000 479,391
- ------------------------------------------------------------------------------------------------------
Liberty Life Assn. Africa Ltd. 28,099 330,177
- ------------------------------------------------------------------------------------------------------
National Mutual Asia Ltd. 815,000 315,517
- ------------------------------------------------------------------------------------------------------
WARTA SA 22,500 398,652
----------
2,152,679
- ------------------------------------------------------------------------------------------------------
INDUSTRIAL--2.2%
- ------------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES--1.3%
Cia de Saneamento Basico do Estado de Sao Paulo(1) 5,470,126 455,430
- ------------------------------------------------------------------------------------------------------
MRC Allied Industries, Inc.(1) 4,400,000 18,082
- ------------------------------------------------------------------------------------------------------
Noble Group Ltd.(1) 550,000 55,000
------
528,512
- ------------------------------------------------------------------------------------------------------
TRANSPORTATION--0.9%
Asian Terminals, Inc. 5,600,000 81,826
- ------------------------------------------------------------------------------------------------------
Guangshen Railway Co. Ltd., Sponsored ADR 61,300 256,694
----------
338,520
- ------------------------------------------------------------------------------------------------------
TECHNOLOGY--1.6%
- ------------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE--1.6%
Embraer-Empresa Brasileira de Aeronautica SA Preference(1) 47,750,000 649,137
- ------------------------------------------------------------------------------------------------------
UTILITIES--10.3%
- ------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--3.7%
Cia de Eletricidade do Estado da Bahia 15,560,000 542,046
- ------------------------------------------------------------------------------------------------------
Cia Paranaense Energia, Sponsored ADR, Preference B Shares 163,600 899,800
----------
1,441,846
- ------------------------------------------------------------------------------------------------------
GAS UTILITIES--0.3%
Primagaz Rt. 13,500 135,132
</TABLE>
15 Oppenheimer Developing Markets Fund
<PAGE> 16
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
TELEPHONE UTILITIES--6.3%
Khantimansiysk(1)(3) 4,100 $ 57,667
- ------------------------------------------------------------------------------------------------------
Kubanelectrosvyaz(1)(3) 15,750 85,129
- ------------------------------------------------------------------------------------------------------
Telecomunicacoes Brasileiras SA 18,200,000 974,215
- ------------------------------------------------------------------------------------------------------
Telecomunicacoes do Rio de Janeiro SA, Preference 17,018,554 621,776
- ------------------------------------------------------------------------------------------------------
Telerj Celular SA, Cl. B(1) 4,318,554 152,275
- ------------------------------------------------------------------------------------------------------
Videsh Sanchar Nigam Ltd., GDR(2) 63,000 614,250
----------
2,505,312
----------
Total Common Stocks (Cost $60,699,587) 37,886,455
<CAPTION>
UNITS
=====================================================================================================
<S> <C> <C>
RIGHTS, WARRANTS AND CERTIFICATES--0.4%
- -----------------------------------------------------------------------------------------------------
Banco Bradesco SA Rts., Exp. 9/98 1,264,906 430
- -----------------------------------------------------------------------------------------------------
Cia de Saneamento Basico do Estado de Sao Paulo Rts., Exp. 9/98 2,392 --
- -----------------------------------------------------------------------------------------------------
Haci Omer Sabanci Holding AS ADR Rts., Exp. 9/98 56,000 153,825
- -----------------------------------------------------------------------------------------------------
PT Pan Indonesia Bank Wts., Exp. 6/00 378,930 1,353
------
Total Rights, Warrants and Certificates (Cost $3,112) 155,608
<CAPTION>
FACE
AMOUNT(4)
=====================================================================================================
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--1.9%
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, STRIPS, 6.09%, 8/15/27 (Cost $633,802)(5) $3,600,000 769,651
=====================================================================================================
CORPORATE BONDS AND NOTES--1.5%
- -----------------------------------------------------------------------------------------------------
Grupo Financiero Banorte SA de CV, 23.49% Nts., 12/5/02
(Cost $685,236)(3) (6) MXP 5,760,000 577,760
- -----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $62,021,737) 99.7% 39,389,474
- -----------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.3 123,041
------------ -------------
NET ASSETS 100.0% $39,512,515
============ =============
</TABLE>
1. Non-income producing security.
2. 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 $6,282,866 or 15.90% of the Fund's net
assets as of August 31, 1998.
3. Identifies issues considered to be illiquid or restricted--See Note 6 of
Notes to Financial Statements.
4. Face amount is reported in U.S. Dollars, except for those denoted in the
following currency: MXP--Mexican Peso
5. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
6. Represents the current interest rate for a variable rate security.
16 Oppenheimer Developing Markets Fund
<PAGE> 17
- --------------------------------------------------------------------------------
Distribution of investments by country of issue, as a percentage of total
investments at value, is as follows:
<TABLE>
<CAPTION>
COUNTRY MARKET VALUE PERCENT
- -----------------------------------------------------------------
<S> <C> <C>
Brazil $ 7,415,502 18.8%
- -----------------------------------------------------------------
India 4,543,688 11.5
- -----------------------------------------------------------------
Portugal 4,007,420 10.2
- -----------------------------------------------------------------
Mexico 3,991,230 10.1
- -----------------------------------------------------------------
Singapore 3,093,737 7.9
- -----------------------------------------------------------------
United States 2,409,537 6.1
- -----------------------------------------------------------------
Argentina 1,493,010 3.8
- -----------------------------------------------------------------
Lebanon 1,377,750 3.5
- -----------------------------------------------------------------
Hong Kong 1,278,503 3.2
- -----------------------------------------------------------------
Turkey 1,100,291 2.8
- -----------------------------------------------------------------
South Africa 1,072,186 2.7
- -----------------------------------------------------------------
Poland 1,036,564 2.6
- -----------------------------------------------------------------
Chile 983,062 2.5
- -----------------------------------------------------------------
Egypt 971,739 2.5
- -----------------------------------------------------------------
Greece 811,931 2.1
- -----------------------------------------------------------------
Estonia 799,360 2.0
- -----------------------------------------------------------------
Israel 743,688 1.9
- -----------------------------------------------------------------
Pakistan 628,942 1.6
- -----------------------------------------------------------------
Thailand 584,529 1.5
- -----------------------------------------------------------------
Indonesia 412,275 1.0
- -----------------------------------------------------------------
China 256,694 0.7
- -----------------------------------------------------------------
Russia 142,795 0.4
- -----------------------------------------------------------------
Hungary 135,132 0.3
- -----------------------------------------------------------------
Philippines 99,909 0.3
------------- -----
Total $39,389,474 100.0%
============= =====
</TABLE>
See accompanying Notes to Financial Statements.
17 Oppenheimer Developing Markets Fund
<PAGE> 18
STATEMENT OF ASSETS AND LIABILITIES August 31, 1998
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $62,021,737)--see accompanying statement $ 39,389,474
- ----------------------------------------------------------------------------------------------------------------
Cash 571,968
- ----------------------------------------------------------------------------------------------------------------
Receivables:
Investments sold 514,871
Shares of beneficial interest sold 111,591
Interest and dividends 56,661
- ----------------------------------------------------------------------------------------------------------------
Deferred organization costs--Note 1 20,084
- ----------------------------------------------------------------------------------------------------------------
Other 2,693
-------------
Total assets 40,667,342
================================================================================================================
LIABILITIES
Unrealized depreciation on forward foreign currency
exchange contracts--Note 5 588
- ----------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 793,092
Shares of beneficial interest redeemed 228,440
Shareholder reports 49,758
Trustees' fees--Note 1 34,239
Distribution and service plan fees 15,522
Transfer and shareholder servicing agent fees 14,489
Other 18,699
-------------
Total liabilities 1,154,827
================================================================================================================
NET ASSETS $ 39,512,515
=============
================================================================================================================
COMPOSITION OF NET ASSETS
Paid-in capital $ 63,874,940
- ----------------------------------------------------------------------------------------------------------------
Undistributed net investment income 160,789
- ----------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and
foreign currency transactions (1,900,719)
- ----------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments and translation of
assets and liabilities denominated in foreign currencies (22,622,495)
-------------
Net assets $ 39,512,515
=============
</TABLE>
18 Oppenheimer Developing Markets Fund
<PAGE> 19
<TABLE>
<S> <C>
===============================================================================================
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$23,662,859 and 3,049,995 shares of beneficial interest outstanding) $7.76
Maximum offering price per share (net asset value plus sales charge of
5.75% of offering price) $8.23
- -----------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $12,788,451
and 1,663,076 shares of beneficial interest outstanding) $7.69
- -----------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $3,061,205
and 398,403 shares of beneficial interest outstanding) $7.68
</TABLE>
See accompanying Notes to Financial Statements.
19 Oppenheimer Developing Markets Fund
<PAGE> 20
STATEMENT OF OPERATIONS For the Year Ended August 31, 1998
<TABLE>
<S> <C>
================================================================================================================
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $90,485) $ 1,317,766
- ----------------------------------------------------------------------------------------------------------------
Interest (net of foreign withholding taxes of $5,045) 475,205
------------
Total income 1,792,971
================================================================================================================
EXPENSES
Management fees--Note 4 588,067
- ----------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 81,997
Class B 186,939
Class C 42,076
- ----------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 261,078
- ----------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 129,699
- ----------------------------------------------------------------------------------------------------------------
Shareholder reports 103,932
- ----------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 40,456
- ----------------------------------------------------------------------------------------------------------------
Legal, auditing and other professional fees 18,035
- ----------------------------------------------------------------------------------------------------------------
Deferred organization amortization 3,739
- ----------------------------------------------------------------------------------------------------------------
Insurance expenses 3,374
- ----------------------------------------------------------------------------------------------------------------
Registration and filing fees 1,443
- ----------------------------------------------------------------------------------------------------------------
Other 6,145
------------
Total expenses 1,466,980
================================================================================================================
NET INVESTMENT INCOME 325,991
================================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments 1,237,486
Foreign currency transactions (2,445,877)
------------
Net realized loss (1,208,391)
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments (18,643,908)
Translation of assets and liabilities denominated in foreign currencies (5,168,849)
------------
Net change (23,812,757)
------------
Net realized and unrealized loss (25,021,148)
================================================================================================================
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(24,695,157)
============
</TABLE>
See accompanying Notes to Financial Statements.
20 Oppenheimer Developing Markets Fund
<PAGE> 21
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
AUGUST 31, 1998 AUGUST 31, 1997(1)
================================================================================================================
<S> <C> <C>
OPERATIONS
Net investment income $ 325,991 $ 275,409
- ----------------------------------------------------------------------------------------------------------------
Net realized gain (loss) (1,208,391) 1,264,096
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (23,812,757) 1,190,262
------------ -----------
Net increase (decrease) in net assets resulting from operations (24,695,157) 2,729,767
================================================================================================================
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Class A (246,812) --
Class B (28,433) --
Class C (13,196) --
- ----------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (1,271,220) --
Class B (679,498) --
Class C (163,333) --
================================================================================================================
BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets resulting from beneficial
interest transactions--Note 2:
Class A 2,205,847 35,563,435
Class B 1,248,778 19,948,692
Class C 1,358,951 3,554,694
================================================================================================================
NET ASSETS
Total increase (decrease) (22,284,073) 61,796,588
- ----------------------------------------------------------------------------------------------------------------
Beginning of period 61,796,588 --
------------ -------
End of period (including undistributed net investment
income of $160,789 and $276,929, respectively) $ 39,512,515 $61,796,588
============ =============
</TABLE>
1. For the period from November 18, 1996 (commencement of operations) to August
31, 1997.
See accompanying Notes to Financial Statements.
21 Oppenheimer Developing Markets Fund
<PAGE> 22
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------------------- ----------------------
YEAR ENDED AUGUST 31, YEAR ENDED AUGUST 31,
1998 1997(1) 1998
================================================================================================= ======================
<S> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $12.82 $10.00 $12.73
- ------------------------------------------------------------------------------------------------- ----------------------
Income from investment operations:
Net investment income .11 .07 .01
Net realized and unrealized gain (4.62) 2.75 (4.57)
---------- -------- -------
Total income from investment operations (4.51) 2.82 (4.56)
- ------------------------------------------------------------------------------------------------- ----------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.09) -- (.02)
Distributions from net realized gain (.46) -- (.46)
---------- -------- -------
Total dividends and distributions to shareholders (.55) -- (.48)
- ------------------------------------------------------------------------------------------------- ----------------------
Net asset value, end of period $ 7.76 $12.82 $ 7.69
======== ======== ========
================================================================================================= ======================
TOTAL RETURN, AT NET ASSET VALUE(2) (36.33)% 28.20% (36.85)%
================================================================================================= ======================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $23,663 $37,613 $12,788
- ------------------------------------------------------------------------------------------------- ----------------------
Average net assets (in thousands) $35,864 $17,852 $18,673
- ------------------------------------------------------------------------------------------------- ----------------------
Ratios to average net assets:
Net investment income 0.87% 1.45%(3) 0.07%
Expenses(4) 2.18% 1.94%(3) 2.95%
- ------------------------------------------------------------------------------------------------- ----------------------
Portfolio turnover rate(5) 78.2% 26.7% 78.2%
</TABLE>
1. For the period from November 18, 1996 (commencement of operations) to August
31, 1997.
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.
22 Oppenheimer Developing Markets Fund
<PAGE> 23
<TABLE>
<CAPTION>
CLASS C
----------- -------------------------------
YEAR ENDED AUGUST 31,
1997(1) 1998 1997(1)
==========================================================================================================
<S> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $10.00 $12.74 $10.00
- ----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .03 .02 .04
Net realized and unrealized gain 2.70 (4.58) 2.70
------- ------ ---------
Total income from investment operations 2.73 (4.56) 2.74
- ----------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income -- (.04) --
Distributions from net realized gain -- (.46) --
------- ------ ---------
Total dividends and distributions to shareholders -- (.50) --
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.73 $ 7.68 $12.74
======= ====== =========
==========================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) 27.30% (36.88)% 27.40%
==========================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $20,470 $3,061 $3,713
- ----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) 7,802 $4,206 $1,560
- ----------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 0.87%(3) 0.24% 0.98%(3)
Expenses(4) 2.78%(3) 2.95% 2.77%(3)
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 26.7% 78.2% 26.7%
</TABLE>
4. The expense ratio reflects the effect of gross expenses paid indirectly by
the Fund.
5. 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 August 31, 1998 were $49,398,939 and $42,455,940, respectively.
See accompanying Notes to Financial Statements.
23 Oppenheimer Developing Markets Fund
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Developing Markets Fund (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment objective is to
aggressively seek capital appreciation. The Fund invests primarily in equity
securities of issuers in emerging markets throughout the world. The Fund's
investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund offers
Class A, Class B and Class C shares. Class A shares are sold with a front-end
sales charge. Class B and Class C shares may be subject to a contingent deferred
sales charge. All 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 that class and exclusive voting
rights with respect to matters affecting that class. Class B shares will
automatically convert to Class A shares six years after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Trustees. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Trustees to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount.
- --------------------------------------------------------------------------------
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.
24 Oppenheimer Developing Markets Fund
<PAGE> 25
================================================================================
REPURCHASE AGREEMENTS. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, 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, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
- --------------------------------------------------------------------------------
TRUSTEES' FEES AND EXPENSES. The Fund has adopted a nonfunded retirement plan
for the Fund's independent trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the year ended
August 31, 1998, a provision of $33,393 was made for the Fund's projected
benefit obligations and payments of $1,509 were made to retired trustees,
resulting in an accumulated liability of $32,671 at August 31, 1998.
The Board of Trustees has adopted a deferred compensation
plan for independent Trustees that enables Trustees to elect to defer receipt of
all or a portion of annual fees they are entitled to receive from the Fund.
Under the plan, the compensation deferred is periodically adjusted as though an
equivalent amount had been invested for the Trustee in shares of one or more
Oppenheimer funds selected by the Trustee. The amount paid to the Trustee under
the plan will be determined based upon the performance of the selected funds.
Deferral of Trustees' fees under the plan will not affect the net assets of the
Fund, and will not materially affect the Fund's assets, liabilities or net
income per share.
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders are
recorded on the ex-dividend date.
25 Oppenheimer Developing Markets Fund
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
ORGANIZATION COSTS. The Manager advanced $26,486 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, by any holder thereof, the redemption proceeds will be
reduced by the proportionate amount of unamortized organization costs
represented by the ratio that 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
primarily because of the recognition of certain foreign currency gains (losses)
as ordinary income (loss) for tax purposes. The character of the distributions
made during the year from net investment income or net realized gains may differ
from its ultimate characterization for federal income tax purposes. Also, due to
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or realized gain
was recorded by the Fund.
The Fund adjusts the classification of distributions to
shareholders to reflect the differences between financial statement amounts and
distributions determined in accordance with income tax regulations. Accordingly,
during the year ended August 31, 1998, amounts have been reclassified to reflect
a decrease in undistributed net investment income of $153,690, a decrease in
paid-in capital of $3,937, and a decrease in accumulated net realized loss of
$157,627.
- --------------------------------------------------------------------------------
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.
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.
26 Oppenheimer Developing Markets Fund
<PAGE> 27
================================================================================
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:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, 1998 PERIOD ENDED AUGUST 31, 1997(1)
------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 3,153,898 $ 36,542,888 4,247,882 $ 52,288,386
Dividends and
distributions reinvested 137,965 1,466,572 -- --
Redeemed (3,175,275) (35,803,613) (1,314,475) (16,724,951)
---------- ------------ ---------- ------------
Net increase 116,588 $ 2,205,847 2,933,407 $ 35,563,435
========== ============ ========== ============
- ----------------------------------------------------------------------------------------------------------------
Class B:
Sold 1,231,248 $ 14,160,669 1,782,562 $ 22,206,999
Dividends and
distributions reinvested 64,707 685,899 -- --
Redeemed (1,240,445) (13,597,790) (174,996) (2,258,307)
---------- ------------ ---------- ------------
Net increase 55,510 $ 1,248,778 1,607,566 $ 19,948,692
========== ============ ========== ============
- ----------------------------------------------------------------------------------------------------------------
Class C:
Sold 419,799 $ 4,895,743 342,441 $ 4,208,237
Dividends and
distributions reinvested 15,549 164,660 -- --
Redeemed (328,388) (3,701,452) (50,998) (653,543)
---------- ------------ ---------- ------------
Net increase 106,960 $ 1,358,951 291,443 $ 3,554,694
========== ============ ========== ============
</TABLE>
1. For the period from November 18, 1996 (commencement of operations) to August
31, 1997.
================================================================================
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At August 31, 1998, net unrealized depreciation on investments of $22,622,495
was composed of gross appreciation of $1,822,843, and gross depreciation of
$24,449,988.
27 Oppenheimer Developing Markets Fund
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for an annual fee of 1.00% of
the first $250 million of average annual net assets, 0.95% of the next $250
million, 0.90% of the next $500 million, and 0.85% of average annual net assets
in excess of $1 billion.
For the year ended August 31, 1998, commissions (sales
charges paid by investors) on sales of Class A shares totaled $297,560, of which
$91,264 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 $370,774 and $31,465, respectively, of which $41,968
was paid to an affiliated broker/dealer for Class B. During the year ended
August 31, 1998, OFDI received contingent deferred sales charges of $45,540 and
$3,495, 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 other
Oppenheimer funds. OFS's total costs of providing such services are allocated
ratably to these funds.
The Fund has adopted a Service Plan for Class A shares to
reimburse OFDI for a portion of its costs incurred in connection with the
personal service and maintenance of shareholder accounts that hold Class A
shares. Reimbursement is made quarterly at an annual rate that may not exceed
0.25% of the average annual net assets of Class A shares of the Fund. OFDI uses
the service fee to reimburse brokers, dealers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares. During the year ended
August 31, 1998, OFDI paid $8,051 to an affiliated broker/dealer as
reimbursement for Class A personal service and maintenance expenses.
28 Oppenheimer Developing Markets Fund
<PAGE> 29
================================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED)
The Fund has adopted Distribution and Service Plans for Class B and Class C
shares to compensate OFDI for its costs in distributing Class B and Class C
shares and servicing accounts. Under the Plans, the Fund pays OFDI an annual
asset-based sales charge of 0.75% per year on Class B and Class C shares for its
services rendered in distributing Class B and Class C shares. OFDI also receives
a service fee of 0.25% per year to compensate dealers for providing personal
services for accounts that hold Class B and Class C shares. Each fee is computed
on the average annual net assets of Class B or Class C shares, determined as of
the close of each regular business day. During the year ended August 31, 1998,
OFDI retained $168,977 and $32,242, respectively, as compensation for Class B
and Class C sales commissions and service fee advances, as well as financing
costs. If either Plan is terminated by the Fund, the Board of Trustees may allow
the Fund to continue payments of the asset-based sales charge to OFDI for
distributing shares before the Plan was terminated. As of August 31, 1998, OFDI
had incurred excess distribution and servicing costs of $634,402 for Class B and
$59,931 for Class C.
================================================================================
5. FORWARD CONTRACTS
A forward foreign currency exchange contract (forward contract) is a commitment
to purchase or sell a foreign currency at a future date, at a negotiated rate.
The Fund uses forward contracts to seek to manage foreign
currency risks. They may also be used to tactically shift portfolio currency
risk. The Fund generally enters into forward contracts as a hedge upon the
purchase or sale of a security denominated in a foreign currency. In addition,
the Fund may enter into such contracts as a hedge against changes in foreign
currency exchange rates on portfolio positions.
Forward contracts are valued based on the closing prices of
the forward currency contract rates in the London foreign exchange markets on a
daily basis as provided by a reliable bank or dealer. The Fund will realize a
gain or loss upon the closing or settlement of the forward transaction.
Securities held in segregated accounts to cover net exposure
on outstanding forward contracts are noted in the Statement of Investments where
applicable. Unrealized appreciation or depreciation on forward contracts is
reported in the Statement of Assets and Liabilities. Realized gains and losses
are reported with all other foreign currency gains and losses in the Fund's
Statement of Operations.
Risks include the potential inability of the counterparty to
meet the terms of the contract and unanticipated movements in the value of a
foreign currency relative to the U.S. dollar.
29 Oppenheimer Developing Markets Fund
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
5. FORWARD CONTRACT (continued)
At August 31, 1998, the Fund had outstanding forward contracts as follows:
<TABLE>
<CAPTION>
EXPIRATION CONTRACT VALUATION AS OF UNREALIZED
DATE AMOUNT (000S) AUGUST 31, 1998 DEPRECIATION
- ----------------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
- ---------------------
<S> <C> <C> <C> <C>
Indonesia Rupiah (IDR) 9/1/98-9/2/98 166,886 IDR $14,900 $473
----
CONTRACTS TO SELL
- -----------------
Malaysian Ringgit (MYR) 9/1/98 94 MYR 22,369 115
----
Total Unrealized Depreciation $588
====
</TABLE>
================================================================================
6. ILLIQUID AND RESTRICTED SECURITIES
At August 31, 1998, investments in securities included issues that are illiquid
or restricted. Restricted securities are often purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. A security may be considered
illiquid if it lacks a readily available market or if its valuation has not
changed for a certain period of time. The Fund intends to invest no more than
10% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limit. The aggregate value of illiquid or restricted securities
subject to this limitation at August 31, 1998 was $720,556, which represents
1.82% of the Fund's net assets.
- --------------------------------------------------------------------------------
7. BANK BORROWINGS
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
For the year ended August 31, 1998, the Fund had borrowings
of $6,000,000 outstanding over a two-day period at an average interest rate of
6.1%. The Fund had no borrowings outstanding as of August 31, 1998.
30 Oppenheimer Developing Markets Fund
<PAGE> 31
INDEPENDENT AUDITORS' REPORT
================================================================================
The Board of Trustees and Shareholders of
Oppenheimer Developing Markets Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Developing Markets Fund as of August 31, 1998, and
the related statement of operations for the year then ended and the statements
of changes in net assets and financial highlights for the year then ended and
the period from November 18, 1996 (commencement of operations) to August 31,
1997. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of August 31, 1998, by correspondence with
the custodian and brokers; and where confirmations 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 Developing Markets Fund as of August 31, 1998,
the results of its operations for the year then ended and the changes in net
assets and financial highlights for the year then ended and the period from
November 18, 1996 (commencement of operations) to August 31, 1997, in conformity
with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
September 22, 1998
31 Oppenheimer Developing Markets Fund
<PAGE> 32
FEDERAL INCOME TAX INFORMATION (Unaudited)
================================================================================
In early 1999, shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1998. Regulations of
the U.S. Treasury Department require the Fund to report this information to the
Internal Revenue Service.
Dividends paid by the Fund during the year ended August 31,
1998 which are not designated as capital gain distributions should be multiplied
by 8.00% to arrive at the net amount eligible for the corporate
dividend-received deduction.
The foregoing information is presented to assist
shareholders in reporting distributions received from the Fund to the Internal
Revenue Service. Because of the complexity of the federal regulations which may
affect your individual tax return and the many variations in state and local tax
regulations, we recommend that you consult your tax advisor for specific
guidance.
32 Oppenheimer Developing Markets Fund
<PAGE> 33
OPPENHEIMER DEVELOPING MARKETS FUND
===============================================================================
OFFICERS AND TRUSTEES Leon Levy, Chairman of the Board of Trustees
Donald W. Spiro, Vice Chairman of the Board of Trustees
Bridget A. Macaskill, Trustee and President
Robert G. Galli, Trustee
Benjamin Lipstein, Trustee
Elizabeth B. Moynihan, Trustee
Kenneth A. Randall, Trustee
Edward V. Regan, Trustee
Russell S. Reynolds, Jr., Trustee
Pauline Trigere, Trustee
Clayton K. Yeutter, Trustee
Rajeev Bhaman, Vice President
Frank Jennings, Vice President
George C. Bowen, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Andrew J. Donohue, Secretary
Robert G. Zack, Assistant Secretary
===============================================================================
INVESTMENT ADVISOR OppenheimerFunds, Inc.
===============================================================================
DISTRIBUTOR OppenheimerFunds Distributor, Inc.
===============================================================================
TRANSFER AND SHAREHOLDER OppenheimerFunds Services
SERVICING AGENT
===============================================================================
CUSTODIAN OF The Bank of New York
PORTFOLIO SECURITIES
===============================================================================
INDEPENDENT AUDITORS KPMG Peat Marwick LLP
===============================================================================
LEGAL COUNSEL Gordon Altman Butowsky Weitzen Shalov & Wein
This is a copy of a report to shareholders of
Oppenheimer Developing Markets Fund. This
report must be preceded or accompanied by a
Prospectus of Oppenheimer Developing Markets
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.
33 Oppenheimer Developing Markets Fund
<PAGE> 34
OPPENHEIMERFUNDS FAMILY
<TABLE>
<CAPTION>
<S> <C> <C>
========================================================================================================
REAL ASSET FUNDS
- -------------------------------------------------------------------------------------------------------
Real Asset Fund Gold & Special Minerals Fund
========================================================================================================
GLOBAL STOCK FUNDS
- --------------------------------------------------------------------------------------------------------
Developing Markets Fund International Growth Fund Quest Global Value Fund
International Small Global Fund Global Growth &Income Fund
Company Fund
========================================================================================================
STOCK FUNDS
- --------------------------------------------------------------------------------------------------------
Enterprise Fund MidCap Fund Growth Fund
Discovery Fund Capital Appreciation Fund Disciplined Value Fund
Quest Small Cap Value Fund Quest Capital Value Fund Quest Value Fund
========================================================================================================
STOCK & BOND FUNDS
- --------------------------------------------------------------------------------------------------------
Main Street Income & Total Return Fund Disciplined Allocation Fund
Growth Fund Quest Balanced Multiple Strategies Fund
Quest Opportunity Value Fund(1) Convertible Securities Fund(2)
Value Fund Equity Income Fund
========================================================================================================
TAXABLE BOND FUNDS
- --------------------------------------------------------------------------------------------------------
International Bond Fund Champion Income Fund U.S. Government Trust
World Bond Fund Strategic Income Fund Limited-Term Government Fund
High Yield Fund Bond Fund
========================================================================================================
MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------------------------------
California Municipal Fund(3) Pennsylvania Municipal Fund(3) Rochester Division:
Florida Municipal Fund(3) Municipal Bond Fund Rochester Fund Municipals
New Jersey Municipal Fund(3) Insured Municipal Fund Limited Term New York
New York Municipal Fund(3) Intermediate Municipal Fund Municipal Fund
========================================================================================================
MONEY MARKET FUNDS(4)
- --------------------------------------------------------------------------------------------------------
Money Market Fund Cash Reserves
</TABLE>
1. On 5/18/98, the Fund's name was changed from "Quest Growth & Income Value
Fund."
2. On 4/28/98, the Fund's name was changed from "Bond Fund for Growth."
3. Available only to investors in certain states.
4. 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. Oppenheimer
funds are distributed by OppenheimerFunds Distributor, Inc., Two World Trade
Center, New York, NY 10048-0203.
(C) Copyright 1998 OppenheimerFunds, Inc. All rights reserved.
34 Oppenheimer Developing Markets Fund
<PAGE> 35
INTERNET
24-hr access to account
information. Online
transactions now available
WWW.OPPENHEIMERFUNDS.COM
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Mon-Fri 8:30am-9pm ET
Sat 10am-4pm ET
1-800-525-7048
ACCOUNT TRANSACTIONS
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1-800-852-8457
PHONELINK
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1-800-835-3104
INFORMATION AND SERVICES
- --------------------------------------------------------------------------------
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
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When you want to make a transaction, you can do it easily by calling our
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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 or website 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, or visit us at our website at
www.oppenheimerfunds.com--we're here to help.
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DISTRIBUTOR, INC.
RA0785.001.0898 October 30, 1998
