<PAGE> 1
SEMIANNUAL REPORT FEBRUARY 28, 1999
OPPENHEIMER
DEVELOPING
MARKETS FUND
[PHOTO]
[OPPENHEIMERFUNDS LOGO]
THE RIGHT TO INVEST
<PAGE> 2
CONTENTS
3 President's Letter
4 An Interview
with Your Fund's
Manager
9 Financial
Statements
27 Officers and
Trustees
28 Information and Services
REPORT HIGHLIGHTS
- --------------------------------------------------------------------------------
- - LATIN AMERICAN MARKETS DECLINED SHARPLY over the past six months, while stocks
in Asia and Eastern Europe performed relatively well.
- - WE TOOK ADVANTAGE OF BARGAIN PRICES in stocks of solid companies in growing
businesses worldwide.
CUMULATIVE TOTAL RETURNS
For the 6-Month Period
Ended 2/28/99
CLASS A
Without With
Sales Chg.(1) Sales Chg.(2)
7.57% 1.39%
CLASS B
Without With
Sales Chg.(1) Sales Chg.(2)
7.20% 2.20%
CLASS C
Without With
Sales Chg.(1) Sales Chg.(2)
7.22% 6.22%
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
Cumulative total returns are not annualized. 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 THE STOCK MARKET CAN BE VOLATILE, 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.
2. Class A return includes the 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 an annual 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,
- --------------------------------------------------------------------------------
Contrary to what many analysts had expected, the U.S. economy appears to have
picked up steam over the past few months. The fourth quarter of 1998 posted the
fastest rate of economic growth in two years, and early indications suggest that
the first quarter of 1999 may follow suit.
With respect to the U.S. bond market, stronger-than-expected economic
growth has triggered concerns that the Federal Reserve may raise key interest
rates to forestall an acceleration of inflation. As a result, yields of
longer-term taxable bonds have risen from their October 1998 lows, when
investors had bid up prices during the global "flight to quality." At the same
time, tax-exempt bond prices and yields have remained relatively stable.
In the U.S. stock market, it might appear at first glance that prices
are rising as rapidly as the economy is growing. However, a closer look reveals
that, with the exception of large-cap growth companies and the technology
industry, most stock prices remained relatively flat. What's more, the disparity
in valuations between large companies, which have led the market's advance, and
smaller ones, which have lagged, has become historically wide.
What do these observations mean for your investments? In our view,
actively managed portfolios that are closely monitored by expert money managers
are likely to provide better returns than passive index investing in 1999.
That's because selectivity is expected to be more critical to performance than
it has been over the past few years. In a potentially overvalued stock market
and rising interest-rate environment, the ability to identify the most promising
securities could become paramount.
Even though many equity investors may be tempted to jump aboard the
technology bandwagon, we suggest a more prudent course: broad diversification
beyond any single asset class, industry, capitalization range or geographic
region. We believe that the risks of this investment environment require
consideration of a broad range of investments and markets, including bonds. That
way, if one market experiences setbacks, one or more of the others may help
cushion the effects on your overall portfolio.
No matter what the financial markets have in store, we resolve to
continue working with your financial advisor to keep you apprised of potential
risks and opportunities. Providing you with the market information,
professionally managed investments and other resources you need to achieve your
financial goals is an important part of our enduring commitment to you as The
Right Way to Invest.
/s/ BRIDGET A. MACASKILL
Bridget A. Macaskill
March 19, 1999
3 Oppenheimer Developing Markets Fund
<PAGE> 4
"INVESTORS MUST BE WILLING TO WITHSTAND SHORT-TERM VOLATILITY INHERENT IN
EMERGING MARKETS INVESTMENTS."
AN INTERVIEW WITH YOUR FUND'S MANAGER
- --------------------------------------------------------------------------------
HOW DID OPPENHEIMER DEVELOPING MARKETS FUND PERFORM DURING THE SIX-MONTH PERIOD
THAT ENDED FEBRUARY 28, 1999?
We are pleased that the Fund produced positive returns in a highly volatile
investment environment.(1) We attribute the Fund's performance to its emphasis
on investment opportunities in Latin America. Despite our positions in companies
that we believed to be businesses that were significantly undervalued relative
to their long-term prospects, most Latin American markets, including these
positions, declined sharply. The primary reason: the currency and liquidity
crisis that began in Asia in 1997 spread to Latin America in 1998.
WHY DID THE ASIAN FINANCIAL CRISIS SPREAD TO LATIN AMERICA?
In our view, the deterioration of Latin American stock markets was a case of
perception defining reality. When Russia unexpectedly defaulted on its
government debt and devalued its currency in August 1998, investors became
concerned that Latin American countries might follow suit. Although the
similarities in economic conditions between Russia and Latin America were few,
many investors decided to shift their capital to more developed markets,
especially U.S. government bonds. By removing their capital and the liquidity
that supported Latin America's stock markets, these investors essentially made
their prophesy come true. Faced with a sudden shortage of capital, Brazil was
forced to devalue its currency in January 1999. Stock prices fell throughout the
region as a result.
As we stated in our shareholder report six months ago, on a long-term
basis, we regarded Latin America as one of the more attractive regions of the
world.
1. Investing in foreign securities entails additional expenses and risks
including foreign currency fluctuations.
4 Oppenheimer Developing Markets Fund
<PAGE> 5
[PHOTO]
PORTFOLIO MANAGEMENT
TEAM (L TO R)
Frank Jennings
Rajeev Bhaman
(Portfolio Manager)
We believed then--as we continue to believe today--that countries such
as Brazil and Argentina were committed to market-based economic reforms and
financial policies that ultimately should be positive for businesses.
Furthermore, even before Brazil's currency devaluation, many of the
fundamentally sound stocks in the region were selling at very attractive prices
relative to historical valuations. We believe that these stocks have become even
more attractively priced, and we remain confident that we will be rewarded for
our patient and disciplined approach.
WHICH DEVELOPING MARKETS PERFORMED RELATIVELY WELL OVER THE PAST SIX MONTHS, AND
WHY?
Asian markets--particularly those in Korea, Thailand, Singapore and
Indonesia--did very well when they began to rebound from the sharp declines of
1997. Falling interest rates helped Asian companies reduce their borrowing
costs, enabling them to take the steps necessary to finance their future growth.
In addition, the entire Asian region was buoyed by Japan's announcement of
long-awaited economic and banking reforms that are designed to revive the
world's second largest economy.
Markets in Eastern Europe also performed well, benefiting from inflows
of capital from foreign investors as well as declines in inflation. Eleven
European countries joined together on January 1, 1999, to tie their economic
systems to a single interest rate and a common currency. This has helped improve
business conditions throughout Europe.
5 Oppenheimer Developing Markets Fund
<PAGE> 6
<TABLE>
<CAPTION>
AVG ANNUAL TOTAL RETURNS
For the Periods Ended 3/31/99(2)
<S> <C>
CLASS A
Since
1 Year Inception
- -------------------------------
- -26.05% -2.32%
- -------------------------------
CLASS B
Since
1 Year Inception
- -------------------------------
- -25.95% -1.85%
- -------------------------------
CLASS C
Since
1 Year Inception
- -------------------------------
- -22.89% -0.63%
- -------------------------------
</TABLE>
AN INTERVIEW WITH YOUR FUND'S MANAGER
HOW WAS THE FUND MANAGED IN THIS TURBULENT ENVIRONMENT?
Very carefully. We continued to search for solid companies in growing businesses
selling at attractive prices. In Latin America, market turmoil gave us
opportunities to buy such companies at prices that we regarded as bargains. As a
result, we took advantage of new opportunities and also added to existing
holdings at substantially lower prices. In Asia and Eastern Europe, the markets'
rebound allowed us to sell some of our holdings at a substantial profit.
WHAT IS YOUR OUTLOOK FOR 1999?
Although we believe that heightened volatility will continue until the world's
emerging economies and markets stabilize, we are very optimistic over the longer
term. In our view, good companies have become available at prices that have not
been seen in years. Our experience confirms that bargains such as these usually
don't last long, and we are confident that, for many issuers, higher stock
prices lie ahead. While we cannot predict the timing of a market rebound, we
believe that the current weakness is not likely to last. With sound monetary and
fiscal policies in place, and with capitalism imposing greater financial
discipline on companies worldwide, we believe that the outlook is very bright
for the emerging markets.
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 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% (1-year) and 3%
(since inception.) Class C returns include the contingent deferred sales charge
of 1% for the 1-year period. Class B and C shares are subject to an annual 0.75%
asset-based sales charge. An explanation of the different performance
calculations is in the Fund's prospectus.
6 Oppenheimer Developing Markets Fund
<PAGE> 7
REGIONAL ALLOCATION(3)
[PIE CHART]
<TABLE>
<S> <C>
- - Latin America 32.3%
- - Asia, excl. Japan 32.1
- - Emerging Europe 25.7
- - Middle East/Africa 9.9
</TABLE>
However, we hasten to add that opportunities such as these are not for the faint
of heart. In our opinion, investors must be willing to withstand short-term
volatility inherent in emerging markets investments and accept that it may take
several years in order to take maximum advantage of their growth opportunities.
In fact, our long-term perspective and willingness to take advantage of bargains
in weak markets are part of what makes OppenheimerFunds The Right Way to Invest.
<TABLE>
<CAPTION>
TOP 5 INDUSTRIES(3)
- ----------------------------------------------------------------------------
<S> <C>
Banks 18.7%
- ----------------------------------------------------------------------------
Media 17.2
- ----------------------------------------------------------------------------
Autos & Housing 10.1
- ----------------------------------------------------------------------------
Healthcare/Drugs 9.5
- ----------------------------------------------------------------------------
Insurance 8.5
- ----------------------------------------------------------------------------
<CAPTION>
TOP TEN STOCK HOLDINGS(3)
- ----------------------------------------------------------------------------
<S> <C>
Grupo Televisa SA, Sponsored GDR 5.2%
- ----------------------------------------------------------------------------
Lusomundo SGPS SA 4.5
- ----------------------------------------------------------------------------
Pliva d.d., Sponsored GDR 4.1
- ----------------------------------------------------------------------------
Banco Pinto & Sotto Mayor SA 4.0
- ----------------------------------------------------------------------------
ICICI Ltd. GDR 3.7
- ----------------------------------------------------------------------------
Dairy Farm International Holdings Ltd. 3.1
- ----------------------------------------------------------------------------
Marico Industries Ltd. 2.8
- ----------------------------------------------------------------------------
Grupo Financiero Banorte SA de CV 2.8
- ----------------------------------------------------------------------------
Television Broadcasts Ltd. 2.5
- ----------------------------------------------------------------------------
Courts (Singapore) Ltd. 2.4
- ----------------------------------------------------------------------------
</TABLE>
3. Portfolio is subject to change. Percentages are as of February 28, 1999, and
are based on total market value of investments.
7 Oppenheimer Developing Markets Fund
<PAGE> 8
FINANCIALS
- --------------------------------------------------
8 Oppenheimer Developing Markets Fund
<PAGE> 9
STATEMENTS OF INVESTMENTS February 28, 1999 (Unaudited)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
================================================================================================================
<S> <C> <C>
COMMON STOCKS--98.7%
- ----------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--1.3%
- ----------------------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE--1.3%
Embraer-Empresa Brasileira de Aeronautica SA, Preference 85,850,000 $ 519,230
- ----------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--27.3%
- ----------------------------------------------------------------------------------------------------------------
AUTOS & HOUSING--10.1%
Brazil Realty SA, GDR(1)(2) 38,800 368,600
- ----------------------------------------------------------------------------------------------------------------
Corporacion GEO, SA de CV, Series B(1) 233,000 608,539
- ----------------------------------------------------------------------------------------------------------------
Courts (Singapore) Ltd. 3,226,000 964,784
- ----------------------------------------------------------------------------------------------------------------
Ellerine Holdings Ltd. 88,000 275,577
- ----------------------------------------------------------------------------------------------------------------
Grupo Accion SA de CV, Series B(1) 1,814,000 655,992
- ----------------------------------------------------------------------------------------------------------------
IRSA-Inversiones y Representaciones SA, Sponsored GDR 21,000 486,938
- ----------------------------------------------------------------------------------------------------------------
Solidere, GDR(1)(3) 69,200 614,150
----------
3,974,580
- ----------------------------------------------------------------------------------------------------------------
MEDIA--17.2%
Grupo Radio Centro SA de CV, Sponsored ADR 85,100 377,631
- ----------------------------------------------------------------------------------------------------------------
Grupo Televisa SA, Sponsored GDR(1)(3) 72,600 2,041,875
- ----------------------------------------------------------------------------------------------------------------
Lusomundo SGPS SA 154,000 1,775,000
- ----------------------------------------------------------------------------------------------------------------
Singapore Press Holdings Ltd. 68,000 773,968
- ----------------------------------------------------------------------------------------------------------------
Television Broadcasts Ltd. 333,000 990,694
- ----------------------------------------------------------------------------------------------------------------
Times Publishing Ltd. 562,000 835,477
----------
6,794,645
- ----------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--16.8%
- ----------------------------------------------------------------------------------------------------------------
BEVERAGES--0.6%
Serm Suk Public Co. Ltd.(1) 69,300 237,685
- ----------------------------------------------------------------------------------------------------------------
CONSUMER SERVICES--0.9%
Art Marketing Syndicate SA(1) 28,380 356,098
- ----------------------------------------------------------------------------------------------------------------
FOOD--2.9%
Cresud SA 514,720 535,510
- ----------------------------------------------------------------------------------------------------------------
Rolimpex SA(1) 350,000 603,294
----------
1,138,804
- ----------------------------------------------------------------------------------------------------------------
FOOD & DRUG RETAILERS--5.9%
Dairy Farm International Holdings Ltd. 1,150,000 1,230,500
- ----------------------------------------------------------------------------------------------------------------
Makro Atacadista SA 104,000 533,000
- ----------------------------------------------------------------------------------------------------------------
PT Hero Supermarket(1) 5,041,500 556,205
----------
2,319,705
</TABLE>
9 Oppenheimer Developing Markets Fund
<PAGE> 10
STATEMENTS OF INVESTMENTS (Unaudited) (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
================================================================================================================
<S> <C> <C>
HOUSEHOLD GOODS--4.7%
Grupo Casa Autrey SA, ADR(1) 83,000 $ 466,875
- ----------------------------------------------------------------------------------------------------------------
Hengan International Group Co. Ltd.(1) 782,000 275,041
- ----------------------------------------------------------------------------------------------------------------
Hindustan Lever Ltd.(1) 56 2,401
- ----------------------------------------------------------------------------------------------------------------
Marico Industries Ltd. 87,000 1,116,168
----------
1,860,485
- ----------------------------------------------------------------------------------------------------------------
TOBACCO--1.8%
Eastern Tobacco Co. 24,500 720,211
- ----------------------------------------------------------------------------------------------------------------
FINANCIAL--32.5%
- ----------------------------------------------------------------------------------------------------------------
BANKS--17.3%
Banco BHIF, Sponsored ADR(1) 73,500 739,594
- ----------------------------------------------------------------------------------------------------------------
Banco Bradesco SA, Preference 47,906,660 190,469
- ----------------------------------------------------------------------------------------------------------------
Banco de Galicia y Buenos Aires SA de CV, Sponsored ADR 19,594 246,150
- ----------------------------------------------------------------------------------------------------------------
Banco Pinto & Sotto Mayor SA(1) 79,000 1,584,360
- ----------------------------------------------------------------------------------------------------------------
Bank Leumi Le--Israel(1) 465,000 693,028
- ----------------------------------------------------------------------------------------------------------------
Commercial International Bank, Sponsored GDR(1) 68,750 732,188
- ----------------------------------------------------------------------------------------------------------------
Espirito Santo Financial Group, ADR(1) 48,700 797,463
- ----------------------------------------------------------------------------------------------------------------
Grupo Financiero Banorte SA de CV, Series B(1) 1,233,000 1,114,717
- ----------------------------------------------------------------------------------------------------------------
Grupo Financiero Inbursa SA de CV, Series B 228,000 421,417
- ----------------------------------------------------------------------------------------------------------------
Unibanco-Uniao de Bancos Brasileiros SA, Sponsored GDR 23,000 310,500
----------
6,829,886
- ----------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL--6.7%
Haci Omer Sabanci Holding AS, ADR(1) 145,000 837,375
- ----------------------------------------------------------------------------------------------------------------
Housing Development Finance Corp. Ltd.(1) 5,000 267,135
- ----------------------------------------------------------------------------------------------------------------
ICICI Ltd. GDR(1)(3) 238,125 1,470,422
- ----------------------------------------------------------------------------------------------------------------
ICICI Ltd. 6,200 5,877
- ----------------------------------------------------------------------------------------------------------------
Unit Trust of India-Masterplus 91(1) 75,000 31,722
----------
2,612,531
- ----------------------------------------------------------------------------------------------------------------
INSURANCE--8.5%
Adamjee Insurance Co. Ltd. 691,250 416,515
- ----------------------------------------------------------------------------------------------------------------
Aksigorta AS(1) 17,983,000 874,770
- ----------------------------------------------------------------------------------------------------------------
Liberty Life Assn. Africa Ltd. 35,000 481,920
- ----------------------------------------------------------------------------------------------------------------
National Mutual Asia Ltd. 1,017,000 721,951
- ----------------------------------------------------------------------------------------------------------------
Sanlam Ltd.(1) 500,000 356,739
- ----------------------------------------------------------------------------------------------------------------
Towarzystwo Ubezpieczen i Reasekuracji Warta SA(1) 32,213 514,427
----------
3,366,322
</TABLE>
10 Oppenheimer Developing Markets Fund
<PAGE> 11
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
================================================================================================================
<S> <C> <C>
HEALTHCARE--10.5%
- ----------------------------------------------------------------------------------------------------------------
HEALTHCARE/DRUGS--9.5%
Cheminor Drugs Ltd.(1) 160,550 $ 727,600
- ----------------------------------------------------------------------------------------------------------------
Dr. Reddy's Laboratories Ltd.(1) 57,000 758,664
- ----------------------------------------------------------------------------------------------------------------
Lavipharm, SA 77,000 651,518
- ----------------------------------------------------------------------------------------------------------------
Pliva d.d., Sponsored GDR(1)(3) 94,300 1,598,385
----------
3,736,167
- ----------------------------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES--1.0%
Parkway Holdings Ltd. 230,000 403,360
- ----------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--3.9%
- ----------------------------------------------------------------------------------------------------------------
TELEPHONE UTILITIES--3.9%
Embratel Participacoes SA(1) 18,200,000 120,951
- ----------------------------------------------------------------------------------------------------------------
Khantimansiysk(1)(2) 41,000 69,700
- ----------------------------------------------------------------------------------------------------------------
Kubanelectrosvyaz(1)(2) 15,750 63,000
- ----------------------------------------------------------------------------------------------------------------
Tele Norte Leste Participacoes SA(1) 18,200,000 88,587
- ----------------------------------------------------------------------------------------------------------------
Tele Sudeste Celular Participacoes SA(1) 18,200,000 33,154
- ----------------------------------------------------------------------------------------------------------------
Telecomunicacoes do Rio de Janeiro SA, Preference(1) 17,018,554 274,835
- ----------------------------------------------------------------------------------------------------------------
Telesp Celular Participacoes SA(1) 18,200,000 77,097
- ----------------------------------------------------------------------------------------------------------------
Telesp Celular SA, Cl. B(1) 4,500,000 129,034
- ----------------------------------------------------------------------------------------------------------------
Telesp Participacoes SA(1) 18,200,000 158,754
- ----------------------------------------------------------------------------------------------------------------
Videsh Sanchar Nigam Ltd., GDR(3) 53,600 513,220
----------
1,528,332
- ----------------------------------------------------------------------------------------------------------------
TRANSPORTATION--0.9%
- ----------------------------------------------------------------------------------------------------------------
RAILROADS & TRUCKERS--0.9%
Guangshen Railway Co. Ltd., Sponsored ADR(1) 61,300 344,813
- ----------------------------------------------------------------------------------------------------------------
UTILITIES--5.5%
- ----------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--4.4%
Cia de Eletricidade do Estado da Bahia 15,560,000 243,782
- ----------------------------------------------------------------------------------------------------------------
Cia de Eletricidade do Estado da Bahia, Preference 19,250,000 338,609
- ----------------------------------------------------------------------------------------------------------------
Cia de Saneamento Basico do Estado de Sao Paulo 6,900,126 269,350
- ----------------------------------------------------------------------------------------------------------------
Cia Paranaense Energia, Sponsored ADR, Preference B Shares(1) 191,600 862,200
----------
1,713,941
- ----------------------------------------------------------------------------------------------------------------
GAS UTILITIES--1.1%
Aygaz AS(1) 4,771,000 417,075
----------
Total Common Stocks (Cost $54,720,088) 38,873,870
</TABLE>
11 Oppenheimer Developing Markets Fund
<PAGE> 12
STATEMENTS OF INVESTMENTS (Unaudited) (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
UNITS SEE NOTE 1
================================================================================================================
<S> <C> <C>
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- ----------------------------------------------------------------------------------------------------------------
PT Pan Indonesia Bank Wts., Exp. 6/00 (Cost $3,112) 378,930 $ 3,859
<CAPTION>
FACE
AMOUNT(5)
================================================================================================================
<S> <C> <C>
CORPORATE BONDS AND NOTES--1.4%
- ----------------------------------------------------------------------------------------------------------------
Grupo Financiero Banorte SA de CV, 35.77% Nts., 12/5/02(2)(4)MXP
(Cost $685,235) 5,760,000 551,844
- ----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $55,408,435) 100.1% 39,429,573
- ----------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (0.1) (24,628)
--------- -----------
NET ASSETS 100.0% $39,404,945
========= ===========
</TABLE>
1. Non-income producing security.
2. Identifies issues considered to be illiquid or restricted--See Note 6 of
Notes to Financial Statements.
3. 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 $6,238,052 or 15.83% of the Fund's net
assets as of February 28, 1999.
4. Represents the current interest rate for a variable rate security.
5. Face amount is reported in U.S. Dollars, except for those denoted in the
following currency: MXP--Mexican Peso
12 Oppenheimer Developing Markets Fund
<PAGE> 13
- --------------------------------------------------------------------------------
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>
Mexico $ 6,238,890 15.8%
- ----------------------------------------------------------------------------------------------------------------
India 4,893,209 12.4
- ----------------------------------------------------------------------------------------------------------------
Brazil 4,518,154 11.4
- ----------------------------------------------------------------------------------------------------------------
Singapore 4,208,089 10.7
- ----------------------------------------------------------------------------------------------------------------
Portugal 4,156,823 10.5
- ----------------------------------------------------------------------------------------------------------------
China 2,332,499 5.9
- ----------------------------------------------------------------------------------------------------------------
Turkey 2,129,220 5.4
- ----------------------------------------------------------------------------------------------------------------
Croatia 1,598,385 4.1
- ----------------------------------------------------------------------------------------------------------------
Poland 1,473,820 3.7
- ----------------------------------------------------------------------------------------------------------------
Egypt 1,452,399 3.7
- ----------------------------------------------------------------------------------------------------------------
Argentina 1,268,597 3.2
- ----------------------------------------------------------------------------------------------------------------
South Africa 1,114,236 2.8
- ----------------------------------------------------------------------------------------------------------------
Chile 739,594 1.9
- ----------------------------------------------------------------------------------------------------------------
Israel 693,028 1.8
- ----------------------------------------------------------------------------------------------------------------
Greece 651,518 1.7
- ----------------------------------------------------------------------------------------------------------------
Lebanon 614,150 1.6
- ----------------------------------------------------------------------------------------------------------------
Indonesia 560,062 1.4
- ----------------------------------------------------------------------------------------------------------------
Pakistan 416,515 1.1
- ----------------------------------------------------------------------------------------------------------------
Thailand 237,685 0.6
- ----------------------------------------------------------------------------------------------------------------
Russia 132,700 0.3
----------- -----
Total $39,429,573 100.0%
=========== =====
</TABLE>
See accompanying Notes to Financial Statements.
13 Oppenheimer Developing Markets Fund
<PAGE> 14
STATEMENT OF ASSETS AND LIABILITIES February 28, 1999 (Unaudited)
<TABLE>
<CAPTION>
================================================================================================================
<S> <C>
ASSETS
Investments, at value (cost $55,408,435)--see accompanying statement $39,429,573
- ----------------------------------------------------------------------------------------------------------------
Cash--foreign currencies (cost $86,528) 86,126
- ----------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 202,735
Interest and dividends 91,913
Shares of beneficial interest sold 51,003
Other 25,512
-----------
Total assets 39,886,862
================================================================================================================
LIABILITIES
Bank overdraft 102,260
- ----------------------------------------------------------------------------------------------------------------
Unrealized depreciation on forward foreign currency
exchange contracts--Note 5 86
- ----------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 196,409
Investments purchased 56,146
Shareholder reports 39,918
Custodian fees 34,923
Trustees' compensation--Note 1 34,843
Distribution and service plan fees 16,398
Other 934
-----------
Total liabilities 481,917
================================================================================================================
NET ASSETS $39,404,945
===========
================================================================================================================
COMPOSITION OF NET ASSETS
Paid-in capital $61,402,139
- ----------------------------------------------------------------------------------------------------------------
Overdistributed net investment income (140,236)
- ----------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions and
foreign currency transactions (5,844,531)
- ----------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments and translation of
assets and liabilities denominated in foreign currencies (16,012,427)
-----------
Net assets $39,404,945
===========
</TABLE>
14 Oppenheimer Developing Markets Fund
<PAGE> 15
<TABLE>
================================================================================================================
<S> <C>
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $23,128,050 and 2,827,538 shares of beneficial interest outstanding) $8.18
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $8.68
- ----------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $13,340,881
and 1,638,672 shares of beneficial interest outstanding) $8.14
- ----------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $2,936,014
and 360,497 shares of beneficial interest outstanding) $8.14
</TABLE>
See accompanying Notes to Financial Statements.
15 Oppenheimer Developing Markets Fund
<PAGE> 16
STATEMENT OF OPERATIONS For the Six Months Ended February 28, 1999 (Unaudited)
<TABLE>
================================================================================================================
<S> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $49,693) $ 519,078
- ----------------------------------------------------------------------------------------------------------------
Interest (net of foreign withholding taxes of $6,011) 125,518
-------------
Total income 644,596
================================================================================================================
EXPENSES
Management fees--Note 4 209,088
- ----------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 124,687
- ----------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 35,278
Class B 68,864
Class C 15,722
- ----------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 58,293
- ----------------------------------------------------------------------------------------------------------------
Shareholder reports 35,943
- ----------------------------------------------------------------------------------------------------------------
Legal, auditing and other professional fees 12,958
- ----------------------------------------------------------------------------------------------------------------
Trustees' compensation--Note 1 5,004
- ----------------------------------------------------------------------------------------------------------------
Insurance expenses 1,391
- ----------------------------------------------------------------------------------------------------------------
Other 13,480
-------------
Total expenses 580,708
Less expenses paid indirectly--Note 4 (1,637)
-------------
Net expenses 579,071
================================================================================================================
NET INVESTMENT INCOME 65,525
================================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on:
Investments (2,011,168)
Foreign currency transactions (1,564,654)
-------------
Net realized loss (3,575,822)
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 8,375,267
Translation of assets and liabilities denominated in foreign currencies (1,765,199)
-------------
Net change 6,610,068
-------------
Net realized and unrealized gain 3,034,246
================================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 3,099,771
=============
</TABLE>
See accompanying Notes to Financial Statements.
16 Oppenheimer Developing Markets Fund
<PAGE> 17
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 28, 1999 YEAR ENDED
(UNAUDITED) AUGUST 31, 1998
===================================================================================================================
<S> <C> <C>
OPERATIONS
Net investment income $ 65,525 $ 325,991
- -------------------------------------------------------------------------------------------------------------------
Net realized loss (3,575,822) (1,208,391)
- -------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 6,610,068 (23,812,757)
----------- ------------
Net increase (decrease) in net assets resulting from operations 3,099,771 (24,695,157)
===================================================================================================================
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Class A (299,230) (246,812)
Class B (57,858) (28,433)
Class C (9,462) (13,196)
- -------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (217,043) (1,271,220)
Class B (123,499) (679,498)
Class C (27,448) (163,333)
===================================================================================================================
BENEFICIAL INTEREST TRANSACTIONS
Net increase (decrease) in net assets resulting from
beneficial interest transactions--Note 2:
Class A (1,963,029) 2,205,847
Class B (179,628) 1,248,778
Class C (330,144) 1,358,951
===================================================================================================================
NET ASSETS
Total decrease (107,570) (22,284,073)
- -------------------------------------------------------------------------------------------------------------------
Beginning of period 39,512,515 61,796,588
----------- ------------
End of period [including undistributed (overdistributed)
net investment income of $(140,236) and $160,789, respectively] $39,404,945 $ 39,512,515
=========== ============
</TABLE>
See accompanying Notes to Financial Statements.
17 Oppenheimer Developing Markets Fund
<PAGE> 18
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
SIX MONTHS
ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31,
1999 (UNAUDITED) 1998 1997(1)
===============================================================================================================
<S> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $7.76 $12.82 $10.00
- ---------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .03 .11 .07
Net realized and unrealized gain (loss) .56 (4.62) 2.75
----- ------ ------
Total income (loss) from investment operations .59 (4.51) 2.82
- ---------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.10) (.09) --
Distributions from net realized gain (.07) (.46) --
----- ------ ------
Total dividends and distributions
to shareholders (.17) (.55) --
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.18 $ 7.76 $12.82
===== ====== ======
===============================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) 7.57% (36.33)% 28.20%
===============================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $23,128 $23,663 $37,613
- ---------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $25,104 $35,864 $17,852
- ---------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) 0.61%(3) 0.87% 1.45%(3)
Expenses(4) 2.48%(3) 2.18% 1.94%(3)
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 12% 78% 27%
</TABLE>
1. For the period from November 18, 1996 (commencement of operations) to August
31, 1997.
2. Assumes a $1,000 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.
18 Oppenheimer Developing Markets Fund
<PAGE> 19
<TABLE>
<CAPTION>
CLASS B CLASS C
- ------------------------------------------------------- -----------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31, FEBRUARY 28, YEAR ENDED AUGUST 31,
1999 (UNAUDITED) 1998 1997(1) 1999 (UNAUDITED) 1998 1997(1)
====================================================================================================================
<S> <C> <C> <C> <C> <C>
$7.69 $12.73 $10.00 $7.68 $12.74 $10.00
- --------------------------------------------------------------------------------------------------------------------
(.01) .01 .03 (.01) .02 .04
.56 (4.57) 2.70 .57 (4.58) 2.70
----- ------ ------ ----- ------ ------
.55 (4.56) 2.73 .56 (4.56) 2.74
- --------------------------------------------------------------------------------------------------------------------
(.03) (.02) -- (.03) (.04) --
(.07) (.46) -- (.07) (.46) --
----- ------ ------ ----- ------ ------
(.10) (.48) -- (.10) (.50) --
- --------------------------------------------------------------------------------------------------------------------
$8.14 $ 7.69 $12.73 $8.14 $ 7.68 $12.74
===== ====== ====== ===== ====== ======
====================================================================================================================
7.20% (36.85)% 27.30% 7.22% (36.88)% 27.40%
====================================================================================================================
$13,341 $12,788 $20,470 $2,936 $3,061 $3,713
- --------------------------------------------------------------------------------------------------------------------
$13,890 $18,673 $ 7,802 $3,170 $4,206 $1,560
- --------------------------------------------------------------------------------------------------------------------
(0.14)%(3) 0.07% 0.87%(3) (0.10)%(3) 0.24% 0.98%(3)
3.20%(3) 2.95% 2.78%(3) 3.20%(3) 2.95% 2.77%(3)
- --------------------------------------------------------------------------------------------------------------------
12% 78% 27% 12% 78% 27%
</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 February 28, 1999, were $5,024,536 and $8,075,332, respectively.
See accompanying Notes to Financial Statements.
19 Oppenheimer Developing Markets Fund
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (Unaudited)
================================================================================
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 long-term capital appreciation. It emphasizes investments in
common stocks and other equity securities of issuers in emerging and developing
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, except for purchases greater than
$1 million. Class A, 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. 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.
- --------------------------------------------------------------------------------
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.
20 Oppenheimer Developing Markets Fund
<PAGE> 21
================================================================================
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' COMPENSATION. 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 six months ended
February 28, 1999, a provision of $1,428 was made for the Fund's projected
benefit obligations, resulting in an accumulated liability of $34,099 as of
February 28, 1999.
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.
21 Oppenheimer Developing Markets Fund
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
- --------------------------------------------------------------------------------
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.
22 Oppenheimer Developing Markets Fund
<PAGE> 23
================================================================================
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>
SIX MONTHS ENDED FEBRUARY 28, 1999 YEAR ENDED AUGUST 31, 1998
-------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 1,686,562 $ 13,846,377 3,153,898 $ 36,542,888
Dividends and
distributions reinvested 59,038 498,869 137,965 1,466,572
Redeemed (1,968,057) (16,308,275) (3,175,275) (35,803,613)
----------- ------------- ----------- ------------
Net increase (decrease) (222,457) $ (1,963,029) 116,588 $ 2,205,847
=========== ============= =========== ============
- ----------------------------------------------------------------------------------------------------------------
Class B:
Sold 390,036 $3,222,810 1,231,248 $ 14,160,669
Dividends and
distributions reinvested 20,510 172,698 64,707 685,899
Redeemed (434,950) (3,575,136) (1,240,445) (13,597,790)
----------- ------------- ----------- ------------
Net increase (decrease) (24,404) $ (179,628) 55,510 $1,248,778
=========== ============= =========== ============
- ----------------------------------------------------------------------------------------------------------------
Class C:
Sold 121,911 $ 993,230 419,799 $4,895,743
Dividends and
distributions reinvested 4,083 34,424 15,549 164,660
Redeemed (163,900) (1,357,798) (328,388) (3,701,452)
----------- ------------- ----------- ------------
Net increase (decrease) (37,906) $ (330,144) 106,960 $1,358,951
=========== ============= =========== ============
</TABLE>
================================================================================
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
As of February 28, 1999, net unrealized depreciation on investments of
$15,978,862 was composed of gross appreciation of $3,720,342, and gross
depreciation of $19,699,204.
23 Oppenheimer Developing Markets Fund
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (Unaudited) (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 of the Fund, 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. The Fund's management fee for the six months
ended February 28, 1999, was 1.00% of average annual net assets for each class
of shares.
For the six months ended February 28, 1999, commissions (sales
charges paid by investors) on sales of Class A shares totaled $55,618, of which
$15,210 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
A, Class B and Class C shares totaled $7,375, $64,291 and $4,426, respectively.
The amount paid to an affiliated broker/dealer for Class B shares was $8,287.
During the six months ended February 28, 1999, OFDI received contingent
deferred sales charges of $23,432 upon redemption of Class B shares, as
reimbursement for sales commissions advanced by OFDI at the time of sale of
such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund and other Oppenheimer
funds. OFS's total costs of providing such services are allocated ratably to
these funds.
Expenses paid indirectly represent a reduction of custodian fees
for earnings on cash balances maintained by the Fund.
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 six months
ended February 28, 1999, OFDI paid $3,105 to an affiliated broker/dealer as
reimbursement for Class A personal service and maintenance expenses.
24 Oppenheimer Developing Markets Fund
<PAGE> 25
================================================================================
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 six months ended February 28,
1999, OFDI retained $56,651 and $13,894, 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 February 28, 1999,
OFDI had incurred excess distribution and servicing costs of $675,361 for Class
B and $50,832 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.
25 Oppenheimer Developing Markets Fund
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
================================================================================
5. FORWARD CONTRACTS (CONTINUED)
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.
As of February 28, 1999, the Fund had outstanding forward contracts as follows:
<TABLE>
<CAPTION>
EXPIRATION CONTRACT VALUATION AS OF UNREALIZED
CONTRACT DESCRIPTION DATE AMOUNT (000S) FEBRUARY 28, 1999 DEPRECIATION
- ------------------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
- ---------------------
<S> <C> <C> <C> <C>
Brazilian Real(BRR) 3/1/99 15BRR $7,018 $86
</TABLE>
================================================================================
6. ILLIQUID AND RESTRICTED SECURITIES
As of February 28, 1999, 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 as of February 28, 1999, was $1,053,144, which
represents 2.67% 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.
The Fund had no borrowings outstanding during the six months ended
February 28, 1999.
26 Oppenheimer Developing Markets Fund
<PAGE> 27
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
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 OppenheimerFunds Services
SHAREHOLDER
SERVICING AGENT
================================================================================
CUSTODIAN OF The Bank of New York
PORTFOLIO SECURITIES
================================================================================
INDEPENDENT AUDITORS KPMG LLP
================================================================================
LEGAL COUNSEL Gordon Altman Butowsky Weitzen Shalov & Wein
The financial statements included herein have
been taken from the records of the Fund
without examination of the independent
auditors.
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, are not insured by
the FDIC or any other agency, and involve
investment risks, including the possible loss
of the principal amount invested.
27 Oppenheimer Developing Markets Fund
<PAGE> 28
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[OPPENHEIMERFUNDS LOGO]
RS0785.001.0299 April 29, 1999
