Oppenheimer Tax-Free Bond Fund
Annual Report December 31, 1994
[photo depicting couple hiking]
"We need
more income, not more taxes."
(Logo) OppenheimerFunds
<PAGE>
This Fund is for people who want to earn income that's exempt from taxes.
Yield
Standardized Yield
For the 30 Days Ended 12/31/94:4
Class A
5.66%
Class B
5.14%
How Your Fund Is Managed
Oppenheimer Tax-Free Bond Fund invests in a diversified portfolio of
investment grade tax-free municipal bonds.
As a Fund shareholder, you receive income that is free from federal
income taxes.1 Your dividends don't increase your taxable income the way
taxable investments do, so you can keep more of what you earn.
Your Fund invests in investment grade municipal bonds and notes
rated within the four highest rating categories by Moody's, Standard & Poor's
or Fitch's. In addition, Tax-Free Bond Fund is managed by an experi-enced
team of municipal bond specialists who research investments thoroughly before
they are included in the Fund's portfolio.
Performance
Total return at net asset value for the 12 months ended 12/31/94 was -9.19%
for Class A shares and -9.91% for Class B shares.2
The financial markets had a difficult year and, like many mutual
funds, your Fund felt the effects. While difficult years are hard to accept,
they're an inevitable part of investing. That's why keeping a long-term
perspective is crucial to getting the most from your investment and help-ing
you through short-term market fluctuations.
Your Fund's average annual total returns at maximum offering price
for Class A shares for the 1-, 5-, and 10-year periods ended 12/31/94 and
since inception of the Class on 10/27/76 were -13.50%, 4.84%, 8.28% and
6.69%, respectively. For Class B shares, average annual total returns for the
1-year period ended 12/31/94 and since inception of the Class on 3/16/93 were
- -14.18% and -3.25%, respectively.3
Outlook
"In line with our primary objectiveproviding an above-average level of
tax-free income from an investment grade municipal bond portfoliothe
portfolio's average maturity is somewhat longer than most other funds. This
hampered our performance in the short term, but we believe that, in the long
run, shareholders will benefit significantly when interest rates stabilize
and the municipal market's positive fundamentals emerge."
Robert Patterson, Portfolio Manager
December 31, 1994
1. A portion of the distributions paid by the Fund may be subject to federal
and state income taxes. For investors subject to federal and/or state
alternative minimum tax (AMT), the Fund's distributions may increase this
tax. Capital gains distributions, if any, are taxed as capital gains.
2. Based on the change in net asset value per share from 12/31/93 to
12/31/94, without deducting any sales charges. Such performance would have
been lower if sales charges were taken into account.
3. Average annual total returns are based on a hypothetical investment held
until 12/31/94, after deducting the current maximum initial sales charge of
4.75% for Class A shares. Total return for Class B shares was based on a
hypothetical investment held for that period, after deducting the contingent
deferred sales charge of 5% (1 year) and 4% (since inception) for Class B
shares.
4. Standardized yield is net investment income calculated on a
yield-to-maturity basis for the 30-day period ended 12/31/94, divided by the
maximum offering price at the end of the period, compounded semi-annually and
then annualized. Falling net asset values will tend to artificially raise
yields.
All figures assume reinvestment of dividends and capital gains distributions.
Past performance is not indicative of future results. Investment and
principal value on 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.
2 Oppenheimer Tax-Free Bond Fund
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Dear OppenheimerFunds Shareholder,
The past year was marked by one of the greatest tests of the municipal bond
market in more than six decades. In 1994, the Federal Reserve undertook one of
the most aggressive inflation-fighting efforts in its history, raising interest
rates six times and driving bond prices down across the board. Then, in early
December as the market started to stabilize, Orange County, California,
defaulted on a $100 million bond issue, for reasons not related to the bonds
themselves, but rather to the aggressive use of derivatives (investments whose
value is derived from another security, currency, commodity or index) in
managing the county's portfolio. Although Orange County's problems didn't affect
OppenheimerFunds tax-free portfolios significantly, at year end, many investors
were left wondering what the future holds not only for interest rates, but for
the municipal market itself.
Looking at Orange County, there is no question that their problems have
added temporarily to the uncertainties surrounding the tax-free market. In the
near term, investors' heightened sense of caution may push new-issue prices
modestly lower and new-issue yields somewhat higher. In the longer term,
however, we expect developments in Orange County are likely to help rather than
hurt the market. The municipal bond market has always been one of the most
conservative places to invest, and with the increased attention paid to risks of
all types, we expect it to become less risky.
As for the Fed's actions to raise interest rates, changing interest
rates and fluctuating bond prices are facts of life affecting all bond
markets, and it's a bond market basic principle that when interest rates
rise, bond prices generally decline. That is why we believe the best measure
for any fixed income investment is its performance over the long term. And we
believe the long-term outlook for the municipal market is excellent, which is
supported by several considerations.
First, the Fed's attempt to fend off possible future inflation,
while temporarily disconcerting, is beginning to have its desired effect. The
economy is starting to slow, and although short-term rates may move up
modestly from their present levels, long-term interest rates should stabilize
in their current range. Long-term rates may even begin to decline as
overblown concerns about inflation abate.
Those concerns are, in fact, already fading. The inflation rateas
measured by the Consumer Price Indexcontinues to run at less than 3% a year,
and there's nothing on the horizon to suggest to us that it will increase
substantially anytime soon. As a result, municipal bonds today offer some of
the highest real, inflation-adjusted returns we have seen in years. In
addition, while the economy is showing some signs of slowing, it is still
growing at a solid pace. As a result, the financial strength of many
municipal issuers continues to improve, again providing solid support for
municipal bond prices.
Finally, the market's supply and demand characteristics are strong.
The supply of new municipal bonds currently is running some 40% below last
year's pace, while we expect demand for tax-free bonds is likely to increase
substantially over the next few months, helped by more stable bond markets
and rising investor demand to ease their tax burdens.
Together, these factors suggest to us that 1995 will be rewarding
for municipal investors. Your portfolio manager discusses the outlook for
your Fund on the following pages. We appreciate your confidence and we look
forward to continue helping you reach your investment goals.
Donald W. Spiro Jon S. Fossel
January 23, 1995
Donald W. Spiro
President
Oppenheimer
Tax-Free
Bond Fund
Jon S. Fossel
Chairman and CEO
Oppenheimer
Management
Corporation
3 Oppenheimer Tax-Free Bond Fund
<PAGE>
Q + A
An interview with your Fund's manager.
A lot happened in the municipal market over the past year. What were the most
important factors affecting the Fund's performance?
Many factors combined to make 1994 one of the most challenging years tax-free
investors have seen in decades, but one stands out: the Federal Reserve's
efforts to fend off inflation by raising interest rates, which drove interest
rates up and bond prices down. The Fed's actions affected virtually all bond
funds, and this Fund was no exception.
Did those developments cause you to change your investment strategy?
In seeking to provide an attractive level of tax-free income, our investment
strategy remained the sameto keep the Fund's duration, a tech-nical measure of a
bond portfolio's sensitivity to interest rate changes, slightly longer than
those of many other funds.
As a result, the Fund's net asset value declined last year, but we delivered an
attractive stream of tax-free income. Over time, we expect this longer duration
to benefit shareholders, as investors recognize the fundamental positiveslow
inflation, reduced supply and increasing demand, and improving issuer credit
quality--at work in the municipal market today.
Of course, as interest rates rose, we made some adjustments to the
portfolio within this strategy to position it more defensively.
What portfolio adjustments did you make?
We reduced the Fund's average maturity somewhat, focusing on bonds in the 15-
to 20-year maturity range. All other things being equal, the shorter a bond's
maturity, the less sensitive it is to changing interest rates. We also
reduced our exposures to municipal utility issues, whose prices are extremely
sensitive to changing interest rates. And we focused more attention on
insured and prerefunded issues, which make up a significant portion of the
portfolio today.1
What are prerefunded bonds, and what makes those issues so attractive?
Prerefunded bonds are municipal bonds that, as their name implies, have been
refinanced by the issuer ahead of
Q Did the Orange County bankruptcy have an impact on the Fund?
1. The Fund's portfolio is subject to change.
4 Oppenheimer Tax-Free Bond Fund
<PAGE>
their scheduled call or maturity dates by bonds with a lower interest rate.
What makes prerefunded bonds so attractive is their income streams and
credit quality.
When a bond is refunded in advance of what would be its "normal"
retirement date, part of the proceeds of the new issue are used to buy U.S.
Treasury securities sufficient to pay off the holders of the original bond
issue in full. These government securities are placed in an escrow account,
and the refunded issue auto-matically has the same low risk of default as a
triple-A rated security. As a result, we earn above-market yields on
pre-refunded issues until they are retired, and benefit from the highest
credit quality.
What other kinds of bonds are you focusing on today?
We're continuing to find good values in the housing, education, and
transportation sectors backed by what we believe are stable, predictable revenue
streams. As the economic expansion continues and the finances of many
municipalities strengthen, we're also starting to become more interested in
general obligation issues, which we tended to avoid during the recession.
Some analysts are predicting that a record amount of municipal bonds will be
called in 1995. How are you managing calls?
Bond calls, which allow issuers to redeem bonds before their scheduled
maturity and re-place them with lower-yielding issuesare a fact of life in
the municipal market. Because interest rates are currently much lower than
they were in the mid-1980s when many of the municipal bonds outstanding today
were issued, it's fully possible that some of the bonds in the Fund's portfolio
will be called.
We manage that by staying on top of the portfolio at
all times, trying to anticipate calls and seeking to buy bonds that offer
both attractive yields and significant call protection. Virtually no
municipal bond fund can avoid calls entirely. The key is to take a
forward-looking view and manage them intelligently.
Did the Orange County bankruptcy have an impact on the Fund?
Because we only had two indirect holdings, one of which was fully insured,
the impact was negligible.
What's your outlook for the municipal market going forward?
Our long-term outlook is very constructive. The Fed's efforts to raise
interest rates seem to have succeeded; inflation the factor that has the
greatest effect on bond values, remains under control.
At the same time, the market has several fundamental factors in its
favor. The supply of municipal bonds is running well below last year's pace,
while demand for tax-free securities is rising, driven by both rising tax
burdens and, as I mentioned, the volume of bond calls expected nationwide over
the next 18 months.
This combination of shrinking supply and mounting demand should
provide support for municipal bond prices.
Facing page
Left: Robert Patterson,
Portfolio Manager
Right: The trading desk
This page
Len Darling, Executive VP, Director of Fixed Income Investments,
and Caryn Halbrecht,
Tax-Exempt Portfolio Manager
A Because we only had two indirect holdings, the impact was negligible.
5 Oppenheimer Tax-Free Bond Fund
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<TABLE>
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Statement of Investments December 31, 1994
-----------------------------------------------------------------------------------------------------
Ratings:
Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
===================================================================================================================================
Municipal Bonds and Notes--98.5%
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alabama--1.2% Huntsville, Alabama Health Care Authority
Health Care Facilities Revenue Bonds, Series B,
MBIA Insured, 6.625%, 6/1/23 Aaa/AAA $ 7,235,000 $ 7,012,480
- -----------------------------------------------------------------------------------------------------------------------------------
Arizona--0.3% Arizona State Transportation Board Highway
Revenue Bonds, Prerefunded, Sub. Lien,
Series B, 6.50%, 7/1/07 Aaa/AA 1,330,000 1,389,889
-----------------------------------------------------------------------------------------------------
Central Arizona Irrigation and Drainage District
General Obligation Refunding Bonds, 7%, 6/1/98(2) NR/D 1,385,000 661,157
------------
2,051,046
- -----------------------------------------------------------------------------------------------------------------------------------
California--9.3% California Health Facilities Financing Authority
Revenue Bonds, Episcopal Homes Project,
Series A, OSHPD Insured, 7.80%, 7/1/15 NR/A 1,000,000 1,047,599
-----------------------------------------------------------------------------------------------------
California Housing Finance Agency Revenue
Bonds, Home Mtg., Series C, 6.75%, 2/1/25 Aa/AA- 5,000,000 4,777,335
-----------------------------------------------------------------------------------------------------
California Housing Finance Agency Revenue
Bonds, Series C, 6.65%, 8/1/14 Aa/AA- 5,000,000 4,753,374
-----------------------------------------------------------------------------------------------------
California State Public Works Board Lease
Revenue Bonds, University of California Project,
Series A, AMBAC Insured, 6.40%, 12/1/16 Aaa/AAA/AAA 8,700,000 8,343,951
-----------------------------------------------------------------------------------------------------
Los Angeles County, California Transportation
Revenue Bonds, Commission Sales Tax,
Prerefunded, Series A, FGIC Insured, 6.75%, 7/1/18 Aaa/AAA/AAA 5,000,000 5,328,835
-----------------------------------------------------------------------------------------------------
Redding, California Electric System Revenue
Certificates of Participation, FGIC Insured,
6.279%, 6/1/19(1) Aaa/AAA/AAA 6,000,000 4,368,563
-----------------------------------------------------------------------------------------------------
San Joaquin Hills, California Transportation
Corridor Agency Toll Road Revenue Bonds, Sr.
Lien, 6.75%, 1/1/32 NR/NR/BBB 12,700,000 10,445,190
-----------------------------------------------------------------------------------------------------
South Orange County, California Public Financing
Authority Special Tax Revenue Bonds, Sr. Lien,
Series A, MBIA Insured, 6%, 9/1/18 Aaa/AAA/NR 10,500,000 9,415,401
-----------------------------------------------------------------------------------------------------
Southern California Public Power Authority Power
Project Revenue Bonds, Prerefunded, 6%, 7/1/18 Aaa/AAA 6,500,000 6,590,993
------------
55,071,241
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Colorado--1.3% Colorado Health Facilities Authority Revenue Bonds,
Kaiser Permanente Medical Care Project, 9%, 8/1/03 NR/AA 1,000,000 1,044,501
-----------------------------------------------------------------------------------------------------
Colorado Health Facilities Authority Revenue Bonds,
Kaiser Permanente Medical Care Project, 9.125%, 8/1/15 NR/AA 2,000,000 2,090,372
-----------------------------------------------------------------------------------------------------
Colorado Health Facilities Authority Revenue
Bonds, Rocky Mountain Adventist Health System,
6.625%, 2/1/22 Baa/BBB 5,000,000 4,445,514
------------
7,580,387
6 Oppenheimer Tax-Free Bond Fund
<PAGE>
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-----------------------------------------------------------------------------------------------------
Ratings:
Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- -----------------------------------------------------------------------------------------------------------------------------------
Delaware--3.5% Delaware Transportation Authority Revenue
Bonds, Transportation System, Prerefunded, Sr. Lien,
6.75%, 7/1/10 Aaa/AAA $ 5,000,000 $ 5,315,960
-----------------------------------------------------------------------------------------------------
Delaware Transportation Authority Revenue Bonds,
Transportation System, Sr. Lien, 5.50%, 7/1/16 A1/AA 18,440,000 15,825,778
------------
21,141,738
- -----------------------------------------------------------------------------------------------------------------------------------
Florida--5.5% Broward County, Florida Resource Recovery
Revenue Bonds, Broward Waste Energy-LP North
Project, 7.95%, 12/1/08 A/A 2,425,000 2,600,551
-----------------------------------------------------------------------------------------------------
Broward County, Florida Resource Recovery
Revenue Bonds, Ses Broward Co. LP South
Project, 7.95%, 12/1/08 A/A 6,415,000 6,879,394
-----------------------------------------------------------------------------------------------------
Broward County, Florida School District General
Obligation Bonds, Prerefunded, 7.125%, 2/15/08 Aaa/AAA 1,750,000 1,873,812
-----------------------------------------------------------------------------------------------------
Clay County, Florida Utilities System Revenue Bonds,
Prerefunded, Series A, FGIC Insured, 5.75%, 11/1/09 Aaa/AAA/AAA 2,585,000 2,591,871
-----------------------------------------------------------------------------------------------------
Florida State Board of Education Capital Outlay
Public Education General Obligation Bonds,
Prerefunded, Series A, 7.25%, 6/1/23 Aaa/AAA 1,000,000 1,085,593
-----------------------------------------------------------------------------------------------------
Florida State Board of Education Capital Outlay
Public Education Refunding Bonds, 8.40%, 6/1/07 Aa/AA 750,000 895,009
-----------------------------------------------------------------------------------------------------
Florida State Board of Education Capital Outlay
Public Education Refunding Bonds, Series D,
5.125%, 6/1/18 Aa/AA/AA 10,000,000 8,257,410
-----------------------------------------------------------------------------------------------------
Florida State Division of Finance Department
Revenue Bonds, Department of Natural Resource
Preservation, Series 2000-A, FSA Insured, 5.80%, 7/1/13 Aaa/AAA/A 9,250,000 8,465,969
------------
32,649,609
- -----------------------------------------------------------------------------------------------------------------------------------
Georgia--1.7% Georgia State Municipal Electric Authority Special
Obligation Bonds, Fifth Crossover Series, Project One,
6.50%, 1/1/17 A/A+ 10,750,000 10,420,319
- -----------------------------------------------------------------------------------------------------------------------------------
Hawaii--0.2% Hawaii State Revenue Bonds, Prerefunded,
Series BS, 7%, 9/1/02 Aaa/AA 1,000,000 1,068,892
- -----------------------------------------------------------------------------------------------------------------------------------
Illinois--0.2% Regional Transportation Authority Illinois Revenue
Bonds, Series A, AMBAC Insured, 7.20%, 11/1/20 Aaa/AAA/AAA 1,000,000 1,040,753
- -----------------------------------------------------------------------------------------------------------------------------------
Indiana--2.5% Indiana Health Facilities Financing Authority
Hospital Revenue Bonds, CGIC Insured, 5.50%, 8/15/22 Aaa/AAA 5,500,000 4,497,097
-----------------------------------------------------------------------------------------------------
Indianapolis, Indiana Airport Authority Revenue
Bonds, 9%, 7/1/15 A1/A 1,000,000 1,049,893
-----------------------------------------------------------------------------------------------------
Indianapolis, Indiana Airport Authority Revenue
Bonds, Special Facilities-Federal Express Corp.
Project, 7.10%, 1/15/17 Baa2/BBB 10,000,000 9,489,099
------------
15,036,089
7 Oppenheimer Tax-Free Bond Fund
<PAGE>
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Statement of Investments (Continued)
-----------------------------------------------------------------------------------------------------
Ratings:
Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- -----------------------------------------------------------------------------------------------------------------------------------
Kansas--2.5% Kansas State Department of Transportation
Highway Revenue Refunding Bonds, Series A,
5.375%, 3/1/12 Aa/AA/AA $17,500,000 $ 15,144,867
- -----------------------------------------------------------------------------------------------------------------------------------
Kentucky--0.2% Kentucky State Turnpike Authority Economic
Development Road Revenue Bonds, Revitalization
Projects, Prerefunded, 7.375%, 5/15/07 Aaa/AAA/A+ 1,000,000 1,086,897
- -----------------------------------------------------------------------------------------------------------------------------------
Louisiana--1.7% Louisiana Public Facilities Authority Revenue
Bonds, Multifamily Housing, One Lakeshore,
9.25%, 7/20/20 NR/AAA 940,000 988,418
-----------------------------------------------------------------------------------------------------
New Orleans, Louisiana Home Mtg. Authority
Special Obligation Refunding Bonds, Escrowed
to Maturity, 6.25%, 1/15/11 Aaa/AAA 9,500,000 9,074,276
------------
10,062,694
- -----------------------------------------------------------------------------------------------------------------------------------
Maryland--0.1% Baltimore County, Maryland Mtg. Revenue Bonds,
Loch Raven Village Apts., GNMA Collateralized,
10.10%, 11/20/20 NR/AAA 500,000 515,577
- -----------------------------------------------------------------------------------------------------------------------------------
Massachusetts--8.6% Massachusetts Bay Transportation Authority
Revenue Refunding Bonds, Transportation System,
Series A, 5.50%, 3/1/12 A1/A+/A+ 12,000,000 10,509,490
-----------------------------------------------------------------------------------------------------
Massachusetts Municipal Wholesale Electric Co.
Revenue Bonds, Power Supply Systems,
Prerefunded, Series B, 6.75%, 7/1/17 Aaa/BBB+ 6,985,000 7,426,696
-----------------------------------------------------------------------------------------------------
Massachusetts State General Obligation Refunding
Bonds, Series A, 5.50%, 2/1/11 A1/A+/A+ 20,000,000 17,838,238
-----------------------------------------------------------------------------------------------------
Massachusetts State Health & Educational Facilities
Authority Revenue Bonds, Baystate Medical Center,
Prerefunded, Series C, 7.50%, 7/1/20 A1/A+ 2,500,000 2,726,787
-----------------------------------------------------------------------------------------------------
Massachusetts State Housing Finance Agency
Revenue Bonds, Multifamily Mtg., GNMA
Collateralized, Series A, FHA Insured, 9.125%, 12/1/20 Aaa/AAA 975,000 1,016,539
-----------------------------------------------------------------------------------------------------
Massachusetts State Water Resource Authority
Revenue Bonds, Series A, 6.50%, 7/15/19 A/A/A 12,225,000 11,747,467
------------
51,265,217
- -----------------------------------------------------------------------------------------------------------------------------------
Michigan--5.5% Detroit, Michigan Revenue Refunding Bonds,
Water Supply System, FGIC Insured, 8.41%, 7/1/22(1) Aaa/AAA 1,500,000 1,285,639
-----------------------------------------------------------------------------------------------------
Detroit, Michigan Revenue Refunding Bonds,
Water Supply System, Prerefunded, FGIC Insured,
8.41%, 7/1/22(1) Aaa/AAA 3,700,000 3,858,138
-----------------------------------------------------------------------------------------------------
Detroit, Michigan Sewage Disposal System Revenue
Refunding Bonds, FGIC Insured, 6.908%, 7/1/23(1) Aaa/AAA/AAA 13,200,000 8,935,461
-----------------------------------------------------------------------------------------------------
Greater Detroit, Michigan Resource Recovery
Authority Revenue Bonds, Series A, 9.25%, 12/13/08 NR/BBB- 1,500,000 1,575,909
-----------------------------------------------------------------------------------------------------
Greater Detroit, Michigan Resource Recovery
Authority Revenue Bonds, Series H, 9.25%, 12/13/08 NR/BBB- 500,000 525,303
8 Oppenheimer Tax-Free Bond Fund
<PAGE>
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
Ratings:
Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- -----------------------------------------------------------------------------------------------------------------------------------
Michigan (continued) Michigan State Building Authority Revenue
Refunding Bonds, Series I, MBIA Insured,
6.25%, 10/1/20 A/AA-/AA- $10,000,000 $ 9,232,100
-----------------------------------------------------------------------------------------------------
Michigan State Hospital Finance Authority Revenue
Refunding Bonds, FSA Insured, 7.348%, 2/15/22(1) NR/AAA/AAA 5,000,000 4,133,275
-----------------------------------------------------------------------------------------------------
Michigan State Hospital Finance Authority Revenue
Refunding Bonds, Sisters of Mercy Hospital,
Series H, MBIA Insured, 7.50%, 8/15/13 Aaa/AAA 1,000,000 1,052,758
-----------------------------------------------------------------------------------------------------
Royal Oak, Michigan Hospital Finance Authority
Revenue Bonds, William Beaumont Hospital,
Prerefunded, Series C, 7.375%, 1/1/20 Aaa/NR 2,000,000 2,156,693
------------
32,755,276
- -----------------------------------------------------------------------------------------------------------------------------------
Minnesota--0.2% Minnesota State Revenue Bonds, Prerefunded,
7%, 8/1/08 Aaa/AAA/AAA 1,300,000 1,379,161
- -----------------------------------------------------------------------------------------------------------------------------------
Missouri--0.2% Missouri State Environmental Improvement &
Energy Resource Authority Pollution Control
Revenue Bonds, Associates Electric 84G-4,
8.25%, 11/15/14 Aa3/AA- 1,390,000 1,463,108
- -----------------------------------------------------------------------------------------------------------------------------------
New Jersey--4.2% Bergen County, New Jersey Utilities Authority
Water Pollution Control Revenue Bonds, Series A,
FGIC Insured, 6.50%, 12/15/12 Aaa/AAA/AAA 6,000,000 6,000,000
-----------------------------------------------------------------------------------------------------
Mercer County, New Jersey Improvement Authority
Revenue Bonds, Custodial Receipts-Justice
Complex, 6.05%, 1/1/11 Aa/AA- 750,000 706,786
-----------------------------------------------------------------------------------------------------
New Jersey Economic Development Authority
Revenue Bonds, Sr. Lien, Series A, MBIA Insured,
5.875%, 7/1/11 Aaa/AAA 1,250,000 1,171,001
-----------------------------------------------------------------------------------------------------
New Jersey Health Care Facilities Finance Authority
Revenue Bonds, Prerefunded, Series C, 8.60%, 7/1/17 Aaa/AAA 1,100,000 1,200,362
-----------------------------------------------------------------------------------------------------
New Jersey State Housing & Mtg. Finance Agency
Multifamily Housing Revenue Bonds, Series C,
9.75%, 11/1/27 NR/A+ 1,000,000 1,058,367
-----------------------------------------------------------------------------------------------------
New Jersey State Turnpike Authority Revenue
Bonds, Series C, 6.50%, 1/1/16 A/A/A 15,150,000 15,098,398
------------
25,234,914
- -----------------------------------------------------------------------------------------------------------------------------------
New York--14.5% City of New York General Obligation Bonds,
6.113%, 8/1/15(1) Baa1/A- 3,050,000 1,982,134
-----------------------------------------------------------------------------------------------------
City of New York General Obligation Bonds,
Prerefunded, Series D, 8%, 8/1/15 Baa1/A- 10,780,000 12,268,190
-----------------------------------------------------------------------------------------------------
City of New York General Obligation Bonds,
Series A, 7.75%, 8/15/16 Baa1/A- 2,500,000 2,631,130
-----------------------------------------------------------------------------------------------------
City of New York General Obligation Bonds,
Series D, 8%, 8/1/15 Baa1/A- 220,000 236,840
9 Oppenheimer Tax-Free Bond Fund
<PAGE>
-----------------------------------------------------------------------------------------------------
Statement of Investments (Continued)
-----------------------------------------------------------------------------------------------------
Ratings:
Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- -----------------------------------------------------------------------------------------------------------------------------------
New York (continued) City of New York Industrial Development Agency
Revenue Bonds, Terminal One Group Assn., 6%, 1/1/19 A/A/A- $ 6,000,000 $ 5,313,539
-----------------------------------------------------------------------------------------------------
City of New York Municipal Water Finance
Authority Revenue Bonds, Water & Sewer
System Project, Series A, 6%, 6/15/17 A/A-/A 7,800,000 6,995,882
-----------------------------------------------------------------------------------------------------
City of New York Municipal Water Finance
Authority Revenue Bonds, Water & Sewer System
Project, Series F, MBIA Insured, 5.75%, 6/15/20 Aaa/AAA/A 6,800,000 6,045,900
-----------------------------------------------------------------------------------------------------
Dormitory Authority of the State of New York
Revenue Bonds, City University System,
Prerefunded, Series A, 7.625%, 7/1/20 Aaa/BBB 9,325,000 10,362,900
-----------------------------------------------------------------------------------------------------
Dormitory Authority of the State of New York
Revenue Bonds, State University Educational
Facilities, Prerefunded, Series A, 6.75%, 5/15/18 NR/AAA 8,415,000 8,831,717
-----------------------------------------------------------------------------------------------------
Municipal Assistance Corp. for the City of New
York Revenue Bonds, Series 58, 7.375%, 7/1/08 Aa/AA-/AA 2,500,000 2,615,957
-----------------------------------------------------------------------------------------------------
Municipal Assistance Corp. for the City of New
York Revenue Bonds, Series 60, 6%, 7/1/08 Aa/AA-/AA 700,000 683,573
-----------------------------------------------------------------------------------------------------
New York State Dormitory Authority Revenue
Bonds, State University Educational Facilities,
Prerefunded, Series A, 7.625%, 5/15/05 NR/AAA 3,000,000 3,328,155
-----------------------------------------------------------------------------------------------------
New York State Dormitory Authority Revenue
Bonds, State University Educational Facilities,
Series B, 6.25%, 5/15/14 A/BBB+ 6,000,000 5,579,994
-----------------------------------------------------------------------------------------------------
New York State Housing Finance Agency Revenue
Refunding Bonds, New York City Health Facility,
Series A, 7.90%, 11/1/99 Baa/A- 7,000,000 7,553,342
-----------------------------------------------------------------------------------------------------
New York State Medical Care Facilities Finance
Agency Revenue Bonds, Saint Lukes Hospital,
Prerefunded, Series B, 7.40%, 2/15/09 Aaa/AAA 1,400,000 1,534,524
-----------------------------------------------------------------------------------------------------
New York State Mtg. Agency Revenue Bonds, Ninth
Series B, Verex Pool Insured, 8.30%, 10/1/17 Aa/NR 1,715,000 1,756,136
-----------------------------------------------------------------------------------------------------
New York State Power Authority Revenue Bonds,
Series V, 7.875%, 1/1/07 Aa/AA- 3,000,000 3,227,172
-----------------------------------------------------------------------------------------------------
Port Authority of New York and New Jersey
Consolidated Bond Certificates, Series Fifty-One E,
7%, 12/1/14 A1/NR 2,000,000 2,059,796
-----------------------------------------------------------------------------------------------------
Suffolk County, New York General Obligation
Refunding Bonds, Southwest Sewer District,
Escrowed to Maturity, Series B, 22.875%, 2/1/95 NR/AAA 1,075,000 1,091,782
-----------------------------------------------------------------------------------------------------
Triborough Bridge & Tunnel Authority of New York
General Purpose Revenue Bonds, Prerefunded,
Series R, 7.375%, 1/1/10 Aaa/AAA 1,220,000 1,329,200
-----------------------------------------------------------------------------------------------------
Triborough Bridge & Tunnel Authority of New York
General Purpose Revenue Bonds, Series A, 5%, 1/1/12 Aa/A+ 1,000,000 832,568
------------
86,260,431
10 Oppenheimer Tax-Free Bond Fund
<PAGE>
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Ratings:
Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- -----------------------------------------------------------------------------------------------------------------------------------
Ohio--2.3% Franklin County, Ohio Hospital Revenue Refunding
Bonds, Riverside United Methodist, Series A,
5.75%, 5/15/20 Aa/NR $10,000,000 $ 8,556,400
-----------------------------------------------------------------------------------------------------
Ohio Housing Finance Agency Single Family Mtg.
Revenue Bonds, GNMA Mtg.-Backed Security,
Series B, 9.213%, 3/1/31(1) Aaa/AAA 5,800,000 5,392,508
------------
13,948,908
- -----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania--5.3% Delaware County, Pennsylvania Industrial
Development Authority Revenue Refunding Bonds,
Resource Recovery Project, Series A, 8.10%, 12/1/13 Aa3/A+ 3,890,000 4,125,407
-----------------------------------------------------------------------------------------------------
Pennsylvania State General Obligation Refunding
Bonds, Fst. Series, 5%, 4/15/13 A1/AA-/AA- 9,165,000 7,552,024
-----------------------------------------------------------------------------------------------------
Pennsylvania State Higher Education Assistance
Agency Student Loan Revenue Bonds, Series B,
AMBAC Insured, 7.316%, 3/1/22(1) Aaa/AAA/AAA 17,500,000 13,406,047
-----------------------------------------------------------------------------------------------------
Pennsylvania State Industrial Development
Authority Economic Development Revenue
Bonds, Prerefunded, Series A, 7%, 1/1/11 NR/A-/AAA 2,000,000 2,157,188
-----------------------------------------------------------------------------------------------------
Philadelphia, Pennsylvania Municipal Authority
Justice Lease Revenue Bonds, Prerefunded,
Series B, FGIC Insured, 7.125%, 11/15/18 Aaa/AAA/AAA 1,255,000 1,363,910
-----------------------------------------------------------------------------------------------------
Schuylkill County, Pennsylvania Industrial
Development Authority Resource Recovery
Revenue Refunding Bonds, Schuylkill Energy
Resources, Inc., 6.50%, 1/1/10 NR/NR/BBB- 3,000,000 2,712,546
------------
31,317,122
- -----------------------------------------------------------------------------------------------------------------------------------
South Carolina--1.8% South Carolina State Public Service Authority
Revenue Bonds, Santee Cooper, Series D, AMBAC
Insured, 6.50%, 7/1/24 Aaa/AAA/AAA 10,000,000 10,482,590
- ----------------------------------------------------------------------------------------------------------------------------------
Texas--17.5% Alliance Airport Authority, Inc., Texas Special
Facility Revenue Bonds, American Airlines, Inc.
Project, 7%, 12/1/11 Baa2/BB+ 3,000,000 2,765,799
-----------------------------------------------------------------------------------------------------
Alliance Airport Authority, Inc., Texas Special
Facility Revenue Bonds, American Airlines, Inc.
Project, 7.50%, 12/1/29 Baa2/BB+ 12,500,000 11,781,886
-----------------------------------------------------------------------------------------------------
Brazos River Authority, Texas Pollution Control
Revenue Collateral Bonds, Texas Utilities Electric
Co. Project, Series A, 8.25%, 1/1/19 Baa2/BBB/BBB 1,500,000 1,605,135
-----------------------------------------------------------------------------------------------------
Cypress-Fairbanks, Texas Independent School
District General Obligation Capital Appreciation
Refunding Bonds, Series A, 0%, 2/15/14 Aaa/AAA 15,710,000 4,372,863
-----------------------------------------------------------------------------------------------------
Cypress-Fairbanks, Texas Independent School
District General Obligation Capital Appreciation
Refunding Bonds, Series A, 0%, 2/15/15 Aaa/AAA 15,000,000 3,905,173
11 Oppenheimer Tax-Free Bond Fund
<PAGE>
-----------------------------------------------------------------------------------------------------
Statement of Investments (Continued)
-----------------------------------------------------------------------------------------------------
Ratings:
Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- -----------------------------------------------------------------------------------------------------------------------------------
Texas (continued) Cypress-Fairbanks, Texas Independent School
District General Obligation Capital Appreciation
Refunding Bonds, Series A, 0%, 2/15/16 Aaa/AAA $16,240,000 $ 3,954,520
-----------------------------------------------------------------------------------------------------
Dallas-Fort Worth, Texas International Airport
Facilities Improvement Corp. Revenue Bonds,
American Airlines, Inc., 7.25%, 11/1/30 Baa2/BB+ 8,000,000 7,390,383
-----------------------------------------------------------------------------------------------------
Harris County, Texas Revenue Refunding Bonds,
Toll Road Project, Sub. Lien, 6.75%, 8/1/14 Aa/AA+ 8,000,000 8,077,079
-----------------------------------------------------------------------------------------------------
North Central Texas Health Facility Development
Corp. Hospital Revenue Bonds, Baylor Health
Care Project, Series B, 8.459%, 5/15/06(1) Aa/AA 3,000,000 2,879,922
-----------------------------------------------------------------------------------------------------
North Central Texas Health Facility Development
Corp. Hospital Revenue Bonds, Baylor Health Care
Project, Series B, 8.559%, 5/15/08(1) Aa/AA 5,000,000 4,758,305
-----------------------------------------------------------------------------------------------------
Northside Texas Independent School District
Revenue Bonds, PSFG Insured, 6.70%, 2/1/06 Aaa/AAA 1,400,000 1,438,503
-----------------------------------------------------------------------------------------------------
San Antonio, Texas Electric & Gas Improvement
Revenue Refunding Bonds, 5%, 2/1/14 Aa1/AA/AA+ 13,150,000 10,615,706
-----------------------------------------------------------------------------------------------------
San Antonio, Texas Electric & Gas Improvement
Revenue Refunding Bonds, Series B, 6%, 2/1/14 Aa1/AA/AA+ 18,500,000 17,322,916
-----------------------------------------------------------------------------------------------------
San Antonio, Texas Water Revenue Refunding
Bonds, MBIA Insured, 6%, 5/15/16 Aaa/AAA/A+ 7,000,000 6,491,667
-----------------------------------------------------------------------------------------------------
Texas Municipal Power Agency Capital
Appreciation Revenue Refunding Bonds,
MBIA Insured, 0%, 9/1/14 Aaa/AAA/A+ 17,500,000 4,670,224
-----------------------------------------------------------------------------------------------------
Texas Municipal Power Agency Capital
Appreciation Revenue Refunding Bonds,
MBIA Insured, 0%, 9/1/15 Aaa/AAA/A+ 10,000,000 2,495,360
-----------------------------------------------------------------------------------------------------
Texas Municipal Power Agency Capital
Appreciation Revenue Refunding Bonds,
MBIA Insured, 0%, 9/1/16 Aaa/AAA/A+ 39,990,000 9,330,742
------------
103,856,183
- -----------------------------------------------------------------------------------------------------------------------------------
Utah--0.3% Intermountain Power Agency of Utah Special
Obligation Bonds, Second Crossover Series,
7.50%, 7/1/16 Aa/AA 1,435,000 1,489,653
- -----------------------------------------------------------------------------------------------------------------------------------
Washington--3.8% Washington State General Obligation Bonds,
Series A & AT-6, 5.75%, 2/1/17 Aa/AA/AA 12,500,000 11,113,949
-----------------------------------------------------------------------------------------------------
Washington State Public Power Supply System
Revenue Refunding Bonds, 6.776%, 7/1/12(1) Aa/AA/AA 15,000,000 9,807,255
-----------------------------------------------------------------------------------------------------
Washington State Public Power Supply System
Revenue Refunding Bonds, Nuclear Project No. 1,
Series A, 7.50%, 7/1/15 Aa/AAA 1,500,000 1,555,240
------------
22,476,444
- -----------------------------------------------------------------------------------------------------------------------------------
West Virginia--0.5% West Virginia State Parkways Economic
Development & Tourism Authority Revenue Bonds,
7.17%, 5/16/19(1) Aaa/AAA 3,600,000 2,720,826
12 Oppenheimer Tax-Free Bond Fund
<PAGE>
-----------------------------------------------------------------------------------------------------
Statement of Investments (Continued)
-----------------------------------------------------------------------------------------------------
Ratings:
Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- -----------------------------------------------------------------------------------------------------------------------------------
Wisconsin--0.1% Wisconsin Housing Finance Authority Revenue
Bonds, 9.875%, 11/1/03 NR/A $ 560,000 $ 577,241
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Possessions--3.5% Puerto Rico Commonwealth Highway
& Transportation Authority Revenue Bonds,
Prerefunded, Series S, 6.625%, 7/1/18 NR/AAA 5,000,000 5,307,954
-----------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Highway
& Transportation Authority Revenue Bonds,
Prerefunded, Series T, 6.625%, 7/1/18 NR/AAA 1,500,000 1,592,386
-----------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Highway
& Transportation Authority Revenue Bonds,
Series T, 6.625%, 7/1/18 Baa1/A 6,000,000 5,929,583
-----------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Highway
& Transportation Authority Revenue Bonds,
Series Q, 7.75%, 7/1/10 NR/AAA 1,000,000 1,117,393
-----------------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority Revenue
Bonds, Prerefunded, Series 0, 7.125%, 7/1/14 Baa1/AAA 4,000,000 4,308,992
-----------------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority Revenue
Bonds, Series 0, 7.125%, 7/1/14 Baa1/A- 2,350,000 2,418,601
------------
20,674,909
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $627,366,744) 98.5% 585,784,572
- -----------------------------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 1.5 8,620,733
----- ------------
Net Assets 100.0% $594,405,305
===== ============
<FN>
1. Represents the current interest rate for a variable rate bond. These variable rate bonds known as
"inverse floaters" pay interest at a rate that varies inversely with short-term interest rates. As
interest rates rise, inverse floaters produce less current income. Their price may be more volatile
than the price of a comparable fixed-rate security. Inverse floaters amount to $63,528,073 or 10.7%
of the Fund's net assets at December 31, 1994.
2. Non-income producing--issuer is in default of interest payment.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
13 Oppenheimer Tax-Free Bond Fund
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1994
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
===================================================================================================================================
Assets Investments, at value (cost $627,366,744)--see accompanying statement $ 585,784,572
-----------------------------------------------------------------------------------------------------
Cash 598,070
-----------------------------------------------------------------------------------------------------
Receivables:
Interest 12,484,886
Shares of beneficial interest sold 1,523,519
-----------------------------------------------------------------------------------------------------
Other 37,835
-------------
Total assets 600,428,882
===================================================================================================================================
Liabilities Payables and other liabilities:
Shares of beneficial interest redeemed 3,183,448
Dividends 2,187,922
Distribution and service plan fees--Note 4 326,358
Other 325,849
-------------
Total liabilities 6,023,577
===================================================================================================================================
Net Assets $ 594,405,305
=============
===================================================================================================================================
Composition of Paid-in capital $ 637,227,054
Net Assets -----------------------------------------------------------------------------------------------------
Undistributed (overdistributed) net investment income (922,046)
-----------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) from investment transactions (317,531)
Net unrealized appreciation (depreciation) on investments--Note 3 (41,582,172)
-------------
Net assets $ 594,405,305
=============
===================================================================================================================================
Net Asset Value Class A Shares:
Per Share Net asset value and redemption price per share (based on net
assets of $541,160,566 and 60,633,597 shares of beneficial
interest outstanding) $8.93
Maximum offering price per share (net asset value plus sales
charge of 4.75% of offering price) $9.38
-----------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per
share (based on net assets of $53,244,739 and 5,971,980 shares
of beneficial interest outstanding) $8.92
</TABLE>
See accompanying Notes to Financial Statements.
14 Oppenheimer Tax-Free Bond Fund
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1994
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
===================================================================================================================================
Investment Income Interest $ 42,814,615
===================================================================================================================================
Expenses Management fees--Note 4 3,329,317
-----------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A--Note 4 1,185,792
Class B--Note 4 465,406
-----------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 443,291
-----------------------------------------------------------------------------------------------------
Shareholder reports 187,976
-----------------------------------------------------------------------------------------------------
Trustees' fees and expenses 86,123
-----------------------------------------------------------------------------------------------------
Legal and auditing fees 54,706
-----------------------------------------------------------------------------------------------------
Custodian fees and expenses 17,260
-----------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 6,544
Class B 9,402
-----------------------------------------------------------------------------------------------------
Other 89,927
-------------
Total expenses 5,875,744
===================================================================================================================================
Net Investment Income (Loss) 36,938,871
===================================================================================================================================
Realized and Net realized gain (loss) on investments (507,588)
Unrealized Gain (Loss) -----------------------------------------------------------------------------------------------------
On Investments Net change in unrealized appreciation or depreciation
on investments (97,929,896)
-------------
Net realized and unrealized gain (loss) on investments (98,437,484)
===================================================================================================================================
Net Increase (Decrease) in Net Assets Resulting From Operations $ (61,498,613)
=============
</TABLE>
See accompanying Notes to Financial Statements.
15 Oppenheimer Tax-Free Bond Fund
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
-----------------------------------------------------------------------------------------------------
Year Ended December 31,
1994 1993
<S> <C> <C> <C>
===================================================================================================================================
Operations Net investment income (loss) $ 36,938,871 $ 33,032,955
-----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (507,588) 12,029,869
-----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation
on investments (97,929,896) 28,597,626
------------- -------------
Net increase (decrease) in net assets resulting from operations (61,498,613) 73,660,450
===================================================================================================================================
Dividends and Dividends from net investment income:
Distributions to Class A ($.561 and $.624 per share, respectively) (34,265,091) (34,167,307)
Shareholders Class B ($.487 and $.42 per share, respectively) (2,383,056) (627,087)
-----------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments:
Class A ($.211 per share) -- (12,053,200)
Class B ($.211 per share) -- (624,908)
-----------------------------------------------------------------------------------------------------
Distributions in excess of gain on investments:
Class A ($.004 per share) (261,506) --
Class B ($.004 per share) (19,061) --
===================================================================================================================================
Beneficial Interest Net increase (decrease) in net assets resulting from Class A
Transactions beneficial interest transactions--Notes 2 and 5 24,534,984 85,361,641
-----------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from Class B
beneficial interest transactions--Note 2 27,145,605 32,973,976
===================================================================================================================================
Net Assets Total increase (decrease) (46,746,738) 144,523,565
-----------------------------------------------------------------------------------------------------
Beginning of period 641,152,043 496,628,478
------------- -------------
End of period [including undistributed (overdistributed) net
investment income of $(922,046) and $239,794, respectively] $ 594,405,305 $ 641,152,043
============= =============
</TABLE>
See accompanying Notes to Financial Statements.
16 Oppenheimer Tax-Free Bond Fund
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Financial Highlights
------------------------------------------------------------------------------------------------------
Class A Class B
-------------------------------------------------------------------------------------- ---------------
Year Year Period
Ended Ended Ended
December 31, Dec. 31, Dec. 31,
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1994 1993(1)
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning
of period $10.44 $ 9.94 $ 9.77 $ 9.33 $ 9.45 $ 9.27 $ 9.12 $ 9.81 $ 8.80 $ 7.87 $ 10.43 $10.22
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .57 .59 .62 .64 .66 .65(2) .77(2) .69 .69 .70 .50 .41
Net realized and unrealized
gain (loss) on investments (1.52) .74 .25 .45 (.12) .20 .07 (.70) .99 .91 (1.52) .43
------ ------ ------ ------- ------ ------ ------- ------ ------ ------ ------- ------
Total income (loss) from
investment operations (.95) 1.33 .87 1.09 .54 .85 .84 (.01) 1.68 1.61 (1.02) .84
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (.56) (.62) (.58) (.65) (.66) (.67) (.69) (.68) (.67) (.68) (.49) (.42)
Distributions from net
realized gain on
investments -- (.21) (.12) -- -- -- -- -- -- -- -- (.21)
Distributions in excess
of net realized gain
on investments --(3) -- -- -- -- -- -- -- -- -- --(3) --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total dividends and
distributions
to shareholders (.56) (.83) (.70) (.65) (.66) (.67) (.69) (.68) (.67) (.68) (.49) (.63)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $ 8.93 $10.44 $ 9.94 $ 9.77 $ 9.33 $ 9.45 $ 9.27 $ 9.12 $ 9.81 $ 8.80 $ 8.92 $10.43
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
=================================================================================================================================
Total Return,
at Net Asset Value(4) (9.19)% 13.79% 9.20% 12.11% 5.93% 9.42% 10.03% .00% 19.75% 21.38% (9.91)% 8.49%
=================================================================================================================================
Ratios/Supplemental Data:
Net assets,
end of period,
(in thousands) $541,161 $608,128 $496,628 $394,115 $256,542 $223,904 $172,227 $133,508 $132,234 $93,993 $53,245 $33,024
- ---------------------------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $582,038 $567,777 $438,684 $319,081 $238,224 $202,216 $150,901 $135,052 $112,189 $80,974 $46,548 $16,444
- ---------------------------------------------------------------------------------------------------------------------------------
Number of shares
outstanding at
end of period
(in thousands) 60,634 58,277 49,964 40,356 27,505 23,699 18,581 14,633 13,480 10,681 5,972 3,166
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to average net
assets:
Net investment income 5.94% 5.71% 6.34% 6.70% 7.08% 7.18% 7.48% 7.41% 7.33% 8.36% 5.11% 4.54%(5)
Expenses .88% .88% .94% .89% .89% .82%(2) .72%(2) .78% .78% .82% 1.69% 1.74%(5)
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 21.7% 30.2% 34.2% 23.5% 29.3% 57.2% 22.9% 29.4% 27.8% 210.7% 21.7% 30.2%
<FN>
1. For the period from March 16, 1993 (inception of offering) to December 31, 1993.
2. Net investment income would have been $.64 and $.76 absent the voluntary assumption of expenses,
resulting in an expense ratio of .84% and .80% for 1989 and 1988, respectively.
3. Less than .005 per share.
4. Assumes a hypothetical initial investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day of the fiscal period.
Sales charges are not reflected in the total returns.
5. Annualized.
6. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly
average of the market value of portfolio securities owned during the period. Securities with a
maturity or expiration date at the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding short-term securities) for the
year ended December 31, 1994 were $156,047,252 and $135,336,771, respectively.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
17 Oppenheimer Tax-Free Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant
Accounting Policies
Oppenheimer Tax-Free Bond 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 advisor is Oppenheimer Management
Corporation (the Manager). The Fund offers both Class A and Class B shares.
Class A shares are sold with a front-end sales charge. Class B shares may be
subject to a contingent deferred sales charge. Both classes of shares have
identical rights to earnings, assets and voting privileges, except that each
class has its own distribution and/or service plan, expenses directly
attributable to a particular class and exclusive voting rights with respect to
matters affecting a single class. Class B shares will automatically convert to
Class A shares six years after the date of purchase. The following is a summary
of significant accounting policies consistently followed by the Fund.
- --------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued at 4:00 p.m. (New York
time) on each trading day. Listed and unlisted securities for which such
information is regularly reported are valued at the last sale price of the day
or, in the absence of sales, at values based on the closing bid or asked price
or the last sale price on the prior trading day. Long-term debt securities are
valued by a portfolio pricing service approved by the Board of Directors.
Long-term debt securities which cannot be valued by the approved portfolio
pricing service are valued using dealer-supplied valuations provided the Manager
is satisfied that the firm rendering the quotes is reliable and that the quotes
reflect current market value, or under consistently applied procedures
established by the Board of Directors to determine fair value in good faith.
Short-term 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.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses and Gains and Losses. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
Federal Income 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 tax provision is required. At December 31, 1994, the Fund had
available for federal income tax purposes an unused capital loss carryover of
approximately $193,000 which will expire in 2002.
- --------------------------------------------------------------------------------
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
December 31, 1994, a provision of $4,153 was made for the Fund's projected
benefit obligations, resulting in an accumulated liability for the Fund's
projected benefit obligations was $103,524 at December 31, 1994. No payments
have been made under the plan.
- --------------------------------------------------------------------------------
Distributions to Shareholders. The Fund intends to declare dividends separately
for Class A and Class B shares from net investment income each day the New York
Stock Exchange is open for business and pay such dividends monthly.
Distributions from net realized gains on investments, if any, will be declared
at least once each year.
- --------------------------------------------------------------------------------
Change in Accounting 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 premium amortization. The
character of the distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. Also, due to timing of dividend distributions, the
fiscal year in which amounts are distributed may differ from the year that the
income or realized gain (loss) was recorded by the Fund. Effective January 1,
1994, the Fund adopted Statement of Position 93-2: Determination, Disclosure,
and Financial Statement Presentation of Income, Capital Gain, and Return of
Capital Distributions by Investment Companies. As a result, the Fund changed the
classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions determined in
accordance with income tax regulations. Accordingly, subsequent to December 31,
1993, amounts have been reclassified to reflect a decrease in paid-in capital of
$678,494, a decrease in undistributed net investment income of $1,270,564, and a
decrease in accumulated net realized loss on investments of $1,949,058. During
the year ended December 31, 1994, in accordance with Statement of Position 93-2,
undistributed net investment income was decreased by $182,000 and accumulated
net realized loss on investments was decreased by $182,000.
18 Oppenheimer Tax-Free Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting
Policies (continued)
Other. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date). Original issue discount on securities purchased
is amortized over the life of the respective securities, in accordance with
federal income tax requirements. Realized gains and losses on investments and
unrealized appreciation and depreciation are determined on an identified cost
basis, which is the same basis used for federal income tax purposes. For bonds
acquired after April 30, 1993, accrued market discount is recognized at maturity
or disposition as taxable ordinary income. Taxable ordinary income is realized
to the extent of the lesser of gain or accrued market discount.
================================================================================
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 December 31, 1994 Year Ended December 31, 1993(1)
---------------------------- ------------------------------
Shares Amount Shares Amount
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 11,090,618 $ 105,903,608 16,347,891 $ 168,337,919
Issued in connection with the
acquisition of MI Fund, Inc.--Note 5 3,087,731 29,920,109 -- --
Dividends and distributions reinvested 2,417,816 22,986,092 3,051,532 31,643,836
Redeemed (14,239,737) (134,274,825) (11,086,654) (114,620,114)
----------- ------------- ----------- -------------
Net increase 2,356,428 $ 24,534,984 8,312,769 $ 85,361,641
=========== ============= =========== =============
-----------------------------------------------------------------------------------------------------
Class B:
Sold 3,851,883 $ 36,866,795 3,182,952 $ 33,155,886
Dividends and distributions reinvested 167,254 1,573,591 85,584 893,967
Redeemed (1,213,330) (11,294,781) (102,363) (1,075,877)
----------- ------------- ----------- -------------
Net increase 2,805,807 $ 27,145,605 3,166,173 $ 32,973,976
=========== ============= =========== =============
<FN>
1. For the year ended December 31, 1993 for Class A shares and for the period from March 16, 1993
(inception of offering) to December 31, 1993 for Class B shares.
</FN>
</TABLE>
================================================================================
3. Unrealized Gains and
Losses on Investments
At December 31, 1994, net unrealized depreciation on investments of $41,582,172
was composed of gross appreciation of $9,747,982, and gross depreciation of
$51,330,154.
================================================================================
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 .60% on the
first $200 million of net assets, .55% on the next $100 million, .50% on the
next $200 million, .45% on the next $250 million, .40% on the next $250 million
and .35% on net assets in excess of $1 billion. The Manager has agreed to assume
Fund expenses (with specified exceptions) in excess of the most stringent
applicable regulatory limit on Fund expenses.
19 Oppenheimer Tax-Free Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
4. Management Fees and
Other Transactions
With Affiliates
(continued)
For the year ended December 31, 1994, commissions (sales charges paid by
investors) on sales of Class A shares totaled $1,907,642, of which $543,625 was
retained by Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an affiliated broker/dealer. During the
year ended December 31, 1994, OFDI received contingent deferred sales charges of
$110,160 upon redemption of Class B shares.
Oppenheimer Shareholder Services (OSS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund, and for other registered
investment companies. OSS's total costs of providing such services are allocated
ratably to these companies.
Under separate approved plans, each class may expend up to .25% of its net
assets annually to reimburse OFDI for costs incurred in connection with the
personal service and maintenance of accounts that hold shares of the Fund,
including amounts paid to brokers, dealers, banks and other financial
institutions. In addition, Class B shares are subject to an asset-based sales
charge of .75% of net assets annually, to reimburse OFDI for sales commissions
paid from its own resources at the time of sale and associated financing costs.
In the event of termination or discontinuance of the Class B plan, the Board of
Trustees may allow the fund to continue payment of the asset-based sales charge
to OFDI for distribution expenses incurred on Class B shares sold prior to
termination or discontinuance of the plan. During the year ended December 31,
1994, OFDI paid $104,014 and $2,274, respectively, to an affiliated
broker/dealer as reimbursement for Class A and Class B personal service and
maintenance expenses and retained $437,276 as reimbursement for Class B sales
commissions and service fee advances, as well as financing costs.
================================================================================
5. Acquisition of
MI Fund, Inc.
On March 31, 1994, Oppenheimer Tax-Free Bond Fund acquired all of the net assets
of MI Fund, Inc. (MI Fund), pursuant to an Agreement and Plan of Reorganization
approved by the MI shareholders on March 18, 1994. The Fund issued 3,087,731
shares of beneficial interest, valued at $29,920,109, in exchange for the net
assets, resulting in combined net assets of $636,205,208 on March 31, 1994. The
net assets acquired included net unrealized appreciation of $1,808,741. The
exchange was tax-free.
20 Oppenheimer Tax-Free Bond Fund
<PAGE>
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Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
The Board of Trustees and Shareholders of Oppenheimer Tax-Free Bond Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Tax-Free Bond Fund as of December 31, 1994, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the years in the two-year period then ended
and the financial highlights for each of the years in the ten-year period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994, by correspondence with the custodian. 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 Tax-Free Bond Fund as of December 31, 1994, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the ten-year period then ended, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Denver, Colorado
January 23, 1995
21 Oppenheimer Tax-Free Bond Fund
<PAGE>
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Federal Income Tax Information (Unaudited)
- --------------------------------------------------------------------------------
================================================================================
In early 1995, shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1994. Regulations of
the U.S. Treasury Department require the Fund to report this information to the
Internal Revenue Service.
A distribution of $.0044 per share was paid on May 10, 1994, which was
designated as a ``capital gain distribution'' for federal income tax purposes.
Whether received in stock or cash, the capital gain distribution should be
treated by shareholders as a gain from the sale of capital assets held for more
than one year (long-term capital gains).
None of the dividends paid by the Fund during the fiscal year ended
December 31, 1994 are eligible for the corporate dividend-received deduction.
The dividends were derived from interest on municipal bonds and are not subject
to federal income tax. To the extent a shareholder is subject to any state or
local tax laws, some or all of the dividends received may be taxable.
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.
22 Oppenheimer Tax-Free Bond Fund
<PAGE>
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Oppenheimer Tax-Free Bond Fund
- --------------------------------------------------------------------------------
================================================================================
Officers and Trustees Leon Levy, Chairman of the Board of Trustees
Leo Cherne, Trustee
Robert G. Galli, Trustee
Benjamin Lipstein, Trustee
Elizabeth B. Moynihan, Trustee
Kenneth A. Randall, Trustee
Edward V. Regan, Trustee
Russell S. Reynolds, Jr., Trustee
Sidney M. Robbins, Trustee
Donald W. Spiro, Trustee and President
Pauline Trigere, Trustee
Clayton K. Yeutter, Trustee
Robert E. Patterson, Vice President
George C. Bowen, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott Farrar, Assistant Treasurer
Andrew J. Donohue, Secretary
Robert G. Zack, Assistant Secretary
================================================================================
Investment Advisor Oppenheimer Management Corporation
================================================================================
Distributor Oppenheimer Funds Distributor, Inc.
================================================================================
Transfer and Shareholder Oppenheimer Shareholder Services
Servicing Agent
================================================================================
Custodian of Citibank, N.A.
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 Tax-Free Bond Fund.
This report must be preceded or accompanied by a Prospectus of Oppenheimer
Tax-Free Bond Fund. For material information concerning the Fund, see the
Prospectus.
23 Oppenheimer Tax-Free Bond Fund
<PAGE>
"How may I help you?"
As an OppenheimerFunds shareholder, some special privileges are available to
you. 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
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Information number.
When you want to make a transaction, you can do it easily by calling
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and your bank checking or savings account, you can use the Telephone
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For added convenience, you can get auto-mated 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 infor-
mation. It also gives you the ability to make transactions using your touch-tone
phone. Of course, you can always speak with a Customer Service Representative
during business hours.
You can count on us whenever you need assistance. That's why the
International Customer Service Association, an indepen-dent, non-profit
organization made up of over 3,200 customer service management professionals
from around the country, hon-ored the OppenheimerFunds' transfer agent,
Oppenheimer Shareholder Services, with their Award of Excellence in 1993.
So call us today--we're here to help.
Jennifer Leonard, Customer Service Representative
Oppenheimer Shareholder Services
Information
General Information
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