[FRONT COVER]
Oppenheimer Tax-Free Bond Fund
Annual Report July 31, 1996
[Picture of Shopping Couple]
"We want
investment
income
that won't add
to our taxes."
[Oppenheimer Logo]
<PAGE>
Yield
Standardized Yields
For the 30 Days Ended 7/31/96:(3)
Class A
4.94%
Class B
4.41%
Class C
4.38%
Beat the Average
Total Return for the 1-Year Period
Ended 7/31/96:
Oppenheimer Tax-Free Bond
Fund (at net asset value)
7.17%
Lipper General Municipal Debt
Fund Average(4)
5.90%
This Fund is for people who need a source of income that's exempt from current
federal taxes.
How Your Fund Is Managed
Oppenheimer Tax-Free Bond Fund invests in a diversified portfolio of 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.
Tax-Free Bond Fund is managed by an experienced team of municipal bond
specialists who research investments thoroughly before they are included in the
Fund's portfolio.
Performance
Your Fund's average annual total returns at maximum offering price for Class A
shares for the 1-, 5-, and 10-year periods ended 7/31/96 were 2.07%, 6.12% and
7.03%, respectively. For Class B shares, average annual total returns for the
1-year period ended 7/31/96 and since inception of the Class on 3/16/93 were
1.37% and 3.75%, respectively. For Class C shares, cumulative total return since
inception on 8/29/95 was 5.06%.(2)
Outlook
"We think the outlook is positive. From our perspective, the economic growth
rate that set off increases in interest rates will not be enough to make
inflation a serious concern. Thus, we expect any further increase in interest
rates in the near future will be moderate and that the general bond market could
strengthen later in the year."
Robert Patterson, Portfolio Manager
July 31, 1996
Total returns include change in share price and reinvestment of dividends and
capital gains distributions. 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. For more complete information, please review the
prospectus carefully before you invest.
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. Class A returns show results of hypothetical investments on 7/31/95, 7/31/91
and 7/31/86, after deducting the current maximum initial sales charge of 4.75%.
Class B returns show results of hypothetical investments on 7/31/95 and 3/16/93
(inception of class), after the deduction of the applicable contingent deferred
sales charge of 5% (1-year) and 3% (since inception). Class C return shows
results of a hypothetical investment on 8/29/95 (inception of class), after the
deduction of the 1% contingent deferred sales charge. When such returns are
calculated in the same manner for the period ended 6/30/96, they are as follows:
for Class A shares, 1.33%, 6.20%, and 6.98% for the 1-, 5-, and 10-year periods;
for Class B shares, 0.49% and 3.43% for the 1-year period and since inception of
the class; and for Class C shares, cumulative total return since inception of
the class was 3.67%. An explanation of the different performance calculations is
in the Fund's prospectus.
3. Standardized yield is net investment income calculated on a yield-to-maturity
basis for the 30-day period ended 7/31/96, divided by the maximum offering price
at the end of the period, compounded semiannually and then annualized. Falling
net asset values will tend to artificially raise yields.
4. Source: Lipper Analytical Services. The Lipper total return average for the
1-year period was for 225 general municipal debt funds. The average is shown for
comparative purposes only. Oppenheimer Tax-Free Bond Fund is characterized by
Lipper as a general municipal debt fund. Lipper performance does not take sales
charges into consideration.
2 Oppenheimer Tax-Free Bond Fund
<PAGE>
[Photo of Bridget A. Macaskill]
[Caption]Bridget A. Macaskill
President
Oppenheimer
Tax-Free Bond Fund
Dear Shareholder,
While municipal bonds have been affected by the concern over inflation in recent
months, we believe that the outlook remains favorable--especially if you're in a
high tax bracket.
Let's review the first half of the year. The most widely quoted interest
rate on long-term bonds, the benchmark 30-year U.S. Treasury bond, rose from 6%
in January to 7% by mid-year. Municipal bond yields tend to track Treasuries
pretty closely, yielding slightly less--about 80-85% of Treasuries--because
their interest is free from federal income tax. But during those six months,
yields on muni bonds rose proportionately, increasing their after-tax advantage.
So, while the current rise in interest rates over the past six months
pushed bond prices lower, our outlook for the rest of the year is much more
positive. Although the prices of food and gas, the most common gauges of
inflation, have increased recently, we believe that inflation is likely to
remain under control. We feel that food production will be able to meet demand
and, unlike previous energy disruptions, there doesn't appear to be a shortage
of crude oil in the world today. Thus, we are confident that the general
long-term trend is for moderate growth and low inflation. And while we
anticipate that interest rates will fluctuate over the near term, we feel bond
market conditions should improve in the coming months.
A number of other developments bode well for the municipal bond market. The
first is the muni bond's continuing status as one of the few true remaining tax
shelters, as earlier proposals for flat tax legislation seem to have quieted
down considerably. Another factor favorably impacting the municipal bond market
is the strengthening financial condition of many municipalities throughout the
United States. This is particularly true of California, which is one of the
nation's largest issuers of municipal bonds.
Finally, the tax-free market is also benefiting from a shrinking supply of
securities. About ten years ago, a surge of municipal bond issuance occurred
just prior to the Tax Reform Act of 1986. By today's standards, these bonds paid
very high interest. This year, billions of dollars worth of these bonds are
being redeemed by issuers who were contractually obligated to wait at least ten
years to "call" them. As a result, the supply of securities is falling, and the
former bondholders are receiving cash which they will either reinvest in the
municipal bond market or place elsewhere.
All things considered--the prospect of lower interest rates, the
diminishing likelihood of major tax legislation, the strengthening economies of
states and localities, as well as the shrinking supply of securities--the
outlook is very positive for municipal bond investors.
Your portfolio managers discuss the outlook for your Fund in light of these
broad issues on the following pages. Thank you for your confidence in
OppenheimerFunds. We look forward to helping you reach your investment goals in
the future.
/s/ Bridget A. Macaskill
Bridget A. Macaskill
August 21, 1996
3 Oppenheimer Tax-Free Bond Fund
<PAGE>
[Pictures of Robert Patterson with Len Darling (left) and Michael Maciolek
(right)]
Q + A
Q What areas are you currently targeting?
An interview with your Fund's managers.
How has the Fund performed over the past year?
The bond market, during much of the period, weakened due in large part to
investors' concerns that the economy was strengthening and that interest rates
would rise over the near term. Our year-to-date performance, in contrast to the
prevailing environment, has been strong, especially in comparison with our
peers. Because of strategic positioning decisions we made going into this
period, we ranked 27th against a peer group of 225 other ranked national
tax-free bond funds.(1)
What investment strategies made positive contributions to performance?
A major factor on the Fund's performance was our emphasis in pre-refunded bonds,
with shorter maturities, which performed extremely well versus other municipal
bonds. Because these issuers have escrowed money to repay bond holders,
pre-refunded bonds have low credit risk and are less sensitive to changes in
interest rates. With interest rates rising over much of the period, these bonds
performed extremely well compared to longer-term municipal bonds.
Another factor in our strong relative performance was the small percentage
we owned of municipal bonds trading at a discount. Discount bonds tend to be
more volatile than bonds trading at par or a premium and they tend to suffer
significant price declines when interest rates are rising.
Our shorter-than-average duration, a measure of the portfolio's price
sensitivity, was particularly helpful in a rising rate environment. While a long
duration strategy can benefit bond investors when rates decline, the opposite is
typically true when rates rise. Finally, a relatively limited supply of new
municipal bonds coupled with
[Picture of Caryn Halbrecht]
1. Source: Lipper Analytical Services 7/31/96. This comparison does not take
sales charges into consideration.
4 Oppenheimer Tax-Free Bond Fund
<PAGE>
[Captions]
Facing page
Top left: Robert Patterson,
Portfolio Manager, with Len Darling,
Executive VP, Director of Fixed
Income Investments
Top right: Michael Maciolek,
Securities Analyst
Bottom: Caryn Halbrecht, Vice
President, Tax-Exempt
Portfolio Manager
This page
Top right: Robert Patterson
Bottom: Caryn Halbrecht with Donna
Compert, Municipal Securities Trader
A
We continue to look for
high-income opportunities
across the board.
steady demand further enhanced our performance.(2)
Did any investment perform poorly?
As always, our philosophy is to diversify the Fund's assets across a broad range
of fixed-income securities. Unfortunately, our holdings in long-term municipal
bonds underperformed other municipal bond sectors. But, we lowered our
weightings in this sector over the past six months, which helped the Fund's
performance. Should rates turn around and begin to head lower again, these bonds
would typically have the potential to appreciate significantly.
What areas are you currently targeting?
Because we believe the market and interest rate environment will be slightly
better later in the year, we're buying securities with a higher degree of
exposure to the market. We're buying some longer-term bonds that tend to be more
volatile, but have the potential to outperform shorter-term bonds. At the same
time, by maintaining a diversified portfolio, we're taking appropriate measures
to offset the possibility that rates may continue to rise.
We've also been buying bonds issued by projects and localities that are
well-positioned to benefit from ongoing regional economic recovery. In
particular, we purchased airport bonds in Texas, correctional facilities bonds
in California, as well as New York City bonds where we think budget concerns
have caused prices to become overly discounted. Finally, we continue to look for
high-income opportunities across the board, conducting careful research and
trying to lock in our income using bonds with call-protection whenever possible.
[Picture of Robert Patterson]
What is your outlook for the Fund?
We think the outlook is positive. From our perspective, the economic growth rate
that set off increases in interest rates will not be enough to make inflation a
serious concern. Thus, we expect any further increase in interest rates in the
near future will be moderate and that the general bond market could strengthen
later in the year.[solid box]
[Picture of Caryn Halbrecht with Donna Compert]
2. The Fund's portfolio is subject to change.
5 Oppenheimer Tax-Free Bond Fund
<PAGE>
Financials
Contents
Statement of Investments 7
Statement of Assets and Liabilities 15
Statements of Operations 16
Statements of Changes in Net Assets 17
Financial Highlights 18
Notes to Financial Statements 20
Independent Auditors' Report 24
Federal Income Tax Information 25
6 Oppenheimer Tax-Free Bond Fund
<PAGE>
Statement of Investments July 31, 1996
<TABLE>
<CAPTION>
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
<S> <C> <C> <C>
====================================================================================================================================
Municipal Bonds and Notes--97.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Alabama--1.1% Huntsville, Alabama Health Care Authority
Health Care Facilities Revenue Bonds, Series B,
MBIA Insured, 6.625%, 6/1/23 Aaa/AAA $ 7,235,000 $ 7,668,571
- ------------------------------------------------------------------------------------------------------------------------------------
Arizona--1.0% Arizona State Health Facilities Authority Hospital
System Revenue Refunding Bonds, Phoenix Memorial
Hospital, 8.20%, 6/1/21 NR/BBB 300,000 323,671
--------------------------------------------------------------------------------------------------------------
Central Arizona Irrigation & Drainage District General
Obligation Refunding Bonds, Series A, 6%, 6/1/13 NR/NR 1,094,150 989,811
--------------------------------------------------------------------------------------------------------------
Navajo County, Arizona Industrial Development
Authority Revenue Bonds, Stone Container Corp.
Project, 7.40%, 4/1/26 NR/NR 5,000,000 5,077,309
------------
6,390,791
- ------------------------------------------------------------------------------------------------------------------------------------
California--13.0% California Health Facilities Financing
Authority Revenue Bonds:
Episcopal Homes Project, Series A,
7.80%, 7/1/15 NR/A 1,000,000 1,066,046
Refunding, Hospital of the Good Samaritan, 7%, 9/1/21 Baa/A- 1,315,000 1,384,471
--------------------------------------------------------------------------------------------------------------
California Housing Finance Agency Home Mtg. Revenue Bonds:
Series C, 6.65%, 8/1/14 Aa/AA- 5,000,000 5,215,025
Series C, 6.75%, 2/1/25 Aa/AA- 4,990,000 5,222,559
--------------------------------------------------------------------------------------------------------------
California State General Obligation Bonds:
Prerefunded, 7%, 11/1/12 Aaa/AAA 700,000 811,728
Unrefunded Balance, FGIC Insured, 7%, 11/1/12 Aaa/AAA 25,000 28,421
--------------------------------------------------------------------------------------------------------------
California State Public Works Board Lease Revenue Bonds:
Department of Corrections, Series A,
AMBAC Insured, 5.50%, 1/1/14 Aaa/AAA/AAA 11,750,000 11,504,694
Department of Corrections, Series A, AMBAC
Insured, 5.50%, 1/1/17 Aaa/AAA/AAA 6,000,000 5,827,811
Regents of the University of California, Series A,
AMBAC Insured, 6.40%, 12/1/16 Aaa/AAA/AAA 8,700,000 9,075,247
--------------------------------------------------------------------------------------------------------------
Foothill/Eastern Transportation Corridor Agency
California Toll Road Revenue Bonds, Sr. Lien, Series A,
6.50%, 1/1/32 Baa/BBB-/BBB 10,500,000 10,594,080
--------------------------------------------------------------------------------------------------------------
Industry, California Urban Development Agency Tax
Allocation Bonds, Transportation Distribution Project No.
3, 6.90%, 11/1/07 NR/A- 500,000 534,682
--------------------------------------------------------------------------------------------------------------
Los Angeles County, California Certificates of
Participation, Correctional Facilities Project, MBIA
Insured, 6.50%, 9/1/13 Aaa/AAA 740,000 772,344
--------------------------------------------------------------------------------------------------------------
Los Angeles, California Regional Airports Improvement
Corp. Lease Revenue Refunding Bonds, Facilities
Sublease-International Airport Project, 6.35%, 11/1/25 Baa3/BB+ 8,930,000 9,009,860
--------------------------------------------------------------------------------------------------------------
Pomona, California Single Family Mtg. Revenue
Refunding Bonds, Escrowed to Maturity,
Series A, 7.60%, 5/1/23 NR/AAA 6,000,000 7,260,858
7 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
====================================================================================================================================
California Redding, California Electric System Revenue
(continued) Certificates of Participation, FGIC Insured,
Inverse Floater, 7.484%, 6/1/19(1) Aaa/AAA/AAA $ 6,000,000 $ 5,520,456
--------------------------------------------------------------------------------------------------------------
San Joaquin Hills, California Transportation Corridor
Agency Toll Road Revenue Bonds, Sr. Lien, 6.75%, 1/1/32 NR/NR/BBB 12,700,000 13,009,752
------------
86,838,034
- ------------------------------------------------------------------------------------------------------------------------------------
Colorado--1.0% Colorado Health Facilities Authority Revenue Bonds,
Rocky Mountain Adventist Health System, 6.625%, 2/1/22 Baa/BBB 5,000,000 5,028,999
--------------------------------------------------------------------------------------------------------------
Colorado Student Obligation Bond Authority
Student Loan Revenue Bonds, Series C, 7.15%, 9/1/06 A/NR 1,000,000 1,094,422
--------------------------------------------------------------------------------------------------------------
Jefferson County, Colorado School District No. R-001,
AMBAC Insured, 6.25%, 12/15/12 Aaa/AAA/AAA 500,000 525,628
----------
6,649,049
- ------------------------------------------------------------------------------------------------------------------------------------
Florida--5.4% Broward County, Florida Resource Recovery
Revenue Bonds:
Broward Waste Energy-LP North Project,
7.95%, 12/1/08 A/A 5,955,000 6,573,075
Ses Broward Co.-LP South Project, 7.95%, 12/1/08 A/A- 9,810,000 10,828,189
-------------------------------------------------------------------------------------------------------------
Dade County, Florida Industrial Development Authority
Revenue Bonds, Miami Cerebral
Palsy Services Project, 8%, 6/1/22 NR/NR 1,000,000 1,026,481
--------------------------------------------------------------------------------------------------------------
Florida Housing Finance Agency Revenue Refunding
Bonds, Single Family Mtg., Series A, 6.35%, 7/1/14 Aaa/AA 920,000 947,904
--------------------------------------------------------------------------------------------------------------
Florida State Board of Education Capital Outlay General
Obligation Refunding Bonds, 8.40%, 6/1/07 Aa/AA 750,000 948,223
--------------------------------------------------------------------------------------------------------------
Hillsborough County, Florida Industrial Development
Authority Pollution Control Revenue Refunding Bonds,
Tampa Electric Co. Project, 8%, 5/1/22 Aa3/AA/AA- 4,000,000 4,740,828
--------------------------------------------------------------------------------------------------------------
Tampa, Florida Water & Sewer Revenue Refunding
Bonds, 6.60%, 10/1/ Aaa/NR 9,950,000 10,958,830
----------
36,023,530
- ------------------------------------------------------------------------------------------------------------------------------------
Georgia--2.7% Municipal Electric Authority of Georgia
Special Obligation Bonds:
Fifth Crossover Series, Project One, 6.50%, 1/1/17 A/A 10,750,000 11,495,716
Fifth Crossover Series, Project One,
MBIA Insured, 6.50% 1/1/17 Aaa/AAA 1,000,000 1,088,109
Fourth Crossover Series, Project One,
MBIA Insured, 6.50%, 1/1/12 Aaa/AAA 500,000 537,970
--------------------------------------------------------------------------------------------------------------
Savannah, Georgia Economic Development Authority
Industrial Development Revenue Bonds,
Stone Container Corp. Project, 7.40%, 4/1/26 NR/NR 5,000,000 5,077,309
----------
18,199,104
- ------------------------------------------------------------------------------------------------------------------------------------
Hawaii--0.1% Honolulu, Hawaii City & County General
Obligation Bonds, Series B, 6.10%, 6/1/11 Aa/AA 500,000 518,661
8 Oppenheimer Tax-Free Bond Fund
<PAGE>
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
Illinois--1.2% Chicago, Illinois O'hare International Airport
Revenue Bonds, Passenger Facility Charge,
Series A, 5.625%, 1/1/15 Aaa/AAA/AAA $ 5,000,000 $ 4,865,625
--------------------------------------------------------------------------------------------------------------
Hoffman Estates, Illinois Tax Increment Revenue Bonds,
Economic Development Project, 7.625%, 11/15/09 Aaa/AAA 825,000 912,335
--------------------------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Revenue Bonds,
Hinsdale Hospital Project, Unrefunded Balance,
Series C, 9.50%, 11/15/19 Baa1/BBB 970,000 1,133,305
--------------------------------------------------------------------------------------------------------------
Regional Transportation Authority of Illinois Revenue
Bonds, Series A, AMBAC Insured, 7.20%, 11/1/20 Aaa/AAA/AAA 1,000,000 1,160,690
-----------
8,071,955
- ------------------------------------------------------------------------------------------------------------------------------------
Indiana--3.1% Indianapolis, Indiana Airport Authority
Revenue Bonds, Special Facilities:
Federal Express Corp. Project, 7.10%, 1/15/17 Baa2/BBB 10,000,000 10,539,229
United Airlines Project, Series A, 6.50%, 11/15/31 Baa2/BB 10,500,000 10,441,074
-----------
20,980,303
- ------------------------------------------------------------------------------------------------------------------------------------
Kentucky--0.4% Kenton County, Kentucky Airport Board Revenue
Bonds, Special Facilities-Delta Air Lines Project,
Series A, 6.125%, 2/1/22 Ba1/BB+ 2,790,000 2,689,032
- ------------------------------------------------------------------------------------------------------------------------------------
Louisiana--1.7% Louisiana Public Facilities Authority Gtd. Student Loan
Revenue Refunding Bonds, Series A-2, 6.75%, 9/1/06 Aa/NR 1,000,000 1,057,907
--------------------------------------------------------------------------------------------------------------
New Orleans, Louisiana Home Mtg. Authority
Special Obligation Refunding Bonds,
Escrowed to Maturity, 6.25%, 1/15/11 Aaa/AAA 9,500,000 10,067,320
-----------
11,125,227
- ------------------------------------------------------------------------------------------------------------------------------------
Maine--0.1% Maine Educational Loan Marketing Corp. Student Loan
Revenue Refunding Bonds, 6.90%, 11/1/03 A/NR/A+ 500,000 534,861
- ------------------------------------------------------------------------------------------------------------------------------------
Maryland--0.1% University of Maryland System Auxiliary Facilities &
Tuition Revenue Refunding Bonds, Series A, 5.90%, 2/1/03 Aa/AA+/AA 500,000 529,542
- ------------------------------------------------------------------------------------------------------------------------------------
Massachusetts--5.1% Massachusetts Bay Transportation Authority Revenue
Refunding Bonds, General Transportation Systems,
Series A, 5.50%, 3/1/12 A1/A+/A+ 12,000,000 11,814,479
--------------------------------------------------------------------------------------------------------------
Massachusetts Municipal Wholesale Electric Co.
Revenue Bonds, Power Supply Systems, Prerefunded,
Series B, 6.75%, 7/1/17 Aaa/BBB+ 6,985,000 7,788,344
--------------------------------------------------------------------------------------------------------------
Massachusetts State General Obligation Refunding
Bonds, Series B, MBIA Insured, 6.50%, 8/1/11 Aaa/AAA/AAA 1,000,000 1,059,835
--------------------------------------------------------------------------------------------------------------
Massachusetts State Water Resource Authority
Revenue Bonds, Series A, 6.50%, 7/15/19 A/A/A 12,225,000 13,188,916
-----------
33,851,574
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
- ------------------------------------------------------------------------------------------------------------------------------------
Michigan--6.4% Charter County of Wayne, Michigan Special Airport
Facilities Revenue Refunding Bonds, Northwest
Airlines, Inc. Facilities, Series 1995, 6.75%, 12/1/15 NR/NR $10,500,000 $10,598,016
--------------------------------------------------------------------------------------------------------------
Detroit, Michigan General Obligation Refunding Bonds,
Series B:
6.25%, 4/1/09 Ba1/BBB 4,065,000 4,111,878
6.375%, 4/1/06 Ba1/BBB 2,000,000 2,075,760
6.375%, 4/1/07 Ba1/BBB 500,000 515,959
--------------------------------------------------------------------------------------------------------------
Detroit, Michigan Sewage Disposal Revenue Bonds,
FGIC Insured, Inverse Floater, 7.445%, 7/1/23(1) Aaa/AAA/AAA 13,200,000 12,168,603
--------------------------------------------------------------------------------------------------------------
Detroit, Michigan Water Supply System Revenue Bonds:
Prerefunded, FGIC Insured, Inverse Floater,
8.897%, 7/1/22(1) Aaa/AAA/AAA 3,700,000 4,408,454
Unrefunded Balance, FGIC Insured, Inverse Floater,
8.897%, 7/1/22(1) Aaa/AAA 1,500,000 1,564,986
--------------------------------------------------------------------------------------------------------------
Michigan Municipal Bond Authority Revenue
Refunding Bonds, Local Government Loan Program,
Series A, FGIC Insured, 6%, 12/1/13 Aaa/AAA/AAA 1,000,000 1,019,962
--------------------------------------------------------------------------------------------------------------
Michigan State Hospital Finance Authority
Revenue Refunding Bonds:
FSA Insured, Inverse Floater, 8.867%, 2/15/22(1) Aaa/AAA 5,000,000 5,161,189
Sisters of Mercy Hospital, Series H, MBIA Insured,
7.50%, 8/15/13 Aaa/AAA 1,000,000 1,060,320
-----------
42,685,127
- ------------------------------------------------------------------------------------------------------------------------------------
Minnesota--0.1% Western Minnesota Municipal Power Agency
Revenue Refunding Bonds, Series A, 7%, 1/1/13 A1/A 1,000,000 1,028,016
- ------------------------------------------------------------------------------------------------------------------------------------
New Hampshire--0.2% New Hampshire State Housing Finance Authority
Revenue Bonds, Single Family Mtg., Series C, 6.90%, 7/1/19 Aa/NR 1,000,000 1,033,996
- ------------------------------------------------------------------------------------------------------------------------------------
New Jersey--4.7% Bergen County, New Jersey Utilities Municipal
Authority Water Pollution Control Revenue Bonds,
Series A, FGIC Insured, 6.50%, 12/15/12(2) Aaa/AAA/AAA 5,600,000 5,987,934
--------------------------------------------------------------------------------------------------------------
New Jersey Health Care Facilities Financing Authority
Revenue Bonds, Southern Ocean County Hospital,
Series A, 6.25%, 7/1/23 Baa/NR/BBB 2,000,000 1,981,864
--------------------------------------------------------------------------------------------------------------
New Jersey State General Obligation Bonds,
Series D, 8%, 2/15/07 Aa1/AA+/AA+ 3,100,000 3,825,843
--------------------------------------------------------------------------------------------------------------
New Jersey State Housing & Mtg. Finance Agency
Multifamily Housing Revenue Bonds,
Series C, 9.75%, 11/1/27 NR/AA 1,000,000 1,029,074
--------------------------------------------------------------------------------------------------------------
New Jersey State Turnpike Authority Revenue Bonds:
Series C, 6.50%, 1/1/16 Baa1/BBB+/A- 16,150,000 17,475,559
Series C, Refunding, MBIA Insured, 6.50%, 1/1/16 Aaa/AAA 1,100,000 1,216,223
-----------
31,516,497
10 Oppenheimer Tax-Free Bond Fund
<PAGE>
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
New York--15.2% City of New York General Obligation:
Bonds:
Inverse Floater, 7.177%, 8/1/15(1) Baa1/BBB+ $ 3,050,000 $ 2,606,246
Prerefunded, Series A, 7.75%, 8/15/16 Aaa/BBB+/A- 1,375,000 1,584,865
Prerefunded, Series D, 8%, 8/1/15 Aaa/BBB+ 10,780,000 12,534,671
Unrefunded Balance, Series A, 7.75%, 8/15/16 Baa1/BBB+ 1,125,000 1,232,282
Unrefunded Balance, Series D, 8%, 8/1/15 Baa1/BBB+ 220,000 249,370
Refunding Bonds:
Series B, MBIA Insured, 6.20%, 8/15/06 Aaa/AAA 10,000,000 10,709,509
Series G, 7.625%, 2/1/15 Baa1/BBB+ 945,000 1,059,053
--------------------------------------------------------------------------------------------------------------
City of New York Industrial Development Agency
Special Facilities Revenue Bonds,
Terminal One Group Assn. Project, 6%, 1/1/19 A/A/A- 6,000,000 5,898,077
--------------------------------------------------------------------------------------------------------------
Dormitory Authority of the State of New York Revenue:
Bonds:
City University System, Prerefunded, Series A,
7.625%, 7/1/20 Aaa/BBB 9,500,000 10,716,266
City University System, Prerefunded, Series F,
7.875%, 7/1/07 Aaa/BBB 3,005,000 3,416,426
State University Educational Facilities, Prerefunded,
Series A, 7.625%, 5/15/05 NR/AAA/A 3,000,000 3,378,723
Refunding Bonds, State University Educational Facilities:
Prerefunded, Series A, 7.70%, 5/15/12 Aaa/BBB+/A 5,000,000 5,637,514
Series A, 5.50%, 5/15/07 Baa1/BBB+/A 1,000,000 992,689
--------------------------------------------------------------------------------------------------------------
New York State General Obligation Bonds, 6.875%, 3/1/12 A/A- 1,000,000 1,091,423
--------------------------------------------------------------------------------------------------------------
New York State Housing Finance Agency
Revenue Refunding Bonds:
New York City Health Facilities, Series A, 6%, 5/1/08 Baa/BBB+ 2,000,000 1,978,224
New York City Health Facilities, Series A, 6%, 11/1/06 Baa/BBB+ 4,000,000 3,984,440
Unrefunded Balance, 7.90%, 11/1/99 Baa2/BBB+ 5,450,000 5,887,531
--------------------------------------------------------------------------------------------------------------
New York State Local Government Assistance Corp.
Revenue Bonds:
Prerefunded, Series A, 7%, 4/1/16 Aaa/AAA/AAA 10,350,000 11,553,756
Prerefunded, Series B, 7.375%, 4/1/12 Aaa/AAA 3,750,000 4,243,818
Series A, 7.125%, 4/1/11 A/A/A+ 745,000 819,814
Series D, 7%, 4/1/11 A/A/A+ 900,000 993,405
--------------------------------------------------------------------------------------------------------------
New York State Mtg. Agency Revenue Bonds,
Ninth Series B, 8.30%, 10/1/17 Aa/NR 1,715,000 1,751,068
--------------------------------------------------------------------------------------------------------------
New York State Power Authority Revenue Bonds,
Series V, 7.875%, 1/1/07 Aa/AA 3,000,000 3,192,990
--------------------------------------------------------------------------------------------------------------
New York State Thruway Authority Highway &
Bridge Trust Fund Revenue Bonds, Series A,
MBIA Insured, 5.50%, 4/1/15 Aaa/AAA/A+ 4,000,000 3,877,208
--------------------------------------------------------------------------------------------------------------
Port Authority of New York & New Jersey Consolidated
Revenue Bonds, Series Fifty-One E, 7%, 12/1/14 A1/NR 2,000,000 2,073,458
-------------
101,462,826
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
- ------------------------------------------------------------------------------------------------------------------------------------
Ohio--2.6% Cleveland, Ohio Public Power System First Mtg.
Revenue Bonds, Series A, MBIA Insured, 7%, 11/15/16 Aaa/AAA $ 2,000,000 $ 2,200,320
--------------------------------------------------------------------------------------------------------------
Northeast Ohio Regional Sewer District Wastewater
Revenue Bonds, AMBAC Insured, 6.50%, 11/15/16 Aaa/AAA/AAA 1,000,000 1,094,107
--------------------------------------------------------------------------------------------------------------
Ohio Housing Finance Agency Single Family Mtg.
Revenue Bonds, Series B, Inverse Floater, 9.872%, 3/1/31(1) Aaa/AAA 5,630,000 5,888,433
-------------------------------------------------------------------------------------------------------------
Ohio State Building Authority Revenue Bonds,
Juvenile Correctional Projects, Series A,
AMBAC Insured, 6.60%, 10/1/14 Aaa/AAA/AAA 500,000 534,310
--------------------------------------------------------------------------------------------------------------
Ohio State Solid Waste Revenue Bonds,
Republic Engineered Steels, Inc. Project, 9%, 6/1/21 NR/NR 6,000,000 6,112,350
--------------------------------------------------------------------------------------------------------------
Summit County, Ohio General Obligation
Revenue Bonds, 6.625%, 12/1/12 Aaa/AAA/AAA 1,200,000 1,274,151
------------
17,103,671
- ------------------------------------------------------------------------------------------------------------------------------------
Oklahoma--1.9% Muskogee, Oklahoma Industrial Trust Pollution Control
Revenue Bonds, Oklahoma Gas & Electric Co.,
Series A, 7%, 3/1/17 A1/AA- 1,575,000 1,619,347
--------------------------------------------------------------------------------------------------------------
Oklahoma State Industrial Authority Revenue Bonds,
Baptist Medical Center, Prerefunded, Series A,
AMBAC Insured, 7%, 8/15/14 Aaa/AAA/AAA 1,400,000 1,546,376
--------------------------------------------------------------------------------------------------------------
Tulsa, Oklahoma Municipal Airport Trust Revenue
Bonds, American Airline Project, 6.25%, 6/1/20 Baa2/BB+ 9,820,000 9,734,860
------------
12,900,583
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania--5.9% Delaware County, Pennsylvania Industrial Development
Authority Revenue Refunding Bonds,
Resource Recovery Project, Series A, 8.10%, 12/1/13 Aa3/AA- 3,320,000 3,473,765
--------------------------------------------------------------------------------------------------------------
Pennsylvania Economic Development Financing
Authority Resource Recovery Revenue Bonds,
Colver Project, Series D, 7.15%, 12/1/18 NR/BBB- 3,000,000 3,177,141
--------------------------------------------------------------------------------------------------------------
Pennsylvania State General Obligation Bonds,
Second Series A, 6.60%, 11/1/11 A1/AA-/AA- 810,000 863,402
--------------------------------------------------------------------------------------------------------------
Pennsylvania State Higher Education Assistance
Agency Student Loan Revenue Bonds:
Series B, AMBAC Insured, Inverse Floater,
8.397%, 3/1/22(1) Aaa/AAA/AAA 17,500,000 16,877,366
Series C, AMBAC Insured, 7.15%, 9/1/21 Aaa/AAA/AAA 500,000 549,323
--------------------------------------------------------------------------------------------------------------
Pennsylvania State Turnpike Commission
Revenue Refunding Bonds, Series N, 6.50%, 12/1/13 Aaa/AAA 750,000 799,730
--------------------------------------------------------------------------------------------------------------
Philadelphia, Pennsylvania Water & Sewer Revenue
Refunding Bonds, Escrowed to Maturity, Tenth
Series, 7.35%, 9/1/04 Aaa/AAA 2,230,000 2,497,707
--------------------------------------------------------------------------------------------------------------
Philadelphia, Pennsylvania Water & Wastewater
Revenue Bonds, FGIC Insured, 10%, 6/15/05 Aaa/AAA/AAA 6,100,000 8,112,908
--------------------------------------------------------------------------------------------------------------
Schuylkill County, Pennsylvania Industrial Development
Authority Resource Recovery Revenue Refunding
Bonds, Schuylkill Energy Resources, Inc., 6.50%, 1/1/10 NR/NR 2,910,000 2,904,637
------------
39,255,979
12 Oppenheimer Tax-Free Bond Fund
<PAGE>
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
South Carolina--2.4% Florence County, South Carolina Industrial Development
Revenue Bonds, Stone Container Project, 7.375%, 2/1/07 NR/NR $ 3,000,000 $ 3,085,284
--------------------------------------------------------------------------------------------------------------
Piedmont, South Carolina Municipal Power Agency
Electrical Revenue Refunding Bonds, Series A,
FGIC Insured, 6.50%, 1/1/16 Aaa/AAA/AAA 2,000,000 2,166,604
--------------------------------------------------------------------------------------------------------------
South Carolina State Public Service Authority
Revenue Bonds, Santee Cooper, Series D,
AMBAC Insured, 6.50%, 7/1/2 Aaa/AAA/AAA 10,000,000 11,044,460
------------
16,296,348
- ------------------------------------------------------------------------------------------------------------------------------------
Texas--13.2% Alliance Airport Authority, Inc.,
Texas Special Facility Revenue Bonds:
American Airlines, Inc. Project, 7%, 12/1/11 Baa2/BB+ 3,000,000 3,247,374
Federal Express Corp. Project, 6.375%, 4/1/21 Baa2/BBB 9,100,000 8,943,570
--------------------------------------------------------------------------------------------------------------
Cypress-Fairbanks, Texas Independent School District
General Obligation Capital Appreciation
Refunding Bonds, Series A, Zero Coupon:
5.886%, 2/15/14(3) Aaa/AAA 15,710,000 5,665,937
5.85%, 2/15/15(3) Aaa/AAA 15,000,000 5,104,273
5.908%, 2/15/16(3) Aaa/AAA 16,240,000 5,164,821
--------------------------------------------------------------------------------------------------------------
Dallas-Fort Worth, Texas International Airport Facility
Improvement Corp. Revenue Bonds,
American Airlines, Inc., 7.25%, 11/1/30 Baa2/BB+ 8,000,000 8,450,487
--------------------------------------------------------------------------------------------------------------
Harris County, Texas General Obligation Revenue
Refunding Bonds, Toll Road Project:
Sub Lien, 6.75%, 8/1/14 Aa/AA 1,000,000 1,079,736
Sub Lien, Series A, 6.50%, 8/15/15 Aa/AA 1,000,000 1,060,908
--------------------------------------------------------------------------------------------------------------
Houston, Texas Airport System Revenue Bonds,
Sub Lien, Series B, FGIC Insured, 6.625%, 7/1/22 Aaa/AAA/AAA 1,000,000 1,066,952
--------------------------------------------------------------------------------------------------------------
Houston, Texas Water & Sewer System
Revenue Refunding Bonds, Prior Lien, Series B:
6.40%, 12/1/09 A/A/A 1,000,000 1,041,789
6.75%, 12/1/08 A/A/A 500,000 535,989
--------------------------------------------------------------------------------------------------------------
North Central Texas Health Facility Development Corp.
Hospital Revenue Bonds, Baylor Health Care Project,
Series B, Inverse Floater:
7.65%, 5/15/06(1) Aa/AA 3,000,000 3,140,175
7.75%, 5/15/08(1) Aa/AA 5,000,000 5,218,310
--------------------------------------------------------------------------------------------------------------
Texas Municipal Power Agency Capital Appreciation
Revenue Refunding Bonds, MBIA Insured, Zero Coupon:
5.93%, 9/1/14(3) Aaa/AAA/A+ 17,500,000 6,157,951
5.85%, 9/1/15(3) Aaa/AAA/A+ 10,000,000 3,290,709
5.985%, 9/1/16(3) Aaa/AAA/A+ 39,990,000 12,318,477
--------------------------------------------------------------------------------------------------------------
Texas State General Obligation Bonds:
Prerefunded, 8.25%, 12/1/10 NR/AAA 5,940,000 6,643,254
Prerefunded, 8.30%, 12/1/16 NR/AAA 8,030,000 8,993,013
--------------------------------------------------------------------------------------------------------------
Veterans Housing Assistance Fund II,
Series A, 6.80%, 12/1/10 Aa/AA 1,000,000 1,035,903
-----------
88,159,628
13 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
- ------------------------------------------------------------------------------------------------------------------------------------
Vermont--0.2% Vermont Housing Finance Agency Home Mtg.
Purchase Revenue Bonds, Series A, 7.85%, 12/1/29 A1/NR $ 1,570,000 $ 1,643,796
- ------------------------------------------------------------------------------------------------------------------------------------
Washington--4.4% Washington State Public Power Supply System
Revenue Refunding Bonds, Nuclear Project No. 1:
5.40%, 7/1/12 Aa/AA-/AA- 30,000,000 27,878,577
Series A, 7.50%, 7/1/15 Aa/AA- 1,500,000 1,609,120
-----------
29,487,697
- ------------------------------------------------------------------------------------------------------------------------------------
West Virginia--0.5% West Virginia State Parkways Economic
Development & Tourism Authority Revenue Bonds,
Inverse Floater, FGIC Insured, 7.735%, 5/16/19(1) Aaa/AAA 3,600,000 3,358,271
- ------------------------------------------------------------------------------------------------------------------------------------
Wisconsin--0.1% Wisconsin Housing & Economic Development Authority
Home Ownership Revenue Refunding Bonds,
Series A, 7.10%, 3/1/23 Aa/AA 740,000 775,203
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Possessions--4.0%
Puerto Rico Commonwealth General Obligation Bonds:
6.50%, 7/1/14 Baa1/A 6,690,000 7,317,188
6.50%, 7/1/15 Baa1/A 3,310,000 3,609,876
--------------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue Bonds:
Prerefunded, Series S, 6.625%, 7/1/18 NR/AAA 5,000,000 5,558,550
Unrefunded Balance, Series T, 6.625%, 7/1/18 NR/AAA 6,000,000 6,683,448
--------------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Highway Authority
Revenue Bonds, Series Q, 7.75%, 7/1/10 NR/AAA 1,000,000 1,133,809
--------------------------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority Revenue Bonds,
Unrefunded Balance, Series O, 7.125%, 7/1/14 Baa1/A- 2,350,000 2,509,419
------------
26,812,290
------------
Total Municipal Bonds and Notes (Cost $638,447,023) 653,590,162
</TABLE>
<TABLE>
<S> <C> <C>
====================================================================================================================================
Short-Term Tax-Exempt Obligations--1.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Illinois Development Finance Authority Pollution Control
Revenue Refunding Bonds, Commonwealth Edison Co.
Project, Series A, 3.60%, 9/3/96 (Cost $11,000,000)(4)(5) 11,000,000 11,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $649,447,023) 99.4% 664,590,162
- -----------------------------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 0.6 3,974,029
----------- ------------
Net Assets 100.0% $ 668,564,191
=========== =============
1. Represents the current interest rate for a variable rate bond. These 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 $65,912,489 or 9.86% of the Fund's net assets at July 31,
1996.
2. Securities with an aggregate market value of $2,592,989 are held in collateralized accounts to cover
initial margin requirements on open futures sales contracts. See Note 5 of Notes to Financial Statements.
3. For zero coupon bonds, the interest rate shown is the effective yield on the date of purchase.
4. When-issued security to be delivered and settled after July 31, 1996.
5. Floating or variable rate obligation maturing in more than one year. The interest rate, which is based on
specific, or an index of, market interest rates, is subject to change periodically and is the effective rate
on July 31, 1996. This instrument may also have a demand feature which allows the recovery of principal at any
time, or at specified intervals not exceeding one year, on up to 30 days' notice. Maturity date shown
represents effective maturity based on variable rate and, if applicable, demand feature.
As of July 31, 1996, securities subject to the alternative minimum tax amounted to $114,462,248 or 17.12% of
the Fund's net assets. See accompanying Notes to Financial Statements.
</TABLE>
14 Oppenheimer Tax-Free Bond Fund
<PAGE>
Statement of Assets and Liabilities July 31, 1996
<TABLE>
<CAPTION>
===================================================================================================================================
<S> <C> <C>
Assets Investments, at value (cost $649,447,023)--see accompanying statement $664,590,162
------------------------------------------------------------------------------------------------------------
Cash 419,678
------------------------------------------------------------------------------------------------------------
Receivables:
Investments sold 22,737,500
Interest 7,641,843
Shares of beneficial interest sold 186,109
------------------------------------------------------------------------------------------------------------
Other 19,953
------------
Total assets 695,595,245
====================================================================================================================================
Liabilities Payables and other liabilities:
Investments purchased 22,224,996
Dividends 2,120,679
Shares of beneficial interest redeemed 1,693,639
Daily variation on futures contracts--Note 5 429,688
Trustees' fees 259,386
Distribution and service plan fees 125,991
Transfer and shareholder servicing agent fees 21,580
Other 155,095
------------
Total liabilities 27,031,054
====================================================================================================================================
Net Assets $668,564,191
============
====================================================================================================================================
Composition of Paid-in capital $652,885,280
Net Assets ------------------------------------------------------------------------------------------------------------
Undistributed net investment income 744,031
------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (23,103)
------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Notes 3 and 5 14,957,983
------------
Net assets $668,564,191
============
====================================================================================================================================
Net Asset Value
Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$590,299,480 and 60,586,867 shares of beneficial interest outstanding) $ 9.74
Maximum offering price per share (net asset value plus sales charge of 4.75% of
offering price) $ 10.23
------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $74,054,635 and 7,612,017 shares of beneficial interest outstanding) $ 9.73
------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $4,210,076 and 432,798 shares of beneficial interest outstanding) $ 9.73
</TABLE>
See accompanying Notes to Financial Statements.
15 Oppenheimer Tax-Free Bond Fund
<PAGE>
Statements of Operations
<TABLE>
<CAPTION>
Seven Months Year Ended
Ended July 31, December 31,
1996(1) 1995
====================================================================================================================================
<S> <C> <C>
Investment Income Interest $25,803,856 $41,392,406
====================================================================================================================================
Expenses Management fees--Note 4 2,079,375 3,351,982
------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 797,590 1,216,878
Class B 424,862 636,220
Class C 18,050 5,096
------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 283,038 390,854
------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses--Note 1 132,798 78,493
------------------------------------------------------------------------------------------------------------
Shareholder reports 115,108 202,087
------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 65,592 97,981
------------------------------------------------------------------------------------------------------------
Legal and auditing fees 34,742 60,278
------------------------------------------------------------------------------------------------------------
Insurance expenses 13,210 37,705
------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 4,408 11,418
Class B 2,387 3,762
Class C 1,001 10
------------------------------------------------------------------------------------------------------------
Other 24,702 27,680
----------- -----------
Total expenses 3,996,863 6,120,444
Less reimbursement of expenses by OppenheimerFunds, Inc.--Note 4 -- (8,207
----------- -----------
Net expenses 3,996,863 6,112,237
====================================================================================================================================
Net Investment Income 21,806,993 35,280,169
====================================================================================================================================
Realized and Net realized gain (loss) on:
Unrealized Gain (Loss) Investments 4,226,096 3,082,001
Closing of futures contracts 6,046,947 (13,142,188
----------- -----------
Net realized gain (loss) 10,273,043 (10,060,187
------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (27,145,177) 79,929,069
----------- -----------
Net realized and unrealized gain (loss) (16,872,134) 69,868,882
====================================================================================================================================
Net Increase in Net Assets Resulting From Operations $ 4,934,859 $105,149,051
=========== ============
</TABLE>
1. The Fund changed its fiscal year end from December 31 to July 31.
See accompanying Notes to Financial Statements.
16 Oppenheimer Tax-Free Bond Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Seven Months
Ended July 31, Year Ended December 31,
1996(1) 1995 1994
====================================================================================================================================
<S> <C> <C> <C>
Operations Net investment income $21,806,993 $35,280,169 $36,938,871
------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 10,273,043 (10,060,187) (507,588)
------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
or depreciation (27,145,177) 79,929,069 (97,929,896)
------------ ----------- -----------
Net increase (decrease) in net assets resulting
from operations 4,934,859 105,149,051 (61,498,613)
====================================================================================================================================
Dividends and Dividends from net investment income:
Distributions to Class A (19,338,196) (31,334,557) (34,265,091)
Shareholders Class B (2,010,127) (3,003,846) (2,383,056)
Class C (84,287) (19,720) --
------------------------------------------------------------------------------------------------------------
Distributions in excess of net investment income:
Class A -- (1,231,760) --
Class B -- (140,728) --
Class C -- (3,835) --
------------------------------------------------------------------------------------------------------------
Distributions in excess of net realized gain:
Class A -- -- (261,506)
Class B -- -- (19,061)
====================================================================================================================================
Beneficial Interest Net increase (decrease) in net assets resulting from
Transactions beneficial interest transactions--Note 2:
Class A (29,466,037) 30,679,725 24,534,984
Class B 3,308,384 12,510,842 27,145,605
Class C 2,283,590 1,925,528 --
====================================================================================================================================
Net Assets Total increase (decrease) (40,371,814) 114,530,700 (46,746,738)
------------------------------------------------------------------------------------------------------------
Beginning of period 708,936,005 594,405,305 641,152,043
---------- ----------- -----------
End of period [including undistributed (overdistributed)
net investment income of $744,031, $591,821 and
$(922,046), respectively] $668,564,191 $708,936,005 $594,405,305
============ ============ ============
1. The Fund changed its fiscal year end from December 31 to July 31.
See accompanying Notes to Financial Statements.
</TABLE>
17 Oppenheimer Tax-Free Bond Fund
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class A
----------------------------------------------------
Seven Months
Ended July 31, Year Ended December 31,
1996(2) 1995 1994 1993
====================================================================================================
<S> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $9.98 $8.93 $10.44 $ 9.94
----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .32 .54 .57 .59
Net realized and unrealized gain (loss) (.25) 1.06 (1.52) .74
------- ------- -------- --------
Total income (loss) from
investment operations .07 1.60 (.95) 1.33
----------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.31) (.54) (.56) (.62)
Dividends in excess of net
investment income -- (.01) -- --
Distributions from net realized gain -- -- -- (.21)
Distributions in excess of net realized gain -- -- --(4) --
----------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.31) (.55) (.56) (.83)
----------------------------------------------------------------------------------------------------
Net asset value, end of period $9.74 $9.98 $ 8.93 $10.44
======== ======== ======== ========
====================================================================================================
Total Return, at Net Asset Value(5) 0.77% 18.28% (9.19)% 13.79%
====================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $590,299 $634,473 $541,161 $608,128
----------------------------------------------------------------------------------------------------
Average net assets (in thousands) $606,509 $569,859 $582,038 $567,777
----------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.58%(6) 5.65% 5.94% 5.71%
Expenses 0.92%(6) 0.88% 0.88% 0.88%
----------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 23.9% 25.1% 21.7% 30.2%
1. For the period from August 29, 1995 (inception of offering) to December 31,
1995.
2. The Fund changed its fiscal year end from December 31 to July 31.
3. For the period from March 16, 1993 (inception of offering) to December 31,
1993.
4. Less than $.005 per share.
5. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
</TABLE>
18 Oppenheimer Tax-Free Bond Fund
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
-------------------------- ------------------------------------------------ -----------------------------
Period
Seven Months Seven Months Ended
Ended July 31 Year Ended December 31, Ended July 31, Dec. 31,
1992 1991 1996(2) 1995 1994 1993(3) 1996(2) 1995(1)
==============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
$9.77 $9.33 $9.96 $8.92 $10.43 $10.22 $9.96 $9.58
--------------------------------------------------------------------------------------------------------------
.62 .64 .27 .47 .50 .41 .27 .15
.25 .45 (.23) 1.05 (1.52) .43 (.23) .39
-------- -------- -------- -------- -------- -------- -------- --------
.87 1.09 .04 1.52 (1.02) .84 .04 .54
--------------------------------------------------------------------------------------------------------------
(.58) (.65) (.27) (.47) (.49) (.42) (.27) (.15)
-- -- -- (.01) -- -- -- (.01)
(.12) -- -- -- -- (.21) -- --
-- -- -- -- --(4) -- -- --
--------------------------------------------------------------------------------------------------------------
(.70) (.65) (.27) (.48) (.49) (.63) (.27) (.16)
--------------------------------------------------------------------------------------------------------------
$9.94 $9.77 $9.73 $9.96 $ 8.92 $10.43 $9.73 $9.96
======== ======== ======= ======= ======= ======= ======= =======
==============================================================================================================
9.20% 12.11% 0.43% 17.30% (9.91)% 8.49% 0.40% 5.64%
==============================================================================================================
$496,628 $394,115 $74,055 $72,488 $53,245 $33,024 $4,210 $1,975
--------------------------------------------------------------------------------------------------------------
$438,684 $319,081 $73,047 $63,669 $46,548 $16,444 $3,105 $1,506
--------------------------------------------------------------------------------------------------------------
6.34% 6.70% 4.79%(6) 4.84% 5.11% 4.54%(6) 4.72%(6) 4.49%(6)
0.94% 0.89% 1.70%(6) 1.68% 1.69% 1.74%(6) 1.75%(6) 1.64%(6)
--------------------------------------------------------------------------------------------------------------
34.2% 23.5% 23.9% 25.1% 21.7% 30.2% 23.9% 25.1%
6. Annualized.
7. 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 July 31, 1996 were $162,256,752 and $191,195,959, respectively.
</TABLE>
See accompanying Notes to Financial Statements.
19 Oppenheimer Tax-Free Bond Fund
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Significant Oppenheimer Tax-Free Bond Fund (the Fund) is
Accounting Policies registered under the Investment Company Act of
1940, as amended, as a diversified, open-end
management investment company. On June 6, 1996,
the Board of Trustees elected to change the fiscal
year end of the Fund from December 31 to July 31.
Accordingly, these financial statements include
information for the seven month period from
January 1, 1996 to July 31, 1996. The Fund's
investment objective is to seek the maximum
current income exempt from Federal income taxes
for individual investors that is consistent with
preservation of capital. The Fund's investment
advisor is OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B and Class C
shares. Class A shares are sold with a front-end
sales charge. Class B and Class C shares may be
subject to a contingent deferred sales charge. All
classes of shares have identical rights to
earnings, assets and voting privileges, except
that each class has its own distribution and/or
service plan, expenses directly attributable to a
particular class and exclusive voting rights with
respect to matters affecting a single class. Class
B shares will automatically convert to Class A
shares six years after the date of purchase. The
following is a summary of significant accounting
policies consistently followed by the Fund.
--------------------------------------------------------
Investment Valuation. Portfolio securities are
valued at the close of the New York Stock Exchange
on each trading day. Listed and unlisted
securities for which such information is regularly
reported are valued at the last sale price of the
day or, in the absence of sales, at values based
on the closing bid or asked price or the last sale
price on the prior trading day. Long-term and
short-term "non-money market" debt securities are
valued by a portfolio pricing service approved by
the Board of Trustees. Such securities which
cannot be valued by the approved portfolio pricing
service are valued using dealer-supplied
valuations provided the Manager is satisfied that
the firm rendering the quotes is reliable and that
the quotes reflect current market value, or are
valued under consistently applied procedures
established by the Board of Trustees to determine
fair value in good faith. Short-term "money market
type" debt securities having a remaining maturity
of 60 days or less are valued at cost (or last
determined market value) adjusted for amortization
to maturity of any premium or discount.
--------------------------------------------------------
Allocation of Income, Expenses, and Gains and
Losses. Income, expenses (other than those
attributable to a specific class) and gains and
losses are allocated daily to each class of shares
based upon the relative proportion of net assets
represented by such class. Operating expenses
directly attributable to a specific class are
charged against the operations of that class.
--------------------------------------------------------
Federal Taxes. The Fund intends to continue to
comply with provisions of the Internal Revenue
Code applicable to regulated investment companies
and to distribute all of its taxable income,
including any net realized gain on investments not
offset by loss carryovers, to shareholders.
Therefore, no federal income or excise tax
provision is required. At July 31, 1996, the Fund
had available for federal income tax purposes an
unused capital loss carryover of $114,000, which
expires in 2003.
--------------------------------------------------------
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 seven months
ended July 31, 1996, a provision of $102,072 was
made for the Fund's projected benefit obligations,
and payments of $5,460 were made to retired
trustees, resulting in an accumulated liability of
$247,005 at July 31, 1996.
--------------------------------------------------------
Distributions to Shareholders. The Fund intends to
declare dividends separately for Class A, Class B
<PAGE>
and Class C shares from net investment income each
day the New York Stock Exchange is open for
business and pay such dividends monthly.
Distributions from net realized gains on
investments, if any, will be declared at least
once each year.
--------------------------------------------------------
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
for tax purposes. The character of the
distributions made during the year from net
investment income or net realized gains may differ
from their ultimate characterization for federal
income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which
amounts are distributed may differ from the year
that the income or realized gain (loss) was
recorded by the Fund.
During the seven months ended July 31, 1996,
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, during the seven
months ended July 31, 1996, amounts have been
reclassified to reflect an increase in paid-in
capital of $1,203,603, a decrease in undistributed
net investment income of $222,173, and a decrease
in accumulated net realized gain on investments of
$981,430.
20 Oppenheimer Tax-Free Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
1. Significant Other. Investment transactions are accounted for
Accounting Policies on the date the investments are purchased or sold
(continued) (trade date). Original issue discount on
securities purchased is amortized over the life of
the respective securities, in accordance with
federal income tax requirements. For bonds
acquired after April 30, 1993, on disposition or
maturity, taxable ordinary income is recognized to
the extent of the lesser of gain or market
discount that would have accrued over the holding
period. 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.
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make estimates
and assumptions that affect the reported amounts
of assets and liabilities and disclosure of
contingent assets and liabilities at the date of
the financial statements and the reported amounts
of income and expenses during the reporting
period. Actual results could differ from those
estimates.
- --------------------------------------------------------------------------------
2. Shares of The Fund has authorized an unlimited number of no
Beneficial Interest par value shares of beneficial interest of each
class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
Seven Months Ended Year Ended Year Ended
July 31, 1996(2) December 31, 1995(1) December 31, 1994
--------------------------- ---------------------------- ----------------------------
Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A:
Sold 4,747,849 $ 46,379,774 7,178,151 $ 68,805,897 11,090,618 $105,903,608
Issued in connection with the
acquisition of MI Fund, Inc.--Note 6 -- -- -- -- 3,087,731 29,920,109
Issued in connection with the
acquisition of Quest National Tax-
Exempt Fund--Note 6 -- -- 7,276,353 71,599,310 -- --
Dividends and distributions reinvested 1,312,265 12,765,106 2,221,310 21,323,241 2,417,816 22,986,092
Redeemed (9,076,955) (88,610,917) (13,705,703) (131,048,723) (14,239,737) (134,274,825)
---------- ------------ ----------- ------------ ----------- ------------
Net increase (decrease) (3,016,841) $(29,466,037) 2,970,111 $ 30,679,725 2,356,428 $ 24,534,984
========== ============ =========== ============ =========== ============
- -----------------------------------------------------------------------------------------------------------------------------------
Class B:
Sold 1,143,171 $ 11,161,707 2,306,017 $ 22,148,575 3,851,883 $ 36,866,795
Dividends and distributions reinvested 136,205 1,322,907 219,509 2,106,903 167,254 1,573,591
Redeemed (943,865) (9,176,230) (1,221,000) (11,744,636) (1,213,330) (11,294,781)
---------- ------------ ----------- ------------ ----------- ------------
Net increase 335.511 $ 3,308,384 1,304,526 $ 12,510,842 2,805,807 $ 27,145,605
========== ============ =========== ============ =========== ============
- -----------------------------------------------------------------------------------------------------------------------------------
Class C:
Sold 241,982 $ 2,355,795 223,883 $ 2,176,098 -- $ --
Dividends and distributions reinvested 4,841 46,807 553 5,492 -- --
Redeemed (12,272) (119,012) (26,189) (256,062) -- --
---------- ------------ ----------- ------------ ----------- ------------
Net increase 234,551 $ 2,283,590 198,247 $ 1,925,528 -- $ --
========== ============ =========== ============ =========== ============
</TABLE>
1. For the year ended December 31, 1995 for both Class A and B shares and for
the period from August 29, 1995 (inception of offering) to December 31, 1995 for
Class C shares.
2. The Fund changed its fiscal year end from December 31 to July 31.
- --------------------------------------------------------------------------------
3. Unrealized Gains and At July 31, 1996, net unrealized appreciation on
Losses on Investments investments of $15,143,139 was composed of gross
appreciation of $22,088,617, and gross
depreciation of $6,945,478.
21 Oppenheimer Tax-Free Bond Fund
<PAGE>
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
4. Management Fees and Management fees paid to the Manager were in
Other Transactions accordance with the investment advisory agreement
With Affiliates with the Fund which provides for a fee of 0.60% on
the first $200 million of average annual net
assets, 0.55% on the next $100 million, 0.50% on
the next $200 million, 0.45% on the next $250
million, 0.40% on the next $250 million and 0.35%
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.
In 1995, the Manager reimbursed the Fund for
SEC fees incurred in connection with the acquisition
of Quest National Tax-Exempt Fund.
For the seven months ended July 31, 1996,
commissions (sales charges paid by investors) on
sales of Class A shares totaled $519,750, of which
$161,377 was retained by OppenheimerFunds
Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an
affiliated broker/dealer. Sales charges advanced
to broker/dealers by OFDI on sales of the Fund's
Class B and Class C shares totaled $358,053 and
$23,062, of which $17,194 and $1,601,
respectively, was paid to an affiliated
broker/dealer. During the seven months ended July
31, 1996, OFDI received contingent deferred sales
charges of $123,046, 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 for other
registered investment companies. OFS's total costs
of providing such services are allocated ratably
to these companies.
The Fund has adopted a Service Plan for Class
A shares to reimburse OFDI for a portion of its
costs incurred in connection with the personal
service and maintenance of accounts that hold
Class A shares. Reimbursement is made quarterly at
an annual rate that may not exceed 0.25% of the
average annual net assets of Class A shares of the
Fund. OFDI uses the service fee to reimburse
brokers, dealers, banks and other financial
institutions quarterly for providing personal
service and maintenance of accounts of their
customers that hold Class A shares. During the
seven months ended July 31, 1996, OFDI paid
$56,525 to an affiliated broker/dealer as
reimbursement for Class A personal service and
maintenance expenses.
The Fund has adopted compensation type
Distribution and Service Plans for Class B and
Class C shares to compensate OFDI for its services
and costs in distributing Class B and Class C
shares and servicing accounts. Under the Plans,
the Fund pays OFDI an annual asset-based sales
charge of 0.75% per year on Class B shares that
are outstanding for 6 years or less and on Class C
shares, as compensation for sales commissions paid
from its own resources at the time of sale and
associated financing costs. If the Plans are
terminated by the Fund, the Board of Trustees may
allow the Fund to continue payments of the
asset-based sales charge to OFDI for certain
expenses it incurred before the Plans were
terminated. OFDI also receives a service fee of
0.25% per year as compensation for costs incurred
in connection with the personal service and
maintenance of accounts that hold shares of the
Fund, including amounts paid to brokers, dealers,
banks and other financial institutions. Both fees
are computed on the average annual net assets of
Class B and Class C shares, determined as of the
close of each regular business day. During the
seven months ended July 31, 1996, OFDI paid $4,790
to an affiliated broker/dealer as compensation for
Class B personal service and maintenance expenses
and retained $344,077 and $18,050, respectively,
as compensation for Class B and Class C sales
commissions and service fee advances, as well as
financing costs. At July 31, 1996, OFDI had
incurred unreimbursed expenses of $2,743,714 for
Class B and $74,173 for Class C.
- --------------------------------------------------------------------------------
5. Futures Contracts The Fund may buy and sell interest rate futures
contracts in order to gain exposure to or protect
against changes in interest rates. The Fund may
also buy or write put or call options on these
futures contracts.
The Fund generally sells futures contracts
to hedge against increases in interest rates and
the resulting negative effect on the value of
fixed rate portfolio securities. The Fund may also
purchase futures contracts to gain exposure to
changes in interest rates as it may be more
efficient or cost effective than actually buying
fixed income securities.
Upon entering into a futures contract, the
Fund is required to deposit either cash or
securities in an amount (initial margin) equal to
a certain percentage of the contract value.
Subsequent payments (variation margin) are made or
received by the Fund each day. The variation
margin payments are equal to the daily changes in
the contract value and are recorded as unrealized
gains and losses. The Fund recognizes a realized
gain or loss when the contract is closed or
expires.
22 Oppenheimer Tax-Free Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
5. Futures Contracts Securities held in collateralized accounts to
(continued) cover initial margin requirements on open futures
contracts are noted in the Statement of
Investments. The Statement of Assets and
Liabilities reflects a receivable or payable for
the daily mark to market for variation margin.
Risks of entering into futures contracts
(and related options) include the possibility that
there may be an illiquid market and that a change
in the value of the contract or option may not
correlate with changes in the value of the
underlying securities.
At July 31, 1996, the Fund had outstanding futures
contracts to sell debt securities as follows:
<TABLE>
<CAPTION>
Expiration Number of Valuation as of Unrealized
Date Futures Contracts July 31, 1996 Depreciation
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Bonds 9/96 625 $68,203,125 $185,156
</TABLE>
-----------------------------------------------------
6. Acquisition of MI On March 31, 1994 Oppenheimer Tax-Free Bond Fund
Fund, Inc. acquired all of the net assets of MI Fund, Inc.
And Quest National (MI Fund), pursuant to an Agreement and Plan of
Tax-Exempt Fund 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.
On November 24, 1995, Oppenheimer Tax-Free
Bond Fund acquired all of the net assets of Quest
National Tax-Exempt Fund, pursuant to an Agreement
and Plan of Reorganization approved by the Quest
National Tax-Exempt Fund shareholders on November
16, 1995. The Fund issued 7,276,353 shares of
beneficial interest, valued at $71,599,310, in
exchange for the net assets, resulting in combined
net assets of $711,397,113 on November 24, 1995.
The net assets acquired included net unrealized
appreciation of $3,756,263. The exchange was
tax-free.
23 Oppenheimer Tax-Free Bond Fund
<PAGE>
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 July 31,
1996, and the statements of operations for the
seven month period then ended and the year ended
December 31, 1995, the statements of changes in
net assets for the seven month period ended July
31, 1996 and the years ended December 31, 1995 and
1994, and the financial highlights for the seven
month period ended July 31, 1996 and each of the
years in the five year period ended December 31,
1995. 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 July 31,
1996, by correspondence with the custodian and
brokers; and where confirmations were not received
from brokers, we performed other auditing
procedures. An audit also includes assessing the
accounting principles used and significant
estimates made by management, as well as
evaluating the overall financial statement
presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements
and financial highlights referred to above present
fairly, in all material respects, the financial
position of Oppenheimer Tax-Free Bond Fund as of
July 31, 1996, the results of its operations for
the seven month period then ended and the year
ended December 31, 1995, the changes in its net
assets for the seven month period ended July 31,
1996 and the years ended December 31, 1995 and
1994, and the financial highlights for the seven
month period ended July 31, 1996 and each of the
years in the five year period ended December 31,
1995, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Denver, Colorado
August 21, 1996
24 Oppenheimer Tax-Free Bond Fund
<PAGE>
Federal Income Tax Information (Unaudited)
- --------------------------------------------------------------------------------
In early 1997, shareholders will receive
information regarding all dividends and
distributions paid to them by the Fund during
calendar year 1996. Regulations of the U.S.
Treasury Department require the Fund to report
this information to the Internal Revenue Service.
None of the dividends paid by the Fund
during the fiscal year ended July 31, 1996 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.
25 Oppenheimer Tax-Free Bond Fund
<PAGE>
Oppenheimer Tax-Free Bond 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
Sidney M. Robbins, Trustee
Pauline Trigere, Trustee
Clayton K. Yeutter, Trustee
Robert E. Patterson, Vice President
Jerry A. Webman, Vice President
George C. Bowen, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Andrew J. Donohue, Secretary
Robert G. Zack, Assistant Secretary
- --------------------------------------------------------------------------------
Investment Advisor OppenheimerFunds, Inc.
- --------------------------------------------------------------------------------
Distributor OppenheimerFunds Distributor, Inc.
- --------------------------------------------------------------------------------
Transfer and Shareholder OppenheimerFunds Services
Servicing Agent
- --------------------------------------------------------------------------------
Custodian of 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. Shares of Oppenheimer
funds are not deposits or obligations of any bank, are
not guaranteed by any bank, and are not insured by the
FDIC or any other agency, and involve investment risks,
including possible loss of the principal amount
invested.
26 Oppenheimer Tax-Free Bond Fund
<PAGE>
OppenheimerFunds Family
- --------------------------------------------------------------------------------
OppenheimerFunds offers over 50 funds designed to fit
virtually every investment goal. Whether you're
investing for retirement, your children's education or
tax-free income, we have the funds to help you seek
your objective.
When you invest with OppenheimerFunds, you can
feel comfortable knowing that you are investing with a
respected financial institution with over 35 years of
experience in helping people just like you reach their
financial goals. And you're investing with a leader in
global, growth stock and flexible fixed-income
investments--with over 3 million shareholder accounts
and more than $50 billion under OppenheimerFunds'
management and that of our affiliates.
At OppenheimerFunds we don't charge a fee to
exchange shares. And you can exchange shares easily by
mail or by telephone.1 For more information on
Oppenheimer funds, please contact your financial
advisor or call us at 1-800-525-7048 for a prospectus.
You may also write us at the address shown on the back
cover. As always, please read the prospectus carefully
before you invest.
<TABLE>
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Stock Funds Global Emerging Growth Fund Growth Fund
Enterprise Fund2 Global Fund
International Growth Fund Quest Global Value Fund
Discovery Fund Disciplined Value Fund
Quest Small Cap Value Fund Oppenheimer Fund
Gold & Special Minerals Fund Value Stock Fund
Target Fund Quest Value Fund
- ---------------------------------------------------------------------------------------------------
Stock & Bond Funds Main Street Income & Growth Fund Equity Income Fund
Quest Opportunity Value Fund Disciplined Allocation Fund
Total Return Fund Asset Allocation Fund
Quest Growth & Income Value Fund Strategic Income & Growth Fund
Global Growth & Income Fund Bond Fund for Growth
- ---------------------------------------------------------------------------------------------------
Bond Funds International Bond Fund Bond Fund
High Yield Fund U.S. Government Trust
Champion Income Fund Limited-Term Government Fund
Strategic Income Fund
- ---------------------------------------------------------------------------------------------------
Tax-Exempt Funds California Tax-Exempt Fund(3) Insured Tax-Exempt Fund
Florida Tax-Exempt Fund(3) Intermediate Tax-Exempt Fund
New Jersey Tax-Exempt Fund(3)
New York Tax-Exempt Fund(3) Rochester Division
Pennsylvania Tax-Exempt Fund(3) Rochester Fund Municipals
Tax-Free Bond Fund Limited Term New York Municipal Fund
- ---------------------------------------------------------------------------------------------------
Money Market Funds(4) Money Market Fund Cash Reserves
- ---------------------------------------------------------------------------------------------------
LifeSpan Growth Fund Income Fund
Balanced Fund
1. Exchange privileges are subject to change or termination. Shares may be
exchanged only for shares of the same class of eligible funds.
2. Effective 4/1/96, the Fund is closed to new investors.
3. Available only to investors in certain states.
4. An investment in money market funds is neither insured nor guaranteed by the
U.S. government and there can be no assurance that a money market fund will be
able to maintain a stable net asset value of $1.00 per share. Oppenheimer funds
are distributed by OppenheimerFunds Distributor, Inc., Two World Trade Center,
New York, NY 10048-0203.
(C) Copyright 1996 OppenheimerFunds, Inc. All rights reserved.
27 Oppenheimer Tax-Free Bond Fund
</TABLE>
<PAGE>
[BACK COVER]
Information
General Information
Monday-Friday 8:30 a.m.-9 p.m. ET
Saturday 10 a.m.-2 p.m. ET
1-800-525-7048
Telephone Transactions
Monday-Friday 8:30 a.m.-8 p.m. ET
1-800-852-8457
PhoneLink
24 hours a day, automated
information and transactions
1-800-533-3310
Telecommunications Device
for the Deaf (TDD)
Monday-Friday 8:30 a.m.-8 p.m. ET
1-800-843-4461
OppenheimerFunds
Information Hotline
24 hours a day, timely and insightful
messages on the economy and
issues that affect your investments
1-800-835-3104
RA0310.001.0796 September 30, 1996
[Picture of Jennifer Leonard]
[Caption] Jennifer Leonard, Customer Service Representative
OppenheimerFunds Services
"How may I help you?"
As an Oppenheimer fund shareholder, you have some special privileges. Whether
it's automatic investment plans, informative newsletters and hotlines, or ready
account access, you can benefit from services designed to make investing simple.
And when you need help, our Customer Service Representatives are only a
toll-free phone call away. They can provide information about your account and
handle administrative requests. You can reach them at our General Information
number.
When you want to make a transaction, you can do it easily by calling our
toll-free Telephone Transactions number. And, by enrolling in AccountLink, a
convenient service that "links" your Oppenheimer funds accounts and your bank
checking or savings account, you can use the Telephone Transactions number to
make investments.
For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week.
PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.
You can count on us whenever you need assistance. That's why the
International Customer Service Association, an independent, nonprofit
organization made up of over 3,200 customer service management professionals
from around the country, honored the Oppenheimer funds' transfer agent,
OppenheimerFunds Services, with their Award of Excellence in 1993.
So call us today--we're here to help.
- --------------------------------------------------------------------------------
[Oppenheimer Logo]
OppenheimerFunds Distributor, Inc.
P.O. Box 5270
Denver, CO 80217-5270
- --------------
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PAID
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