<PAGE> 1
ANNUAL REPORT JULY 31, 1999
OPPENHEIMER
MUNICIPAL
BOND FUND
[PHOTO]
[OPPENHEIMERFUNDS LOGO]
THE RIGHT WAY TO INVEST
<PAGE> 2
CONTENTS
3 President's Letter
5 An interview with
your Fund's
Manager
10 Fund Performance
- --------------------------
14 Financial
Statements
37 Independent
Auditors' Report
- --------------------------
38 Federal
Income Tax
Information
39 Officers and
Trustees
40 Information and
Services
REPORT HIGHLIGHTS
- --------------------------------------------------------------------------------
- - IN STARK CONTRAST TO U.S. TREASURY SECURITIES, municipal bond prices were
generally stable throughout the reporting period.
- - OUR RESEARCH-INTENSIVE SECURITY SELECTION STRATEGY helped us
find areas of opportunity.
AVG ANNUAL TOTAL RETURNS
For the 1-Year Period
Ended 7/31/99
<TABLE>
<S> <C>
CLASS A
Without With
Sales Chg.(1) Sales Chg.(2)
- ------------------------------------
2.57% -2.31%
- ------------------------------------
CLASS B
Without With
Sales Chg.(1) Sales Chg.(2)
- ------------------------------------
1.78% -3.10%
- ------------------------------------
CLASS C
Without With
Sales Chg.(1) Sales Chg.(2)
- ------------------------------------
1.78% 0.80%
- ------------------------------------
</TABLE>
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
IN REVIEWING PERFORMANCE AND RANKINGS, PLEASE REMEMBER THAT PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. THE FUND'S
PERFORMANCE MAY FROM TIME TO TIME BE SUBJECT TO SUBSTANTIAL SHORT-TERM CHANGES,
PARTICULARLY DURING PERIODS OF MARKET OR INTEREST RATE VOLATILITY. FOR UPDATES
ON THE FUND'S PERFORMANCE, PLEASE CONTACT YOUR FINANCIAL ADVISOR, CALL US AT
1-800-525-7048 OR VISIT OUR WEBSITE, WWW.OPPENHEIMERFUNDS.COM.
1. Includes changes in net asset value per share without deducting any sales
charges.
2. Class A returns include the current maximum initial sales charge of 4.75%.
Class B returns include the applicable contingent deferred sales charge of 5%.
Class C returns include the contingent deferred sales charge of 1%. Class B and
C shares are subject to an annual 0.75% asset-based sales charge. An explanation
of the different performance calculations is in the Fund's prospectus.
2 Oppenheimer Municipal Bond Fund
<PAGE> 3
[PHOTO]
BRIDGET A. MACASKILL
President
Oppenheimer
Municipal Bond Fund
DEAR SHAREHOLDER,
- --------------------------------------------------------------------------------
In many ways, the 1999 investment environment has, so far, unfolded as many
expected it would, producing both attractive opportunities and formidable
challenges for investors.
On the economic front, early worries about the effects of global weakness in
the wake of last year's credit and currency crises have abated. Instead, as many
economies around the world begin to strengthen, concerns now center around
whether the U.S. economy may be growing too quickly. Throughout the year,
consumers in the United States have continued to spend and borrow heavily, more
than offsetting any temporary slowdown in the industrial and export sectors.
The economy's strength has not gone unnoticed by the nation's monetary
policymakers. In an effort to ward off emerging inflationary pressures, the
Federal Reserve Board increased short-term interest rates this past summer.
Market reaction to robust economic growth has been mixed. The U.S. bond
market has generally declined, as fixed income investors became increasingly
concerned about the effects of rising interest rates.
In the stock market, the performance of large-capitalization growth stocks,
which has driven the market's advance over the past few years, has begun to
moderate, and many previously out-of-favor value-oriented, mid-cap and small-cap
stocks have rallied. At the same time, a healthy percentage of actively managed,
diversified portfolios have once again begun to outperform unmanaged stock
indices such as Standard & Poor's 500.
(over, please)
3 Oppenheimer Municipal Bond Fund
<PAGE> 4
At OppenheimerFunds, we applaud the Fed's pre-emptive strike against inflation.
In our view, history has repeatedly demonstrated that most financial assets do
best in a low-inflation environment. What's more, we believe that the move to
higher interest rates should be temporary.
One recent development is quite troublesome to us however: the increasing
popularity of "day trading" among individuals seeking to make fast money in a
volatile stock market. In our opinion, day trading is not investing, it is
gambling. Experience proves that without extensive research and analysis,
attempting to time short-term price swings is a fool's errand. Instead, we
continue to encourage investors to maintain a long-term perspective that is
measured in years, not days.
Finally, while we remain alert to the potential impact of the Y2K issue, we
are encouraged by the progress made in addressing the matter. At
OppenheimerFunds, our shareholder accounting systems are already Y2K compliant,
and we have successfully participated in all required industry-wide tests. We
intend to continue re-testing our systems in order to help further protect
against any potential problems. After all, whether in our computer accounting
systems or the financial markets, managing risk is an important part of what
makes OppenheimerFunds The Right Way to Invest.
Sincerely,
/s/ BRIDGET A. MACASKILL
Bridget A. Macaskill
August 20, 1999
4 Oppenheimer Municipal Bond Fund
<PAGE> 5
[PHOTO]
PORTFOLIO MANAGEMENT
TEAM (L TO R)
Bob Patterson
(Portfolio Manager)
Caryn Halbrecht
Jerry Webman
AN INTERVIEW WITH YOUR FUND'S MANAGER
- --------------------------------------------------------------------------------
HOW DID OPPENHEIMER MUNICIPAL BOND FUND PERFORM DURING THE ONE-YEAR PERIOD THAT
ENDED JULY 31, 1999?
We are generally pleased with the Fund's performance over the fiscal year. We
attribute the Fund's performance to our conservative investment strategy in a
rapidly changing investment environment. In fact, market conditions during the
final six months of 1998 and the first half of 1999 were, in many respects,
direct opposites of each other. The final six months of 1998 were generally
characterized by recessionary economic conditions throughout much of the world,
declining interest rates in the United States and less restrictive monetary
policies worldwide. In contrast, the first half of 1999 saw signs of global
economic recovery, rising domestic interest rates and, ultimately, a tighter
monetary policy in the United States.
HOW DID THESE ECONOMIC CONDITIONS AFFECT THE U.S. MUNICIPAL BOND MARKET?
In stark contrast to the volatile prices of U.S. Treasury securities, municipal
bonds were generally stable throughout the one-year reporting period. In the
first half of the period, global economic uncertainty triggered a "flight to
quality" among U.S. and foreign investors. This created unprecedented demand for
U.S. Treasury securities, driving their prices up and their yields down (prices
and yields move in opposite directions). However, because municipal bonds do not
provide tax advantages to foreign investors, municipals did not benefit to the
same extent. As a result, U.S. Treasury securities significantly outperformed
triple-A rated municipal bonds with comparable maturities.
5 Oppenheimer Municipal Bond Fund
<PAGE> 6
"MUNICIPAL BONDS ENDURED SIGNIFICANTLY LESS VOLATILITY THAN OTHER HIGH-QUALITY,
FIXED INCOME SECURITIES OVER THE PAST YEAR."
AN INTERVIEW WITH YOUR FUND'S MANAGER
- --------------------------------------------------------------------------------
In the second half of the reporting period, while municipal bonds remained
stable, prices of U.S. Treasury securities declined sharply. As the economy grew
stronger, many investors regained their confidence and sold their Treasury bonds
in order to return to riskier financial assets such as stocks and corporate
bonds. Consequently, municipal bonds generally provided higher total returns
than U.S. Treasuries.
In our opinion, municipal bonds' relative stability is the result of
supply-and-demand factors. Strong economic conditions in the United States
reduced many states and municipalities' need to borrow, leading to a diminished
supply of tax-exempt bonds. In fact, approximately 23% fewer municipal bonds
were issued during the first six months of 1999 than in the same period one year
earlier. Yet, demand remained high from investors seeking to minimize their
income tax liabilities. This supply-and-demand relationship helped support the
stability of municipal bond prices and yields.
DID YOU FIND COMPELLING VALUES IN THIS MARKET ENVIRONMENT?
Yes. In the fourth quarter of 1998, long-term, tax-exempt municipal bond yields
were actually slightly higher than yields of long-term, taxable U.S. Treasury
securities. In effect, most investors who purchased municipal bonds at that time
generally received the tax advantages for free. By mid-1999, municipal bond
yields decreased to approximately 91% of comparable Treasury yields. While this
represented a substantial narrowing of the yield relationship between tax-exempt
and taxable bonds, we believe that, compared to historical norms, municipal
bonds continue to provide excellent after-tax values.
6 Oppenheimer Municipal Bond Fund
<PAGE> 7
AVG ANNUAL TOTAL RETURNS
For the Periods Ended 6/30/99(1)
<TABLE>
<CAPTION>
CLASS A
<S> <C> <C>
1 year 5 year 10 Year
- ------------------------------------
- -2.39% 5.87% 6.55%
- ------------------------------------
CLASS B
Since
1 year 5 year Inception
- ------------------------------------
- -3.09% 5.74% 4.85%
- ------------------------------------
CLASS C
Since
1 year 5 year Inception
- ------------------------------------
0.81% N/A 5.81%
- ------------------------------------
</TABLE>
HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?
We attempted to invest in tax-exempt securities while managing the risks of
changing interest rates. Throughout the one-year reporting period, we
emphasized those sectors of the municipal bond market that we expected to
benefit most from prevailing economic and market conditions. Conversely, we
tried to avoid those sectors that we believed would benefit least. This
strategy led us to areas of opportunity such as retirement villages and adult
living facilities. These residential housing projects have issued tax-exempt
bonds to meet rising demands of a growing population of aging Americans who
want amenities tailored to their lifestyles.
Our strategy also led us to avoid certain issuers, such as health care
facilities that are subject to financial pressures because of a currently
unfavorable regulatory and legislative environment, including cutbacks in
Medicaid and Medicare. We also tended to avoid bonds issued by utilities that
are in the midst of industry-wide deregulation.
1. Total returns include changes in share price and reinvestment of dividends
and capital gains distributions in a hypothetical investment for the periods
shown. Class A returns include the current maximum initial sales charge of
4.75%. Class A shares were first publicly offered on 10/27/76. Class B returns
include the applicable contingent deferred sales charge of 5% (1-year) and 1%
(since inception on 3/16/93). Class C returns for the one-year result include
the contingent deferred sales charge of 1%. Class C shares have an inception
date of 8/29/95. Class B and C shares are subject to an annual 0.75%
asset-based sales charge. An explanation of the different performance
calculations is in the Fund's prospectus.
7 Oppenheimer Municipal Bond Fund
<PAGE> 8
<TABLE>
<CAPTION>
STANDARDIZED YIELDS(2)
For the 30 Days Ended 7/31/99
- ------------------------------------
<S> <C>
CLASS A 4.61%
- ------------------------------------
CLASS B 4.05
- ------------------------------------
CLASS C 4.05
- ------------------------------------
</TABLE>
AN INTERVIEW WITH YOUR FUND'S MANAGER
- -------------------------------------------------------------------------------
In addition, throughout the reporting period, we maintained a neutral average
duration--which is a measure of sensitivity to changes in interest rates. When
interest rates declined in 1998, our neutral position constrained performance
slightly compared to portfolios with longer durations. However, when interest
rates rose in 1999, our neutral position helped shelter the portfolio from the
brunt of the interest-rate risks affecting investors who had previously adopted
a longer, more aggressive, duration strategy.
WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL BOND MARKET AND THE FUND?
We remain cautiously optimistic. First, we believe that municipal bonds are
attractively valued relative to comparable taxable securities, and should
benefit as that relationship returns to more normal levels. Second, states and
municipalities have benefited greatly from the recent strength of the U.S.
economy, which has enabled many of them to put their fiscal houses in good
order. This should help reduce the risk of potential defaults.
2. Standardized yield is based on net investment income for the 30-day period
ended July 31, 1999. Falling share prices will tend to artificially raise
yields.
8 Oppenheimer Municipal Bond Fund
<PAGE> 9
CREDIT ALLOCATION(3)
[PIE CHART]
<TABLE>
<S> <C>
- - AAA 42.9%
- - AA 7.4
- - A 14.9
- - BBB 24.5
- - BB 8.9
- - B 1.4
</TABLE>
On the other hand, we remain concerned about rising interest rates.
Accordingly, we intend to continue to monitor the economic environment
carefully. If the economy continues to grow at an unsustainable rate, we may
position the portfolio to reduce the adverse effects of potentially higher
interest rates. We believe that these credit-conscious, risk-averse strategies
make Oppenheimer Municipal Bond Fund an important part of The Right Way to
Invest.
<TABLE>
<CAPTION>
TOP FIVE INDUSTRIES (Percentages of invested assets) (4)
- ------------------------------------------------------------------------
<S> <C>
Corporate Backed 22.5%
- ------------------------------------------------------------------------
Electric Utilities 13.3
- ------------------------------------------------------------------------
Highways 13.3
- ------------------------------------------------------------------------
Single Family Housing 8.7
- ------------------------------------------------------------------------
General Obligation 7.7
- ------------------------------------------------------------------------
</TABLE>
3. Portfolio data are as of July 31, 1999, are dollar-weighted based on
invested assets and are subject to change. The Fund may invest up to 25% of its
assets in below-investment-grade securities which carry greater risk of
default. Average credit quality and ratings allocations include securities
rated by national ratings organizations as well as unrated securities
(currently 9.45% of total investments) which have ratings assigned by the
Manager in categories equivalent to those of ratings organizations.
4. Industry weightings are as of July 31, 1999, and are subject to change.
9 Oppenheimer Municipal Bond Fund
<PAGE> 10
FUND PERFORMANCE
- --------------------------------------------------------------------------------
HOW HAS THE FUND PERFORMED? Below is a discussion, by the Manager, of the
Fund's performance during its fiscal year ended July 31, 1999, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index.
- MANAGEMENT'S DISCUSSION OF PERFORMANCE. During the Fund's fiscal year
that ended July 31, 1999, Oppenheimer Municipal Bond Fund performed relatively
well, despite the fact that the overall bond market weakened considerably in
1999. The weakness in the bond market stemmed from signs of continuing strong
economic growth, which could cause inflation to reemerge. However, the Fund
benefited from a reduced supply of new tax-exempt bond issues relative to
robust demand from investors seeking to manage their income tax liabilities.
This reduction in issuance was primarily a result of strong economic conditions
throughout the United States, which helped curtail states and municipalities'
need to borrow. In this environment, the Fund continued to adhere to its
longstanding strategy of holding a diversified portfolio of municipal bonds
selected after extensive research into their issuers' credit quality. The
Fund's portfolio holdings, allocations and strategies are subject to change.
- COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow
show the performance of a hypothetical $10,000 investment in each class of
shares of the Fund held from the inception of the class until July 31, 1999. In
the case of Class A shares, performance is measured over a ten-year period. In
the case of Class B shares, performance is measured from the inception of the
class on March 16, 1993, and in the case of Class C shares, from the inception
of the class on August 29, 1995. The Fund's performance reflects the deduction
of the maximum initial sales charge on
10 Oppenheimer Municipal Bond Fund
<PAGE> 11
Class A shares and the applicable contingent deferred sales charge for Class B
and Class C shares. The graphs assume that all dividends and capital gains
distributions were reinvested in additional shares.
Because the Fund invests in a variety of municipal securities, the Fund's
performance is compared to that of the Lehman Brothers Municipal Bond Index, an
unmanaged index of a broad range of investment grade municipal bonds that is
widely regarded as a measure of the performance of the general municipal bond
market. Index performance reflects the reinvestment of income but does not
consider the effect of capital gains or transaction costs, and none of the data
below shows the effect of taxes. Also, the Fund's performance reflects the
effect of Fund business and operating expenses. While index comparisons may be
useful to provide a benchmark for the Fund's performance, it must be noted that
the Fund's investments are not limited to the securities in any one index.
11 Oppenheimer Municipal Bond Fund
<PAGE> 12
FUND PERFORMANCE
- --------------------------------------------------------------------------------
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Municipal Bond Fund (Class A) and Lehman Brothers Municipal Bond
Index
[The following table was originally a line graph in the printed materials.]
<TABLE>
<CAPTION>
Oppenheimer Municipal Lehman Brothers Municipal
Bond Fund (Class A) Bond Index
<S> <C> <C>
12/31/88 $ 9,525 $ 10,000
12/31/89 10,423 11,079
12/31/90 11,041 11,886
12/31/91 12,379 13,329
12/31/92 13,517 14,504
12/31/93 15,381 16,286
12/31/94 13,968 15,444
12/31/95 16,522 18,140
7/31/96(1) 16,648 18,222
7/31/97 18,474 20,091
7/31/98 19,499 21,295
7/31/99 19,999 21,908
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS A SHARES OF THE FUND AT 7/31/99 (2)
1 YEAR -2.31% 5 YEAR 5.46% 10 YEAR 6.44%
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Municipal Bond Fund (Class B) and Lehman Brothers Municipal Bond
Index
[The following table was originally a line graph in the printed materials.]
<TABLE>
<CAPTION>
Oppenheimer Municipal Lehman Brothers Municipal
Bond Fund (Class B) Bond Index
<S> <C> <C>
3/16/93 $ 10,000 $ 10,000
12/31/93 10,839 10,826
12/31/94 9,765 10,267
12/31/95 11,455 12,059
7/31/96(1) 11,504 12,113
7/31/97 12,659 13,355
7/31/98 13,260 14,156
7/31/99 13,496 14,563
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS B SHARES OF THE FUND AT 7/31/99(3)
1 YEAR -3.10% 5 YEAR 5.35% LIFE 4.81%
12 Oppenheimer Municipal Bond Fund
<PAGE> 13
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Municipal Bond Fund (Class C) and Lehman Brothers Municipal Bond
Index
[The following table was originally a line graph in the printed materials.]
<TABLE>
<CAPTION>
Oppenheimer Municipal Lehman Brothers Municipal
Bond Fund (Class C) Bond Index
<S> <C> <C>
8/29/95 $ 10,000 $ 10,000
12/31/95 10,564 10,479
7/31/96(1) 10,606 10,526
7/31/97 11,669 11,605
7/31/98 12,223 12,301
7/31/99 12,440 12,655
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS C SHARES OF THE FUND AT 7/31/99(4)
1 YEAR 0.80% LIFE 5.72%
Total returns and the ending account values in the graphs show change in share
value and include reinvestment of all dividends and capital gains distributions.
The performance information for the Lehman Brothers Municipal Bond Index in the
graphs begins on 12/31/88 for Class A, 3/31/93 for Class B and 8/31/95 for Class
C.
1 The Fund changed its fiscal year end from December 31 to July 31.
2. The average annual total returns are shown net of the applicable 4.75%
maximum initial sales charge.
3. Class B shares of the Fund were first publicly offered on 3/16/93. The
average annual total returns are shown net of the applicable 5% (1-year) and 1%
(since inception) contingent deferred sales charges. The ending account value in
the graph is net of the applicable 1% sales charge.
4. Class C shares of the Fund were first publicly offered on 8/29/95. The 1-year
period is shown net of the applicable 1% contingent deferred sales charge.
Past performance is not predictive of future performance. Graphs are not drawn
to the same scale.
13 Oppenheimer Municipal Bond Fund
<PAGE> 14
STATEMENT OF INVESTMENTS July 31, 1999
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/
S&P/FITCH FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
=================================================================================================
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--101.3%
- -------------------------------------------------------------------------------------------------
ALABAMA--1.2%
Huntsville, AL HCF Authority RB, Prerefunded,
Series B, MBIA Insured, 6.625%, 6/1/23 Aaa/AAA $ 7,235,000 $ 8,054,508
- -------------------------------------------------------------------------------------------------
ARIZONA--0.9%
Central AZ Irrigation & Drainage District
GORB, Series A, 6%, 6/1/13 NR/NR 1,080,950 979,784
- -------------------------------------------------------------------------------------------------
Peoria, AZ IDAU RRB, Sierra Winds Life,
Series A, 6.375%, 8/15/29(1) NR/NR 5,000,000 4,837,950
------------
5,817,734
- -------------------------------------------------------------------------------------------------
CALIFORNIA--13.6%
CA Foothill/Eastern Transportation Corridor
Agency Toll Road RB, Sr. Lien,
Series A, 6.50%, 1/1/32 Baa3/BBB-/BBB 10,500,000 11,742,675
- -------------------------------------------------------------------------------------------------
CA HFA RB, Series C, 6.65%, 8/1/14 Aa2/AA- 5,000,000 5,259,350
- -------------------------------------------------------------------------------------------------
CA HFA SFM RB, Series C, 6.75%, 2/1/25 Aa2/AA- 4,860,000 5,111,213
- -------------------------------------------------------------------------------------------------
CA SCDAU Revenue Refunding COP,
Inverse Floater, 7.575%, 11/1/15(2) A1/NR 1,500,000 1,438,125
- -------------------------------------------------------------------------------------------------
Foothill/Eastern Corridor Agency CA Toll
Road RRB, 5.75%, 1/15/40 Baa3/BBB-/BBB 5,750,000 5,719,410
- -------------------------------------------------------------------------------------------------
Industry, CA UDA TXAL Bonds, Transportation
Distribution Project No. 3, 6.90%, 11/1/07 NR/A- 500,000 540,010
- -------------------------------------------------------------------------------------------------
Los Angeles, CA Regional AIC Lease
RRB, 5.65%, 8/1/17 Ba2/BB 10,000,000 9,719,600
- -------------------------------------------------------------------------------------------------
Los Angeles, CA Regional AIC Lease RRB,
Facilities Sublease-International Airport
Project, 6.35%, 11/1/25 Baa3/BBB- 8,930,000 9,378,643
- -------------------------------------------------------------------------------------------------
Palmdale, CA Community RA SFM RRB,
Escrowed to Maturity, Series A, 8%, 3/1/16 Aaa/NR/A+ 5,000,000 6,486,900
- -------------------------------------------------------------------------------------------------
Perris, CA SFM RB, Escrowed to Maturity,
Series A, 8.30%, 6/1/13 Aaa/AAA 7,000,000 9,114,630
- -------------------------------------------------------------------------------------------------
Pomona, CA SFM RRB, Escrowed to Maturity,
Series A, 7.60%, 5/1/23 Aaa/AAA 6,000,000 7,525,800
- -------------------------------------------------------------------------------------------------
Redding, CA Electric System Revenue COP,
FGIC Insured, Inverse Floater, 7.97%,
6/1/19(2) Aaa/AAA/AAA 6,000,000 6,202,500
- -------------------------------------------------------------------------------------------------
San Joaquin Hills, CA Transportation
Corridor Agency Toll Road RB, Sr. Lien,
Prerefunded, 6.75%, 1/1/32 Aaa/AAA/AAA 12,700,000 14,003,528
------------
92,242,384
</TABLE>
14 Oppenheimer Municipal Bond Fund
<PAGE> 15
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/
S&P/FITCH FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
COLORADO--0.7%
CO HFAU RB, Rocky Mountain Adventist
Health System, 6.625%, 2/1/22 Baa2/BB- $ 5,000,000 $ 4,819,750
- -------------------------------------------------------------------------------------------------
CONNECTICUT--4.1%
Mashantucket, CT Western Pequot Tribe Special
RB, Prerefunded, Series A, 6.40%, 9/1/11(3) Aaa/AAA 7,435,000 8,362,516
- -------------------------------------------------------------------------------------------------
Mashantucket, CT Western Pequot Tribe Special
RB, Unrefunded Balance, Series A, 6.40%,
9/1/11(3) NR/BBB- 7,565,000 8,040,763
- -------------------------------------------------------------------------------------------------
Mashantucket, CT Western Pequot Tribe
Special RRB, Sub. Lien, Series B, 5.75%,
9/1/27(3) Baa3/NR 11,900,000 11,521,223
------------
27,924,502
- -------------------------------------------------------------------------------------------------
FLORIDA--4.6%
Dade Cnty., FL IDAU RB, Miami Cerebral Palsy
Services Project, 8%, 6/1/22 NR/NR 2,755,000 2,989,230
- -------------------------------------------------------------------------------------------------
Escambia Cnty., FL HFAU RB,
Azalea Trace, Inc., 6%, 1/1/15 NR/NR 4,000,000 4,016,600
- -------------------------------------------------------------------------------------------------
FL BOE Capital Outlay GORB, 8.40%, 6/1/07 Aa2/AA+ 750,000 910,425
- -------------------------------------------------------------------------------------------------
FL HFA SFM RRB, Series A, 6.35%, 7/1/14 Aaa/AAA 710,000 745,138
- -------------------------------------------------------------------------------------------------
Grand Haven, FL CDD SPAST RB, Series A,
6.30%, 5/1/02 NR/NR 1,153,000 1,168,715
- -------------------------------------------------------------------------------------------------
Lee Cnty., FL Housing FAU SFM RB, Series A-2,
6.85%, 3/1/29 Aaa/NR 1,585,000 1,766,039
- -------------------------------------------------------------------------------------------------
Lee Cnty., FL IDAU HCF RRB, Shell Point Village
Project, Series A, 5.50%, 11/15/21 NR/BBB- 2,000,000 1,877,760
- -------------------------------------------------------------------------------------------------
Lee Cnty., FL IDAU HCF RRB, Shell Point Village
Project, Series A, 5.50%, 11/15/29 NR/BBB- 2,250,000 2,087,662
- -------------------------------------------------------------------------------------------------
Miami-Dade Cnty., FL SPO RB, Sub. Lien,
Series B, MBIA Insured, Zero Coupon, 5.45%,
10/1/29(4) Aaa/AAA/AAA 25,895,000 4,642,715
- -------------------------------------------------------------------------------------------------
Palm Beach Cnty., FL HF Authority RB,
Retirement Community, 5.125%, 11/15/29 NR/A- 3,130,000 2,807,422
- -------------------------------------------------------------------------------------------------
Village Center CDD FL Recreational RB,
Series A, MBIA Insured, 5%, 11/1/23 Aaa/AAA/AAA 8,345,000 7,836,956
------------
30,848,662
- -------------------------------------------------------------------------------------------------
GEORGIA--2.7%
GA MEAU RRB, Project One, Series X,
MBIA Insured, 6.50%, 1/1/12 Aaa/AAA 500,000 564,040
- -------------------------------------------------------------------------------------------------
GA MEAU SPO Refunding Bonds, Series Y,
6.50%, 1/1/17 A3/A 10,750,000 12,003,557
- -------------------------------------------------------------------------------------------------
GA MEAU SPO Refunding Bonds, Series Y,
MBIA Insured, 6.50%, 1/1/17 Aaa/AAA 1,000,000 1,133,490
- -------------------------------------------------------------------------------------------------
Rockdale Cnty., GA DAU SWD RB, Visy
Paper Inc. Project, 7.40%, 1/1/16 NR/NR 4,555,000 4,776,009
------------
18,477,096
</TABLE>
15 Oppenheimer Municipal Bond Fund
<PAGE> 16
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/
S&P/FITCH FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
ILLINOIS--1.5%
IL HFAU RB, Hinsdale Hospital Project,
Escrowed to Maturity, Series C, 9.50%,
11/15/19 NR/AAA $ 860,000 $ 943,437
- -------------------------------------------------------------------------------------------------
IL Regional Transportation Authority RB,
AMBAC Insured, 7.20%, 11/1/20 Aaa/AAA/AAA 7,500,000 9,133,875
------------
10,077,312
- -------------------------------------------------------------------------------------------------
INDIANA--4.1%
Indianapolis, IN Airport Authority RB, SPF
Federal Express Corp. Project, 7.10%,
1/15/17 Baa2/BBB 15,500,000 16,983,970
- -------------------------------------------------------------------------------------------------
Indianapolis, IN Airport Authority RB, SPF
United Airlines Project, Series A,
6.50%, 11/15/31 Baa2/BB+ 10,500,000 10,984,260
------------
27,968,230
- -------------------------------------------------------------------------------------------------
KENTUCKY--0.4%
Kenton Cnty., KY AB RB, SPF Delta Airlines
Project, Series A, 6.125%, 2/1/22 Baa3/BBB- 2,790,000 2,820,857
- -------------------------------------------------------------------------------------------------
LOUISIANA--1.5%
New Orleans, LA Home Mtg. Authority SPO
Refunding Bonds, Escrowed to Maturity,
6.25%, 1/15/11 Aaa/NR 9,500,000 10,498,070
- -------------------------------------------------------------------------------------------------
MARYLAND--0.1%
MD University Auxiliary Facilities & Tuition
System RRB, Series A, 5.90%, 2/1/03 Aa3/AA+/AA 500,000 521,535
- -------------------------------------------------------------------------------------------------
MASSACHUSETTS--3.9%
MA GOB, Unrefunded Balance, Series B,
MBIA Insured, 6.50%, 8/1/11 Aaa/AAA/AAA 430,000 455,951
- -------------------------------------------------------------------------------------------------
MA TUAU Metropolitan Highway System RRB,
Sr. Lien, Series A, MBIA Insured, 5%, 1/1/37 Aaa/AAA/AAA 7,000,000 6,309,450
- -------------------------------------------------------------------------------------------------
MA Water Pollution Abatement Trust RRB,
Series A, FGIC Insured, 4.75%, 2/1/26 Aaa/NR/AAA 6,500,000 5,729,425
- -------------------------------------------------------------------------------------------------
MA Water Resource Authority RB,
Series A, 6.50%, 7/15/19 A1/A+/A+ 12,225,000 13,788,944
------------
26,283,770
- -------------------------------------------------------------------------------------------------
MICHIGAN--7.1%
Detroit, MI GORB, Series B, 6.25%, 4/1/09 Baa1/BBB+/A- 4,065,000 4,343,534
- -------------------------------------------------------------------------------------------------
Detroit, MI GORB, Series B, 6.375%, 4/1/06 Baa1/BBB+/A- 2,000,000 2,158,500
- -------------------------------------------------------------------------------------------------
Detroit, MI GORB, Series B, 6.375%, 4/1/07 Baa1/BBB+/A- 500,000 537,315
- -------------------------------------------------------------------------------------------------
Detroit, MI Sewage Disposal RB, Prerefunded,
FGIC Insured, Inverse Floater, 7.87%,
7/1/23(2) Aaa/AAA 10,100,000 11,349,875
- -------------------------------------------------------------------------------------------------
Detroit, MI Sewage Disposal RRB, Unrefunded
Balance, FGIC Insured, Inverse Floater,
7.87%, 7/1/23(2) Aaa/AAA/AAA 3,100,000 3,173,625
</TABLE>
16 Oppenheimer Municipal Bond Fund
<PAGE> 17
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/
S&P/FITCH FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
MICHIGAN (CONTINUED)
Detroit, MI Water Supply System RB,
Prerefunded, FGIC Insured, Inverse Floater,
9.22%, 7/1/22(2) Aaa/AAA/AAA $ 3,700,000 $ 4,241,125
- -------------------------------------------------------------------------------------------------
Detroit, MI Water Supply System RB,
Unrefunded Balance, FGIC Insured,
Inverse Floater, 9.22%, 7/1/22(2) Aaa/AAA 1,500,000 1,704,375
- -------------------------------------------------------------------------------------------------
MI Hospital FAU RRB, FSA Insured,
Inverse Floater, 8.97%, 2/15/22(2) Aaa/AAA/AAA 5,000,000 5,562,500
- -------------------------------------------------------------------------------------------------
MI Strategic Fund SWD RRB, Genesee Power
Station Project, 7.50%, 1/1/21 NR/NR 3,650,000 3,873,928
- -------------------------------------------------------------------------------------------------
Wayne Cnty., MI Special Airport Facilities RRB,
Northwest Airlines, Inc. Facilities,
Series 1995, 6.75%, 12/1/15 NR/NR 10,460,000 11,119,085
------------
48,063,862
- -------------------------------------------------------------------------------------------------
NEW HAMPSHIRE--0.1%
NH Housing FAU SFM RB, Series C,
6.90%, 7/1/19 Aa3/NR 940,000 986,192
- -------------------------------------------------------------------------------------------------
NEW JERSEY--4.4%
Bergen Cnty., NJ Utilities WPCAU RB,
Prerefunded, Series A, FGIC Insured,
6.50%, 12/15/12(5) Aaa/AAA/AAA 5,600,000 6,059,536
- -------------------------------------------------------------------------------------------------
NJ EDAU RRB, First Mtg. Franciscan Oaks
Project, 5.75%, 10/1/23 NR/NR 2,255,000 2,203,000
- -------------------------------------------------------------------------------------------------
NJ EDAU RRB, First Mtg. Keswick Pines,
5.70%, 1/1/18 NR/NR 1,000,000 971,110
- -------------------------------------------------------------------------------------------------
NJ EDAU RRB, First Mtg. Keswick Pines,
5.75%, 1/1/24 NR/NR 1,125,000 1,082,576
- -------------------------------------------------------------------------------------------------
NJ TUAU RRB, Series C, 6.50%, 1/1/16 Baa1/BBB+/A- 16,150,000 18,067,328
- -------------------------------------------------------------------------------------------------
NJ TUAU RRB, Series C, MBIA Insured,
6.50%, 1/1/16 Aaa/AAA/AAA 1,100,000 1,252,361
------------
29,635,911
- -------------------------------------------------------------------------------------------------
NEW YORK--4.9%
NYC GOB, Inverse Floater, 7.684%, 8/27/15(2) A3/A- 3,050,000 3,194,875
- -------------------------------------------------------------------------------------------------
NYC GOB, Prerefunded, Series D, 8%, 8/1/15 Aaa/A-/A 10,980,000 11,972,263
- -------------------------------------------------------------------------------------------------
NYC GOB, Series H, 6.125%, 8/1/25 A3/A-/A 5,000,000 5,304,150
- -------------------------------------------------------------------------------------------------
NYC IDA SPF RB, Terminal One Group Assn.
Project, 6%, 1/1/19 A3/A/A- 6,000,000 6,184,620
- -------------------------------------------------------------------------------------------------
NYS HFA RRB, NYC HF, Series A, 6%, 11/1/06 Baa1/A- 4,000,000 4,286,920
- -------------------------------------------------------------------------------------------------
NYS HFA RRB, NYC HF, Series A, 6%, 5/1/08 Baa1/A- 2,000,000 2,129,400
------------
33,072,228
</TABLE>
17 Oppenheimer Municipal Bond Fund
<PAGE> 18
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/
S&P/FITCH FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
OHIO--4.3%
Cleveland, OH PPS First Mtg. RB, Series A,
MBIA Insured, 7%, 11/15/16 Aaa/AAA $ 2,000,000 $ 2,278,260
- -------------------------------------------------------------------------------------------------
Montgomery Cnty., OH HCF RRB, Series B,
6.25%, 2/1/22 NR/NR 2,500,000 2,443,950
- -------------------------------------------------------------------------------------------------
OH Building Authority RB, Juvenile
Correctional Projects, Series A,
AMBAC Insured, 6.60%, 10/1/14 Aaa/AAA/AAA 500,000 559,180
- -------------------------------------------------------------------------------------------------
OH HFA SFM RB, Series B, Inverse Floater,
10.116%, 3/1/31(2)(6) Aaa/AAA 4,030,000 4,387,663
- -------------------------------------------------------------------------------------------------
OH Solid Waste RB, Republic Engineered
Steels, Inc. Project, 9%, 6/1/21 NR/NR 7,800,000 8,389,602
- -------------------------------------------------------------------------------------------------
OH SWD RB, USG Corporate Project,
5.65%, 3/1/33 Baa2/BBB 10,000,000 9,558,600
- -------------------------------------------------------------------------------------------------
Summit Cnty., OH GOB, AMBAC Insured,
6.625%, 12/1/12 Aaa/AAA/AAA 1,200,000 1,291,860
------------
28,909,115
- -------------------------------------------------------------------------------------------------
OKLAHOMA--1.5%
Tulsa, OK Municipal Airport Trust RB,
American Airlines Project, 6.25%, 6/1/20 Baa2/BBB- 9,820,000 10,137,775
- -------------------------------------------------------------------------------------------------
PENNSYLVANIA--13.0%
Allegheny Cnty., PA HDAU RRB, Villa St.
Joseph HCF, 6%, 8/15/28 NR/NR 2,000,000 1,882,480
- -------------------------------------------------------------------------------------------------
Chartiers Valley, PA CD IDAU First Mtg. RRB,
Asbury Health Center, 6.375%, 12/1/19(1) NR/NR 1,250,000 1,239,325
- -------------------------------------------------------------------------------------------------
Chartiers Valley, PA CD IDAU First Mtg. RRB,
Asbury Health Center, 6.375%, 12/1/24(1) NR/NR 1,500,000 1,473,045
- -------------------------------------------------------------------------------------------------
PA EDFAU Facilities RB, National Gypsum Co.,
Series B, 6.125%, 11/2/27 NR/NR 10,000,000 9,827,500
- -------------------------------------------------------------------------------------------------
PA EDFAU RR RB, Colver Project, Series D,
7.15%, 12/1/18 NR/BBB- 3,000,000 3,294,990
- -------------------------------------------------------------------------------------------------
PA EDFAU SWD RB, USD Corp. Project,
6%, 6/1/31 Baa2/BBB+ 12,000,000 11,931,360
- -------------------------------------------------------------------------------------------------
PA HEAA Student Loan RB, Series B,
AMBAC Insured, Inverse Floater,
8.616%, 3/1/22(2) Aaa/AAA/AAA 17,500,000 19,512,500
- -------------------------------------------------------------------------------------------------
PA TUCM RRB, Series N, 6.50%, 12/1/13 Aaa/AAA 750,000 798,255
- -------------------------------------------------------------------------------------------------
Philadelphia, PA Hospital & HEFAU RB,
Temple University Childrens Medical,
Series A, 5.625%, 6/15/19 NR/BBB+ 1,200,000 1,119,096
- -------------------------------------------------------------------------------------------------
Philadelphia, PA Hospital & HEFAU RRB,
The Philadelphia Protestant Home Project,
Series A, 6.50%, 7/1/27 NR/NR 3,380,000 3,478,662
</TABLE>
18 Oppenheimer Municipal Bond Fund
<PAGE> 19
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/
S&P/FITCH FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
PENNSYLVANIA (CONTINUED)
Philadelphia, PA IDAU HCF RRB, Baptist
Home of Philadelphia, Series A, 5.50%,
11/15/18 NR/NR $ 1,670,000 $ 1,541,460
- -------------------------------------------------------------------------------------------------
Philadelphia, PA IDAU HCF RRB, Baptist Home
of Philadelphia, Series A, 5.60%, 11/15/28 NR/NR 1,275,000 1,166,676
- -------------------------------------------------------------------------------------------------
Philadelphia, PA Water & Wastewater RB,
FGIC Insured, 10%, 6/15/05 Aaa/AAA/AAA 17,600,000 22,343,728
- -------------------------------------------------------------------------------------------------
Schuylkill Cnty., PA IDAU RR RRB, Schuylkill
Energy Resources, Inc., 6.50%, 1/1/10(6) NR/NR/BB+ 8,110,000 8,225,973
------------
87,835,050
- -------------------------------------------------------------------------------------------------
SOUTH CAROLINA--1.9%
Piedmont, SC MPA RRB, Escrowed to Maturity,
Series A, FGIC Insured, 6.50%, 1/1/16 Aaa/AAA 285,000 325,735
- -------------------------------------------------------------------------------------------------
Piedmont, SC MPA RRB, Unrefunded Balance,
Series A, FGIC Insured, 6.50%, 1/1/16 Aaa/AAA 1,715,000 1,937,693
- -------------------------------------------------------------------------------------------------
SC Public Service Authority RB, Santee Cooper,
Prerefunded, Series D, AMBAC Insured,
6.50%, 7/1/24 Aaa/AAA/AAA 10,000,000 10,821,200
------------
13,084,628
- -------------------------------------------------------------------------------------------------
TEXAS--14.8%
AAAU TX SPF RB, American Airlines, Inc.
Project, 7%, 12/1/11 Baa2/BBB- 3,000,000 3,416,280
- -------------------------------------------------------------------------------------------------
AAAU TX SPF RB, Federal Express Corp.
Project, 6.375%, 4/1/21 Baa2/BBB 11,640,000 12,097,918
- -------------------------------------------------------------------------------------------------
Cypress-Fairbanks, TX ISD CAP GORB, Series A,
Zero Coupon, 5.85%, 2/15/15(4) Aaa/AAA 15,000,000 6,464,400
- -------------------------------------------------------------------------------------------------
Cypress-Fairbanks, TX ISD CAP GORB, Series A,
Zero Coupon, 5.89%, 2/15/14(4) Aaa/AAA 15,710,000 7,198,008
- -------------------------------------------------------------------------------------------------
Cypress-Fairbanks, TX ISD CAP GORB, Series A,
Zero Coupon, 5.91%, 2/15/16(4) Aaa/AAA 16,240,000 6,576,713
- -------------------------------------------------------------------------------------------------
Dallas-Fort Worth, TX International Airport
Facilities Improvement Corp. RB,
American Airlines, Inc., 7.25%, 11/1/30 Baa1/BBB- 8,000,000 8,629,440
- -------------------------------------------------------------------------------------------------
Harris Cnty., TX GORB, Toll Road, Sub. Lien,
Prerefunded, 6.50%, 8/15/15 Aa2/AA 215,000 232,849
- -------------------------------------------------------------------------------------------------
Harris Cnty., TX GORB, Toll Road, Sub. Lien,
Unrefunded Balance, 6.50%, 8/15/15 Aa2/AA 785,000 841,347
- -------------------------------------------------------------------------------------------------
Harris Cnty., TX GORRB, Toll Road,
Sub. Lien, 6.75%, 8/1/14 Aa2/AA 1,000,000 1,065,420
- -------------------------------------------------------------------------------------------------
Houston, TX WSS RB, Prior Lien, Unrefunded
Balance, Series B, 6.40%, 12/1/09 A3/A+ 995,000 1,069,715
</TABLE>
19 Oppenheimer Municipal Bond Fund
<PAGE> 20
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/
S&P/FITCH FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
TEXAS (CONTINUED)
Houston, TX WSS RB, Prior Lien, Unrefunded
Balance, Series B, 6.75%, 12/1/08 Aaa/AAA $ 440,000 $ 470,021
- -------------------------------------------------------------------------------------------------
North Central TX HFDC RB, Prerefunded,
Series B, Inverse Floater, 8.008%, 5/15/06(2) Aa2/AA 290,000 313,606
- -------------------------------------------------------------------------------------------------
North Central TX HFDC RB, Prerefunded,
Series B, Inverse Floater, 8.109%, 5/15/08(2) Aa2/AA 480,000 517,824
- -------------------------------------------------------------------------------------------------
North Central TX HFDC RB, Unrefunded
Balance, Series B, Inverse Floater,
8.008%, 5/15/06(2) Aa2/AA 2,710,000 2,873,223
- -------------------------------------------------------------------------------------------------
North Central TX HFDC RB, Unrefunded
Balance, Series B, Inverse Floater,
8.109%, 5/15/08(2) Aa2/AA 4,520,000 4,798,839
- -------------------------------------------------------------------------------------------------
Retama, TX Development Corp. SPF RRB,
Retama Racetrack, Escrowed to Maturity,
Series A, 10%, 12/15/19 Aaa/AAA 4,880,000 7,661,795
- -------------------------------------------------------------------------------------------------
San Antonio, TX Electric & Gas RRB,
Series A, 4.50%, 2/1/21 Aa1/AA/AA+ 6,000,000 5,177,460
- -------------------------------------------------------------------------------------------------
TX MPA CAP RRB, MBIA Insured,
Zero Coupon, 5.85%, 9/1/15(4) Aaa/AAA/AAA 10,000,000 4,184,400
- -------------------------------------------------------------------------------------------------
TX MPA CAP RRB, MBIA Insured,
Zero Coupon, 5.95%, 9/1/13(4) Aaa/AAA/AAA 6,900,000 3,261,975
- -------------------------------------------------------------------------------------------------
TX MPA CAP RRB, MBIA Insured,
Zero Coupon, 5.98%, 9/1/16(4) Aaa/AAA/AAA 39,990,000 15,720,069
- -------------------------------------------------------------------------------------------------
TX MPA CAP RRB, MBIA Insured,
Zero Coupon, 6.39%, 9/1/14(4) Aaa/AAA/AAA 17,500,000 7,787,150
------------
100,358,452
- -------------------------------------------------------------------------------------------------
VERMONT--0.2%
VT HFA Home Mtg. Purchase RB,
Series A, 7.85%, 12/1/29 A1/NR 1,330,000 1,358,861
- -------------------------------------------------------------------------------------------------
VIRGINIA--4.4%
Pocahontas Parkway Assn., VA Toll Road RB,
CAP, First Tier, Sub. Lien, Series C, Zero
Coupon, 5.60%, 8/15/05(4) Ba1/NR 2,300,000 1,624,582
- -------------------------------------------------------------------------------------------------
Pocahontas Parkway Assn., VA Toll Road RB,
CAP, First Tier, Sub. Lien, Series C, Zero
Coupon, 5.75%, 8/15/07(4) Ba1/NR 2,800,000 1,742,468
</TABLE>
20 Oppenheimer Municipal Bond Fund
<PAGE> 21
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/
S&P/FITCH FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
VIRGINIA (CONTINUED)
Pocahontas Parkway Assn., VA Toll Road RB,
CAP, First Tier, Sub. Lien, Series C, Zero
Coupon, 5.82%, 8/15/08(4) Ba1/NR 3,000,000 $ 1,752,450
- -------------------------------------------------------------------------------------------------
Pocahontas Parkway Assn., VA Toll Road RB,
CAP, First Tier, Sub. Lien, Series C, Zero
Coupon, 5.85%, 8/15/09(4) Ba1/NR 3,100,000 1,698,056
- -------------------------------------------------------------------------------------------------
Pocahontas Parkway Assn., VA Toll Road RB,
CAP, Sr. Lien, Series B, Zero Coupon,
5.86%, 8/15/20(4) Baa3/A/A $25,000,000 7,491,250
- -------------------------------------------------------------------------------------------------
Pocahontas Parkway Assn., VA Toll Road RB,
CAP, Sr. Lien, Series B, Zero Coupon,
5.86%, 8/15/21(4) Baa3/A/A 26,300,000 7,439,218
- -------------------------------------------------------------------------------------------------
Pocahontas Parkway Assn., VA Toll Road RB,
CAP, Sr. Lien, Series B, Zero Coupon,
5.86%, 8/15/22(4) Baa3/A/A 29,900,000 7,983,599
------------
29,731,623
- -------------------------------------------------------------------------------------------------
WASHINGTON--3.0%
WA PP Supply System RRB, Nuclear
Project No. 1, 5.40%, 7/1/12 Aa1/AA-/AA- 20,000,000 20,019,000
- -------------------------------------------------------------------------------------------------
WEST VIRGINIA--0.6%
WV Parkways ED & Tourism Authority RB,
FGIC Insured, Inverse Floater, 8.032%,
5/16/19(2) Aaa/AAA 3,600,000 3,780,000
- -------------------------------------------------------------------------------------------------
WISCONSIN--1.0%
WI Health & Educational FA RB, Sinai
Samaritan Medical Center, Inc.,
MBIA Insured, 5.75%, 8/15/16 Aaa/AAA 6,250,000 6,375,563
- -------------------------------------------------------------------------------------------------
WI Housing & EDAU Home Ownership RRB,
Series A, 7.10%, 3/1/23 Aa2/AA 445,000 467,450
------------
6,843,013
- -------------------------------------------------------------------------------------------------
U.S. POSSESSIONS--0.8%
Guam Housing Corp. SFM RB, Series A,
5.75%, 9/1/31 NR/AAA 5,595,000 5,660,517
- -------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $653,008,490) 101.3% 685,830,637
- -------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (1.3) (8,514,240)
------- ------------
NET ASSETS 100.0% $677,316,397
======= ============
</TABLE>
21 Oppenheimer Municipal Bond Fund
<PAGE> 22
STATEMENT OF INVESTMENTS (Continued)
- --------------------------------------------------------------------------------
To simplify the listings of securities, abbreviations are used per the table
below:
<TABLE>
<S> <C> <C> <C>
AAAU --Alliance Airport Authority, Inc. IDA --Industrial Development Agency
AB --Airport Board IDAU --Industrial Development Authority
AIC --Airport Improvement Corp. ISD --Independent School District
BOE --Board of Education MEAU --Municipal Electric Authority
CAP --Capital Appreciation MPA --Municipal Power Agency
CD --Commercial Development NYC --New York City
CDD --Community Development District NYS --New York State
COP --Certificates of Participation PP --Public Power
DAU --Development Authority PPS --Public Power System
ED --Economic Development RA --Redevelopment Agency
EDAU --Economic Development Authority RB --Revenue Bonds
EDFAU --Economic Development Finance Authority RR --Resource Recovery
FA --Facilities Authority RRB --Revenue Refunding Bonds
FAU --Finance Authority SCDAU --Statewide Communities Development Authority
GOB --General Obligation Bonds SFM --Single Family Mtg.
GORB --General Obligation Refunding Bonds SPAST --Special Assessment
GORRB --General Obligation Revenue Refunding Bonds SPF --Special Facilities
HCF --Health Care Facilities SPO --Special Obligations
HDAU --Hospital Development Authority SWD --Solid Waste Disposal
HEAA --Higher Education Assistance Agency TUAU --Turnpike Authority
HEFAU --Higher Educational Facilities Authority TUCM --Turnpike Commission
HF --Health Facilities TXAL --Tax Allocation
HFA --Housing Finance Agency UDA --Urban Development Agency
HFAU --Health Facilities Authority USD --Unified School District
HFDC --Health Facilities Development Corp. WPCAU --Water Pollution Control Authority
WSS --Water & Sewer System
</TABLE>
1. When-issued security to be delivered and settled after July 31, 1999.
2. Represents the current interest rate for a variable rate bond known as an
"inverse floater" which pays 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 $73,050,655 or
10.79% of the Fund's net assets as of July 31, 1999.
3. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities
have been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $27,924,502 or 4.12% of the Fund's net
assets as of July 31, 1999.
4. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
5. Securities with an aggregate market value of $2,623,996 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 5 of Notes to Financial Statements.
6. Identifies issues considered to be illiquid or restricted--See Note 6 of
Notes to Financial Statements.
As of July 31, 1999, securities subject to the alternative minimum tax amount
to $190,490,293 or 28.12% of the Fund's net assets.
See accompanying Notes to Financial Statements.
22 Oppenheimer Municipal Bond Fund
<PAGE> 23
STATEMENT OF ASSETS AND LIABILITIES July 31, 1999 (Unaudited)
<TABLE>
<S> <C>
=================================================================================================
ASSETS
Investments, at value (cost $653,008,490)--see accompanying statement $685,830,637
- -------------------------------------------------------------------------------------------------
Cash 144,423
- -------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest 7,246,911
Shares of beneficial interest sold 373,373
Daily variation on futures contracts--Note 5 206,250
Other 6,032
------------
Total assets 693,807,626
=================================================================================================
LIABILITIES
Payables and other liabilities:
Investments purchased (including $7,550,320 purchased on a
when-issued basis)--Note 1 13,278,758
Dividends 1,894,440
Shares of beneficial interest redeemed 792,982
Trustees' compensation--Note 1 238,496
Distribution and service plan fees 117,016
Shareholder reports 67,562
Transfer and shareholder servicing agent fees 56,496
Other 45,479
-----------
Total liabilities 16,491,229
=================================================================================================
NET ASSETS $677,316,397
============
=================================================================================================
COMPOSITION OF NET ASSETS
Paid-in capital $643,616,468
- -------------------------------------------------------------------------------------------------
Overdistributed net investment income (1,542,690)
- -------------------------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions 1,980,630
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Notes 3 and 5 33,261,989
------------
Net assets $677,316,397
============
</TABLE>
23 Oppenheimer Municipal Bond Fund
<PAGE> 24
STATEMENT OF ASSETS AND LIABILITIES (Continued)
<TABLE>
<S> <C>
=================================================================================================
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net
assets of $568,673,426 and 56,741,261 shares of beneficial
interest outstanding) $10.02
Maximum offering price per share (net asset value plus sales
charge of 4.75% of offering price) $10.52
- -------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $90,021,995 and 9,001,472 shares of beneficial interest
outstanding) $10.00
- -------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $18,620,976 and 1,862,191 shares of beneficial interest
outstanding) $10.00
</TABLE>
See accompanying Notes to Financial Statements.
24 Oppenheimer Municipal Bond Fund
<PAGE> 25
STATEMENT OF OPERATIONS For the Year Ended July 31, 1999
<TABLE>
<S> <C>
=================================================================================================
INVESTMENT INCOME
Interest $ 41,078,858
=================================================================================================
EXPENSES
Management fees--Note 4 3,651,960
- -------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 1,290,905
Class B 963,566
Class C 168,521
- -------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 539,930
- -------------------------------------------------------------------------------------------------
Shareholder reports 134,765
- -------------------------------------------------------------------------------------------------
Custodian fees and expenses 83,843
- -------------------------------------------------------------------------------------------------
Trustees' compensation--Note 1 65,562
- -------------------------------------------------------------------------------------------------
Legal, auditing and other professional fees 40,948
- -------------------------------------------------------------------------------------------------
Other 42,650
------------
Total expenses 6,982,650
Less expenses paid indirectly--Note 1 (26,108)
------------
Net expenses 6,956,542
=================================================================================================
NET INVESTMENT INCOME 34,122,316
=================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain on:
Investments 795,479
Closing of futures contracts 3,239,515
------------
Net realized gain 4,034,994
- -------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (21,131,992)
------------
Net realized and unrealized loss (17,096,998)
=================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 17,025,318
============
</TABLE>
See accompanying Notes to Financial Statements.
25 Oppenheimer Municipal Bond Fund
<PAGE> 26
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION> YEAR ENDED JULY 31,
1999 1998
=================================================================================================
<S> <C> <C>
OPERATIONS
Net investment income $ 34,122,316 $ 33,251,946
- -------------------------------------------------------------------------------------------------
Net realized gain (loss) 4,034,994 (3,864,299)
- -------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation (21,131,992) 6,481,326
------------ ------------
Net increase in net assets resulting
from operations 17,025,318 35,868,973
=================================================================================================
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Class A (29,412,371) (29,581,175)
Class B (4,082,909) (3,825,603)
Class C (714,322) (457,414)
=================================================================================================
BENEFICIAL INTEREST TRANSACTIONS
Net increase (decrease) in net assets resulting
from beneficial interest transactions--Note 2:
Class A 3,343,191 (8,655,646)
Class B 748,967 7,490,759
Class C 6,304,825 4,173,260
=================================================================================================
NET ASSETS
Total increase (decrease) (6,787,301) 5,013,154
- -------------------------------------------------------------------------------------------------
Beginning of period 684,103,698 679,090,544
------------ ------------
End of period (including overdistributed net
investment income of $1,542,690 and
$1,455,404, respectively) $677,316,397 $684,103,698
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
26 Oppenheimer Municipal Bond Fund
<PAGE> 27
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------------
YEAR ENDED JULY 31, YEAR ENDED DECEMBER 31,
1999 1998 1997 1996(1) 1995 1994
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $10.27 $10.24 $ 9.74 $9.98 $8.93 $10.44
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .52 .51 .55 .32 .54 .57
Net realized and unrealized gain (loss) (.25) .04 .49 (.25) 1.06 (1.52)
------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations .27 .55 1.04 .07 1.60 (.95)
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from
net investment income (.52) (.52) (.54) (.31) (.54) (.56)
Dividends in excess of
net investment income -- -- -- -- (.01) --
------ ------ ------ ------ ------ ------
Total dividends and
distributions to shareholders (.52) (.52) (.54) (.31) (.55) (.56)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.02 $10.27 $10.24 $9.74 $9.98 $ 8.93
====== ====== ====== ====== ===== ======
=============================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) 2.57% 5.55% 10.97% 0.77% 18.28% (9.19)%
=============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $568,673 $579,570 $586,546 $590,299 $634,473 $541,161
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $587,197 $581,630 $582,624 $606,509 $569,859 $582,038
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 5.00% 5.00% 5.55% 5.58% 5.65% 5.94%
Expenses 0.87% 0.87%(4) 0.87%(4) 0.92%(4) 0.88%(4) 0.88%
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 18% 21% 24% 24% 25% 22%
</TABLE>
1. For the seven months ended July 31, 1996. The Fund changed its fiscal year
end from December 31 to July 31.
2. Assumes a $1,000 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.
3. Annualized for periods of less than one full year.
4. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended July 31, 1999, were $145,629,048 and $121,967,453,
respectively.
27 Oppenheimer Municipal Bond Fund
<PAGE> 28
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------------------------
YEAR ENDED JULY 31, YEAR ENDED DECEMBER 31,
1999 1998 1997 1996(1) 1995 1994
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $10.25 $10.22 $ 9.73 $9.96 $8.92 $10.43
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .44 .43 .47 .27 .47 .50
Net realized and
unrealized gain (loss) (.25) .04 .48 (.23) 1.05 (1.52)
------- ------ ------ ------ ------ ------
Total income (loss) from
investment operations .19 .47 .95 .04 1.52 (1.02)
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from
net investment income (.44) (.44) (.46) (.27) (.47) (.49)
Dividends in excess of
net investment income -- -- -- -- (.01) --
------- ------ ------ ------ ------ ------
Total dividends and
distributions to shareholders (.44) (.44) (.46) (.27) (.48) (.49)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.00 $10.25 $10.22 $9.73 $9.96 $ 8.92
======= ====== ====== ===== ===== ======
=============================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) 1.78% 4.75% 10.05% 0.43% 17.30% (9.91)%
=============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $90,022 $91,677 $83,897 $74,055 $72,488 $53,245
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $96,352 $88,531 $77,881 $73,047 $63,669 $46,548
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 4.22% 4.21% 4.76% 4.79% 4.84% 5.11%
Expenses 1.65% 1.65%(4) 1.65%(4) 1.70%(4) 1.68%(4) 1.69%
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 18% 21% 24% 24% 25% 22%
</TABLE>
1. For the seven months ended July 31, 1996. The Fund changed its fiscal year
end from December 31 to July 31.
2. Assumes a $1,000 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.
3. Annualized for periods of less than one full year.
4. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended July 31, 1999, were $145,629,048 and $121,967,453,
respectively.
28 Oppenheimer Municipal Bond Fund
<PAGE> 29
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------------------
PERIOD
ENDED
YEAR ENDED JULY 31, DEC. 31,
1999 1998 1997 1996(1) 1995(6)
==============================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $10.25 $10.22 $ 9.73 $9.96 $9.58
- -----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .44 .43 .46 .27 .15
Net realized and unrealized gain (loss) (.25) .04 .49 (.23) .39
------ ------ ------ ------ ------
Total income (loss) from
investment operations .19 .47 .95 .04 .54
- -----------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.44) (.44) (.46) (.27) (.15)
Dividends in excess of
net investment income -- -- -- -- (.01)
------ ------ ------ ------ ------
Total dividends and
distributions to shareholders (.44) (.44) (.46) (.27) (.16)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.00 $10.25 $10.22 $9.73 $9.96
====== ====== ====== ===== =====
===========================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) 1.78% 4.75% 10.03% 0.40% 5.64%
===========================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $18,621 $12,857 $8,648 $4,210 $1,975
- -----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $16,868 $10,655 $5,724 $3,105 $1,506
- -----------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 4.22% 4.30% 4.72% 4.72% 4.49%
Expenses 1.65% 1.64%(4) 1.67%(4) 1.75%(4) 1.64%(4)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 18% 21% 24% 24% 25%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
1. For the seven months ended July 31, 1996. The Fund changed its fiscal year
end from December 31 to July 31.
2. Assumes a $1,000 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.
3. Annualized for periods of less than one full year.
4. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended July 31, 1999, were $145,629,048 and $121,967,453,
respectively.
6. For the period from August 29, 1995 (inception of offering) to December 31,
1995.
See accompanying Notes to Financial Statements.
29 Oppenheimer Municipal Bond Fund
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Municipal 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 objective is to seek as high a level
of current interest income exempt from federal income taxes as is available from
investing in municipal securities, while attempting to preserve 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, on investments up to $1 million. Class B and Class C
shares may be subject to a contingent deferred sales charge (CDSC). All classes
of shares have identical rights to earnings, assets and voting privileges,
except that each class has its own expenses directly attributable to that class
and exclusive voting rights with respect to matters affecting that class.
Classes A, B and C have separate distribution and/or service plans. 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.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Trustees. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Trustees to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount. Options are valued based upon the last sale price on the
principal exchange on which the option is traded or, in the absence of any
transactions that day, the value is based upon the last sale price on the prior
trading date if it is within the spread between the closing bid and asked
prices. If the last sale price is outside the spread, the closing bid is used.
30 Oppenheimer Municipal Bond Fund
<PAGE> 31
================================================================================
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. Delivery and payment for securities
that have been purchased by the Fund on a forward commitment or when-issued
basis can take place a month or more after the transaction date. Normally the
settlement date occurs within six months after the transaction date; however,
the fund may, from time to time, purchase securities whose settlement date
extends beyond six months and possibly as long as two years or more beyond the
trade date. During this period, such securities do not earn interest, are
subject to market fluctuation and may increase or decrease in value prior to
their delivery. The Fund maintains segregated assets with a market value equal
to or greater than the amount of its purchase commitments. The purchase of
securities on a when-issued or forward commitment basis may increase the
volatility of the Fund's net asset value to the extent the Fund makes such
purchases while remaining substantially fully invested. As of July 31, 1999, the
Fund had entered into outstanding when-issued or forward commitments of
$7,550,320.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted a nonfunded retirement plan for the
Fund's independent Trustees. Benefits are based on years of service and fees
paid to each trustee during the years of service. During the year ended July 31,
1999, a provision of $4,456 was made for the Fund's projected benefit
obligations and payments of $18,457 were made to retired trustees, resulting in
an accumulated liability of $235,370 as of July 31, 1999.
The Board of Trustees has adopted a deferred compensation
plan for independent Trustees that enables Trustees to elect to defer receipt of
all or a portion of annual compensation they are entitled to receive from the
Fund. Under the plan, the compensation deferred is periodically adjusted as
though an equivalent amount had been invested for the Trustees in shares of one
or more Oppenheimer funds selected by the Trustee. The amount paid to the
Trustee under the plan will be determined based upon the performance of the
selected funds. Deferral of Trustees' fees under the plan will not affect the
net assets of the Fund, and will not materially affect the Fund's assets,
liabilities or net income per share.
31 Oppenheimer Municipal Bond Fund
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes. The character of distributions made during the year from net
investment income or net realized gains may differ from its ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the fiscal year in which the income or realized gain was recorded by
the Fund.
- --------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENTS. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
OTHER. Investment transactions are accounted for as of the trade date. Original
issue discount is accreted and premium is amortized in accordance with federal
income tax requirements. For municipal 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.
32 Oppenheimer Municipal Bond Fund
<PAGE> 33
================================================================================
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 JULY 31, 1999 YEAR ENDED JULY 31, 1998
------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 14,899,854 $ 154,002,934 7,539,023 $ 77,439,740
Dividends and/or
distributions reinvested 1,840,869 19,006,893 1,883,571 19,274,883
Redeemed (16,420,114) (169,666,636) (10,278,245) (105,370,269)
----------- ------------- ----------- --------------
Net increase (decrease) 320,609 $ 3,343,191 (855,651) $ (8,655,646)
=========== ============= =========== ==============
- -----------------------------------------------------------------------------------------------------------------
Class B:
Sold 2,590,055 $ 26,762,743 2,062,272 $ 21,072,590
Dividends and/or
distributions reinvested 246,696 2,542,377 230,245 2,351,819
Redeemed (2,778,452) (28,556,153) (1,556,731) (15,933,650)
----------- ------------- ----------- --------------
Net increase 58,299 $ 748,967 735,786 $ 7,490,759
=========== ============= =========== ==============
- -----------------------------------------------------------------------------------------------------------------
Class C:
Sold 1,026,290 $ 10,616,838 679,752 $ 6,954,811
Dividends and/or
distributions reinvested 49,362 508,501 30,969 316,430
Redeemed (467,899) (4,820,514) (302,537) (3,097,981)
----------- ------------- ----------- --------------
Net increase 607,753 $ 6,304,825 408,184 $ 4,173,260
=========== ============= =========== ==============
</TABLE>
================================================================================
3. UNREALIZED GAINS AND LOSSES ON SECURITIES
As of July 31, 1999, net unrealized appreciation on securities of $32,822,147
was composed of gross appreciation of $36,674,948, and gross depreciation of
$3,852,801.
================================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee of 0.60% of
the first $200 million of average annual net assets, 0.55% of the next $100
million, 0.50% of the next $200 million, 0.45% of the next $250 million, 0.40%
of the next $250 million and 0.35% of average annual net assets in excess of $1
billion. The Fund's management fee for the year ended July 31, 1999 was 0.52% of
the average annual net assets for each class of shares.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer and shareholder servicing agent for the Fund and for other
Oppenheimer funds. OFS's total costs of providing such services are allocated
ratably to these funds.
33 Oppenheimer Municipal Bond Fund
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED)
DISTRIBUTION AND SERVICE PLAN FEES. Under its General Distributor's Agreement
with the Manager, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is shown in the table below for the period
indicated.
<TABLE>
<CAPTION>
CLASS A
AGGREGATE FRONT-END COMMISSIONS ON COMMISSIONS ON COMMISSIONS ON
FRONT-END SALES SALES CHARGES CLASS A SHARES CLASS B SHARES CLASS C SHARES
YEAR CHARGES ON RETAINED BY ADVANCED BY ADVANCED BY ADVANCED BY
ENDED CLASS A SHARES DISTRIBUTOR DISTRIBUTOR(1) DISTRIBUTOR(1) DISTRIBUTOR(1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
July 31, 1999 $801,669 $216,077 $65,289 $707,523 $71,786
</TABLE>
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
CONTINGENT DEFERRED CONTINGENT DEFERRED CONTINGENT DEFERRED
YEAR SALES CHARGES SALES CHARGES SALES CHARGES
ENDED RETAINED BY DISTRIBUTOR RETAINED BY DISTRIBUTOR RETAINED BY DISTRIBUTOR
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
July 31, 1999 $1,578 $291,023 $8,384
</TABLE>
The Fund has adopted a Service Plan for Class A shares and
Distribution and Service Plans for Class B and Class C shares under Rule 12b-1
of the Investment Company Act. Under those plans the Fund pays the Distributor
for all or a portion of its costs incurred in connection with the distribution
and/or servicing of the shares of the particular class.
- --------------------------------------------------------------------------------
CLASS A SERVICE PLAN FEES. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions. The Class A service plan permits reimbursements to
the Distributor at a rate of up to 0.25% of average annual net assets of Class A
shares. The Distributor makes payments to plan recipients quarterly at an annual
rate not to exceed 0.25% of the average annual net assets consisting of Class A
shares of the Fund. For the fiscal year ended July 31, 1999, payments under the
Class A Plan totaled $1,290,905, all of which was paid by the Distributor to
recipients. That included $109,431 paid to an affiliate of the Distributor's
parent company. Any unreimbursed expenses the Distributor incurs with respect to
Class A shares in any fiscal year cannot be recovered in subsequent years.
- --------------------------------------------------------------------------------
CLASS B AND CLASS C DISTRIBUTION AND SERVICE PLAN FEES. Under each plan, service
fees and distribution fees are computed on the average of the net asset value of
shares in the respective class, determined as of the close of each regular
business day during the period. The Class B and Class C plans provide for the
Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund under
the plan during the period for which the fee is paid.
34 Oppenheimer Municipal Bond Fund
<PAGE> 35
================================================================================
The Distributor retains the asset-based sales charge on Class B shares. The
Distributor retains the asset-based sales charge on Class C shares during the
first year the shares are outstanding. The asset-based sales charges on Class B
and Class C shares allow investors to buy shares without a front-end sales
charge while allowing the Distributor to compensate dealers that sell those
shares.
The Distributor's actual expenses in selling Class B and
Class C shares may be more than the payments it receives from the contingent
deferred sales charges collected on redeemed shares and from the Fund under the
plans. If either the Class B or the Class C plan is terminated by the Fund, the
Board of Trustees may allow the Fund to continue payments of the asset-based
sales charge to the Distributor for distributing shares before the plan was
terminated. The plans allow for the carry-forward of distribution expenses, to
be recovered from asset-based sales charges in subsequent fiscal periods.
Distribution fees paid to the Distributor for the year ended July 31, 1999, were
as follows:
<TABLE>
<CAPTION>
DISTRIBUTOR'S
DISTRIBUTOR'S AGGREGATE UNREIMBURSED
TOTAL PAYMENTS AMOUNT RETAINED UNREIMBURSED EXPENSES EXPENSES AS % OF
CLASS UNDER PLAN BY DISTRIBUTOR UNDER PLAN NET ASSETS OF CLASS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class B Plan $963,566 $766,109 $2,234,595 2.48%
- ------------------------------------------------------------------------------------------------------------------
Class C Plan $168,521 $ 97,752 $ 223,243 1.20%
==================================================================================================================
</TABLE>
5. FUTURES CONTRACTS
The Fund may buy and sell futures contracts in order to gain exposure to or to
seek to 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 (initial margin) in an amount 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 may recognize a realized gain or loss when the
contract is closed or expires.
Securities held in collateralized accounts to cover initial
margin requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a receivable
and/or payable for the daily mark to market for variation margin.
35 Oppenheimer Municipal Bond Fund
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
5. FUTURES CONTRACTS (CONTINUED)
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.
As of July 31, 1999, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
EXPIRATION NUMBER OF VALUATION AS OF UNREALIZED
CONTRACT DESCRIPTION DATE CONTRACTS JULY 31, 1999 APPRECIATION
- -----------------------------------------------------------------------------------------------------------------
CONTRACTS TO SELL
- -----------------
<S> <C> <C> <C> <C>
U.S. Treasury Bonds 9/21/99 600 $68,981,250 $439,842
</TABLE>
================================================================================
6. ILLIQUID OR RESTRICTED SECURITIES
As of July 31, 1999, investments in securities included issues that are illiquid
or restricted. Restricted securities are often purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. A security may also be considered
illiquid if it lacks a readily available market or if its valuation has not
changed for a certain period of time. The Fund intends to invest no more than
10% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limitation. The aggregate value of illiquid or restricted
securities subject to this limitation as of July 31, 1999, was $12,613,636,
which represents 1.86% of the Fund's net assets.
================================================================================
7. BANK BORROWINGS
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the year ended
July 31, 1999.
36 Oppenheimer Municipal Bond Fund
<PAGE> 37
INDEPENDENT AUDITORS' REPORT
================================================================================
The Board of Trustees and Shareholders of
Oppenheimer Municipal Bond Fund:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Municipal Bond Fund as of July 31,
1999, 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 three-year
period then ended, the seven-month period ended July 31, 1996, and each of the
years in the two-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, 1999, 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 Municipal Bond Fund as of July 31, 1999, 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 three-year period then ended, the
seven-month period ended July 31, 1996, and each of the years in the two-year
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
KPMG LLP
Denver, Colorado
August 20, 1999
37 Oppenheimer Municipal Bond Fund
<PAGE> 38
FEDERAL INCOME TAX INFORMATION (Unaudited)
================================================================================
In early 2000, shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1999. 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, 1999, 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.
38 Oppenheimer Municipal Bond Fund
<PAGE> 39
OPPENHEIMER MUNICIPAL 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
Phillip A. Griffiths, Trustee
Benjamin Lipstein, Trustee
Elizabeth B. Moynihan, Trustee
Kenneth A. Randall, Trustee
Edward V. Regan, Trustee
Russell S. Reynolds, Jr., Trustee
Pauline Trigere, Trustee
Clayton K. Yeutter, Trustee
Robert E. Patterson, Vice President
Andrew J. Donohue, Secretary
Brian W. Wixted, Treasurer
Robert G. Zack, Assistant Secretary
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
================================================================================
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 LLP
================================================================================
LEGAL COUNSEL Mayer, Brown & Platt
This is a copy of a report to shareholders of
Oppenheimer Municipal Bond Fund. This report
must be preceded or accompanied by a
Prospectus of Oppenheimer Municipal 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 the possible loss of the
principal amount invested.
39 Oppenheimer Municipal Bond Fund
<PAGE> 40
INFORMATION AND SERVICES
- --------------------------------------------------------------------------------
As an Oppenheimer fund shareholder, you can benefit from special services
designed to make investing simple. Whether it's automatic investment plans,
timely market updates, or immediate account access, you can count on us whenever
you need assistance. So call us today, or visit our website--we're here to help.
INTERNET
24-hr access to account information and transactions
WWW.OPPENHEIMERFUNDS.COM
GENERAL INFORMATION
Mon-Fri 8:30am-9pm ET, Sat 10am-4pm ET
1-800-525-7048
TELEPHONE TRANSACTIONS
Mon-Fri 8:30am-9pm ET, Sat 10am-4pm ET
1-800-852-8457
PHONELINK
24-hr automated information
and automated transactions
1-800-533-3310
TELECOMMUNICATIONS DEVICE FOR THE DEAF (TDD)
Mon-Fri 8:30am-6pm ET
1-800-843-4461
OPPENHEIMERFUNDS INFORMATION HOTLINE
24 hours a day, timely and insightful messages on the
economy and issues that may affect your investments
1-800-835-3104
TRANSFER AND SHAREHOLDER SERVICING AGENT
OppenheimerFunds Services,
P.O. Box 5270, Denver, CO 80217-5270
[OPPENHEIMERFUNDS LOGO]
RA0310.001.0799 September 29, 1999
