[photo of highway]
Annual Report July 31, 2000
Oppenheimer
Municipal Bond Fund
[logo] OppenheimerFunds(R)
The Right Way to Invest
<PAGE>
REPORT HIGHLIGHTS
Despite lower municipal bond prices over the past year, the municipal bond
market began to rally during the first quarter of 2000.
During the first seven months of 2000, the tax-exempt bond market has benefited
from greater demand and a reduced supply of new issues.
We believe that municipal bonds currently offer compelling value compared to
30-year U.S. Treasury bonds.
Contents
1 President's Letter
3 An Interview
with Your Fund's
Manager
7 Fund Performance
12 Financial
Statements
34 Independent
Auditors' Report
35 Federal
Income Tax
Information
36 Officers and
Trustees
Average Annual
Total Returns*
For the 1-Year Period
Ended 7/31/00
Class A
Without With
Sales Chg. Sales Chg.
------------------------
-0.85% -5.56%
Class B
Without With
Sales Chg. Sales Chg.
------------------------
-1.62% -6.28%
Class C
Without With
Sales Chg. Sales Chg.
------------------------
-1.62% -2.55%
*See Notes on page 10 for further details.
<PAGE>
PRESIDENT'S LETTER
[photo]
Bridget A. Macaskill
President
Oppenheimer
Municipal Bond Fund
Dear Shareholder,
The 1990s, although not free of volatility, were distinguished by an overall
bull market. In contrast, the year 2000 has been characterized so far as a
relatively difficult investment environment with high levels of volatility.
As we entered the year, a vital concern weighing on investors' minds was
growing evidence of a trend toward higher inflation. While productivity
improvements and various economic forces helped keep inflation low over the last
decade, the year 2000 has seen upward pressure on wages and some prices. That's
primarily because the U.S. economy has been growing at a vigorous pace, creating
a labor shortage for businesses and high spending levels among consumers. In
response, since the summer of 1999, the Federal Reserve Board raised short-term
interest rates six times through June 30, 2000, in an attempt to forestall
inflationary pressures.
During that period, higher interest rates adversely affected many stocks and
bonds. In a dramatic decline, previously high-flying technology stocks generally
fell to more reasonable valuations. At the same time, long-neglected value
stocks began to attract investor interest. The result: narrowing of the
valuation gap between growth stocks and value stocks. Finally, in the bond
market, higher interest rates caused prices of most fixed income securities to
fall.
At OppenheimerFunds, we were not surprised by these developments, many of
which we anticipated in our recent letters to investors. What did concern us was
that, prior to the April 2000 correction, we began to see disturbing signs that
short-term trading was taking place not just in technology stocks, but also in
mutual funds. Prudent investors will understand our concern: most stock and bond
funds are carefully designed as long-term investments to help individuals and
families progress toward significant financial goals. In general, short-term
trading is risky and may compromise a well planned financial strategy. It may
also result in unforeseen adverse consequences, such as unnecessarily high tax
bills.
1 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
PRESIDENT'S LETTER
We continue to believe that maintaining a long-term perspective and
practicing diversification are the fundamental drivers of consistent performance
over time. These strategies have helped individual investors, as well as
professional investors, weather declining markets and participate in rising
ones. On the following pages, your portfolio manager discusses the long-term
strategies and particular investment decisions that affected your fund during
the reporting period.
You can remain confident that our portfolio managers will continue to monitor
areas of opportunity in the arenas in which your fund invests, as the effects of
today's changing investment environment take hold. Knowing what's going on in
the world's economies, markets and companies--and making investment decisions
designed to try to take advantage of them over the long term--is central to what
makes OppenheimerFunds The Right Way to Invest.
Sincerely,
/s/ Bridget A. Macaskill
Bridget A. Macaskill
August 21, 2000
These general market views represent opinions of OppenheimerFunds, Inc. and are
not intended to predict or depict performance of any particular fund. Specific
discussion, as it applies to your Fund, is contained in the pages that follow.
Stocks and bonds have different types of investment risks; stocks are subject to
market volatility and bonds are subject to credit and interest rate risks.
2 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
AN INTERVIEW WITH YOUR FUND'S MANAGER
Q How did Oppenheimer Municipal Bond Fund perform during the one-year period
that ended July 31, 2000?
A. During the reporting period, the Fund faced a difficult investment
environment for municipal bonds. Inflation fears and higher interest rates
eroded most tax-exempt bond prices, especially during the last five months of
1999. Despite these factors, however, we began to see signs of a potential
market recovery in the first quarter of 2000, as well as in June and July. Most
significant is that demand for municipal bonds from individual investors has
surged. At the same time, the available supply of newly issued municipal bonds
has fallen sharply. Nevertheless, municipal bond price averages ended the
one-year reporting period at lower levels than where they began.
Why have higher interest rates negatively affected municipal bond prices?
Fixed-income investors generally dislike rising interest rates, which tend to
erode the prices of their previously issued, lower yielding bonds. This is
because the older bonds must drop in price in order to offer higher, more
competitive yields to attract investors. However, investors with a long-term
perspective may benefit from the higher levels of current income when interest
rates are rising. Such was the case with many of the Fund's holdings over the
past year: as interest rates rose, so did the Fund's yield. This enabled us to
maintain the Fund's income stream in a declining market.
3 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
AN INTERVIEW WITH YOUR FUND'S MANAGER
Why has the Federal Reserve Board been raising interest rates?
The Federal Reserve Board, which sets U.S. monetary policy, has been raising key
short-term interest rates over the past year because of inflation concerns. The
U.S. economy has been growing so strongly that it may threaten to reignite
forces potentially leading to higher prices and wages. Most of us have seen
ample evidence of this phenomenon recently in the form of higher gasoline and
heating oil prices. With unemployment currently hovering near record low levels,
we have also seen upward pressure on wages as growing companies compete for a
limited number of skilled workers.
In response to these developments, the Federal Reserve Board raised interest
rates several times during the 12-month reporting period. When added to the
single interest rate hike implemented before the reporting period began, the Fed
has raised interest rates by 1.75 percentage points since mid-June, 1999. These
actions are intended to slow economic growth by making borrowing more expensive
for businesses and consumers.
Why have market conditions improved recently?
Although the market trended consistently downward during the last five months of
1999, the municipal bond market began to rally during the first quarter of 2000,
and again in June and July. There are two primary reasons for this: investors'
interest rate expectations and a reduced supply of municipal bonds.
After more than a year of rising interest rates, evidence has begun to emerge
that the Fed's policies may be starting to reduce the growth rate of the U.S.
economy. Key economic statistics measuring trends in consumer spending, new home
construction, employment and other factors have begun to decline to more
sustainable levels. Accordingly, some investors believe that most--but not
necessarily all--interest rate increases
Average Annual
Total Returns
For the Periods Ended 6/30/00(1)
Class A
1-Year 5-Year 10-Year
------------------------
-6.74% 3.79% 5.74%
Class B Since
1-Year 5-Year Inception
------------------------
-7.46% 3.66% 3.91%
Class C Since
1-Year 5-Year Inception
------------------------
-3.78% N/A 3.95%
1. See Notes on page 10 for further details.
4 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
may be behind us and are buying bonds to lock in prevailing high yields. This
has been particularly true of individual investors who have shifted assets out
of the stock market in the wake of heightened volatility among equities.
In addition, the supply of new municipal bonds is down sharply from the
levels of a year ago. This is primarily the result of the strong U.S. economy,
which has helped create larger-than-expected tax revenues for many state and
local governments. Municipalities thus have had less need to borrow money. As a
result, investors find themselves competing for a smaller pool of investments,
causing the prices of these securities to rise.
Of course, there is no guarantee that these beneficial conditions will
persist or that market conditions will continue to improve.
How was the Fund managed in this environment?
We have continued to seek to reposition the portfolio more defensively by
locking in attractive yields and extending protection against bonds being
retired. However, our ability to accomplish this has been limited by market
conditions. Because demand for municipal bonds has come primarily from
individual investors, and not from institutional investors, some of our
institutional-oriented, lower rated bonds declined more in price relative to
higher rated bonds that individuals are buying. We have generally retained these
holdings as we wait for institutional investors to re-enter the market and
create greater liquidity--and higher prices--for these issues.
When making new purchases, we've focused primarily on insured bonds with
maturities in the 20-year range. These are the types of bonds that tend to
appeal most to individual investors, which potentially makes them easier to sell
when the time comes. Keep in mind that, while individual holdings may be
insured, an investment in the Fund is not.
Standardized Yields(2)
For the 30 Days Ended 7/31/00
-----------------------------
Class A 5.19%
-----------------------------
Class B 4.68
-----------------------------
Class C 4.68
2. Standardized yield is based on net investment income for the 30-day period
ended July 31, 2000. Falling share prices will tend to artificially raise
yields.
5 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
AN INTERVIEW WITH YOUR FUND'S MANAGER
What is your outlook for the foreseeable future?
We remain generally optimistic. At current levels, we believe that municipal
bonds--and municipal bond funds--represent compelling investment values relative
to comparable taxable securities.
Over the near term, however, the direction of the U.S. economy remains
uncertain. If the current higher interest rates ultimately slow the economy
without triggering recession, interest rates should then begin to decline and
bonds may benefit. In our opinion, maintaining a long-term perspective that
spans economic cycles such as these is an important part of what makes
OppenheimerFunds The Right Way to Invest.
Credit Allocation(3)
[pie chart]
AAA 41.4%
AA 9.7
A 12.1
BBB 21.8
BB 13.3
B and below 1.7
Top Five Industries(4)
-----------------------------------------------------------
Marine/Aviation Facilities 14.4%
-----------------------------------------------------------
Electric Utilities 13.7
-----------------------------------------------------------
Highways/Railways 9.5
-----------------------------------------------------------
Single Family Housing 8.1
-----------------------------------------------------------
General Obligation 7.9
3. Portfolio data is subject to change. Percentages are as of July 31, 2000, and
are dollar-weighted based on total market value of investments. Securities rated
by any rating organization are included in the equivalent Standard & Poor's
rating category. Average credit quality and allocation include rated securities
and those not rated by a national rating organization (currently 10.9% of total
investments) but for which the ratings given above have been assigned by the
Manager for internal purposes as being comparable, in the Manager's judgment, to
securities rated by a rating agency in the same category.
4. Industry weightings based on total market value of investments are as of July
31, 2000, and are subject to change.
6 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
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, 2000, 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, 2000, Oppenheimer Municipal Bond Fund's performance was negatively
impacted by adverse economic and fixed-income market conditions, including
inflation fears and rising interest rates. Because of the relatively limited
demand for institutional-oriented bonds, the portfolio manager generally held
his institutional issues during the reporting period. New purchases were
primarily insured bonds with maturities in the 20-year range.
In addition, the Fund was negatively influenced by credit concerns regarding
one of its holdings. The portfolio manager believes that municipal bonds are
currently providing highly competitive after-tax yields, compared to historical
norms. Municipal bonds may represent attractive values if the U.S. economy slows
enough to relieve inflationary pressures without entering recession. The Fund's
portfolio holdings, allocations and investment style 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 until July 31, 2000. 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 inception of the Class on March 16, 1993. In the case of Class C
shares, performance is measured from inception of the Class on August 29, 1995.
The Fund's performance reflects the deduction of the maximum initial sales
charge on Class A shares, the applicable contingent deferred sales charge on
Class B and Class C shares, and reinvestments of all dividends and capital gains
distributions.
The Fund's performance is compared to the performance of 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 dividends but does not consider the effect of capital gains or transaction
costs, and none of the data in the graphs that follow shows the effect of taxes.
The Fund's performance reflects the effects of Fund business and operating
expenses. While index comparisons may be useful to provide a benchmark for the
Fund's performance, it must be noted that the Fund's investments are not limited
to the securities in the index.
7 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
FUND PERFORMANCE
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
[line chart]
<TABLE>
<CAPTION>
Oppenheimer Municipal Bond Fund (Class A) Lehman Brothers Municipal Bond Index
<S> <C> <C>
12/31/90 9525 10000
9731 10226
9921 10444
10340 10851
12/31/91 10678 11214
10664 11248
11139 11674
11395 11985
12/31/92 11718 12203
12101 12656
12545 13070
13113 13512
12/31/93 13269 13702
12405 12950
12325 13092
12355 13182
12/31/94 12051 12994
13083 13912
13328 14247
13583 14656
12/31/95 14252 15262
14127 15078
14178 15193
7/31/96 14362 15331
14724 15717
14988 15968
15079 16032
7/31/97 15937 16903
16042 17052
16578 17582
16461 17523
7/31/98 16822 17916
17228 18419
17593 18750
17613 18741
7/31/99 17252 18431
16609 18093
16279 18070
16723 18569
7/31/00 17106 19226
</TABLE>
Average Annual Total Return of Class A Shares of the Fund at 7/31/00(2)
1-Year -5.56% 5-Year 3.98% 10-Year 5.74%
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
[line chart]
<TABLE>
<CAPTION>
Oppenheimer Municipal Bond Fund (Class B) Lehman Brothers Municipal Bond Index
<S> <C> <C>
3/16/93 10000 10000
9961 9894
6/30/93 10299 10218
10732 10564
10837 10712
10109 10124
6/30/94 10035 10235
10029 10306
9761 10158
10579 10876
6/30/95 10757 11138
10942 11458
11448 11931
11326 11788
6/30/96 11344 11878
7/31/96 11497 11985
11750 12287
11939 12483
11990 12534
7/31/97 12647 13214
12707 13331
13107 13745
12988 13700
7/31/98 13246 14006
13542 14400
13801 14659
13808 14651
7/31/99 13524 14409
13020 14145
12760 14127
13107 14517
7/31/00 13407 15030
</TABLE>
Average Annual Total Return of Class B Shares of the Fund at 7/31/00(2)
1-Year -6.28% 5-Year 3.86% Life 4.08%
1. The Fund changed its fiscal year end from December 31 to July 31.
2. See page 10 for further details.
8 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
Class C Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
[line chart]
<TABLE>
<CAPTION>
Oppenheimer Municipal Bond Fund (Class C) Lehman Brothers Municipal Bond Index
<S> <C> <C>
8/29/95 10000 10000
10097 10063
10564 10479
10449 10353
10465 10432
7/31/96 10604 10526
10839 10791
11012 10963
11058 11008
7/31/97 11664 11605
11719 11708
12087 12072
11978 12032
7/31/98 12216 12301
12489 12647
12729 12874
12717 12868
7/31/99 12431 12655
11944 12423
11683 12407
11979 12750
7/31/00 12230 13201
</TABLE>
Average Annual Total Return of Class C Shares of the Fund at 7/31/00(2)
1-Year -2.55% Life 4.19%
The performance information for the Lehman Brothers Municipal Bond Index in the
graphs begins on 12/31/90 for Class A, 3/31/93 for Class B and begins on 8/31/95
for Class C.
1. See page 10 for further details.
Past performance is not predictive of future performance. Graphs are not drawn
to the same scale.
9 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
NOTES
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 quarterly
updates on the Fund's performance, please contact your financial advisor, call
us at 1.800.525.7048 or visit our website at www.oppenheimerfunds.com.
Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. The Fund's total returns shown do
not show the effects of income taxes on an individual's investment. Taxes may
reduce your actual investment returns on income or gains paid by the Fund or any
gains you may realize if you sell your shares.
Class A shares were first publicly offered on 10/27/76. The average annual total
returns are shown net of the applicable 4.75% maximum initial sales charge.
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 contingent deferred sales
charge of 5% (1-year) and 2% (5-year). Because Class B shares convert to Class A
shares 72 months after purchase, the "life-of-class" return for Class B uses
Class A performance for the period after conversion. Class B shares are subject
to an annual 0.75% asset-based sales charge.
Class C shares of the Fund were first publicly offered on 8/29/95. The average
annual total returns are shown net of the applicable 1% contingent deferred
sales charge for the one-year period. Class C shares are subject to an annual
0.75% asset-based sales charge.
An explanation of the calculation of performance is in the Fund's Statement of
Additional Information.
10 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
Financials
11 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
STATEMENT OF INVESTMENTS July 31, 2000
<TABLE>
<CAPTION>
Ratings:
Moody's/ Market
S&P/Fitch Principal Value
(Unaudited) Amount See Note 1
=========================================================================================
<S> <C> <C> <C>
Municipal Bonds and Notes--100.9%
-----------------------------------------------------------------------------------------
Arizona--1.0%
Central AZ Irrigation & Drainage District GORB,
Series A, 6%, 6/1/13 NR/NR $ 1,080,950 $ 942,621
-----------------------------------------------------------------------------------------
Peoria, AZ IDAU RRB, Sierra Winds Life,
Series A, 6.375%, 8/15/29 NR/NR 5,000,000 4,296,550
-----------
5,239,171
-----------------------------------------------------------------------------------------
California--8.3%
CA Foothill/Eastern Corridor Agency
Toll Road RB, Sr. Lien, Prerefunded,
Series A, 6.50%, 1/1/32 Aaa/AAA/AAA 3,000,000 3,365,640
-----------------------------------------------------------------------------------------
CA HFA RB, Series C, 6.65%, 8/1/14 Aa2/AA- 5,000,000 5,101,300
-----------------------------------------------------------------------------------------
CA HFA SFM RB, Series C, 6.75%, 2/1/25 Aa2/AA- 4,775,000 4,871,455
-----------------------------------------------------------------------------------------
CA SCDAU Revenue Refunding COP,
Inverse Floater, 6.56%, 11/1/15(1) A1/NR 1,500,000 1,483,125
-----------------------------------------------------------------------------------------
Industry, CA UDA TXAL Bonds, Transportation
Distribution Project No. 3, 6.90%, 11/1/07 NR/A- 500,000 527,530
-----------------------------------------------------------------------------------------
Los Angeles, CA Regional AIC Lease RRB,
5.65%, 8/1/17 Ba2/BB 4,600,000 4,161,758
-----------------------------------------------------------------------------------------
Los Angeles, CA Regional AIC Lease RRB,
Facilities Sublease-International Airport Project,
6.35%, 11/1/25 Baa3/BBB- 4,000,000 3,925,560
-----------------------------------------------------------------------------------------
Perris, CA SFM RB, Escrowed to Maturity,
Series A, 8.30%, 6/1/13 Aaa/AAA 7,000,000 9,099,230
-----------------------------------------------------------------------------------------
Pomona, CA SFM RRB, Escrowed to Maturity,
Series A, 7.60%, 5/1/23 Aaa/AAA 6,000,000 7,347,180
-----------------------------------------------------------------------------------------
Redding, CA Electric System Revenue COP,
FGIC Insured, Inverse Floater, 7.20%, 6/1/19(1) Aaa/AAA/AAA 6,000,000 6,000,000
-----------
45,882,778
-----------------------------------------------------------------------------------------
Colorado--0.8%
CO HFAU RB, Rocky Mountain Adventist
Health System, 6.625%, 2/1/22 Ba1/BB 5,000,000 4,657,050
-----------------------------------------------------------------------------------------
Connecticut--4.9%
Mashantucket, CT Western Pequot Tribe
Special RB, Prerefunded, Series A, 6.40%, 9/1/11(2) Aaa/AAA 7,435,000 8,235,080
-----------------------------------------------------------------------------------------
Mashantucket, CT Western Pequot Tribe Special RB,
Unrefunded Balance, Series A, 6.40%, 9/1/11(2) NR/BBB- 7,565,000 7,893,775
-----------------------------------------------------------------------------------------
Mashantucket, CT Western Pequot Tribe
Special RRB, Sub. Lien, Series B, 5.75%, 9/1/27(2) Baa3/NR 11,900,000 10,857,560
-----------
26,986,415
12 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
Ratings:
Moody's/ Market
S&P/Fitch Principal Value
(Unaudited) Amount See Note 1
-----------------------------------------------------------------------------------------
Florida--3.5%
Dade Cnty., FL IDAU RB, Miami Cerebral Palsy
Services Project, 8%, 6/1/22 NR/NR $ 2,735,000 $ 2,863,709
-----------------------------------------------------------------------------------------
FL BOE Capital Outlay GORB, 8.40%, 6/1/07 Aa2/AA+ 750,000 885,330
-----------------------------------------------------------------------------------------
FL HFA SFM RRB, Series A, 6.35%, 7/1/14 Aaa/AAA 635,000 653,777
-----------------------------------------------------------------------------------------
Grand Haven, FL CDD SPAST RB,
Series A, 6.30%, 5/1/02 NR/NR 1,003,000 1,006,571
-----------------------------------------------------------------------------------------
Heritage Springs, FL CDD Capital Improvement RB,
Series B, 6.25%, 5/1/05 NR/NR 2,010,000 1,998,784
-----------------------------------------------------------------------------------------
Lee Cnty., FL Housing FAU SFM RB,
Series A-2, 6.85%, 3/1/29 Aaa/NR 1,585,000 1,698,106
-----------------------------------------------------------------------------------------
Lee Cnty., FL IDAU HCF RRB, Shell Point Village
Project, Series A, 5.50%, 11/15/21 NR/BBB- 2,000,000 1,618,380
-----------------------------------------------------------------------------------------
Lee Cnty., FL IDAU HCF RRB, Shell Point Village
Project, Series A, 5.50%, 11/15/29 NR/BBB- 2,250,000 1,750,680
-----------------------------------------------------------------------------------------
Miami-Dade Cnty., FL SPO RB, Sub. Lien,
Series B, MBIA Insured, Zero Coupon,
5.45%, 10/1/29(3) Aaa/AAA/AAA 25,895,000 4,520,231
-----------------------------------------------------------------------------------------
Palm Beach Cnty., FL HFAU RB, Retirement Community,
5.125%, 11/15/29 NR/A- 3,130,000 2,488,976
-----------
19,484,544
-----------------------------------------------------------------------------------------
Georgia--4.4%
GA MEAU RRB, Project One, Series X,
MBIA Insured, 6.50%, 1/1/12 Aaa/AAA 500,000 561,140
-----------------------------------------------------------------------------------------
GA MEAU SPO Refunding Bonds, Series Y,
MBIA Insured, 6.50%, 1/1/17 Aaa/AAA 11,750,000 13,151,657
-----------------------------------------------------------------------------------------
Rockdale Cnty., GA DAU SWD RB,
Visy Paper Inc. Project, 7.40%, 1/1/16 NR/NR 4,405,000 4,494,818
-----------------------------------------------------------------------------------------
Savannah, GA EDAU RB, College of
Art & Design Project, 6.90%, 10/1/29 NR/BBB- 5,880,000 5,966,554
-----------
24,174,169
-----------------------------------------------------------------------------------------
Illinois--1.8%
IL HFAU RB, Hinsdale Hospital Project, Escrowed
to Maturity, Series C, 9.50%, 11/15/19 NR/AAA 820,000 849,036
-----------------------------------------------------------------------------------------
IL Regional Transportation Authority RB, AMBAC
Insured, 7.20%, 11/1/20 Aaa/AAA/AAA 7,500,000 8,945,700
-----------
9,794,736
-----------------------------------------------------------------------------------------
Indiana--4.7%
Indianapolis, IN Airport Authority RB, SPF
Federal Express Corp. Project, 7.10%, 1/15/17 Baa2/BBB 15,500,000 16,161,850
-----------------------------------------------------------------------------------------
Indianapolis, IN Airport Authority RB, SPF
United Airlines Project, Series A, 6.50%, 11/15/31 Baa2/BB+ 10,500,000 9,860,865
-----------
26,022,715
13 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
STATEMENT OF INVESTMENTS Continued
Ratings:
Moody's/ Market
S&P/Fitch Principal Value
(Unaudited) Amount See Note 1
-----------------------------------------------------------------------------------------------
Kentucky--0.5%
Kenton Cnty., KY AB RB, SPF Delta Airlines Project,
Series A, 6.125%, 2/1/22 Baa3/BBB- $ 2,790,000 $ 2,660,432
-----------------------------------------------------------------------------------------------
Louisiana--1.9%
New Orleans, LA Home Mtg. Authority SPO
Refunding Bonds, Escrowed to Maturity,
6.25%, 1/15/11 Aaa/NR 9,500,000 10,389,485
-----------------------------------------------------------------------------------------------
Massachusetts--2.6%
MA GOB, Unrefunded Balance, Series B, MBIA
Insured, 6.50%, 8/1/11 Aaa/AAA/AAA 430,000 446,177
-----------------------------------------------------------------------------------------------
MA Water Resource Authority RB,
Series A, 6.50%, 7/15/19 A1/A+/A+ 12,225,000 13,706,670
-----------
14,152,847
-----------------------------------------------------------------------------------------------
Michigan--7.0%
Detroit, MI Sewage Disposal RB, Prerefunded,
FGIC Insured, Inverse Floater, 6.65%, 7/1/23(1) Aaa/AAA 10,100,000 10,882,750
-----------------------------------------------------------------------------------------------
Detroit, MI Sewage Disposal RRB, Unrefunded
Balance, FGIC Insured, Inverse Floater, 6.65%, 7/1/23(1) Aaa/AAA/AAA 3,100,000 2,941,125
-----------------------------------------------------------------------------------------------
Detroit, MI Water Supply System RB, Prerefunded,
FGIC Insured, Inverse Floater, 8%, 7/1/22(1) Aaa/AAA/AAA 3,700,000 4,056,125
-----------------------------------------------------------------------------------------------
Detroit, MI Water Supply System RB, Unrefunded
Balance, FGIC Insured, Inverse Floater, 8%, 7/1/22(1) Aaa/AAA 1,500,000 1,575,000
-----------------------------------------------------------------------------------------------
MI Hospital FAU RRB, FSA Insured,
Inverse Floater, 8.01%, 2/15/22(1) Aaa/AAA/AAA 5,000,000 5,168,750
-----------------------------------------------------------------------------------------------
MI Strategic Fund SWD RRB, Genesee Power
Station Project, 7.50%, 1/1/21 NR/NR 3,650,000 3,756,215
-----------------------------------------------------------------------------------------------
Wayne Cnty., MI SPF Airport RRB, Northwest
Airlines, Inc., Series 1995, 6.75%, 12/1/15 NR/NR 10,450,000 10,438,818
-----------
38,818,783
-----------------------------------------------------------------------------------------------
New Hampshire--0.2%
NH Housing FAU SFM RB, Series C, 6.90%, 7/1/19 Aa2/NR 805,000 823,314
-----------------------------------------------------------------------------------------------
New Jersey--6.3%
NJ EDAU RRB, First Mtg. Franciscan Oaks
Project, 5.75%, 10/1/23 NR/NR 2,255,000 1,852,821
-----------------------------------------------------------------------------------------------
NJ EDAU RRB, First Mtg. Keswick Pines, 5.70%, 1/1/18 NR/NR 1,000,000 822,290
-----------------------------------------------------------------------------------------------
NJ EDAU RRB, First Mtg. Keswick Pines, 5.75%, 1/1/24 NR/NR 1,125,000 898,819
-----------------------------------------------------------------------------------------------
NJ EDAU SPF RB, Continental Airlines, Inc.
Project, 6.25%, 9/15/19 Ba2/BB 10,880,000 10,134,067
-----------------------------------------------------------------------------------------------
NJ EDAU SPF RB, Continental Airlines, Inc.
Project, 6.25%, 9/15/29 Ba2/BB 2,120,000 1,937,913
-----------------------------------------------------------------------------------------------
NJ TUAU RRB, Series C, 6.50%, 1/1/16 A3/A-/A- 16,150,000 17,927,307
-----------------------------------------------------------------------------------------------
NJ TUAU RRB, Series C, MBIA Insured,
6.50%, 1/1/16 Aaa/AAA/AAA 1,100,000 1,232,473
-----------
34,805,690
14 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
Ratings:
Moody's/ Market
S&P/Fitch Principal Value
(Unaudited) Amount See Note 1
-----------------------------------------------------------------------------------------
New York--5.6%
NYC GOB, Inverse Floater, 6.77%, 8/27/15(1) Baa1/BBB+ $ 3,050,000 $ 3,107,188
-----------------------------------------------------------------------------------------
NYC GOB, Prerefunded, Series D, 8%, 8/1/15 Aaa/A-/A 10,980,000 11,536,027
-----------------------------------------------------------------------------------------
NYS HFA RRB, NYC HF, Series A, 6%, 11/1/06 Baa1/A- 4,000,000 4,195,680
-----------------------------------------------------------------------------------------
NYS HFA RRB, NYC HF, Series A, 6%, 5/1/08 Baa1/A- 2,000,000 2,102,320
-----------------------------------------------------------------------------------------
TSASC, Inc., NY RB, Series 1, 6.25%, 7/15/34 Aa2/A/A+ 10,000,000 10,003,300
-----------
30,944,515
-----------------------------------------------------------------------------------------
Ohio--2.9%
Cleveland, OH PPS RB, First Mtg., Prerefunded,
Series A, MBIA Insured, 7%, 11/15/16 Aaa/AAA 1,100,000 1,219,922
-----------------------------------------------------------------------------------------
Cleveland, OH PPS RB, First Mtg.,
Unrefunded Balance, Series A, MBIA Insured,
Series A, 7%, 11/15/16 Aaa/AAA 900,000 998,865
-----------------------------------------------------------------------------------------
Montgomery Cnty., OH HCF RRB,
Series B, 6.25%, 2/1/22 NR/NR 2,500,000 2,178,475
-----------------------------------------------------------------------------------------
OH HFA SFM RB, Series B,
Inverse Floater, 9.01%, 3/1/31(1) Aaa/AAA 3,030,000 3,185,288
-----------------------------------------------------------------------------------------
OH Solid Waste RB, Republic Engineered
Steels, Inc. Project, 9%, 6/1/21 NR/NR 7,800,000 1,560,000
-----------------------------------------------------------------------------------------
OH SWD RB, USG Corporate Project,
5.65%, 3/1/33 Baa1/BBB+ 8,000,000 7,064,000
-----------
16,206,550
-----------------------------------------------------------------------------------------
Oklahoma--1.7%
Tulsa, OK Municipal Airport Trust RB,
American Airlines Project, 6.25%, 6/1/20 Baa2/BBB- 9,820,000 9,568,804
-----------------------------------------------------------------------------------------
Pennsylvania--16.1%
Allegheny Cnty., PA HDAU RB, Health System,
Series B, 9.25%, 11/15/30(4) B1/B+/B+ 8,000,000 7,421,200
-----------------------------------------------------------------------------------------
Allegheny Cnty., PA HDAU RRB, Villa
St. Joseph HCF, 6%, 8/15/28 NR/NR 2,000,000 1,650,680
-----------------------------------------------------------------------------------------
Chartiers Valley, PA CD IDAU First Mtg. RRB,
Asbury Health Center, 6.375%, 12/1/19 NR/NR 1,250,000 1,113,913
-----------------------------------------------------------------------------------------
Chartiers Valley, PA CD IDAU First Mtg. RRB,
Asbury Health Center, 6.375%, 12/1/24 NR/NR 1,500,000 1,319,115
-----------------------------------------------------------------------------------------
PA EDFAU Facilities RB, National Gypsum Co.,
Series B, 6.125%, 11/2/27 NR/NR 10,000,000 8,951,500
-----------------------------------------------------------------------------------------
PA EDFAU RR RB, Colver Project,
Series D, 7.15%, 12/1/18 NR/BBB- 3,000,000 3,062,160
-----------------------------------------------------------------------------------------
PA EDFAU SWD RB, USD Corp. Project,
6%, 6/1/31 Baa1/BBB+ 12,000,000 11,040,360
-----------------------------------------------------------------------------------------
PA HEAA Student Loan RB, Series B,
AMBAC Insured, Inverse Floater, 7.68%, 3/1/22(1) Aaa/AAA/AAA 17,500,000 18,046,875
-----------------------------------------------------------------------------------------
PA TUCM RRB, Series N, 6.50%, 12/1/13 Aaa/AAA 750,000 782,730
15 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
STATEMENT OF INVESTMENTS Continued
Ratings:
Moody's/ Market
S&P/Fitch Principal Value
(Unaudited) Amount See Note 1
-----------------------------------------------------------------------------------------
Pennsylvania Continued
Philadelphia, PA Hospital & HEFAU RB,
Temple University Childrens Medical,
Series A, 5.625%, 6/15/19 Baa2/BBB+ $ 1,200,000 $ 992,496
-----------------------------------------------------------------------------------------
Philadelphia, PA Hospital & HEFAU RRB,
The Philadelphia Protestant Home Project,
Series A, 6.50%, 7/1/27 NR/NR 3,380,000 3,026,790
-----------------------------------------------------------------------------------------
Philadelphia, PA IDAU HCF RRB, Baptist
Home of Philadelphia, Series A, 5.50%, 11/15/18 NR/NR 1,670,000 1,376,280
-----------------------------------------------------------------------------------------
Philadelphia, PA IDAU HCF RRB, Baptist
Home of Philadelphia, Series A, 5.60%, 11/15/28 NR/NR 1,275,000 1,010,667
-----------------------------------------------------------------------------------------
Philadelphia, PA Water & Wastewater RB,
FGIC Insured, 10%, 6/15/05 Aaa/AAA/AAA 17,600,000 21,570,912
-----------------------------------------------------------------------------------------
Schuylkill Cnty., PA IDAU RR RRB,
Schuylkill Energy Resources, Inc., 6.50%, 1/1/10 NR/NR/BB+ 7,665,000 7,516,836
-----------
88,882,514
-----------------------------------------------------------------------------------------
South Carolina--0.4%
Piedmont, SC MPA RRB, Escrowed to Maturity,
Series A, FGIC Insured, 6.50%, 1/1/16 Aaa/AAA 285,000 319,901
-----------------------------------------------------------------------------------------
Piedmont, SC MPA RRB, Unrefunded Balance,
Series A, FGIC Insured, 6.50%, 1/1/16 Aaa/AAA 1,715,000 1,913,477
-----------
2,233,378
-----------------------------------------------------------------------------------------
Texas--16.1%
AAAU TX SPF RB, American Airlines, Inc.
Project, 7%, 12/1/11 Baa2/BBB- 3,000,000 3,248,940
-----------------------------------------------------------------------------------------
Cypress-Fairbanks, TX ISD CAP GORB,
Series A, Zero Coupon, 5.89%, 2/15/14(3) Aaa/AAA 15,710,000 7,457,223
-----------------------------------------------------------------------------------------
Cypress-Fairbanks, TX ISD CAP GORB,
Series A, Zero Coupon, 5.85%, 2/15/15(3) Aaa/AAA 15,000,000 6,681,900
-----------------------------------------------------------------------------------------
Cypress-Fairbanks, TX ISD CAP GORB,
Series A, Zero Coupon, 5.91%, 2/15/16(3) Aaa/AAA 16,240,000 6,770,943
-----------------------------------------------------------------------------------------
Dallas-Fort Worth, TX International Airport
Facilities Improvement Corp. RB,
American Airlines, Inc., 7.25%, 11/1/30 Baa1/BBB- 8,000,000 8,147,440
-----------------------------------------------------------------------------------------
Harris Cnty., TX GORB, Toll Road, Sub. Lien,
Prerefunded, 6.50%, 8/15/15 Aa1/AA 215,000 227,449
-----------------------------------------------------------------------------------------
Harris Cnty., TX GORB, Toll Road, Sub. Lien,
Unrefunded Balance, 6.50%, 8/15/15 Aa1/AA 785,000 826,354
-----------------------------------------------------------------------------------------
Harris Cnty., TX GORRB, Toll Road,
Sub. Lien, 6.75%, 8/1/14 Aa1/AA 1,000,000 1,041,540
-----------------------------------------------------------------------------------------
Houston, TX WSS RB, Prior Lien,
Unrefunded Balance, Series B, 6.40%, 12/1/09 A3/A+ 995,000 1,047,705
-----------------------------------------------------------------------------------------
Houston, TX WSS RB, Prior Lien,
Unrefunded Balance, Series B, 6.75%, 12/1/08 A2/AAA 440,000 459,087
16 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
Ratings:
Moody's/ Market
S&P/Fitch Principal Value
(Unaudited) Amount See Note 1
-----------------------------------------------------------------------------------------------
Texas Continued
North Central TX HFDC RB, Prerefunded,
Series B, 6.30%, 5/15/06 Aa2/AA $ 290,000 $ 304,515
-----------------------------------------------------------------------------------------------
North Central TX HFDC RB, Prerefunded,
Series B, 6.40%, 5/15/08 Aa2/AA 480,000 504,840
-----------------------------------------------------------------------------------------------
North Central TX HFDC RB, Series A, 7.25%, 11/15/19 NR/NR 2,000,000 1,924,540
-----------------------------------------------------------------------------------------------
North Central TX HFDC RB, Series A, 7.50%, 11/15/29 NR/NR 3,000,000 2,938,620
-----------------------------------------------------------------------------------------------
North Central TX HFDC RB, Unrefunded Balance,
Series B, 6.30%, 5/15/06 Aa2/AA 2,710,000 2,824,199
-----------------------------------------------------------------------------------------------
North Central TX HFDC RB, Unrefunded Balance,
Series B, 6.40%, 5/15/08 Aa2/AA- 4,520,000 4,707,218
-----------------------------------------------------------------------------------------------
Retama, TX Development Corp. SPF RRB,
Retama Racetrack, Escrowed to Maturity,
Series A, 10%, 12/15/19 Aaa/AAA 4,880,000 7,464,643
-----------------------------------------------------------------------------------------------
TX MPA CAP RRB, MBIA Insured,
Zero Coupon, 5.95%, 9/1/13(3) Aaa/AAA/AAA 6,900,000 3,397,146
-----------------------------------------------------------------------------------------------
TX MPA CAP RRB, MBIA Insured,
Zero Coupon, 5.93%, 9/1/14(3) Aaa/AAA/AAA 17,500,000 8,061,550
-----------------------------------------------------------------------------------------------
TX MPA CAP RRB, MBIA Insured,
Zero Coupon, 5.85%, 9/1/15(3) Aaa/AAA/AAA 10,000,000 4,321,700
-----------------------------------------------------------------------------------------------
TX MPA CAP RRB, MBIA Insured,
Zero Coupon, 5.98%, 9/1/16(3) Aaa/AAA/AAA 39,990,000 16,169,557
-----------
88,527,109
-----------------------------------------------------------------------------------------------
Vermont--0.2%
VT HFA Home Mtg. Purchase RB,
Series A, 7.85%, 12/1/29 A1/NR 1,330,000 1,351,652
-----------------------------------------------------------------------------------------------
Virginia--4.7%
Pocahontas Parkway Assn., VA Toll Road RB,
CAP, First Tier, Sub. Lien, Series C,
Zero Coupon, 5.60%, 8/15/05(3) Ba1/NR 2,300,000 1,605,331
-----------------------------------------------------------------------------------------------
Pocahontas Parkway Assn., VA Toll Road RB,
CAP, First Tier, Sub. Lien, Series C,
Zero Coupon, 5.75%, 8/15/07(3) Ba1/NR 2,800,000 1,682,912
-----------------------------------------------------------------------------------------------
Pocahontas Parkway Assn., VA Toll Road RB,
CAP, First Tier, Sub. Lien, Series C,
Zero Coupon, 5.82%, 8/15/08(3) Ba1/NR 3,000,000 1,677,300
-----------------------------------------------------------------------------------------------
Pocahontas Parkway Assn., VA Toll Road RB,
CAP, First Tier, Sub. Lien, Series C,
Zero Coupon, 5.85%, 8/15/09(3) Ba1/NR 3,100,000 1,612,279
-----------------------------------------------------------------------------------------------
Pocahontas Parkway Assn., VA Toll Road RB,
CAP, Sr. Lien, Series B, Zero Coupon, 5.86%, 8/15/20(3) Baa3/A/A 25,000,000 6,315,750
-----------------------------------------------------------------------------------------------
Pocahontas Parkway Assn., VA Toll Road RB,
CAP, Sr. Lien, Series B, Zero Coupon, 5.86%, 8/15/21(3) Baa3/A/A 26,300,000 6,203,381
-----------------------------------------------------------------------------------------------
Pocahontas Parkway Assn., VA Toll Road RB,
CAP, Sr. Lien, Series B, Zero Coupon, 5.86%, 8/15/22(3) Baa3/A/A 29,900,000 6,584,578
-----------
25,681,531
17 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
STATEMENT OF INVESTMENTS Continued
Ratings:
Moody's/ Market
S&P/Fitch Principal Value
(Unaudited) Amount See Note 1
---------------------------------------------------------------------------------------------------
Washington--3.6%
WA PP Supply System RRB, Nuclear Project No
1, 5.40%, 7/1/12 Aa1/AA-/AA- $20,000,000 $ 20,007,600
---------------------------------------------------------------------------------------------------
West Virginia--0.7%
WV Parkways ED & Tourism Authority RB,
FGIC Insured, Inverse Floater, 6.82%, 5/16/19(1) Aaa/AAA 3,600,000 3,591,000
---------------------------------------------------------------------------------------------------
Wisconsin--0.1%
WI Housing & EDAU Home Ownership RRB,
Series A, 7.10%, 3/1/23 Aa2/AA 290,000 298,158
---------------------------------------------------------------------------------------------------
U.S. Possessions--0.9%
PR CMWLTH Refunding GOUN, Series 312,
FSA Insured, 7.582%, 7/1/20(2,5) Aaa/NR 5,000,000 5,143,750
---------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $562,913,013) 100.9% 556,328,690
---------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (0.9) (4,800,254)
--------------------------
Net Assets 100.0% $551,528,436
=========== ============
</TABLE>
Footnotes to Statement of Investments
To simplify the listings of securities, abbreviations are used per the table
below:
<TABLE>
<S> <C> <C> <C>
AB Airport Board HFAU Health Facilities Authority
AIC Airport Improvement Corp. HFDC Health Facilities Development Corp.
BOE Board of Education IDAU Industrial Development Authority
CAP Capital Appreciation ISD Independent School District
CD Commercial Development MEAU Municipal Electric Authority
CDD Community Development District MPA Municipal Power Agency
CMWLTH Commonwealth NYC New York City
COP Certificates of Participation PPS Public Power System
DAU Development Authority RB Revenue Bonds
ED Economic Development RR Resource Recovery
EDAU Economic Development Authority RRB Revenue Refunding Bonds
EDFAU Economic Development Finance Authority SCDAU Statewide Communities Development Authority
FAU Finance Authority SFM Single Family Mtg.
GOB General Obligation Bonds SPAST Special Assessment
GORB General Obligation Refunding Bonds SPF Special Facilities
GORRB General Obligation Revenue Refunding Bonds SPO Special Obligations
GOUN General Obligation Unlimited Nts. SWD Solid Waste Disposal
HCF Health Care Facilities TUAU Turnpike Authority
HDAU Hospital Development Authority TUCM Turnpike Commission
HEAA Higher Education Assistance Agency TXAL Tax Allocation
HEFAU Higher Educational Facilities Authority UDA Urban Development Agency
HF Health Facilities WSS Water & Sewer System
HFA Housing Finance Agency
</TABLE>
18 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
Footnotes to Statement of Investments Continued
1. 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 $60,037,226 or 10.89% of the
Fund's net assets as of July 31, 2000.
2. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $32,130,165 or 5.83% of the Fund's net
assets as of July 31, 2000.
3. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
4. When-issued security to be delivered and settled after July 31, 2000.
5. Represents the current interest rate for a variable or increasing rate
security.
As of July 31, 2000, securities subject to the alternative minimum tax amount to
$147,936,374 or 26.82% of the Fund's net assets.
See accompanying Notes to Financial Statements.
19 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES July 31, 2000
<TABLE>
==============================================================================================
<S> <C>
Assets
Investments, at value (cost $562,913,013)--see accompanying statement $556,328,690
----------------------------------------------------------------------------------------------
Cash 233,896
----------------------------------------------------------------------------------------------
Receivables and other assets:
Interest 6,009,085
Investments sold 1,975,915
Shares of beneficial interest sold 224,722
Other 2,542
------------
Total assets 564,774,850
==============================================================================================
Liabilities
Payables and other liabilities:
Investments purchased on a when-issued basis 7,647,760
Shares of beneficial interest redeemed 3,318,253
Dividends 1,699,340
Trustees' compensation 259,624
Distribution and service plan fees 98,713
Transfer and shareholder servicing agent fees 78,367
Other 144,357
------------
Total liabilities 13,246,414
==============================================================================================
Net Assets $551,528,436
============
==============================================================================================
Composition of Net Assets
Paid-in capital $563,091,896
----------------------------------------------------------------------------------------------
Overdistributed net investment income (1,301,534)
----------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (3,677,603)
----------------------------------------------------------------------------------------------
Net unrealized depreciation on investments (6,584,323)
------------
Net Assets $551,528,436
============
==============================================================================================
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$482,151,635 and 51,554,078 shares of beneficial interest outstanding) $9.35
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $9.82
----------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $57,204,039
and 6,130,116 shares of beneficial interest outstanding) $9.33
----------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $12,172,762
and 1,304,638 shares of beneficial interest outstanding) $9.33
</TABLE>
See accompanying Notes to Financial Statements.
20 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended July 31, 2000
<TABLE>
=====================================================================
<S> <C>
Investment Income
Interest $ 38,597,128
=====================================================================
Expenses
Management fees 3,203,499
---------------------------------------------------------------------
Distribution and service plan fees:
Class A 1,163,111
Class B 702,540
Class C 145,341
---------------------------------------------------------------------
Transfer and shareholder servicing agent fees 431,907
---------------------------------------------------------------------
Custodian fees and expenses 118,093
---------------------------------------------------------------------
Trustees' compensation 43,062
---------------------------------------------------------------------
Other 261,416
------------
Total expenses 6,068,969
Less expenses paid indirectly (24,054)
------------
Net expenses 6,044,915
=====================================================================
Net Investment Income 32,552,213
=====================================================================
Realized and Unrealized Loss
Net realized loss on:
Investments (441,322)
Closing of futures contracts (1,487,466)
------------
Net realized loss (1,928,788)
---------------------------------------------------------------------
Net change in unrealized depreciation on investments (39,846,312)
------------
Net realized and unrealized loss (41,775,100)
=====================================================================
Net Decrease in Net Assets Resulting from Operations $ (9,222,887)
============
</TABLE>
See accompanying Notes to Financial Statements.
21 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended July 31, 2000 1999
===========================================================================================================
<S> <C> <C>
Operations
Net investment income $ 32,552,213 $ 34,122,316
-----------------------------------------------------------------------------------------------------------
Net realized gain (loss) (1,928,788) 4,034,994
-----------------------------------------------------------------------------------------------------------
Net change in unrealized depreciation (39,846,312) (21,131,992)
------------------------------
Net increase (decrease) in net assets resulting from operations (9,222,887) 17,025,318
===========================================================================================================
Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Class A (28,322,087) (29,412,371)
Class B (3,304,255) (4,082,909)
Class C (684,715) (714,322)
-----------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (3,065,354) --
Class B (436,022) --
Class C (87,540) --
===========================================================================================================
Beneficial Interest Transactions
Net increase (decrease) in net assets resulting from beneficial interest
transactions:
Class A (48,456,283) 3,343,191
Class B (26,975,629) 748,967
Class C (5,233,189) 6,304,825
===========================================================================================================
Net Assets
Total decrease (125,787,961) (6,787,301)
-----------------------------------------------------------------------------------------------------------
Beginning of period 677,316,397 684,103,698
------------------------------
End of period (including overdistributed net investment
income of $1,301,534 and $1,542,690, respectively) $ 551,528,436 $677,316,397
==============================
</TABLE>
See accompanying Notes to Financial Statements.
22 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Year
Ended Ended
July 31, Dec. 31,
Class A 2000 1999 1998 1997 1996(1) 1995
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $10.02 $10.27 $10.24 $ 9.74 $9.98 $8.93
-------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .52 .52 .51 .55 .32 .54
Net realized and unrealized gain (loss) (.61) (.25) .04 .49 (.25) 1.06
------------------------------------------------------------------------------
Total income (loss) from
investment operations (.09) .27 .55 1.04 .07 1.60
-------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.52) (.52) (.52) (.54) (.31) (.54)
Dividends in excess of net
investment income -- -- -- -- -- (.01)
Distributions from net realized gain (.06) -- -- -- -- --
------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.58) (.52) (.52) (.54) (.31) (.55)
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.35 $10.02 $10.27 $10.24 $9.74 $9.98
==============================================================================
===============================================================================================================================
Total Return, at Net Asset Value(2) (0.85)% 2.57% 5.55% 10.97% 0.77% 18.28%
===============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $482,152 $568,673 $579,570 $586,546 $590,299 $634,473
-------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $515,007 $587,197 $581,630 $582,624 $606,509 $569,859
-------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 5.54% 5.00% 5.00% 5.55% 5.58% 5.65%
Expenses 0.90% 0.87% 0.87%(4) 0.87%(4) 0.92%(4) 0.88%(4)
-------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 14% 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 has not been grossed up to reflect the effect of expenses paid
indirectly.
See accompanying Notes to Financial Statements.
23 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
FINANCIAL HIGHLIGHTS Continued
<TABLE>
<CAPTION>
Year Year
Ended Ended
July 31, Dec. 31,
Class B 2000 1999 1998 1997 1996(1) 1995
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $10.00 $10.25 $10.22 $ 9.73 $9.96 $8.92
-------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .43 .44 .43 .47 .27 .47
Net realized and unrealized gain (loss) (.60) (.25) .04 .48 (.23) 1.05
----------------------------------------------------------------------------
Total income (loss) from investment
operations (.17) .19 .47 .95 .04 1.52
-------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.44) (.44) (.44) (.46) (.27) (.47)
Dividends in excess of net
investment income -- -- -- -- -- (.01)
Distributions from net realized gain (.06) -- -- -- -- --
----------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.50) (.44) (.44) (.46) (.27) (.48)
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.33 $10.00 $10.25 $10.22 $9.73 $9.96
============================================================================
===============================================================================================================================
Total Return, at Net Asset Value(2) (1.62)% 1.78% 4.75% 10.05% 0.43% 17.30%
===============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $57,204 $90,022 $91,677 $83,897 $74,055 $72,488
-------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $70,072 $96,352 $88,531 $77,881 $73,047 $63,669
-------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 4.75% 4.22% 4.21% 4.76% 4.79% 4.84%
Expenses 1.67% 1.65% 1.65%(4) 1.65%(4) 1.70%(4) 1.68%(4)
-------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 14% 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 has not been grossed up to reflect the effect of expenses paid
indirectly.
See accompanying Notes to Financial Statements.
24 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
<TABLE>
<CAPTION>
Year Year
Ended Ended
July 31, Dec. 31,
Class C 2000 1999 1998 1997 1996(1) 1995(2)
==================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $10.00 $10.25 $10.22 $ 9.73 $9.96 $9.58
------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .44 .44 .43 .46 .27 .15
Net realized and unrealized gain (loss) (.61) (.25) .04 .49 (.23) .39
------------------------------------------------------------------
Total income (loss) from investment
operations (.17) .19 .47 .95 .04 .54
------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.44) (.44) (.44) (.46) (.27) (.15)
Dividends in excess of net
investment income -- -- -- -- -- (.01)
Distributions from net realized gain (.06) -- -- -- -- --
------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.50) (.44) (.44) (.46) (.27) (.16)
------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.33 $10.00 $10.25 $10.22 $9.73 $9.96
==================================================================
==================================================================================================================
Total Return, at Net Asset Value(3) (1.62)% 1.78% 4.75% 10.03% 0.40% 5.64%
==================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $12,173 $18,621 $12,857 $8,648 $4,210 $1,975
------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $14,497 $16,868 $10,655 $5,724 $3,105 $1,506
------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income 4.76% 4.22% 4.30% 4.72% 4.72% 4.49%
Expenses 1.67% 1.65% 1.64%(5) 1.67%(5) 1.75%(5) 1.64%(5)
------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 14% 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. For the period from August 29, 1995 (inception of offering) to December 31,
1995.
3. 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.
4. Annualized for periods of less than one full year.
5. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
See accompanying Notes to Financial Statements.
25 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
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 an 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
at their offering price, which is normally net asset value plus a front-end
sales charge. Class B and Class C shares are sold without a front-end sales
charge but 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. Securities listed or traded on National Stock Exchanges or
other domestic or foreign exchanges are valued based on the last sale price of
the security traded on that exchange prior to the time when the Fund's assets
are valued. In the absence of a sale, the security is valued at the last sale
price on the prior trading day, if it is within the spread of the closing bid
and asked prices, and if not, at the closing bid price. Securities (including
restricted securities) for which quotations are not readily available are valued
primarily using dealer-supplied valuations, a portfolio pricing service
authorized by the Board of Trustees, or at their fair value. Fair value is
determined in good faith under consistently applied procedures under the
supervision of the Board of Trustees. Short-term "money market type" debt
securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
--------------------------------------------------------------------------------
Securities Purchased on a When-Issued Basis. Delivery and payment for securities
that have been purchased by the Fund on a when-issued basis can take place a
month or more after the trade date. Normally the settlement date occurs within
six months after the trade 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 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, 2000, the Fund had entered into outstanding net
when-issued or forward commitments of $7,647,760.
26 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
--------------------------------------------------------------------------------
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 an unfunded retirement plan for the
Fund's independent Board of 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, 2000, a provision of $17,302 was made for the Fund's projected benefit
obligations, resulting in an accumulated liability of $252,672 as of July 31,
2000.
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 Board of Trustees in shares of one
or more Oppenheimer funds selected by the trustee. The amount paid to the Board
of Trustees 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 investment income per share.
--------------------------------------------------------------------------------
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 Dividends and Distributions to Shareholders. Net investment
income (loss) and net realized gain (loss) may differ for financial statement
and tax purposes. The character of dividends and distributions made during the
fiscal 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 dividends and 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.
27 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
1. Significant Accounting Policies Continued
The Fund adjusts the classification of distributions to shareholders to reflect
the differences between financial statement amounts and distributions determined
in accordance with income tax regulations. Accordingly, during the year ended
July 31, 2000, $140,529 distributed in connection with Fund share redemptions
increased paid-in capital and reduced accumulated net realized loss on
investments. Net assets of the Fund were unaffected by the reclassifications.
--------------------------------------------------------------------------------
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 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.
28 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
================================================================================
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, 2000 Year Ended July 31, 1999
Shares Amount Shares Amount
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Sold 13,414,765 $ 126,546,006 14,899,854 $ 154,002,934
Dividends and/or
distributions reinvested 2,157,960 20,359,502 1,840,869 19,006,893
Redeemed (20,759,908) (195,361,791) (16,420,114) (169,666,636)
--------------------------------------------------------------
Net increase (decrease) (5,187,183) $ (48,456,283) 320,609 $ 3,343,191
==============================================================
-------------------------------------------------------------------------------------------
Class B
Sold 1,310,906 $ 12,395,994 2,590,055 $ 26,762,743
Dividends and/or
distributions reinvested 237,460 2,240,594 246,696 2,542,377
Redeemed (4,419,722) (41,612,217) (2,778,452) (28,556,153)
--------------------------------------------------------------
Net increase (decrease) (2,871,356) $ (26,975,629) 58,299 $ 748,967
==============================================================
-------------------------------------------------------------------------------------------
Class C
Sold 469,950 $ 4,403,501 1,026,290 $ 10,616,838
Dividends and/or
distributions reinvested 54,679 515,996 49,362 508,501
Redeemed (1,082,182) (10,152,686) (467,899) (4,820,514)
--------------------------------------------------------------
Net increase (decrease) (557,553) $ (5,233,189) 607,753 $ 6,304,825
==============================================================
</TABLE>
================================================================================
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended July 31, 2000, were $84,412,843
and $177,982,979, respectively.
As of July 31, 2000, unrealized appreciation (depreciation) based on cost of
securities for federal income tax purposes of $562,975,858 was:
Gross unrealized appreciation $ 16,578,002
Gross unrealized depreciation (23,225,170)
------------
Net unrealized depreciation $ (6,647,168)
============
29 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
4. 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 over $1
billion. The Fund's management fee for the year ended July 31, 2000, was an
annualized rate of 0.53%, before any waiver by the Manager if applicable.
--------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund on an
"at-cost" basis. OFS also acts as the transfer and shareholder servicing agent
for the other Oppenheimer funds.
--------------------------------------------------------------------------------
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>
Aggregate Class A Commissions Commissions Commissions
Front-End Front-End on Class A on Class B on Class C
Sales Charges Sales Charges Shares Shares Shares
on Class A Retained by Advanced by Advanced by Advanced by
Year Ended Shares Distributor Distributor(1) Distributor(1) Distributor(1)
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
July 31, 2000 $447,841 $117,360 $42,151 $282,071 $28,093
</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
Sales Charges Sales Charges Sales Charges
Year Ended Retained by Distributor Retained by Distributor Retained by Distributor
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
July 31, 2000 $28,514 $299,760 $20,741
</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.
30 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
--------------------------------------------------------------------------------
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 purchased. 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 year ended July 31, 2000, payments under
the Class A plan totaled $1,163,111, prior to Manager waivers if applicable, all
of which were paid by the Distributor to recipients, and included $92,596 paid
to an affiliate of the Manager. 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.
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 asset-based sales charges from the Fund under
the plans. If any 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, 2000, were
as follows:
<TABLE>
<CAPTION>
Distributor's Distributor's
Aggregate Unreimbursed
Unreimbursed Expenses as %
Total Payments Amount Retained Expenses of Net Assets
Under Plan by Distributor Under Plan of Class
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class B Plan $702,540 $570,027 $1,782,711 3.12%
Class C Plan 145,341 42,406 224,766 1.85
</TABLE>
31 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
5. Futures Contracts
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a particular price on a stipulated future
date at a negotiated price. Futures contracts are traded on a commodity
exchange. The Fund may buy and sell futures contracts that relate to
broadly-based securities indices "financial futures" or debt securities
"interest rate futures" in order to gain exposure to or to seek to protect
against changes in market value of stock and bonds or 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 decreases in market value of 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 recognizes 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.
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.
32 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
================================================================================
6. 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 0.45%. 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 0.08%
per annum.
The Fund had no borrowings outstanding during the year ended July 31, 2000.
================================================================================
7. Other Matters
On February 29, 2000, the Board of Trustees approved the reorganization of
Oppenheimer Insured Municipal Fund with and into Oppenheimer Municipal Bond
Fund. Shareholders of Oppenheimer Insured Municipal Fund will be asked to
approve a reorganization whereby shareholders would receive shares of
Oppenheimer Municipal Bond Fund. If shareholder approval is received, it is
expected that the reorganization will occur during the fourth quarter of
calendar 2000.
33 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
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,
2000, 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 four-year
period then ended, the seven-month period ended July 31, 1996, and the year
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 auditing standards generally
accepted in the United States of America. 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, 2000, 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, 2000, 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 four-year period then ended, the seven-month period
ended July 31, 1996, and the year ended December 31, 1995, in conformity with
accounting principles generally accepted in the United States of America.
KPMG LLP
Denver, Colorado
August 21, 2000
34 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
FEDERAL INCOME TAX INFORMATION Unaudited
================================================================================
In early 2001 shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 2000. Regulations of
the U.S. Treasury Department require the Fund to report this information to the
Internal Revenue Service.
Dividends and distributions of $0.0983, $0.0918 and $0.0919 per share were
paid to Class A, Class B and Class C shareholders, respectively, on December 10,
1999, of which $0.0552 was designated as a "capital gain distribution" for
federal income tax purposes. Whether received in stock or in cash, the capital
gain distribution should be treated by shareholders as a gain from the sale of
capital assets held for more than one year (long-term capital gains).
None of the dividends paid by the Fund during the year ended July 31, 2000
are eligible for the corporate dividend-received deduction. The dividends were
derived from interest on municipal bonds and are not subject to federal income
taxes. 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.
35 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
OPPENHEIMER MUNICIPAL BOND FUND
<TABLE>
================================================================================
<S> <C>
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
Clayton K. Yeutter, Trustee
Robert E. Patterson, Vice President
Andrew J. Donohue, Secretary
Brian W. Wixted, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
================================================================================
Investment Advisor OppenheimerFunds, Inc.
================================================================================
Distributor OppenheimerFunds Distributor, Inc.
================================================================================
Transfer and Shareholder OppenheimerFunds Services
Servicing Agent
================================================================================
Custodian of Citibank, N.A.
Portfolio Securities
================================================================================
Independent Auditors KPMG LLP
================================================================================
Legal Counsel Mayer, Brown & Platt
This is a copy of a report to shareholders of
Oppenheimer Municipal Bond Fund. For other material
information concerning the Fund, see the Prospectus.
Shares of Oppenheimer funds are not deposits or
obligations of any bank, are not guaranteed by any
bank, are not insured by the FDIC or any other agency,
and involve investment risks, including the possible
loss of the principal amount invested.
Oppenheimer funds are distributed by OppenheimerFunds
Distributor, Inc., Two World Trade Center, New York,
NY 10048-0203.
(C)Copyright 2000 OppenheimerFunds, Inc. All rights
reserved.
</TABLE>
36 | OPPENHEIMER MUNICIPAL BOND FUND
<PAGE>
OPPENHEIMERFUNDS FAMILY
<TABLE>
=========================================================================================================
<S> <C> <C>
Global Equity
Developing Markets Fund Global Fund
International Small Company Fund Quest Global Value Fund
Europe Fund Global Growth & Income Fund
International Growth Fund
=========================================================================================================
Equity
Stock Stock & Bond
Enterprise Fund Main Street(R) Growth & Income Fund
Discovery Fund Quest Opportunity Value Fund
Main Street(R) Small Cap Fund Total Return Fund
Quest Small Cap Value Fund Quest Balanced Value Fund
MidCap Fund Capital Income Fund
Capital Appreciation Fund Multiple Strategies Fund
Growth Fund Disciplined Allocation Fund
Disciplined Value Fund Convertible Securities Fund
Quest Value Fund
Trinity Growth Fund Specialty
Trinity Core Fund Real Asset Fund
Trinity Value Fund Gold & Special Minerals Fund
=========================================================================================================
Fixed Income
Taxable Municipal
International Bond Fund California Municipal Fund(1)
World Bond Fund Main Street(R) California Municipal Fund(1)
High Yield Fund Florida Municipal Fund(1)
Champion Income Fund New Jersey Municipal Fund(1)
Strategic Income Fund New York Municipal Fund(1)
Bond Fund Pennsylvania Municipal Fund(1)
Senior Floating Rate Fund Municipal Bond Fund
U.S. Government Trust Insured Municipal Fund
Limited-Term Government Fund Intermediate Municipal Fund
Rochester Division
Rochester Fund Municipals
Limited Term New York Municipal Fund
=========================================================================================================
Money Market(2)
Money Market Fund Cash Reserves
</TABLE>
1. Available to investors only in certain states.
2. An investment in money market funds is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
these funds may seek to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in these funds.
<PAGE>
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(1)
www.oppenheimerfunds.com
--------------------------------------------------------------------------------
General Information
Mon-Fri 8am-9pm ET, Sat 10am-4pm ET
1.800.525.7048
--------------------------------------------------------------------------------
Telephone Transactions
Mon-Fri 8am-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 9am-6:30pm ET
1.800.843.4461
--------------------------------------------------------------------------------
OppenheimerFunds Market 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
Ticker Symbols Class A: OPTAX Class B: OTFBX Class C: OMFCX
1. At times this website may be inaccessible or its transaction feature may be
unavailable.
[logo] OppenheimerFunds(R)
Distributor, Inc.
RA0310.001.0700 September 29, 2000
