<PAGE>
OPPENHEIMER INVESTMENT GRADE BOND FUND
ANNUAL REPORT DECEMBER 31, 1993
OPPENHEIMERFUNDS-R-
"We need high income, but we're also safety-conscious about our investments.
"We're satisfied with this Fund because of the income it has given us. And the
peace of mind we get from the Fund's investment grade portfolio."
<PAGE>
---------------------------------------------------
Fund Facts
- --------------------------------------------------------------------------------
Five Facts Every Shareholder Should Know About
Oppenheimer Investment Grade Bond Fund
---------------------------------------------------
1 The Fund's objective is to seek high current
income, consistent with prudent investment
risk and stability of capital, from a
diversified portfolio of investment grade
In this report: fixed income securities.
Answers to two timely ---------------------------------------------------
questions you should ask 2 Standardized yield for Class A shares for the
your Fund's managers. 30-day period ended December 31, 1993, was
6.03%. That figure for Class B shares was
My financial advisor says 5.52%.(1)
that the value of a bond ---------------------------------------------------
investment tends to fall 3 To seek stability of principal, the Fund
when interest rates rise. currently has over 58% of its assets in
What steps are you taking securities rated "A" or better by Standard &
to protect the Fund's net Poor's, including corporate bonds, U.S.
asset value in the event of Treasury securities, and mortgage-backed
a rise in interest rates? securities.
---------------------------------------------------
With the U.S. economy in a 4 On December 31, 1993, the Fund's portfolio
gradual growth mode, what allocation was:(2)
opportunities do you see for
capital appreciation in the U.S. TREASURY NOTES AND BONDS 45.6%
Fund's portfolio? U.S. CORPORATE BONDS 26.5%
CASH EQUIVALENTS 14.3%
MORTGAGE-BACKED AND ASSET-BACKED
SECURITIES 11.8% [GRAPHIC]
MUNICIPALS (TAXABLE) 0.9%
FOREIGN FIXED INCOME
SECURITIES 0.9%
---------------------------------------------------
5 "The corporate bond market was a stellar
performer through most of 1993. Over the
past six months, we took advantage of price
increases to sell lower-rated corporate bonds
that we felt to be fully valued, realizing
substantial profits on many of these
transactions. We shifted a large portion of
the proceeds of these sales into higher
quality, A-rated securities to help maintain
stability of principal. With interest rates
stabilizing, we are focusing on shorter term
securities, which are less likely to
fluctuate when interest rates rise."
MARY WILSON, MASS. MUTUAL LIFE INSURANCE CO.,
FUND SUB-ADVISOR, DECEMBER 31, 1993
(1). Standardized yield is net investment income calculated on a
yield-to-maturity basis for the 30-day period ended 12/31/93, divided by the
maximum offering price at the end of the period, compounded semi-annually and
then annualized.
(2). The Fund's portfolio is subject to change.
(3). Based on the change in net asset value per Class A share from 12/31/92 to
12/31/93. The Fund's average annual total returns for Class A shares after
deducting the current maximum sales charge of 4.75% for the 1- and 5-year
periods ended 12/31/93 and since inception of the Fund on 4/15/88 were 5.06%,
9.12%, and 8.77%, respectively. Total return for Class B shares from 5/1/93
(inception of the Class) and held until 12/31/93 was -1.09%. This reflects the
change in value of a hypothetical investment made on 5/1/93 and held until
12/31/93, with all dividends reinvested and after applying the contingent
deferred sales charge of 5%. All figures include reinvestment of dividends.
(4). Source of data: Lipper Analytical Services, Inc., an independent monitor of
mutual funds, 12/31/93. The Lipper total return average for the 12-month period
ended 12/31/93 was for 71 intermediate investment grade bond funds, including
reinvestment of dividends. This average is shown for comparative purposes only.
Oppenheimer Investment Grade Bond Fund is categorized by Lipper as an
intermediate investment grade bond fund. Lipper Performance does not take sales
charges into consideration.
Past performance is not indicative of future results. An investment in the Fund
will fluctuate in value so that an investor's shares, when redeemed, may be
worth more or less than the original cost.
2 Oppenheimer Investment Grade Bond Fund
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------
REPORT TO SHAREHOLDERS
<C> <S>
- --------------------------------------------------------------------------------
Oppenheimer Investment Grade Bond Fund generated a standardized yield for Class
A shares of 6.03% and 5.52% for Class B shares for the 30-day period ended
December 31, 1993.(5)
The Fund's total return at net asset value for Class A shares for the
12-month period was 10.30%,(6) which was higher than the Lipper average of 9.50%
- ----------------------- for intermediate investment grade bond funds.(7) Total return at net asset value
SUPERIOR for Class B shares for the period from their inception on May 1 to December 31,
INVESTMENT INCOME 1993, was 3.91%.(6)
As of December 31, 1993 The U.S. economy continued to grow slowly and interest rates declined
- ------------------------- steadily through most of 1993. In this environment, corporate bonds outperformed
other sectors, as companies issuing these bonds benefited both from increased
Oppenheimer 6.03% demand and from lower interest rates and strengthened their balance sheets. This
Investment Grade caused the value of many corporate bonds in the Fund's portfolio to appreciate.
Bond Fund A As a result, the Fund's managers have sold a number of bond issues at
(standardized yield)(5) substantial profits, including Tele-Communications, Inc. and Time Warner. We
- ------------------------- have shifted the proceeds from these sales into investments with higher credit
Oppenheimer 5.52% ratings. This strategy helps to protect the Fund's net asset value as highly
Investment Grade rated investments tend to hold their value better when interest rates rise.
Bond Fund B In the U.S. Treasury market, interest rates declined in September
(standardized yield)(5) 1993 to their lowest point in more than 30 years, and have since rebounded
- ------------------------- somewhat. The dramatic rate decline caused the value of existing long-term
Average rate of 3.04% Treasury bonds to increase in value. However, it appears that rates have now
12-month CD(8) stabilized somewhat, and may move modestly upward in the first half of 1994.
- ------------------------- Accordingly, the Fund's managers have emphasized shorter-term Treasuries, which
Average money 2.34% are less likely to decline in price than longer-term securities in a rising
market fund rate(8) interest rate environment.
- ------------------------- Extremely low U.S. interest rates have prompted many U.S. homeowners
to refinance their mortgages, and this trend has caused volatility in the
mortgage-backed securities market. To insulate the portfolio from this effect,
the Fund's managers continue to invest in a combination of very short-term
securities, which are at low risk of prepayment, and highly seasoned securities
that have already survived several refinancing waves.
Going forward, we will continue to monitor interest rates closely, and
to seek the best investment opportunities for the Fund. We appreciate your trust
in Oppenheimer Investment Grade Bond Fund and look forward to serving your
investment needs.
"THE FUND'S
TOTAL RETURN WAS
HIGHER THAN THE
LIPPER AVERAGE."
/s/ James C. Swain /s/ Jon S. Fossel
James C. Swain Jon S. Fossel
Chairman, Oppenheimer Integrity Fund President, Oppenheimer Integrity Fund
January 21, 1994
<FN>
(5). See footnote 1, page 2.
(6). See footnote 3, page 2.
(7). See footnote 4, page 2.
(8). Source of CD and money market fund data: BANK RATE MONITOR, 12/31/93. The
CD rate is the average of 12-month certificates of deposit available for
purchase from 12 regional banks on 12/31/93. CDs are insured by the FDIC and
provide a guaranteed return, whereas the Fund's yield and share value may
fluctuate and are not insured by the FDIC. The average money market fund yield
is the average yield for the 30-day period ended 12/31/93 for 10 selected money
market mutual funds. The share value of money market funds generally does not
vary whereas the Fund's share value may fluctuate.
</TABLE>
3 Oppenheimer Investment Grade Bond Fund
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------
STATEMENT OF INVESTMENTS December 31, 1993
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM SECURITIES: COMMERCIAL PAPER--15.7%
- -----------------------------------------------------------------------------------------------------------------------------------
Caterpillar Financial Services Corp., 3.40%, 1/6/94 $2,500,000 $2,498,819
-----------------------------------------------------------------------------------------------------
ConAgra, Inc., 3.40%, 1/11/94 1,975,000 1,973,135
-----------------------------------------------------------------------------------------------------
Countrywide Funding Corp., 3.50%, 1/3/94 2,500,000 2,499,514
-----------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 3.40%, 1/5/94 160,000 160,000
-----------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 3.05%, 1/3/94 390,000 390,000
-----------------------------------------------------------------------------------------------------
GTE Northwest, Inc., 3.31%, 1/12/94 1,800,000 1,798,180
-----------------------------------------------------------------------------------------------------
ITT Financial Corp., 3.35%, 1/7/94 665,000 665,000
-----------------------------------------------------------------------------------------------------
Kerr-McGee Credit Corp., 3.45%, 1/4/94 2,500,000 2,499,281
-----------------------------------------------------------------------------------------------------
Maytag Corp., 3.55%, 1/10/94 1,900,000 1,898,314
-----------------------------------------------------------------------------------------------------
Public Service Co. of Colorado, 3.70%, 1/7/94 1,185,000 1,184,269
-----------------------------------------------------------------------------------------------------
Tyson Foods, Inc., 3.45%, 1/5/94 2,100,000 2,099,195
------------
Total Short-Term Securities: Commercial Paper (Cost $17,665,707) 17,665,707
- -----------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT OBLIGATIONS--64.1%
- -----------------------------------------------------------------------------------------------------------------------------------
AGENCY: FULL FAITH Allentown, Pennsylvania, 8.74% U.S. Government Gtd. Nts., Series A, 8/1/01 65,000 75,934
AND CREDIT--1.1% -----------------------------------------------------------------------------------------------------
Fajardo, Puerto Rico, 8.74% U.S. Government Gtd. Nts., Series A, 8/1/01 300,000 350,466
-----------------------------------------------------------------------------------------------------
New Haven, Connecticut, 8.74% U.S. Government Gtd. Nts., Series A, 8/1/01 400,000 467,288
-----------------------------------------------------------------------------------------------------
Trujillo Alto, Puerto Rico, 8.74% U.S. Government Gtd. Nts., Series A, 8/1/01 235,000 274,531
------------
1,168,219
- -----------------------------------------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE Federal Home Loan Mortgage Corp., 7.50% Collateralized Mortgage
OBLIGATIONS/GOVERNMENT--7.0% Obligation Gtd. Multiclass Mortgage Participation Certificates, 2/15/07 2,000,000 2,083,700
-----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 7% Gtd. Multiclass Mortgage
Participation Certificates, Series 1460, Cl. 1460-H, 5/15/07 1,500,000 1,543,890
-----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 58.60% Collateralized Mortgage
Obligation Gtd. Real Estate Mortgage Investment Conduit Pass-Through
Certificates, 10/25/22(1) 883,689 636,256
-----------------------------------------------------------------------------------------------------
JHM Acceptance Corp., 8.96% Collateralized Mortgage
Obligation, Series E, Cl. E-6, 4/1/19 2,000,000 2,142,880
-----------------------------------------------------------------------------------------------------
Morgan Stanley Mortgage Trust 28, 8% Collateralized
Mortgage Obligation, Series 28, Cl. 28-5, 12/1/15 1,437,032 1,459,895
------------
7,866,621
- -----------------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED Federal Home Loan Mortgage Corp.:
SECURITIES--4.8% 13.50%, 11/1/10 136,564 158,472
12.50%, 4/1/14 66,775 75,804
9% Certificates of Participation, 3/1/17 1,080,848 1,150,963
-----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 8% Gtd. Mortgage
Pass-Through Certificates, 8/1/17 1,446,631 1,513,060
</TABLE>
4 Oppenheimer Investment Grade Bond Fund
<PAGE>
<TABLE>
<CAPTION>
------------------------------------
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE-BACKED SECURITIES Government National Mortgage Assn.:
(CONTINUED) 12%, 1/15/99 $110,981 $123,443
9%, 2/15/09 305,000 328,266
9%, 3/15/09 271,249 291,941
9%, 5/15/09 34,955 37,621
9%, 6/15/09 190,257 204,770
10%, 11/15/09 1,281,866 1,405,797
15%, 2/15/12 26,453 31,364
12%, 5/15/14 3,170 3,706
12.75%, 5/15/15 31,287 36,146
12.75%, 6/15/15 68,024 78,590
------------
5,439,943
- -----------------------------------------------------------------------------------------------------------------------------------
TREASURY--50.2% U.S. Treasury Bonds:
7.875%, 2/15/21 900,000 1,048,212
8%, 11/15/21 2,000,000 2,369,360
7.25%, 8/15/22 7,600,000 8,295,855
7.125%, 2/15/23 4,000,000 4,329,960
-----------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
8.50%, 7/15/97 6,925,000 7,751,637
6.375%, 1/15/99 1,200,000 1,260,744
7%, 4/15/99 12,350,000 13,326,390
8%, 5/15/01 1,900,000 2,174,303
7.875%, 8/15/01 2,600,000 2,959,918
5.57%, 8/15/03 13,000,000 12,959,309
------------
56,475,688
- -----------------------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT Quebec, Canada (Province of), 8.80% Debs., 4/15/03 1,000,000 1,156,200
------------
BONDS AND NOTES--1.0% Total Government Obligations (Cost $70,668,745) 72,106,671
- -----------------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--1.2%
- -----------------------------------------------------------------------------------------------------------------------------------
AUTO RECEIVABLES--1.2% General Motors Acceptance Corp. Grantor Trust,
Series 1992-E, Cl.A, 4.75%, 8/15/97 879,210 884,694
-----------------------------------------------------------------------------------------------------
Select Auto Receivables Trust, 7.65% Asset-Backed Certificates,
1991-2 Cl. A, 7/15/96 499,029 509,963
------------
Total Asset-Backed Securities (Cost $1,383,949) 1,394,657
- -----------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--29.1%
- -----------------------------------------------------------------------------------------------------------------------------------
AIRLINES--1.5% United Air Lines, Inc., 10.11% 1991 Equipment Trust Certificates,
Series B, 2/19/06 1,467,010 1,700,363
- -----------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILES, TRUCKS Ford Motor Co., 7.875% Debs., 10/15/96 3,000,000 3,188,823
AND PARTS--2.9%
- -----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES--1.4% Comdisco, Inc., 6.20% Med.-Term Nts., 3/15/96 1,500,000 1,529,063
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL/INSURANCE--3.7% Ford Motor Credit Co., 9.90% Med.-Term Nts., 11/6/97 2,000,000 2,237,206
-----------------------------------------------------------------------------------------------------
Leucadia National Corp., 7.75% Sr. Nts., 8/15/13 2,000,000 1,955,948
------------
4,193,154
</TABLE>
5 Oppenheimer Investment Grade Bond Fund
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------
STATEMENT OF INVESTMENTS (Continued)
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
FOOD AND RESTAURANTS--1.0% Wendy's International, Inc., 12.125% Debs., 4/1/95 $1,000,000 $1,077,300
- -----------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE/MEDICAL Baxter International, Inc., 9.25% Nts., 9/15/96 1,000,000 1,102,631
PRODUCTS--1.8% -----------------------------------------------------------------------------------------------------
Imcera Group, Inc., 6% Nts., 10/15/03 1,000,000 967,128
------------
2,069,759
- -----------------------------------------------------------------------------------------------------------------------------------
HOTELS/MOTELS--1.3% Marriott International, Inc., 6.75% Sr. Nts., Series A, 12/15/03 1,500,000 1,493,377
- -----------------------------------------------------------------------------------------------------------------------------------
LEISURE/ENTERTAINMENT--0.9% Toro Co. (The), 11% Debs., 8/1/17 1,000,000 1,055,000
- -----------------------------------------------------------------------------------------------------------------------------------
MANUFACTURING: Textron, Inc., 9.55% Med.-Term Nts., 3/19/01 500,000 597,940
DIVERSIFIED--0.5%
- -----------------------------------------------------------------------------------------------------------------------------------
MEDIA--2.3% News America Holdings, Inc., 7.50% Gtd. Sr. Nts., 3/1/00 2,500,000 2,610,640
- -----------------------------------------------------------------------------------------------------------------------------------
METALS/MINING--3.5% AMAX, Inc., 9.875% Nts., 6/13/01 1,000,000 1,177,383
-----------------------------------------------------------------------------------------------------
Newmont Mining Corp., 8.625% Nts., 4/1/02 1,000,000 1,112,903
-----------------------------------------------------------------------------------------------------
Teck Corp., 8.70% Debs., 5/1/02 1,500,000 1,665,801
------------
3,956,087
- -----------------------------------------------------------------------------------------------------------------------------------
OIL AND GAS: EXPLORATION Marathon Oil Co., 9.50% Gtd. Nts., 3/1/94 1,500,000 1,508,506
AND PRODUCTION--1.4%
- -----------------------------------------------------------------------------------------------------------------------------------
OIL AND GAS: INTEGRATED--2.9% Union Oil Co. of California:
9.625% Gtd. Debs., 5/15/96 1,500,000 1,593,485
8.75% Nts., 8/15/01 1,500,000 1,696,594
------------
3,290,079
- -----------------------------------------------------------------------------------------------------------------------------------
PAPER AND FOREST Georgia-Pacific Corp., 9.95% Debs., 6/15/02 1,500,000 1,816,089
PRODUCTS--1.6%
- -----------------------------------------------------------------------------------------------------------------------------------
RAILROADS/EQUIPMENT--2.4% CSX Corp., 9.50% Sr. Nts., 11/15/96 2,500,000 2,705,147
------------
Total Corporate Bonds and Notes (Cost $31,523,837) 32,791,327
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $121,242,238) 110.1% 123,958,362
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (10.1) (11,389,977)
--------- ------------
NET ASSETS 100.0% $112,568,385
--------- ------------
--------- ------------
<FN>
1. Interest rate resets monthly, based on LIBOR.
See accompanying Notes to Financial Statements.
</TABLE>
6 Oppenheimer Investment Grade Bond Fund
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES December 31, 1993
<C> <S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
ASSETS Investments, at value (cost $121,242,238)--see accompanying statement $123,958,362
-------------------------------------------------------------------------------------------------------
Cash 215,492
-------------------------------------------------------------------------------------------------------
Receivables:
Interest 1,737,916
Shares of beneficial interest sold 431,065
Investments sold 188,975
-------------------------------------------------------------------------------------------------------
Other 22,252
------------
Total assets 126,554,062
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES Payables and other liabilities:
Investments purchased 12,972,500
Dividends 569,872
Shares of beneficial interest redeemed 239,614
Distribution assistance--Note 4 77,058
Deferred trustee fees--Note 5 34,149
Other 92,484
------------
Total liabilities 13,985,677
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $112,568,385
------------
------------
- -----------------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS Paid-in capital $111,376,568
-------------------------------------------------------------------------------------------------------
Overdistributed net investment income (56,074)
-------------------------------------------------------------------------------------------------------
Accumulated net realized loss from investment transactions (1,468,233)
-------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Note 3 2,716,124
------------
Net assets $112,568,385
------------
------------
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE Class A Shares:
Net asset value and redemption price per share (based on net assets of $110,759,490 and
9,963,302 shares of beneficial interest outstanding) $11.12
Maximum offering price per share (net asset value plus sales charge of 4.75% of offering price) $11.67
-------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $1,808,895 and 162,838 shares of beneficial interest outstanding) $11.11
</TABLE>
See accompanying Notes to Financial Statements.
7 Oppenheimer Investment Grade Bond Fund
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------
STATEMENT OF OPERATIONS For the Year Ended December 31, 1993
<C> <S> <C>
- -------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME Interest $8,145,735
- -------------------------------------------------------------------------------------------------------------------
EXPENSES Management fees--Note 4 555,430
---------------------------------------------------------------------------------------
Distribution assistance:
Class A--Note 4 279,190
Class B--Note 4 6,089
---------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 171,164
---------------------------------------------------------------------------------------
Shareholder reports 98,061
---------------------------------------------------------------------------------------
Custodian fees and expenses 26,144
---------------------------------------------------------------------------------------
Legal and auditing fees 13,774
---------------------------------------------------------------------------------------
Trustees' fees and expenses 6,398
---------------------------------------------------------------------------------------
Registration and filing fees:
Class A 4,542
Class B 582
---------------------------------------------------------------------------------------
Other 29,281
-----------
Total expenses 1,190,655
- -------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 6,955,080
- -------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED Net realized gain on investments 3,772,429
GAIN ON INVESTMENTS ---------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments:
Beginning of year 2,693,891
End of year--Note 3 2,716,124
-----------
Net change 22,233
-----------
Net realized and unrealized gain on investments 3,794,662
- -------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $10,749,742
-----------
-----------
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer Investment Grade Bond Fund
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
-------------------------
1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
OPERATIONS Net investment income $6,955,080 $6,898,017
------------------------------------------------------------------------------------------------------
Net realized gain on investments 3,772,429 2,881,367
------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 22,233 (3,303,621)
------------ ------------
Net increase in net assets resulting from operations 10,749,742 6,475,763
- ----------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS Dividends from net investment income:
Class A ($.707 and $.763 per share, respectively) (7,067,709) (7,002,468)
Class B ($.420 per share) (33,652) --
- ----------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST Net increase in net assets resulting from Class A beneficial interest
TRANSACTIONS transactions--Note 2 802,199 16,193,234
------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class B beneficial interest
transactions--Note 2 1,828,205 --
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS Total increase 6,278,785 15,666,529
------------------------------------------------------------------------------------------------------
Beginning of year 106,289,600 90,623,071
------------ ------------
End of year (including (overdistributed) undistributed net investment
income of ($56,074) and $90,207, respectively) $112,568,385 $106,289,600
------------ ------------
------------ ------------
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer Investment Grade Bond Fund
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CLASS A
---------------------------------------------------------------------------
ELEVEN
YEAR MONTHS
ENDED ENDED
DEC. 31, DEC. 31,
1993 1992 1991(3) 1990 1989 1988(2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.74 $10.80 $9.86 $10.29 $10.12 $10.55
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .69 .75 .82 .88(4) .92 .93
Net realized and unrealized
gain (loss) on investments .40 (.05) .90 (.43) .19 (.36)
------ ------ ------ ------ ------ ------
Total income from investment
operations 1.09 .70 1.72 .45 1.11 .57
- ----------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.71) (.76) (.78) (.88) (.94) (1.00)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.12 $10.74 $10.80 $9.86 $10.29 $10.12
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(5) 10.30% 6.77% 18.28% 4.74% 11.31% 4.48%
- ----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $110,759 $106,290 $90,623 $87,021 $96,380 $102,293
- ----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $111,702 $98,672 $86,471 $90,065 $100,891 $111,264
- ----------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 9,963 9,899 8,390 8,829 9,369 10,108
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.20% 7.00% 8.02% 8.85% 8.85% 8.75%
Expenses 1.06% 1.10% 1.23% 1.24%(4) 1.14% 1.05%
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 110.1% 116.4% 97.1% 80.4% 41.3% 45.0%
<CAPTION>
Class B
- -------------------------------------------------------------------------------------------------------- --------
PERIOD
ENDED
YEAR ENDED JANUARY 31, DEC. 31,
1988(2) 1987(2) 1986(2) 1985(2) 1984(2) 1993(1)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $11.30 $11.16 $10.91 $11.00 $11.07 $11.10
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 1.09 1.16 1.22 1.27 1.28 .40
Net realized and unrealized
gain (loss) on investments (.55) .22 .35 (.04) (.03) .03
-------- -------- -------- -------- -------- --------
Total income from investment
operations .54 1.38 1.57 1.23 1.25 .43
- ----------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (1.29) (1.24) (1.32) (1.32) (1.32) (.42)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.55 $11.30 $11.16 $10.91 $11.00 $11.11
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(5) N/A N/A N/A N/A N/A 3.91%
- ----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $118,568 $125,513 $121,979 $117,293 $116,193 $1,809
- ----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $118,724 $123,045 $118,253 $111,235 $115,058 $922
- ----------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 11,234 11,103 10,930 10,751 10,563 163
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 10.28% 10.45% 11.26% 12.21% 11.69% 4.80%(6)
Expenses .98% .93% .97% 1.01% .99% 1.90%(6)
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 19.5% 59.8% 36.5% 76.7% 49.9% 110.1%
<FN>
1. For the period from May 1, 1993 (inception of offering) to December 31, 1993.
2. Operating results prior to April 15, 1988 were achieved by the Fund's
predecessor corporation as a closed-end fund under different investment
objectives and policies. Such results are thus not necessarily representative of
operating results the Fund may achieve under its current investment objectives
and policies.
3. On March 28, 1991, Oppenheimer Management Corporation became the investment
advisor to the Fund.
4. Net investment income would have been $.87 absent the voluntary expense
limitation, resulting in an expense ratio of 1.26%.
5. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in the total returns.
6. Annualized.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the year
ended December 31, 1993 were $123,943,358 and $134,301,656, respectively.
See accompanying Notes to Financial Statements.
</TABLE>
10 Oppenheimer Investment Grade Bond Fund
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SIGNIFICANT Oppenheimer Investment Grade Bond Fund (the Fund) is
ACCOUNTING POLICIES a separate fund of Oppenheimer Integrity Funds, a
diversified, open-end management investment company
registered under the Investment Company Act of 1940,
as amended. The Fund's investment advisor is
Oppenheimer Management Corporation (the Manager). The
Fund offers both Class A and Class B shares. Class A
shares are sold with a front-end sales charge. Class
B shares may be subject to a contingent deferred
sales charge. Both classes of shares have identical
rights to earnings, assets and voting privileges,
except that each class has its own distribution plan,
expenses directly attributable to a particular class
and exclusive voting rights with respect to matters
affecting a single class. Class B shares will
automatically convert to Class A shares six years
after the date of purchase. The following is a
summary of significant accounting policies
consistently followed by the Fund.
-----------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued
at 4:00 p.m. (New York time) on each trading day.
Long-term debt securities are valued by a portfolio
pricing service approved by the Board of Trustees.
Long-term debt securities which cannot be valued by
the approved portfolio pricing service are valued by
averaging the mean between the bid and asked prices
obtained from two active market makers in such
securities. Short-term debt securities having a
remaining maturity of 60 days or less are valued at
cost (or last determined market value) adjusted for
amortization to maturity of any premium or discount.
Securities for which market quotes are not readily
available are valued under procedures established by
the Board of Trustees to determine fair value in good
faith.
-----------------------------------------------------
ALLOCATION OF INCOME, EXPENSES AND GAINS AND LOSSES.
Income, expenses (other than those attributable to a
specific class) and gains and losses are allocated
daily to each class of shares based upon the relative
proportion of net assets represented by such class.
Operating expenses directly attributable to a
specific class are charged against the operations of
that class.
-----------------------------------------------------
FEDERAL INCOME TAXES. The Fund intends to continue to
comply with provisions of the Internal Revenue Code
applicable to regulated investment companies and to
distribute all of its taxable income, including any
net realized gain on investments not offset by loss
carryovers, to shareholders. Therefore, no federal
income tax provision is required. At December 31,
1993, the Fund had available for federal income tax
purposes an unused capital loss carryover of
approximately $1,400,000, $442,000 of which will
expire in 1997, and $958,000 in 1998.
-----------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to
declare dividends separately for Class A and Class B
shares from net investment income each regular
business day and pay such dividends monthly.
Distributions from net realized gains on investments,
if any, will be declared at least once each year.
-----------------------------------------------------
OTHER. Investment transactions are accounted for on
the date the investments are purchased or sold (trade
date). Discount on securities purchased is amortized
over the life of the respective securities, in
accordance with federal income tax requirements.
Realized gains and losses on investments and
unrealized appreciation and depreciation are
determined on an identified cost basis, which is the
same basis used for federal income tax purposes.
11 Oppenheimer Investment Grade Bond Fund
<PAGE>
------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
2. SHARES OF The Fund has authorized an unlimited number of no
BENEFICIAL INTEREST par value shares of beneficial interest of each
class. Transactions in shares of beneficial interest
were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993(1) YEAR ENDED DECEMBER 31, 1992
------------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 2,953,788 $33,325,053 2,484,198 $26,675,262
Dividends reinvested 259,953 2,897,712 216,393 2,318,129
Redeemed (3,149,098) (35,420,566) (1,191,950) (12,800,157)
---------- ----------- ---------- -----------
Net increase 64,643 $802,199 1,508,641 $16,193,234
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
Class B:
Sold 195,606 $ 2,198,191 -- $ --
Dividends reinvested 2,293 25,726 -- --
Redeemed (35,061) (395,712) -- --
---------- ----------- ---------- -----------
Net increase 162,838 $ 1,828,205 -- $ --
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
<FN>
1. For the year ended December 31, 1993 for Class A shares and for the period
from May 1, 1993 (inception of offering) to December 31, 1993 for Class B
shares.
</TABLE>
- --------------------------------------------------------------------------------
3. UNREALIZED GAINS AND At December 31, 1993, net unrealized appreciation on
LOSSES ON INVESTMENTS investments of $2,716,124 was composed of gross
appreciation of $3,957,810, and gross depreciation of
$1,241,686.
- --------------------------------------------------------------------------------
4. MANAGEMENT FEES Management fees paid to the Manager were in
AND OTHER TRANSACTIONS accordance with the investment advisory agreement
WITH AFFILIATES with the Fund which provides for an annual fee of
.50% on the first $100 million of net assets with a
reduction of .05% on each $200 million thereafter, to
.35% on net assets in excess of $500 million. The
Manager has agreed to reimburse the Fund if aggregate
expenses (with specified exceptions) exceed the most
stringent applicable regulatory limit on Fund
expenses.
For the year ended December 31, 1993,
commissions (sales charges paid by investors) on
sales of Class A shares totaled $269,639, of which
$163,271 was retained by Oppenheimer Funds
Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an affiliated
broker/dealer. During the year ended December 31,
1993, OFDI received contingent deferred sales charges
of $350 upon redemption of Class B shares.
Oppenheimer Shareholder Services (OSS), a
division of the Manager, is the transfer and
shareholder servicing agent for the Fund, and for
other registered investment companies. OSS's total
costs of providing such services are allocated
ratably to these companies.
Under separate approved plans of distribution,
each class may expend up to .25% of its net assets
annually to reimburse OFDI for costs incurred in
distributing shares of the Fund, including amounts
paid to brokers, dealers, banks and other
institutions. In addition, Class B shares are subject
to an asset-based sales charge of .75% of net assets
annually, to reimburse OFDI for sales commissions
paid from its own resources at the time of sale and
associated financing costs. In the event of
termination or discontinuance of the Class B plan of
distribution, the Fund would be contractually
obligated to pay OFDI for any expenses not previously
reimbursed or recovered through contingent deferred
sales charges. During the year ended December 31,
1993, OFDI paid $181,032 to an affiliated
broker/dealer as reimbursement for Class A
distribution-related expenses and retained $6,089 as
reimbursement for Class B distribution-related
expenses and sales commissions.
- --------------------------------------------------------------------------------
5. DEFERRED TRUSTEE A former trustee elected to defer receipt of fees
COMPENSATION earned. These deferred fees earn interest at a rate
determined by the current Board of Trustees at the
beginning of each calendar year, compounded each
quarter-end. As of December 31, 1993, the Fund was
incurring interest at a rate of 6.01% per annum.
Deferred fees are payable in annual installments,
with accrued interest, each April 1 through 1995.
12 Oppenheimer Investment Grade Bond Fund
<PAGE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders of Oppenheimer
Investment Grade Bond Fund:
We have audited the accompanying statement of assets
and liabilities, including the statement of
investments, of Oppenheimer Investment Grade Bond
Fund as of December 31, 1993, the related
statement of operations for the year then ended, the
statements of changes in net assets for the years
ended December 31, 1993 and 1992 and the financial
highlights for the period January 1, 1991 to
December 31, 1993. 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. The
financial highlights (except for total return) for
the period February 1, 1983 to December 31, 1990
were audited by other auditors whose report dated
February 4, 1991, expressed an unqualified opinion
on those financial highlights.
We conducted our audits in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform the audit
to obtain reasonable assurance about whether the
financial statements and financial highlights are
free of material misstatement. An audit also
includes examining, on a test basis, evidence
supporting the amounts and disclosures in the
financial statements. Our procedures included
confirmation of securities owned at December 31,
1993 by correspondence with the custodian and
brokers; where replies 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, such financial statements and
financial highlights present fairly, in all material
respects, the financial position of Oppenheimer
Investment Grade Bond Fund at December 31, 1993, the
results of its operations, the changes in its net
assets, and the financial highlights for the
respective stated periods, in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE
Denver, Colorado
January 21, 1994
13 Oppenheimer Investment Grade Bond Fund
<PAGE>
-------------------------------------------
FEDERAL INCOME TAX INFORMATION (Unaudited)
- --------------------------------------------------------------------------------
In early 1994, shareholders will receive information
regarding all dividends and distributions paid to
them by the Fund during calendar year 1993.
Regulations of the U.S. Treasury Department require
the Fund to report this information to the Internal
Revenue Service.
None of the dividends paid by the Fund during
the fiscal year ended December 31, 1993 are eligible
for the corporate dividend-received deduction.
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.
14 Oppenheimer Investment Grade Bond Fund
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------
OPPENHEIMER INVESTMENT GRADE BOND FUND
A Series of Oppenheimer Integrity Funds
<C> <S>
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES James C. Swain, Chairman and Chief Executive Officer
William A. Baker, Trustee
Charles Conrad, Jr., Trustee
Jon S. Fossel, Trustee and President
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Ned M. Steel, Trustee
Andrew J. Donohue, Vice President
Mary E. Wilson, Vice President
George C. Bowen, Vice President, Secretary and
Treasurer
Lynn M. Coluccy, Assistant Treasurer
Robert G. Zack, Assistant Secretary
--------------------------------------------------------------------------------
INVESTMENT ADVISOR Oppenheimer Management Corporation
--------------------------------------------------------------------------------
SUB-ADVISOR Massachusetts Mutual Life Insurance Company
--------------------------------------------------------------------------------
DISTRIBUTOR Oppenheimer Funds Distributor, Inc.
--------------------------------------------------------------------------------
TRANSFER AND SHAREHOLDER Oppenheimer Shareholder Services
SERVICING AGENT
--------------------------------------------------------------------------------
CUSTODIAN OF The Bank of New York
PORTFOLIO SECURITIES
--------------------------------------------------------------------------------
INDEPENDENT AUDITORS Deloitte & Touche
--------------------------------------------------------------------------------
LEGAL COUNSEL Myer, Swanson & Adams, P.C.
This is a copy of a report to shareholders of Oppenheimer Investment Grade Bond
Fund. This report must be preceded or accompanied by a Prospectus of Oppenheimer
Investment Grade Bond Fund. For material information concerning the Fund, see
the Prospectus.
15 Oppenheimer Investment Grade Bond Fund
</TABLE>
<PAGE>
"How may I help you?"
GENERAL INFORMATION
1-800-525-7048
Talk to a Customer Service Representative.
Monday through Friday from 8:30 a.m. to 8:00 p.m., and Saturday from 10:00 a.m.
to 2:00 p.m. ET.
TELEPHONETRANSACTIONS
1-800-852-8457
Make account transactions with a Customer Service Representative.
Monday through Friday from 8:30 a.m. to 8:00 p.m. ET.
PHONELINK
1-800-533-3310
Get automated information or make automated transactions.
24 hours a day, 7 days a week.
TELECOMMUNICATION
Device for the Deaf
1-800-843-4461
Service for the hearing impaired.
Monday through Friday from 8:30 a.m. to 8:00 p.m. ET.
OPPENHEIMER FUNDS INFORMATION HOTLINE
1-800-835-3104
Hear timely and insightful messages on the economy and issues that affect your
finances.
24 hours a day, 7 days a week.
"Just as OppenheimerFunds offers over 30 different funds designed to help meet
virtually every investment need, Oppenheimer Shareholder Services offers a
variety of services to satisfy your individual needs. Whenever you require help,
we're only a toll-free phone call away.
"For personalized assistance and account information, call our General
Information number to speak with our knowledgeable Customer Service
Representatives.
"We also make it easy for you to redeem shares, exchange shares, or conduct
AccountLink transactions, simply by calling our Telephone Transactions number.
"And for added convenience, OppenheimerFunds' PhoneLink, an automated voice
response system, is available 24 hours a day, 7 days a week. PhoneLink gives you
access to variety of fund, account, and market information. You can even make
purchases, exchanges and redemptions using your touch-tone phone. Of course,
PhoneLink will always give you the option to speak with a Customer Service
Representative during regular business hours.
"When you invest in OppenheimerFunds, you know you'll receive a high level of
customer service. The International Customer Service Association knows it, too,
as it recently awarded Oppenheimer Shareholder Services a 1993 Award of
Excellence for consistently demonstrating superior customer service.
"Whatever your needs, we're ready to assist you."
Bulk Rate
U.S. Postage
PAID
Permit No. 314
Farmingdale, NY
[LOGO]
Oppenheimer Funds Distributor, Inc.
P.O. Box 5270
Denver, CO 80217-5270
