<PAGE>
OPPENHEIMER INVESTMENT GRADE BOND FUND
SEMI-ANNUAL REPORT JUNE 30, 1994
[Logo] OPPENHEIMERFUNDS
"WE NEED HIGH INCOME, BUT NOT A LOT OF RISK.
"WE'RE SATISFIED WITH THIS FUND BECAUSE OF THE INCOME IT HAS GIVEN US. AND WE
FEEL COMFORTABLE INVESTING IN A FUND THAT HAS AN INVESTMENT GRADE PORTFOLIO."
<PAGE>
FUND FACTS
IN THIS REPORT:
ANSWERS TO TIMELY QUESTIONS YOU SHOULD ASK YOUR FUND'S MANAGERS.
- - DID THE FEDERAL RESERVE'S MOVES TO RAISE SHORT-TERM INTEREST RATES AFFECT THE
FUND'S INVESTMENT STRATEGY?
- - HAS THE FUND CHANGED ITS INVESTMENT MIX SIGNIFICANTLY?
FACTS EVERY SHAREHOLDER SHOULD KNOW ABOUT
OPPENHEIMER INVESTMENT GRADE BOND FUND
1 The Fund's investment objective is to seek high current income, consistent
with prudent investment risk and stability of capital.
2 The standardized yield for the 30-day period ended June 30, 1994 was 5.77%
for Class A shares and 5.28% for Class B shares.(1)
3 Total return at net asset value for the 6-month period ended June 30, 1994
was -4.52% for Class A shares and -4.82% for Class B shares.(2)
4 Average annual total returns for Class A shares for the 1- and 5-year periods
ended June 30, 1994 and since inception of the Fund on April 15, 1988 were
-6.77%, 6.59%, and 7.24%, respectively. Average annual total returns for
Class B shares for the 1-year period ended June 30, 1994 and since
inception on May 1, 1993 were -7.74% and -4.36%, respectively.(3)
5 To meet its investment objective, the Fund has the flexibility to shift
assets between sectors of the investment grade fixed income market shown in
the portfolio allocation on June 30, 1994:(4)
[Graph]
U.S. TREASURY NOTES AND BONDS 37.7%
U.S. CORPORATE BONDS 27.4%
CASH EQUIVALENTS 16.7%
MORTGAGE BACKED AND ASSET-BASED SECURITIES 12.7%
MUNICIPALS (TAXABLE) 3.5%
FOREIGN FIXED INCOME SECURITIES 2.0%
6 "Our outlook for the investment grade bond market is positive. We believe
that interest rates should remain relatively stable in the second half of
1994. The U.S. economy is growing at a moderate pace and inflation remains
subdued."
MARY WILSON, MASSACHUSETTS MUTUAL LIFE INSURANCE CO., THE FUND'S SUB-ADVISOR
(1) Standardized yield is net investment income calculated on a yield to
maturity basis for the 30-day period ended 6/30/94, divided by the maximum
offering price at the end of the period, compounded semi-annually and then
annualized. Falling net asset values will tend to artificially raise yields.
(2) Based on the change in net asset value per share, without deducting any
sales charges.
(3) Average annual total returns are based on a hypothetical investment held
until 6/30/94, after deducting the maximum initial sales charge of 4.75% for
Class A shares and the contingent deferred sales charge of 5% (1 year) and 4%
(since inception) for Class B shares.
(4) The Fund's portfolio is subject to change.
All figures assume reinvestment of dividends and capital gains distributions.
Past performance is not indicative of future results. Investment return and
principal value on an investment in the Fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the original
cost.
2 Oppenheimer Investment Grade Bond Fund
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REPORT TO SHAREHOLDERS
We are pleased to report that Oppenheimer Investment Grade Bond Fund met its
objective of providing high current income to its shareholders from a
diversified portfolio of investment grade fixed income securities.
In the past six months, interest rate increases affected the fixed income
markets. From early February through mid-May, the Federal Reserve Board
increased rates four times in anticipation of rising inflation based on strong
economic growth in late 1993. When interest rates rise, bond prices tend to
fall; thus, the Fed's actions caused price volatility in the bond markets. And
the prices of longer-term bonds fell significantly because they are more
sensitive to interest rate changes than shorter-term bonds.
While the allocation of the assets in the Fund's portfolio did not change
significantly during this uncertain economic period, the managers took steps
late in 1993 to prepare the Fund for the possibility of interest rate
increases. For example, in the U.S. Treasury sector of the portfolio, they
emphasized shorter-term Treasuries to help reduce the impact of rising rates
on the Fund.
In the corporate bond sector of the portfolio, the Fund's managers
maintained investments in or purchased bonds of companies they expected would
do well as the economy gradually improves. As the economy strengthens, the
credit ratings of these companies should improve and the value of their bonds
should then increase.
Oppenheimer Investment Grade Bond Fund managers are encouraged by several
economic factors that they believe will have a positive effect on the Fund.
First, despite recent increases, interest rates should stabilize as investors
realize that inflation is not increasing dramatically. Second, U.S. companies
have virtually stopped issuing new bonds because increased interest rates make
it unattractive to issue new debt. Your managers believe that this can cause
the value of many corporate bonds, like those in the Fund's portfolio, to
increase because investor demand will be higher than supply.
Thank you for your trust in Oppenheimer Investment Grade Bond Fund. We look
forward to continuing to help you meet your financial goals.
James C. Swain Jon S. Fossel
Chairman President
Oppenheimer Integrity Oppenheimer Integrity
Funds for Oppenheimer Funds for Oppenheimer
Investment Grade Bond Fund Investment Grade Bond Fund
July 22, 1994
3 Oppenheimer Investment Grade Bond Fund
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Statement of Investments June 30, 1994 (Unaudited)
Face Market Value
Amount See Note 1
- ------
Short-Term Securities: Commercial Paper--17.9%
- ------
Borden, Inc., 4.60%, 7/28/94 $2,500,000 $2,491,375
- ------
Detroit Edison Co., 4.55%, 7/7/94 2,285,000 2,283,267
- ------
Electronic Data Systems Corp., 4.32%, 7/19/94 1,215,000 1,214,258
- ------
Indiana & Michigan Power Co., 4.45%, 7/14/94 2,300,000 2,296,304
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Mattel, Inc., 4.43%, 7/1/94 1,535,000 1,535,000
- ------
ORIX America, Inc., 4.50%, 7/12/94 2,415,000 2,411,679
- ------
Public Service Electric and Gas Co., 4.43%, 7/8/94 2,395,000 2,392,937
- ------
Ryder System, Inc., 4.45%, 7/11/94 1,555,000 1,553,078
- ------
TJX Cos., Inc., 4.43%, 7/5/94 2,350,000 2,348,843
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Total Short-Term Securities: Commercial Paper (Cost $18,526,741) 18,526,741
- ------
Government Obligations--59.4%
- ------
Agency: Full Faith
And Credit--3.8%
Allentown, Pennsylvania,
8.74% U.S. Government Gtd. Nts., Series A, 8/1/01 65,000 68,523
- ------
Babylon, New York,
5.93% U.S. Government Gtd. Nts., Series A, 8/1/99 115,000 107,933
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Bakersfield, California,
5.93% U.S. Government Gtd. Nts., Series A, 8/1/99 255,000 239,329
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Boston, Massachusetts,
5.93% U.S. Government Gtd. Nts., Series A, 8/1/99 795,000 746,144
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Buena Vista Township, New Jersey, 5.93% U.S. Government Gtd. Nts.,
Series A, 8/1/99 270,000 253,407
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Buffalo, New York,
5.93% U.S. Government Gtd. Nts., Series A, 8/1/99 400,000 375,418
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Detroit, Michigan,
5.93% U.S. Government Gtd. Nts., Series A, 8/1/99 405,000 380,111
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Fajardo, Puerto Rico,
8.74% U.S. Government Gtd. Nts., Series A, 8/1/01 300,000 316,261
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New Haven, Connecticut,
8.74% U.S. Government Gtd. Nts., Series A, 8/1/01 400,000 421,682
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Roanoke, Virginia,
5.93% U.S. Government Gtd. Nts., Series A, 8/1/99 220,000 206,480
- ------
Sacramento County, California,
5.93% U.S. Government Gtd. Nts., Series A, 8/1/99 240,000 225,251
- ------
Tacoma, Washington,
5.93% U.S. Government Nts., Series A, 8/1/99 165,000 154,860
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Trenton, New Jersey,
5.93% U.S. Government Gtd. Nts., Series A, 8/1/99 135,000 126,704
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Tujillo Alto, Puerto Rico,
8.74% U.S. Government Gtd. Nts., Series A, 8/1/01 235,000 247,738
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3,869,841
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Collateralized Mortgage
Obligations/Government--5.9%
Federal Home Loan Mortgage Corp.:
7.50% Collateralized Mortgage Obligation Gtd. Multiclass
Mortgage Participation Certificates, 2/15/07 2,000,000 1,980,660
7% Gtd. Multiclass Mortgage Participation Certificates, Series 1460,
Cl. 1460-H, 5/15/07 1,500,000 1,430,745
- ------
Federal National Mortgage Assn., 57.10% Interest-Only Collateralized Mortgage
Obligation Gtd. Real Estate Mortgage Investment Conduit Pass-Through
Certificates, 10/25/22(1) 626,125 472,725
- ------
JHM Acceptance Corp., 8.96% Collateralized Mortgage
Obligation Bonds, Series E, Cl. E-6, 4/1/19 2,000,000 2,063,340
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Morgan Stanley Mortgage Trust 28, 8% Collateralized
Mortgage Obligation Bonds, Series 28, Cl. 28-5, 12/1/15 118,774 119,064
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6,066,534
4 Oppenheimer Investment Grade Bond Fund
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Face Market Value
Amount See Note 1
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Mortgage-Backed
Securities--6.9%
Federal Home Loan Mortgage Corp.:
13.50%, 11/1/10 $106,405 $120,390
12.50%, 4/1/14 56,069 62,842
9% Certificates of Participation, 3/1/17 873,288 898,430
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Federal National Mortgage Assn., 8% Gtd. Mortgage
Pass-Through Certificates, 8/1/17 1,234,522 1,255,694
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Government National Mortgage Assn:
12%, 1/15/99 99,990 108,836
8%, 6/15/05 385,434 392,288
8%, 7/15/05 711,874 724,533
8%, 8/15/05 303,068 308,458
8%, 9/15/05 546,069 555,778
8%, 10/15/05 261,337 265,985
8%, 7/15/06 411,920 418,540
8%, 10/15/06 395,944 402,307
9%, 2/15/09 263,647 275,437
9%, 3/15/09 222,275 232,214
9%, 5/15/09 34,020 35,541
9%, 6/15/09 161,936 169,177
10%, 11/15/09 766,829 821,060
15%, 2/15/12 26,315 30,731
12%, 5/15/14 2,202 2,486
12.75%, 6/15/15 44,390 50,272
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7,130,999
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Treasury--40.7% U.S. Treasury Bonds:
7.875%, 2/15/21 900,000 913,781
8%, 11/15/21 2,000,000 2,066,250
7.25%, 8/15/22 7,600,000 7,227,120
7.125%, 2/15/23 4,000,000 3,743,748
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U.S. Treasury Nts.:
8.50%, 7/15/97 6,925,000 7,292,891
7%, 4/15/99 11,700,000 11,729,250
5.875%, 2/15/04 10,000,000 8,990,619
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41,963,659
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Foreign Government
Bonds and Notes--2.1%
Iceland (Republic of) Nts., 6.125%, 2/1/04 2,500,000 2,208,917
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Total Government Obligations (Cost $64,739,574) 61,239,950
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Asset-Backed Securities--0.9%
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Auto Receivables--0.9% General Motors Acceptance Corp., Grantor Trust,
Series 1992-E, Cl. A, 4.75%, 8/15/97 631,077 623,479
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Select Auto Receivable Trust, Series 1991-2 Asset
Backed Certificates, Cl. A, 7.65%, 7/15/96 314,283 315,767
- ------
Total Asset-Backed Securities (Cost $947,928) 939,246
- ------
Corporate Bonds and Notes--29.5%
- ------
Aerospace--2.7% McDonnell Douglas Corp., 8.25% Nts., 7/1/00 2,750,000
2,788,272
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Airlines--1.4% United Air Lines, Inc., 10.11% 1991 Equipment Trust
Certificates,
Series B, 2/19/06 1,449,687 1,420,205
5 Oppenheimer Investment Grade Bond Fund
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Statement of Investments June 30, 1994 (Unaudited) (Continued)
Face Market Value
Amount See Note 1
- ------
Automobiles, Trucks
and Parts--1.1%
Chrysler Corp., 10.40% Nts., 8/1/99 $1,000,000 $1,083,190
- ------
Broker/Dealers--1.3% Goldman Sachs Group, L.P.,
6.20% Nts., 2/15/01 1,500,000 1,383,750
- ------
Electronics--1.0% Thomas & Betts Corp.,
8.25% Sr. Nts., 1/15/04 1,000,000 1,005,759
- ------
Financial/Insurance--3.8% Ford Motor Credit Co.,
9.90% Med.-Term Nts., 11/6/97 2,000,000 2,132,998
- ------
Leucadia National Corp., 7.75% Sr. Nts., 8/15/13 2,000,000 1,782,452
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3,915,450
- ------
Food and Restaurants--1.0% Wendy's International, Inc.,
12.125% Debs., 4/1/95 1,000,000 1,038,389
- ------
Healthcare/Medical
Products--1.5%
Baxter International, Inc., 9.25% Nts., 9/15/96 1,000,000 1,049,847
- ------
Imcera Group, Inc., 6% Nts., 10/15/03 500,000 435,966
- ------
1,485,813
- ------
Hotels/Motels--1.3% Marriott International, Inc.,
6.75% Sr. Nts., Series A, 12/15/03 1,500,000 1,358,592
- ------
Leisure/Entertainment--1.0% Toro Co. (The),
11% Debs., 8/1/17 1,000,000 1,035,000
- ------
Manufacturing: Diversified--0.5% Textron, Inc.,
9.55% Med.-Term Nts., 3/19/01 500,000 545,687
- ------
Media--2.3% News America Holdings, Inc.,
7.50% Gtd. Sr. Nts., 3/1/00 2,500,000 2,403,287
- ------
Metals/Mining--3.5% AMAX, Inc.,
9.875% Nts., 6/13/01 1,000,000 1,080,208
- ------
Newmont Mining Corp., 8.625% Nts., 4/1/02 1,000,000 1,016,198
- ------
Teck Corp., 8.70% Debs., 5/1/02 1,500,000 1,525,525
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3,621,931
- ------
Oil and Gas: Integrated--3.0% Union Oil Co. of California:
9.625% Gtd. Debs., 5/15/95 1,500,000 1,543,169
8.75%, Nts., 8/15/01 1,500,000 1,569,610
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3,112,779
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Paper and Forest Products--1.6% Georgia-Pacific Corp.,
9.95% Debs., 6/15/02 1,500,000 1,654,027
- ------
Railroads/Equipment--2.5% CSX Corp.,
9.50% Sr. Nts., 11/15/95 2,500,000 2,606,115
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Total Corporate Bonds and Notes (Cost $31,390,196) 30,458,246
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Total Investments, at Value (Cost $115,604,439) 107.7% 111,164,183
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Liabilities in Excess of Other Assets (7.7) (7,969,106)
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Net Assets 100.0% $103,195,077
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- ------ ------
1. Interest rate resets monthly, inversely related to LIBOR. Interest-Only
Strips represent the right to receive the monthly interest payments on an
underlying pool of mortgage loans. These securities are subject to the risk of
accelerated principal paydowns as interest rates decline. The principal amount
represents the notional amount on which current interest is calculated.
See accompanying Notes to Financial Statements.
6 Oppenheimer Investment Grade Bond Fund
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- ------
Statement of Assets and Liabilities June 30, 1994 (Unaudited)
- ------
Assets Investments, at value (cost $115,604,439)-
- -see accompanying statement $111,164,183
- ------
Receivables:
Interest 1,780,905
Shares of beneficial interest sold 114,247
Investments sold 17,999
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Other 30,129
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Total assets 113,107,463
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Liabilities Bank overdraft 34,672
Payables and other liabilities:
Investments purchased 8,931,250
Shares of beneficial interest redeemed 219,557
Dividends 215,993
Distribution and service plan fees--Note 4 136,189
Deferred trustee fees--Note 5 18,867
Other 355,858
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Total liabilities 9,912,386
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Net Assets $103,195,077
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- ------
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Composition of
Net Assets
Paid-in capital $110,143,628
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Undistributed net investment income 42,134
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Accumulated net realized loss from investment transactions (2,550,429)
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Net unrealized depreciation on investments--Note 3 (4,440,256)
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Net assets $103,195,077
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- ------
- ------
Net Asset Value
Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$100,263,452 and 9,727,527 shares of beneficial interest outstanding) $10.31
Maximum offering price per share (net asset value plus sales charge of 4.75% of
offering price) $10.82
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Class B Shares:
Net asset value, redemption price and offering price per share (based on net
assets of
$2,931,625 and 284,361 shares of beneficial interest outstanding) $10.31
See accompanying Notes to Financial Statements.
7 Oppenheimer Investment Grade Bond Fund
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Statement of Operations For the Six Months Ended June 30, 1994 (Unaudited)
- ------
Investment Income Interest $3,833,450
- ------
Expenses Management fees--Note 4 265,913
- ------
Distribution and service plan fees:
Class A--Note 4 125,172
Class B--Note 4 11,017
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Transfer and shareholder servicing agent fees--Note 4 112,347
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Shareholder reports 77,393
- ------
Custodian fees and expenses 11,902
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Legal and auditing fees 7,844
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Trustees' fees and expenses 4,649
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Registration and filing fees--Class B 423
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Other 11,515
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Total expenses 628,175
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Net Investment Income 3,205,275
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Realized and Unrealized
Loss on Investments
Net realized loss on investments (1,069,865)
- ------
Net change in unrealized appreciation or depreciation on investments (7,156,380)
Net realized and unrealized loss on investments (8,226,245)
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Net Decrease in Net Assets Resulting From Operations $(5,020,970)
- ------
- ------
See accompanying Notes to Financial Statements.
8 Oppenheimer Investment Grade Bond Fund
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Statements of Changes in Net Assets
Six Months Ended Year Ended
June 30, 1994 December 31,
(Unaudited) 1993
- ------
Operations Net investment income $3,205,275 $6,955,080
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Net realized gain (loss) on investments (1,069,865) 3,772,429
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Net change in unrealized appreciation or depreciation on investments
(7,156,380) 22,233
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Net increase (decrease) in net assets resulting from operations
(5,020,970) 10,749,742
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Dividends to
Shareholders
Dividends from net investment income:
Class A
($.3133 and $.707 per share, respectively) (3,087,280) (7,067,709)
Class B
($.2702 and $.420 per share, respectively) (61,921) (33,652)
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Beneficial Interest
Transactions
Net increase (decrease) in net assets resulting from Class A beneficial interest
transactions--Note 2 (2,514,034) 802,199
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Net increase in net assets resulting from Class B beneficial interest
transactions--Note 2 1,310,897 1,828,205
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Net Assets Total increase 9,373,308 6,278,785
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Beginning of period 112,568,385 106,289,600
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End of period (including undistributed (overdistributed)
net investment income of $42,134 and $(56,074), respectively)
$103,195,077 $112,568,385
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- ------ ------
See accompanying Notes to Financial Statements.
9 Oppenheimer Investment Grade Bond Fund
<PAGE>
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Financial Highlights
Class A Class B
- ------ ------
Six Months Six Months
Ended Year Ended Ended Period Ended
June 30, 1994 December 31, June 30, 1994 December 31,
(Unaudited) 1993 1992 1991 1990 1989 (Unaudited) 1993(1)
- ------
Per Share Operating Data:
Net asset value, beginning
of period
$11.12 $10.74 $10.80 $9.86 $10.29 $10.12 $11.11 $11.10
- ------
Income (loss) from investment
operations:
Net investment income .32 .69 .75 .82 .88(3) .92 .28 .40
Net realized and unrealized gain
(loss) on investments (.82) .40 (.05) .90 (.43) .19 (.81) .03
- ------ ------ ------ ------ ------ ------ ------
- ------
Total income (loss) from investment operations
(.50) 1.09 .70 1.72 .45 1.11 (.53) .43
- ------
Dividends from net investment income
(.31) (.71) (.76) (.78) (.88) (.94) (.27) (.42)
- ------
Net asset value, end of period
$10.31 $11.12 $10.74 $10.80 $9.86 $10.29 $10.31 $11.11
- ------ ------ ------ ------ ------ ------ ------
- ------
- ------ ------ ------ ------ ------ ------ ------
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Total Return, at Net Asset Value(4)
(4.52)% 10.30% 6.77% 18.28% 4.74% 11.31% (4.82)% 3.91%
- ------
Ratios/Supplemental Data:
Net assets, end of period
(in thousands)
$100,263 $110,759 $106,290 $90,623 $87,021 $96,380 $2,932 $1,809
- ------
Average net assets (in thousands)
$105,561 $111,702 $98,672 $86,471 $90,065 $100,891 $2,424 $922
- ------
Number of shares outstanding
at end of period (in thousands)
9,728 9,963 9,899 8,390 8,829 9,369 284 163
- ------
Ratios to average net assets:
Net investment income
6.00%(5) 6.20% 7.00% 8.02% 8.85% 8.85% 5.27%(5) 4.80%(5)
Expenses
1.16%(5) 1.06% 1.10% 1.23% 1.24%(3) 1.14% 1.86%(5) 1.90%(5)
- ------
Portfolio turnover rate(6)
38.8% 110.1% 116.4% 97.1% 80.4% 41.3% 38.8% 110.1%
1. For the period from May 1, 1993 (inception of offering) to December 31, 1993.
2. On March 28, 1991, Oppenheimer Management Corporation became the investment
advisor to the Fund.
3. Net investment income would have been $.87 absent the voluntary expense
limitation, resulting in an expense ratio of 1.26%.
4. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in the total returns.
5. Annualized.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the six
months ended June 30, 1994 were $38,796,999 and $44,109,532, respectively.
See accompanying Notes to Financial Statements.
10 Oppenheimer Investment Grade Bond Fund
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Notes to Financial Statements (Unaudited)
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1. Significant Accounting Policies
Oppenheimer Investment Grade Bond Fund (the Fund) is 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 and/or
service plan, expenses directly attributable to a particular class
and exclusive voting rights with respect to matters affecting a single class.
Class B shares will automatically convert to Class A shares six years after the
date of purchase. The following is a summary of significant accounting policies
consistently followed by the Fund.
- ------
Investment Valuation. Portfolio securities are valued at 4:00 p.m. (New York
time) on each trading day. 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 June 30, 1994, 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 day the New York
Stock Exchange is open for business and pay such dividends monthly.
Distributions from net realized gains on investments, if any, will be declared
at least once each year.
- ------
Change in Accounting for Distributions to Shareholders. Effective January 1,
1994, the Fund adopted Statement of Position 93-2: Determination, Disclosure,
and Financial Statement Presentation of Income, Capital Gain, and Return of
Capital Distributions by Investment Companies. As a result, the Fund changed the
classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions determined in
accordance with income tax regulations. Accordingly, subsequent to December 31,
1993, amounts have been reclassified to reflect a decrease in paid-in capital of
$29,803, an increase in undistributed net investment income of $42,134, and an
increase in undistributed capital loss on investments of $12,331.
- ------
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>
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Notes to Financial Statements (Unaudited) (Continued)
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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:
Six Months Ended June 30, 1994 Year Ended December 31, 1993(1)
- ------ ------
Shares Amount Shares Amount
- ------
Class A:
Sold 581,315 $6,249,881 2,953,788 $33,325,053
Dividends reinvested 142,773 1,519,216 259,953 2,897,712
Redeemed (959,863) (10,283,131) (3,149,098) (35,420,566)
- ------ ------ ------ ------
Net increase (decrease) (235,775) $(2,514,034) 64,643 $802,199
- ------ ------ ------ ------
- ------ ------ ------ ------
- ------
Class B:
Sold 176,471 $1,897,996 195,606 $2,198,191
Dividends reinvested 4,449 47,055 2,293 25,726
Redeemed (59,397) (634,154) (35,061) (395,712)
- ------ ------ ------ ------
Net increase 121,523 $1,310,897 162,838 $1,828,205
- ------ ------ ------ ------
- ------ ------ ------ ------
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.
- ------
3. Unrealized Gains and Losses on Investments
At June 30, 1994, net unrealized depreciation on investments of $4,440,256 was
composed of gross appreciation of $991,366, and gross depreciation of
$5,431,622.
- ------
4. Management Fees And Other Transactions With Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for 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 six months ended June 30, 1994, commissions (sales charges paid by
investors) on sales of Class A shares totaled $96,318, of which $46,514 was
retained by Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an affiliated broker/dealer. During the
six months ended June 30, 1994, OFDI received contingent deferred sales charges
of $3,348 upon redemption of Class B shares, as reimbursement for sales
commissions advanced by OFDI at the time of sale of such shares.
Oppenheimer Shareholder Services (OSS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund, and for other registered
investment companies. OSS's total costs of providing such services are allocated
ratably to these companies.
Under separate approved plans, each class may expend up to .25% of its net
assets annually to reimburse OFDI for costs incurred in connection with the
personal service and maintenance of accounts that hold shares of the Fund,
including amounts paid to brokers, dealers, banks and other institutions. In
addition, Class B shares are subject to an asset-based sales charge of .75% of
net assets annually, to reimburse OFDI for sales commissions paid from its own
resources at the time of sale and associated financing costs. In the event of
termination or discontinuance of the Class B plan, the Board of Trustees may
allow the Fund to continue payment of the asset-based sales charge to OFDI for
distribution expenses incurred on Class B shares sold prior to termination or
discontinuance of the plan. During the six months ended June 30, 1994, OFDI paid
$81,165 to an affiliated broker/dealer as reimbursement for Class A personal
service and maintenance expenses and retained $12,718 as reimbursement for Class
B sales commissions and service fee advances, as well as financing costs.
- ------
5. Deferred Trustee Compensation
A former trustee elected to defer receipt of fees 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 June 30,
1994, the Fund was incurring interest at a rate of 5.22% per annum. Deferred
fees are payable in annual installments, with accrued interest, each April 1
through 1995.
12 Oppenheimer Investment Grade Bond Fund
<PAGE>
- ------
Oppenheimer Investment Grade Bond Fund
A Series of Oppenheimer Integrity Funds
- ------
Officers and Trustees James C. Swain, Chairman and Chief Executive Officer
Robert G. Avis, Trustee
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
Robert J. Bishop, Assistant Treasurer
Scott Farrar, 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
Servicing Agent
Oppenheimer Shareholder Services
- ------
Custodian of
Portfolio Securities
The Bank of New York
- ------
Independent Auditors Deloitte & Touche
- ------
Legal Counsel Myer, Swanson & Adams, P.C.
The financial statements included herein have been taken from the records of the
Fund without examination by the independent auditors.
This is a copy of a report to shareholders of Oppenheimer Investment Grade Bond
Fund. This report must be preceded by a Prospectus of Oppenheimer Investment
Grade Bond Fund. For material information concerning the Fund, see the
Prospectus.
13 Oppenheimer Investment Grade Bond Fund
<PAGE>
- ------
The Family of OppenheimerFunds
- ------
OppenheimerFunds offers over 30 funds designed to fit virtually every investment
goal. Whether you're investing for retirement, your children's education, or
tax-free income, we have the funds to help you seek your objective.
When you invest with OppenheimerFunds, you can feel comfortable knowing that
you are investing with a respected financial institution with over 30 years of
experience in helping people just like you reach their financial goals. And
you're investing with a leader in global, growth stock, and flexible fixed
income investments--with over 1.8 million shareholder accounts and more than $26
billion under Oppenheimer's management and that of our affiliates.
As an OppenheimerFunds shareholder, you can easily exchange shares of
eligible funds of the same class by mail or by telephone for a small
administrative fee.1 For more information on OppenheimerFunds, please contact
your financial advisor or call us at 1-800-525-7048 for a prospectus. You may
also write us at the address shown on the back cover. As always, please read the
prospectus carefully before you invest.
- ------
Specialty Stock Fund Gold & Special Minerals Fund
- ------
Stock Funds Discovery Fund Global Fund
Time Fund Oppenheimer Fund
Target Fund Value Stock Fund
Special Fund
- ------
Stock and Bond Funds
Main Street Income & Growth Fund
Total Return Fund
Global Growth & Income Fund
Equity Income Fund
Asset Allocation Fund
- ------
Bond Funds
High Yield Fund
Champion High Yield Fund
Strategic Income & Growth Fund
Strategic Income Fund
Strategic Diversified Income Fund
Strategic Investment Grade Bond Fund
Strategic Short-Term Income Fund
Investment Grade Bond Fund
Mortgage Income Fund
U.S. Government Trust
Limited-Term Government2
- ------
Tax-Exempt Funds
New York Tax-Exempt Fund3
California Tax-Exempt Fund3
Pennsylvania Tax-Exempt Fund3
Florida Tax-Exempt Fund3
New Jersey Tax-Exempt Fund3
Tax-Free Bond Fund
Insured Tax-Exempt Bond Fund
Intermediate Tax-Exempt Bond Fund
- ------
Money Market Funds Money Market Fund Cash Reserves
1. The fee is waived for PhoneLink exchanges between existing accounts. Exchange
privileges are subject to change or termination.
2. Formerly Government Securities Fund.
3. Available only to residents of those states.
OppenheimerFunds are distributed by Oppenheimer Funds Distributor, Inc., Two
World Trade Center, New York, NY 10048-0203.
(C) Copyright 1994 Oppenheimer Management Corporation. All rights reserved.
14 Oppenheimer Investment Grade Bond Fund
<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.
TELEPHONE TRANSACTIONS
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.
OPPENHEIMERFUNDS
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 mutual 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 and get the help you need.
"When you want to make account transactions, it's 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 a 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 the hours shown to the left.
"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 awarded Oppenheimer Shareholder Services a 1993 Award of Excellence
for consistently demonstrating superior customer service.
"Whatever your needs, we're ready to assist you."
[Logo]
1993
AWARD OF EXCELLENCE
ICSA
International Customer Service Association
[Photo]
Barbara Hennigar
Chief Executive Officer
Oppenheimer Shareholder Services
[Logo] OPPENHEIMER FUNDS
Oppenheimer Funds Distributor, Inc.
P.O. Box 5270
Denver, CO 80217-5270
Bulk Rate
U.S. Postage
PAID
Permit No. 314
Farmingdale, NY
