<PAGE> 1
ANNUAL REPORT DECEMBER 31, 1997
OPPENHEIMER
BOND FUND
[PHOTO]
[OPPENHEIMERFUNDS LOGO]
THE RIGHT TO INVEST
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<PAGE> 3
CONTENTS
3 President's Letter
4 Fund Performance
6 An Interview with the Fund's Managers
10 Statement of Investments
24 Statement of Assets & Liabilities
26 Statement of Operations
27 Statements of Changes in Net Assets
28 Financial Highlights
30 Notes to Financial Statements
40 Independent Auditors' Report
41 Federal Income Tax Information
42 Officers & Trustees
44 Information & Services
REPORT HIGHLIGHTS
- - BOND PRICES RALLIED IN 1997 in response to low inflation and declining
interest rates.
- - U.S. GOVERNMENT SECURITIES AND CORPORATE BONDS, two of the best performing
bond market sectors, comprised about 90% of the portfolio.
- - IF U.S. ECONOMIC GROWTH SLOWS
in 1998, we believe bonds should continue to do well.
AVG ANNUAL TOTAL RETURNS
For the 1-year period ended
12/31/97 (without sales charges)(1)
CLASS A
10.13%
Class B
9.41%
Class C
9.39%
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
IN REVIEWING PERFORMANCE AND RANKINGS, PLEASE REMEMBER THAT PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST.
1. Includes changes in net asset value per share without deducting any sales
charges. Such performance would have been lower if sales charges were taken into
account.
2 Oppenheimer Bond Fund
<PAGE> 4
[PHOTO]
JAMES C. SWAIN
Chairman
Oppenheimer
Bond Fund
[PHOTO]
BRIDGET A. MACASKILL
President
Oppenheimer
Bond Fund
Dear SHAREHOLDER,
- -------------------------------------------------------------------------------
These have been very positive times for many American investors. The U.S.
economy has continued to grow at a moderate pace, unemployment has fallen to its
lowest level in 30 years and inflation has also fallen to a record low. In fact,
long-term interest rates have fallen to their lowest level since the government
began issuing 30-year Treasury bonds in 1977.
What benefits does this provide to the average American? First, when
unemployment levels are low, many individuals tend to feel a greater sense of
job security and can command higher wages because there are fewer unemployed
workers vying for their jobs. Second, many homeowners are opting to refinance
their existing home mortgage loans and take advantage of lower financing rates.
And third, because wages are increasing faster than the rate of inflation, a
paycheck may stretch further and investors, as consumers, are able to enjoy a
higher level of disposable income. This extra income can be put to use in many
ways, including allocating more money to investment opportunities.
Some industry analysts have tempered such positive news by suggesting
that if the rate of inflation falls any lower, it might actually trigger a
period of deflation, where we see the prices of American goods and services
decline. While lower prices may sound like positive news, in reality it isn't:
When prices fall too low, it erodes the value of those goods to the producer.
That is, when economic conditions force a decrease in the price of goods,
companies have to sell more of those items in order to make the same amount of
profit, which translates into greater difficulties for corporations to improve
their bottom lines.
At OppenheimerFunds, we do not believe we will see a period of
deflation in the United States. The fundamental factors that have driven the
U.S. market still appear to be in place: an economy that's in its eighth year of
expansion with moderate growth, low unemployment, virtually no inflation and low
interest rates. However, because of economic uncertainties in other parts of the
world, particularly Asia, we expect to see slower growth for stocks in 1998 and
a year in which double-digit returns from the equity markets are unlikely. It's
also possible that we may continue to see investors favor the fixed, more secure
interest payments offered from the bond markets.
In closing, we'd like to reassure you that as professional money
managers, we continue to keep a watchful eye on these situations and are closely
monitoring your fund's investments. In times like these, your financial advisor
can be of invaluable assistance to you in helping review your financial plan and
guide your investments accordingly.
Thank you for your confidence in OppenheimerFunds, The Right Way to
Invest. We look forward to helping you reach your investment goals in the
future.
/s/ JAMES C. SWAIN /s/ BRIDGET A. MACASKILL
James C. Swain Bridget A. Macaskill
January 23, 1998
3 Oppenheimer Bond Fund
<PAGE> 5
AVG ANNUAL TOTAL RETURNS
For the Period Ended 12/31/97(1)
CLASS A
<TABLE>
<CAPTION>
Since
1 year 5 year Inception
<S> <C> <C> <C>
4.90% 6.40% 7.93%
</TABLE>
CLASS B
<TABLE>
<CAPTION>
Since
1 year 5 year Inception
<S> <C> <C> <C>
4.41% N/A 5.61%
</TABLE>
CLASS C
<TABLE>
<CAPTION>
Since
1 year 5 year Inception
<S> <C> <C> <C>
8.39% N/A 6.94%
</TABLE>
CUMULATIVE TOTAL RETURN
For the Period Ended 12/31/97(1)
CLASS A
5 year
36.40% $13,640(3)
PERFORMANCE UPDATE
- --------------------------------------------------------------------------------
Oppenheimer Bond Fund performed well over the past twelve months. In fact, the
Fund's Class A shares were in the first quartile, ranking 16 out of 137
Corporate Debt A Rated funds ranked by Lipper Analytical Services for the
one-year period ended 12/31/97.(2)
GROWTH OF $10,000
Over five years
(without sales charges)
<TABLE>
<CAPTION>
Oppenheimer
Bond Fund Lehman Aggregate
Class A shares Bond Index(3)
-------------- ----------------
<S> <C>
10000 10000
10487 10413.9
10759.7 10690.5
11091.5 10969.1
11030.4 10975.1
10681.6 10659.7
10531.6 10550.1
10579.7 10614.6
10603.8 10654.8
11129.4 11192.2
11824.1 11874.1
11933.9 12107.7
12399.6 12623.4
12235.6 12398.2
12296.2 12469
12572.9 12698.5
13002.9 13079.6
12984.1 13006.6
13483.6 13484.2
13965 13932.2
14319.9 14342.4
</TABLE>
1. Total returns include changes in share price and reinvestment of dividends
and capital gains distributions in a hypothetical investment for the periods
shown. Class A returns include the current maximum initial sales charge of
4.75%. Class A shares were first publicly offered on 4/15/88. The Fund's maximum
sales charge for Class A shares was lower prior to 3/29/91, so actual
performance may have been higher. Class B returns include the applicable
contingent deferred sales charge of 5% (1-year) and 2% (since inception on
5/1/93). Class C returns for the one-year result include the contingent deferred
sales charge of 1%. Class C shares have an inception date of 7/11/95. An
explanation of the different performance calculations is in the Fund's
prospectus.
Class B and C shares are subject to an annual 0.75% asset-based sales charge.
2. Source: Lipper Analytical Services, Inc., 12/31/97. Based on the comparisons
between changes in net asset value without considering sales charges, with
dividends and capital gains distributions of the Fund's Class A shares
reinvested. The Fund's Class A shares were ranked 16 of 137 (1-year), 25 of 59
(5-year) and 24 of 35 (10-year) among Corporate Debt A Rated funds for the
period ended 12/31/97.
4 Oppenheimer Bond Fund
<PAGE> 6
CREDIT ALLOCATION(5)
Treasury/Agency 42.6%
AAA/AA 5.4
A/BBB 29.7
BB/B 16.7
CCC/C 0.1
Other 5.5
Portfolio REVIEW
Oppenheimer Bond Fund is for investors looking for solid income potential from a
fund emphasizing quality securities.
WHAT WE LOOK FOR
- - Sectors of the market that offer RELATIVE VALUE.
- - Primarily INVESTMENT-GRADE SECURITIES that help reduce credit risk.(4)
- - High income potential from different types of GOVERNMENT AND CORPORATE
securities.
CORPORATE BONDS & NOTES--TOP 10 INDUSTRIES
(Percentage of net assets)(4)
<TABLE>
<S> <C> <C> <C>
Diversified Financial 7.3% Capital Goods 2.1%
Energy Services & Producers 5.4 Insurance 1.7
Automotive 2.7 Hotel/Gaming 1.6
Information Technology 2.7 Banks & Thrifts 1.4
Aerospace 2.3 Chemicals 1.4
</TABLE>
3. Results of a hypothetical $10,000 investment in Class A shares on December
31, 1992. The Lehman Aggregate Bond Index includes a broad range of U.S.
government and corporate bonds. It is an unmanaged index including reinvestment
of income, and cannot be purchased directly by investors.
4. Portfolio data is as of December 31, 1997 and is based on net assets and is
subject to change.
5. Pie chart is based on total market value of investments as of December 31,
1997 and is subject to change. Average credit quality and ratings allocations
include rated securities and those not rated by a national rating organization
(currently 6.6% of total assets) but to 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.
Under normal market conditions, the Fund invests at least 65% of its assets in
investment-grade securities. Securities rated below investment-grade (up to 35%
of Fund assets) carry a greater risk of default. While the Fund has generally
invested under 10% of its assets in foreign securities, which are subject to
exchange rate and political uncertainties, it is not restricted to any amount by
prospectus.
5 Oppenheimer Bond Fund
<PAGE> 7
"We created a portfolio that was more sensitive to DECLINING INTEREST RATES."
AN INTERVIEW WITH YOUR FUND'S MANAGERS
- --------------------------------------------------------------------------------
HOW HAS THE FUND PERFORMED DURING THE 12-MONTH PERIOD ENDED DECEMBER 31, 1997?
Oppenheimer Bond Fund's Class A shares provided an average annual total return
of 10.13% for the one-year period ended December 31, 1997.(1) These results
reflect changes in share price, plus reinvested income distributions, but are
calculated before sales charges are considered. Class A shares of the Fund also
performed well relative to our peers, ranking 16 of 137 funds in the Corporate
Debt category, as measured by Lipper Analytical Services.(2)
HOW DID THE U.S. BOND MARKET RESPOND TO 1997'S ECONOMY?
Early in the year, fixed-income investors became concerned that the economy was
growing too rapidly, and they feared that the rate of inflation would
accelerate. The Federal Reserve raised a key short-term interest rate in late
March in an attempt to forestall this resurgence of inflation. As a result, bond
prices fell.
Toward mid-year, however, it became apparent that inflation would
probably remain low because of improvements in productivity and the need for
prices of goods to remain competitive with overseas companies. As investors
became more comfortable investing in bonds, interest rates declined steadily
during the second half of 1997. Because interest rates and bond prices move in
opposite directions, the result was attractive total rates of return for most
bonds during 1997.
1. Includes changes in net asset value per share without deducting any sales
charges. Such performance would have been lower if sales charges were taken into
account.
2. Source: Lipper Analytical Services, Inc., 12/31/97. Based on the comparisons
between changes in net asset value without considering sales charges, with
dividends and capital gains distributions of the Fund's Class A shares
reinvested. The Fund's Class A shares were ranked 16 of 137 (1-year), 25 of 59
(5-year) and 24 of 35 (10-year) among Corporate Debt A Rated funds for the
period ended 12/31/97.
6 Oppenheimer Bond Fund
<PAGE> 8
[PHOTO]
PORTFOLIO MANAGEMENT TEAM (L TO R)
Leslie Falconio
David Negri (Fund Manager)
Gina Palmieri
Len Darling
HOW WAS THE FUND MANAGED IN THAT ENVIRONMENT?
As our view of the interest-rate environment became more positive, we increased
the Fund's average duration, a measure of the portfolio's sensitivity to changes
in interest rates. By increasing the average duration from about 4.8 years early
in the year to a high of 5.3 years, we created a portfolio that was more
sensitive to declining interest rates, which helped produce higher rates of
capital appreciation.
DID THE MIX OF BONDS FROM DIFFERENT MARKET SECTORS CHANGE DURING THE PERIOD?
Our allocation of assets among the various types of bonds did not change
significantly. Throughout the year, we have kept about 50% of the Fund's assets
in U.S. government securities, including U.S. Treasuries and mortgage-backed
securities issued and backed by federal agencies. Another 45% of the portfolio
was invested in corporate bonds, which performed particularly well. Our
corporate bond position was split evenly between high-yield bonds and
investment-grade corporate securities. In addition, about 3% of the portfolio
was invested in bonds issued by governments and corporations overseas.(3)
3. The Fund invests in below-investment-grade securities, which may entail
greater credit risks, as described in the prospectus. The Fund invests in
foreign securities which entails special risks, such as currency fluctuations,
described in the prospectus.
7 Oppenheimer Bond Fund
<PAGE> 9
"Commercial mortgage bonds offered ATTRACTIVELY HIGH YIELDS compared to other
bonds..."
AN INTERVIEW WITH YOUR FUND'S MANAGERS
- -------------------------------------------------------------------------------
WHERE DID YOU FIND THE BEST OPPORTUNITIES IN THE CORPORATE BOND MARKET SECTOR?
Our positions in investment-grade corporate bonds were primarily in the cable
television, media and commercial banking industries. In the high-yield area,
we've emphasized telecommunications companies, including wireless
communications, cable television and financial services. These industries are in
the midst of deregulation, which we believe will be good for their businesses.
On the other hand, we've de-emphasized companies in the metals, paper and retail
industries because, at this late stage of the economic cycle, we don't want
exposure to companies that are too sensitive to changes in the economy.
At the end of the period, about 19% of our corporate bond position
was allocated to commercial private mortgage securities, which represent pools
of mortgages on hotels, shopping malls, apartment buildings and other
enterprises. Commercial mortgage bonds offered attractively high yields compared
to other bonds, as well as the relative safety of secured underlying assets.
DID THE PROBLEMS IN SOUTHEAST ASIA AFFECT THE FUND'S INVESTMENTS?
The impact has been very slight, because the Fund had virtually no exposure to
Southeast Asia. However, we do have some positions in bonds issued in New
Zealand and Australia. While the bond markets there have recently performed very
well, the ripple effect from the Asian economic crisis caused a devaluation of
their currencies relative to the U.S. dollar, which offset the returns from the
bond market rallies in those countries for U.S. investors.
8 Oppenheimer Bond Fund
<PAGE> 10
"...as well as the RELATIVE SAFETY of secured underlying assets."
WHAT IS YOUR OUTLOOK FOR THE FORESEEABLE FUTURE?
We are optimistic about prospects for the U.S. bond market during 1998. Perhaps
most important, we believe economic conditions should remain favorable. We
expect economic growth to slow from current levels, in large part in response to
declining demand for U.S. products overseas. We believe the rate of inflation
should remain at its current low levels as growth moderates. The federal
government's progress toward a balanced budget should contribute to less
issuance of U.S. Treasury securities. Yet, demand for these bonds should remain
high as economic problems overseas cause investors to seek the safety of bonds
issued by the most creditworthy government in the world. We expect these factors
and others to cause long-term interest rates to decline modestly from current
levels.
We intend to maintain the Fund's current strategic orientation. We
intend to keep the portfolio's average duration relatively long to hold higher
yielding securities for as long as possible while interest rates fall. What's
more, we plan to continue to allocate assets among those sectors of the bond
market that we believe will provide the best yields relative to risk. We believe
this strategy should help the Fund to provide a competitive level of income and
the opportunity for attractive total returns for its shareholders.
9 Oppenheimer Bond Fund
<PAGE> 11
STATEMENT OF INVESTMENTS December 31, 1997
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE (1)
================================================================================================================================
<S> <C> <C>
MORTGAGE-BACKED OBLIGATIONS--55.6%
- --------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY--36.7%
- --------------------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED--26.7%
Federal Home Loan Mortgage Corp.:
Certificates of Participation:
9%, 3/1/17 $ 445,202 $ 476,977
Series 17-039, 13.50%, 11/1/10 48,485 57,732
Series 17-094, 12.50%, 4/1/14 27,295 31,974
Collateralized Mtg. Obligations, Gtd. Multiclass Mtg. Participation
Certificates:
Series 1343, Cl. LA, 8%, 8/15/22 1,600,000 1,751,426
Series 151, Cl. F, 9%, 5/15/21 1,000,000 1,085,287
Series 1712, Cl. B, 6%, 3/15/09 1,000,000 975,000
Series 1714, Cl. M, 7%, 8/15/23 1,000,000 1,005,000
Gtd. Multiclass Mtg. Participation Certificates:
Series 1460, Cl. H, 7%, 5/15/07 1,500,000 1,538,430
Series G056, Cl. H, 9%, 7/20/24 2,493,000 2,717,370
Gtd. Real Estate Mtg. Investment Conduit Pass-Through
Certificates, Series 1914, Cl. G, 6.50%, 2/15/24 3,000,000 2,951,250
Interest-Only Stripped Mtg.-Backed Security,
Series 177, Cl. B, 9.335%-10.914%, 7/1/26(2) 16,225,514 4,743,428
Principal-Only Stripped Mtg.-Backed Security,
Series 1690, Cl. B, 3.748%, 11/15/23(3) 1,892,161 1,052,515
- --------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
11%, 7/1/16 4,322,515 4,926,317
7%, 1/1/09-11/1/25 956,476 972,909
7%, 1/1/13-1/25/28(4) 22,060,000 22,240,811
7.50%, 2/1/08-3/1/08 621,862 639,256
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates, Trust 1992-34, Cl. G, 8%, 3/25/22 540,000 584,717
Gtd. Mtg. Pass-Through Certificates, 8%, 8/1/17 484,158 498,369
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates:
Trust 1991-170, Cl. E, 8%, 12/25/06 2,500,000 2,616,991
Trust 1992-162, Cl. C, 7%, 10/25/21 8,400,000 8,486,604
Trust 1995-4, Cl. PC, 8%, 5/25/25 869,210 952,053
Trust 1997-25, Cl. B, 7%, 12/18/22 510,000 516,345
Trust 1997-27, Cl. J, 7.50%, 4/18/27 844,594 898,896
Interest-Only Stripped Mtg.-Backed Security, Trust 249, Cl. 2, 9.958%,
10/25/23(2) 11,029,757 3,367,523
Principal-Only Stripped Mtg.-Backed Security,
Trust 277-C1, 8.142%, 4/1/27(3) 1,508,371 1,180,301
-----------
66,267,481
</TABLE>
10 Oppenheimer Bond Fund
<PAGE> 12
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE (1)
- --------------------------------------------------------------------------------------------------------------------------------
GNMA/GUARANTEED--10.0%
Government National Mortgage Assn.:
<S> <C> <C>
7%, 1/1/28(4) $ 9,950,000 $10,021,540
10%, 11/15/09 244,986 271,774
10.50%, 12/15/17-5/15/21 249,447 280,187
11%, 10/20/19 928,361 1,064,710
12%, 1/15/99-5/15/14 9,380 9,701
13%, 12/15/14 27,374 32,789
6%, 7/20/27 248,188 251,718
7%, 1/1/28(4) 2,200,000 2,217,886
7%, 7/15/09-7/20/25 1,617,774 1,657,314
7.50%, 12/1/27(4) 6,900,000 7,068,222
8%, 6/15/05-10/15/06 1,413,602 1,468,716
9%, 2/15/09-6/15/09 422,630 456,835
-----------
24,801,392
- --------------------------------------------------------------------------------------------------------------------------------
PRIVATE--18.9%
- --------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL--15.3%
Amresco Commercial Mortgage Funding I Corp., Multiclass Mtg.
Pass-Through Certificates, Series 1997-C1, Cl. E, 7%, 6/17/29(5) 150,000 138,656
- --------------------------------------------------------------------------------------------------------------------------------
Asset Securitization Corp.:
Commercial Mtg. Pass-Through Certificates:
Series 1996-D3, Cl. A5, 8.33%, 10/13/26(5)(6) 800,000 859,250
Series 1996-MD6, Cl. A5, 6.957%, 11/13/26(6) 2,000,000 2,080,000
Series 1997-D4, Cl. B1, 7.525%, 4/14/29(6) 333,000 329,878
Series 1997-D4, Cl. B2, 7.525%, 4/14/29(6) 333,000 321,709
Series 1997-D4, Cl. B3, 7.525%, 4/14/29(6) 334,000 309,524
Series 1997-D5, Cl. A6, 7.184%, 2/14/41 1,500,000 1,503,750
Series 1997-D5, Cl. B1, 6.93%, 2/14/41 2,000,000 1,826,562
Series 1997-MD7, Cl. A6, 8.11%, 1/13/30(6) 200,000 211,219
Interest-Only Stripped Mtg.-Backed Security,
Series 1997-D5, Cl. PS1, 1.367%, 2/14/41(2) 6,250,000 678,711
- --------------------------------------------------------------------------------------------------------------------------------
Capital Lease Funding Securitization LP, Interest-Only Corporate-Backed
Pass-Through Certificates, Series 1997-CTL1, 9.55%, 6/22/24(2)(5) 13,750,315 657,265
- --------------------------------------------------------------------------------------------------------------------------------
CBA Mortgage Corp., Mtg. Pass-Through Certificates,
Series 1993-C1, Cl. E, 7.76%, 12/25/03(6) 250,000 252,675
- --------------------------------------------------------------------------------------------------------------------------------
CMC Securities Corp. I, Collateralized Mtg. Obligation,
Series 1993-D, Cl. D-3, 10%, 7/25/23(5) 536,614 565,753
- --------------------------------------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., Interest-Only Stripped
Mtg.-Backed Security, Series 1996-C1, Cl. X-2, 0.981%, 12/25/20(2)(5) 18,624,900 529,646
- --------------------------------------------------------------------------------------------------------------------------------
FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit Pass-Through
Certificates, Series 1994-C1:
Cl. 2-D, 8.70%, 9/25/25(5) 1,000,000 1,037,500
Cl. 2-E, 8.70%, 9/25/25(5) 1,000,000 1,038,700
- --------------------------------------------------------------------------------------------------------------------------------
First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through
Certificates, Series 1997-CHL1:
8.116%, 2/25/11(5)(6) 750,000 638,475
8.116%, 5/25/08(5)(6) 750,000 760,725
</TABLE>
11 Oppenheimer Bond Fund
<PAGE> 13
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL (CONTINUED)
<S> <C> <C>
General Motors Acceptance Corp., Collateralized Mtg. Obligations:
Series 1995-C2, Cl. D, 7.192%, 1/15/08 $1,500,000 $ 1,503,750
Series 1997-C2, Cl. F, 6.75%, 4/16/29 1,000,000 857,187
- --------------------------------------------------------------------------------------------------------------------------------
GS Mortgage Securities Corp. II, Commercial Mtg. Pass-Through
Certificates, Series 1997-CL1, Cl. F:
7.353%, 7/13/30 1,000,000 1,018,125
7.823%, 7/13/30 1,000,000 1,035,937
- --------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc., Mtg. Pass-Through Certificates:
Series 1996-C1, Cl. D, 7.42%, 4/25/28 1,500,000 1,529,648
Series 1997-C2, Cl. D, 7.075%, 12/10/29 1,000,000 997,188
- --------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through
Certificates:
Series 1996-C1:
Cl. D-1, 7.51%, 2/15/28(5)(6) 1,000,000 1,016,563
Cl. E, 7.51%, 2/15/28(5)(6) 1,100,000 1,051,359
Series 1997-HF1, Cl. F, 6.86%, 2/15/10(5) 225,000 205,031
- --------------------------------------------------------------------------------------------------------------------------------
NationsCommercial Corp., NB Commercial Mtg. Pass-Through
Certificates, Series-DMC, Cl. B, 8.562%, 8/12/11(5) 3,000,000 3,181,875
- --------------------------------------------------------------------------------------------------------------------------------
Potomac Gurnee Financial Corp., Commercial Mtg. Pass-Through
Certificates, Series 1, Cl. D, 7.683%, 12/21/26(5) 1,500,000 1,547,400
- --------------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1993-C1, Cl. B, 8.75%, 5/25/24 322,008 321,127
Series 1994-C1, Cl. C, 8%, 6/25/26 1,500,000 1,530,900
Series 1995-C1, Cl. D, 6.90%, 2/25/27 2,500,000 2,489,266
- --------------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VII, Series 1996-C1, Cl. E,
9.187%, 1/20/06 700,000 736,094
- --------------------------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp.:
Commercial Mtg. Pass-Through Certificates,
Series 1997-LLI, Cl. D, 7.15%, 4/12/12 2,500,000 2,538,281
Multiclass Pass-Through Certificates, Series 1996-C3, Cl. D, 8%, 6/25/30(5) 2,500,000 2,531,641
------------
37,831,370
- --------------------------------------------------------------------------------------------------------------------------------
MANUFACTURED HOUSING--0.1%
Green Tree Financial Corp., Series 1994-6, Cl. A3, 7.70%, 1/15/20 151,555 152,123
- --------------------------------------------------------------------------------------------------------------------------------
MULTI-FAMILY--1.1%
Mortgage Capital Funding, Inc.:
Commercial Mtg. Pass-Through Certificates,
Series 1997-MC1, Cl. F, 7.452%, 5/20/07(5) 254,890 242,783
Multifamily Mtg. Pass-Through Certificates, Series 1996-MC1,
Cl. G, 7.15%, 6/15/06(7) 2,250,000 2,138,203
- --------------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates,
Series 1991-M5, Cl. A, 9%, 3/25/17 391,747 396,419
------------
2,777,405
</TABLE>
12 Oppenheimer Bond Fund
<PAGE> 14
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE (1)
- --------------------------------------------------------------------------------------------------------------------------------
OTHER--0.7%
<S> <C> <C>
GE Capital Mortgage Services, Inc., Series 1994-14, Cl. A1,
6.50%, 4/25/24 $ 47,944 $ 47,780
- --------------------------------------------------------------------------------------------------------------------------------
JHM Mtg. Acceptance Corp., Collateralized Mtg. Obligation Bonds,
Series E, Cl. 5, 8.96%, 4/1/19 1,548,082 1,619,682
- --------------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VI:
Interest-Only Stripped Mtg.-Backed Security,
Series 1987-3, Cl. B, 12.50%, 10/23/17(2) 105,837 30,180
Principal-Only Stripped Mtg.-Backed Security,
Series 1987-3, Cl. A, 10/23/17(3) 154,135 131,255
------------
1,828,897
- --------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL--1.7%
CS First Boston Mortgage Securities Corp., Mtg. Pass-Through
Certificates, Series 1997-C1:
Cl. E, 7.50%, 3/1/11(5) 1,000,000 1,035,300
Cl. F, 7.50%, 6/20/13(5) 150,000 145,500
Cl. G, 7.50%, 6/20/14(5) 150,000 138,705
Cl. H, 7.50%, 8/20/14(5) 105,000 82,908
- --------------------------------------------------------------------------------------------------------------------------------
NationsBank Trust, Lease Pass-Through Certificates,
Series 1997A-1, 7.442%, 1/10/11(6) 500,000 520,938
- --------------------------------------------------------------------------------------------------------------------------------
Residential Funding Corp., Mtg. Pass-Through Certificates,
Series 1993-S10, Cl. A9, 8.50%, 2/25/23 490,776 507,340
- --------------------------------------------------------------------------------------------------------------------------------
Ryland Mortgage Securities Corp. III, Sub. Bonds,
Series 1992-A, Cl. 1A, 8.268%, 3/29/30(6) 343,559 349,357
- --------------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VII, Series 1996-B, Cl. 1,
7.136%, 4/25/26 1,965,016 1,387,793
------------
4,167,841
------------
Total Mortgage-Backed Obligations (Cost $135,028,453) 137,826,509
================================================================================================================================
U.S. GOVERNMENT OBLIGATIONS--12.5%
- --------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
10.375%, 11/15/09 5,500,000 6,876,721
11.625%, 11/15/04 2,375,000 3,151,331
12.75%, 11/15/10 1,000,000 1,427,501
8.875%, 8/15/17(8) 6,000,000 7,963,128
STRIPS, 6.374%, 2/15/07(9) 725,000 427,004
STRIPS, 6.52%, 8/15/22(9) 2,000,000 456,670
- --------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
6%, 8/15/00 1,000,000 1,007,501
6.125%, 8/15/07 6,000,000 6,168,756
7.50%, 10/31/99 3,430,000 3,537,191
------------
Total U.S. Government Obligations (Cost $29,886,433) 31,015,803
</TABLE>
13 Oppenheimer Bond Fund
<PAGE> 15
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE (1)
================================================================================================================================
CORPORATE BONDS AND NOTES--43.4%
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BASIC INDUSTRY--2.0%
- --------------------------------------------------------------------------------------------------------------------------------
CHEMICALS--1.4%
FMC Corp., 8.75% Sr. Nts., 4/1/99 $ 250,000 $ 257,366
- --------------------------------------------------------------------------------------------------------------------------------
Harris Chemical North America, Inc., 10.75% Gtd. Sr. Sub.
Nts., 10/15/03 100,000 107,250
- --------------------------------------------------------------------------------------------------------------------------------
Laroche Industries, Inc., 9.50% Sr. Sub. Nts., 9/15/07(7) 150,000 148,500
- --------------------------------------------------------------------------------------------------------------------------------
NL Industries, Inc., 11.75% Sr. Sec. Nts., 10/15/03 492,000 547,350
- --------------------------------------------------------------------------------------------------------------------------------
Pioneer Americas Acquisition Corp., 9.25% Sr. Nts., 6/15/07 200,000 202,500
- --------------------------------------------------------------------------------------------------------------------------------
Quantum Chemical Corp., 10.375% First Mtg. Nts., 6/1/03 900,000 944,395
- --------------------------------------------------------------------------------------------------------------------------------
Rohm & Haas Co., 9.50% Debs., 4/1/21 500,000 572,630
- --------------------------------------------------------------------------------------------------------------------------------
Sovereign Specialty Chemicals, Inc., 9.50% Sr. Sub. Nts., 8/1/07(7) 175,000 180,250
- --------------------------------------------------------------------------------------------------------------------------------
Sterling Chemicals, Inc., 11.75% Sr. Unsec. Sub. Nts., 8/15/06 470,000 481,750
-----------
3,441,991
- --------------------------------------------------------------------------------------------------------------------------------
CONTAINERS--0.1%
U.S. Can Corp., 10.125% Sr. Sub. Nts., Series B, 10/15/06 250,000 266,250
- --------------------------------------------------------------------------------------------------------------------------------
PAPER--0.3%
Repap New Brunswick, Inc., 9.063% First Priority Sr. Sec.
Nts., 7/15/00(6) 100,000 99,000
- --------------------------------------------------------------------------------------------------------------------------------
Riverwood International Corp., 10.625% Sr. Unsec. Nts., 8/1/07 200,000 204,000
- --------------------------------------------------------------------------------------------------------------------------------
Scotia Pacific Holding Co., 7.95% Timber Collateralized
Nts., 7/20/15 415,538 431,251
-----------
734,251
- --------------------------------------------------------------------------------------------------------------------------------
STEEL--0.2%
AK Steel Corp., 9.125% Sr. Nts., 12/15/06 350,000 360,500
- --------------------------------------------------------------------------------------------------------------------------------
Keystone Consolidated Industries, Inc., 9.625% Sr. Nts., 8/1/07(7) 200,000 201,750
-----------
562,250
- --------------------------------------------------------------------------------------------------------------------------------
CONSUMER RELATED--4.4%
- --------------------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS--0.4%
Icon Health & Fitness, Inc., 13% Sr. Sub. Nts., Series B, 7/15/02 400,000 449,000
- --------------------------------------------------------------------------------------------------------------------------------
TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(5) 370,000 445,850
-----------
894,850
- --------------------------------------------------------------------------------------------------------------------------------
FOOD/BEVERAGES/TOBACCO--0.9%
B.A.T. Capital Corp., 6.66% Medium-Term Nts., 3/22/00(7) 250,000 251,975
- --------------------------------------------------------------------------------------------------------------------------------
Coca-Cola Enterprises, Inc., 6.95% Debs., 11/15/26 2,000,000 2,030,054
-----------
2,282,029
</TABLE>
14 Oppenheimer Bond Fund
<PAGE> 16
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE (1)
- --------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE--0.5%
<S> <C> <C>
HEALTHSOUTH Corp., 9.50% Sr. Sub. Nts., 4/1/01 $ 500,000 $ 525,000
- --------------------------------------------------------------------------------------------------------------------------------
Imcera Group, Inc., 6% Nts., 10/15/03 500,000 492,542
- --------------------------------------------------------------------------------------------------------------------------------
Integrated Health Services, Inc., 9.50% Sr. Sub. Nts., 9/15/07(7) 30,000 30,900
- --------------------------------------------------------------------------------------------------------------------------------
Sun Healthcare Group, Inc., 9.50% Sr. Sub. Nts., 7/1/07(7) 220,000 226,600
-----------
1,275,042
- --------------------------------------------------------------------------------------------------------------------------------
HOTEL/GAMING---1.6%
Capstar Hotel Co., 8.75% Sr. Sub. Nts., 8/15/07 150,000 155,250
- --------------------------------------------------------------------------------------------------------------------------------
Casino Magic of Louisiana Corp., 13% First Mtg. Nts., Series B, 8/15/03 300,000 289,500
- --------------------------------------------------------------------------------------------------------------------------------
Grand Casinos, Inc., 10.125% Gtd. First Mtg. Nts., 12/1/03 300,000 324,000
- --------------------------------------------------------------------------------------------------------------------------------
Hilton Hotels Corp., 7.95% Sr. Nts., 4/15/07 1,000,000 1,076,652
- --------------------------------------------------------------------------------------------------------------------------------
HMC Acquisition Properties, Inc., 9% Sr. Nts., Series B, 12/15/07 800,000 834,000
- --------------------------------------------------------------------------------------------------------------------------------
HMH Properties, Inc., 8.875% Sr. Nts., 7/15/07 500,000 528,750
- --------------------------------------------------------------------------------------------------------------------------------
Horseshoe Gaming LLC, 9.375% Sr. Sub. Nts., 6/15/07 100,000 105,250
- --------------------------------------------------------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority (Connecticut),
13.50% Sr. Sec. Nts., Series B, 11/15/02 310,000 398,350
- --------------------------------------------------------------------------------------------------------------------------------
Rio Hotel & Casino, Inc., 10.625% Sr. Sub. Nts., 7/15/05 100,000 108,500
- --------------------------------------------------------------------------------------------------------------------------------
Signature Resorts, Inc., 9.75% Sr. Sub. Nts., 10/1/07(7) 150,000 150,750
-----------
3,971,002
- --------------------------------------------------------------------------------------------------------------------------------
RESTAURANTS--0.7%
Ameriking, Inc., 10.75% Sr. Nts., 12/1/06 160,000 168,800
- --------------------------------------------------------------------------------------------------------------------------------
Foodmaker, Inc.:
9.25% Sr. Nts., 3/1/99 689,000 704,502
9.75% Sr. Sub. Nts., 6/1/02 750,000 774,375
-----------
1,647,677
- --------------------------------------------------------------------------------------------------------------------------------
TEXTILE/APPAREL--0.3%
Dan River, Inc., 10.125% Sr. Sub. Nts., 12/15/03 100,000 107,375
- --------------------------------------------------------------------------------------------------------------------------------
Fruit of the Loom, Inc., 7% Debs., 3/15/11 500,000 492,877
- --------------------------------------------------------------------------------------------------------------------------------
William Carter Co., 10.375% Sr. Sub. Nts., Series A, 12/1/06 200,000 211,000
-----------
811,252
- --------------------------------------------------------------------------------------------------------------------------------
ENERGY--5.4%
- --------------------------------------------------------------------------------------------------------------------------------
Belden & Blake Corp., 9.875% Sr. Sub. Nts., 6/15/07 400,000 406,000
- --------------------------------------------------------------------------------------------------------------------------------
Chesapeake Energy Corp., 12% Gtd. Sr. Exchangeable Nts., 3/1/01 675,000 710,437
- --------------------------------------------------------------------------------------------------------------------------------
Clark R&M, Inc., 8.375% Sr. Nts., 11/15/07(7) 200,000 201,750
- --------------------------------------------------------------------------------------------------------------------------------
Cliffs Drilling Co., 10.25% Sr. Nts., 5/15/03 50,000 54,687
- --------------------------------------------------------------------------------------------------------------------------------
Coastal Corp., 8.75% Sr. Nts., 5/15/99 325,000 335,998
- --------------------------------------------------------------------------------------------------------------------------------
Eastern Energy Ltd., 6.75% Sr. Nts., 12/1/06(7) 2,000,000 2,013,104
- --------------------------------------------------------------------------------------------------------------------------------
Enterprise Oil plc, 6.70% Sr. Nts., 9/15/07 1,000,000 1,027,105
</TABLE>
15 Oppenheimer Bond Fund
<PAGE> 17
STATEMENT OF INVESTMENT (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE (1)
- --------------------------------------------------------------------------------------------------------------------------------
ENERGY (CONTINUED)
<S> <C> <C>
Global Marine, Inc., 7.125% Nts., 9/1/07(5) $2,000,000 $ 2,020,000
- --------------------------------------------------------------------------------------------------------------------------------
Gothic Energy Corp., 12.25% Sr. Nts., 9/1/04(5) 200,000 210,000
- --------------------------------------------------------------------------------------------------------------------------------
J. Ray McDermott SA, 9.375% Sr. Sub. Bonds, 7/15/06 600,000 645,750
- --------------------------------------------------------------------------------------------------------------------------------
McDermott, Inc., 9.375% Nts., 3/15/02 100,000 106,485
- --------------------------------------------------------------------------------------------------------------------------------
Occidental Petroleum Corp., 11.125% Sr. Debs., 6/1/19 2,000,000 2,236,314
- --------------------------------------------------------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc., 9.375% Sub. Debs., 2/1/06 750,000 678,750
- --------------------------------------------------------------------------------------------------------------------------------
Phillips Petroleum Co., 7.53% Pass-Through Certificates,
Series 1994-A1, 9/27/98 198,646 200,689
- --------------------------------------------------------------------------------------------------------------------------------
Stone Energy Corp., 8.75% Sr. Sub. Nts., 9/15/07 400,000 409,000
- --------------------------------------------------------------------------------------------------------------------------------
TransCanada PipeLines Ltd., 9.875% Debs., 1/1/21 1,500,000 1,995,000
- --------------------------------------------------------------------------------------------------------------------------------
Wiser Oil Co., 9.50% Sr. Sub. Nts., 5/15/07 65,000 64,025
-----------
13,315,094
- --------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES--10.4%
- --------------------------------------------------------------------------------------------------------------------------------
BANKS AND THRIFTS--1.4%
Banque Nationale de Paris, 9.875% Debs., 5/25/98 205,000 207,945
- --------------------------------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. (New), 6.625% Sr. Nts., 1/15/98 25,000 25,004
- --------------------------------------------------------------------------------------------------------------------------------
Citicorp Capital I, 7.933% Gtd. Bonds, 2/15/27 1,000,000 1,069,495
- --------------------------------------------------------------------------------------------------------------------------------
First Fidelity Bancorp, 8.50% Sub. Capital Nts., 4/1/98 325,000 326,728
- --------------------------------------------------------------------------------------------------------------------------------
First Nationwide Holdings, Inc.:
10.625% Sr. Sub. Nts., 10/1/03 150,000 168,750
9.125% Sr. Sub. Nts., 1/15/03 500,000 527,500
- --------------------------------------------------------------------------------------------------------------------------------
National Westminster Bank plc, 9.375% Gtd. Capital Nts., 11/15/03 70,000 80,557
Royal Bank of Scotland Group (The) plc, 10.125% Gtd. Sub.
- --------------------------------------------------------------------------------------------------------------------------------
Capital Nts., 3/1/04 500,000 591,194
- --------------------------------------------------------------------------------------------------------------------------------
Suntrust Banks, Inc., 8.875% Debs., 2/1/98 500,000 501,029
-----------
3,498,202
- --------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL--7.3%
Associates Corp. of North America, 7.40% Medium-Term Nts., 7/7/99 300,000 305,592
- --------------------------------------------------------------------------------------------------------------------------------
Beneficial Corp., 12.875% Debs., 8/1/13 20,000 21,734
- --------------------------------------------------------------------------------------------------------------------------------
BHP Finance (USA) Ltd., 8.50% Gtd. Debs., 12/1/12 1,500,000 1,756,584
- --------------------------------------------------------------------------------------------------------------------------------
Enterprise Rent-A-Car USA Finance Co., 7.875% Nts., 3/15/98(7) 1,500,000 1,505,331
- --------------------------------------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 6.75% Nts., 8/15/08 1,000,000 1,012,842
- --------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 6.875% Nts., 3/1/03 750,000 770,451
- --------------------------------------------------------------------------------------------------------------------------------
Midland American Capital Corp., 12.75% Gtd. Nts., 11/15/03 205,000 215,084
- --------------------------------------------------------------------------------------------------------------------------------
NationsBank Corp., 10.20% Sub. Nts., 7/15/15 1,300,000 1,748,590
- --------------------------------------------------------------------------------------------------------------------------------
Ocwen Capital Trust I, 10.875% Gtd. Bonds, 8/1/27 300,000 327,000
- --------------------------------------------------------------------------------------------------------------------------------
Penske Truck Leasing Co. LP, 7.75% Sr. Nts., 5/15/99 1,825,000 1,868,676
- --------------------------------------------------------------------------------------------------------------------------------
Rank Group Finance plc, 6.75% Gtd. Nts., 11/30/04 1,000,000 1,003,500
- --------------------------------------------------------------------------------------------------------------------------------
Ryder System, Inc., 8.75% Debs., Series J, 3/15/17 1,600,000 1,671,586
- --------------------------------------------------------------------------------------------------------------------------------
Salomon, Inc, 7.30% Nts., 5/15/02 1,000,000 1,035,115
</TABLE>
16 Oppenheimer Bond Fund
<PAGE> 18
<TABLE>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE (1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Saul (B.F.) Real Estate Investment Trust, 11.625% Sr. Sec. Nts.,
Series B, 4/1/02 $1,125,000 $ 1,209,375
- --------------------------------------------------------------------------------------------------------------------------------
Source One Mortgage Services Corp., 9% Debs., 6/1/12 1,250,000 1,379,060
- --------------------------------------------------------------------------------------------------------------------------------
Washington Mutual Capital I, 8.375% Gtd. Bonds, 6/1/27 2,000,000 2,180,952
-----------
18,011,472
- --------------------------------------------------------------------------------------------------------------------------------
INSURANCE--1.7%
Aetna Services, Inc., 8% Debs., 1/15/17 849,000 868,270
- --------------------------------------------------------------------------------------------------------------------------------
Allmerica Capital I, 8.207% Debs., 2/3/27 2,000,000 2,209,596
- --------------------------------------------------------------------------------------------------------------------------------
Liberty Mutual Insurance Co., 7.697% Nts., 10/15/2097(5) 1,000,000 1,051,292
- --------------------------------------------------------------------------------------------------------------------------------
Veritas Holdings, Inc., 9.625% Sr. Nts., 12/15/03 200,000 214,000
-----------
4,343,158
- --------------------------------------------------------------------------------------------------------------------------------
HOUSING RELATED--0.8%
- --------------------------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS--0.1%
Nortek, Inc., 9.25% Sr. Nts., Series B, 3/15/07 250,000 256,250
- --------------------------------------------------------------------------------------------------------------------------------
HOMEBUILDERS/REAL ESTATE--0.7%
Continental Homes Holding Corp., 10% Gtd. Unsec. Bonds, 4/15/06 50,000 54,750
- --------------------------------------------------------------------------------------------------------------------------------
Greystone Homes, Inc., 10.75% Sr. Gtd. Nts., 3/1/04(5) 50,000 54,750
- --------------------------------------------------------------------------------------------------------------------------------
Nortek, Inc., 9.125% Sr. Nts., Series B, 9/1/07 250,000 255,000
- --------------------------------------------------------------------------------------------------------------------------------
Trizec Hahn Corp., 7.95% Sr. Unsec. Debs., 6/1/07CAD 2,000,000 1,450,435
-----------
1,814,935
- --------------------------------------------------------------------------------------------------------------------------------
MANUFACTURING--7.1%
- --------------------------------------------------------------------------------------------------------------------------------
AEROSPACE--2.3%
Amtran, Inc., 10.50% Sr. Nts., 8/1/04(7) 100,000 104,500
- --------------------------------------------------------------------------------------------------------------------------------
Atlas Air, Inc.:
10.75% Sr. Nts., 8/1/05 125,000 132,500
12.25% Pass-Through Certificates, 12/1/02 1,000,000 1,115,000
- --------------------------------------------------------------------------------------------------------------------------------
Boeing Co., 7.50% Debs., 8/15/42 2,000,000 2,254,914
- --------------------------------------------------------------------------------------------------------------------------------
Rolls-Royce Capital, Inc., 7.125% Gtd. Nts., 7/29/03 1,000,000 1,028,125
- --------------------------------------------------------------------------------------------------------------------------------
SC International Services, Inc., 9.25% Sr. Sub. Nts., 9/1/07(7) 250,000 260,000
- --------------------------------------------------------------------------------------------------------------------------------
Southwest Airlines Co., 9.25% Debs., 2/15/98 500,000 501,700
- --------------------------------------------------------------------------------------------------------------------------------
Trans World Airlines, Inc., 11.50% Sr. Sec. Nts., 12/15/04(7) 250,000 252,500
-----------
5,649,239
- --------------------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE--2.7%
Cambridge Industries, Inc., 10.25% Sr. Sub. Nts., 7/15/07(7) 100,000 105,000
- --------------------------------------------------------------------------------------------------------------------------------
Chrysler Corp., 7.40% Debs., 8/1/2097 3,000,000 3,212,247
- --------------------------------------------------------------------------------------------------------------------------------
Ford Motor Co., 8.875% Debs., 11/15/22 2,000,000 2,267,818
- --------------------------------------------------------------------------------------------------------------------------------
Hayes Wheels International, Inc., 11% Sr. Sub. Nts., 7/15/06 200,000 224,000
- --------------------------------------------------------------------------------------------------------------------------------
Johnson Controls, Inc., 7.70% Debs., 3/1/15 500,000 564,073
- --------------------------------------------------------------------------------------------------------------------------------
Key Plastics, Inc., 10.25% Sr. Sub. Nts., Series B, 3/15/07 200,000 213,500
-----------
6,586,638
</TABLE>
17 Oppenheimer Bond Fund
<PAGE> 19
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE (1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL GOODS--2.1%
Caterpillar, Inc., 9.75% Debs., 6/1/19 $1,750,000 $1,895,626
- --------------------------------------------------------------------------------------------------------------------------------
Clark-Schwebel, Inc.:
10.50% Sr. Nts., 4/15/06 650,000 711,750
12.50% Debs., 7/15/07(7)(10) 137,982 148,331
- --------------------------------------------------------------------------------------------------------------------------------
Communications & Power Industries, Inc., 12% Sr. Sub. Nts.,
Series B, 8/1/05 500,000 560,000
- --------------------------------------------------------------------------------------------------------------------------------
Hydrochem Industrial Services, Inc., 10.375% Sr. Sub. Nts., 8/1/07 325,000 337,187
- --------------------------------------------------------------------------------------------------------------------------------
Polymer Group, Inc., 9% Sr. Sub. Nts., 7/1/07 150,000 150,375
- --------------------------------------------------------------------------------------------------------------------------------
Roller Bearing Co. of America, Inc., 9.625% Gtd. Sr. Sub. Nts., 6/15/07(5) 200,000 202,500
- --------------------------------------------------------------------------------------------------------------------------------
Titan Wheel International, Inc., 8.75% Sr. Sub. Nts., 4/1/07 250,000 263,125
- --------------------------------------------------------------------------------------------------------------------------------
Westinghouse Electric Corp., 8.375% Nts., 6/15/02 1,000,000 1,050,813
-----------
5,319,707
- --------------------------------------------------------------------------------------------------------------------------------
MEDIA--2.9%
- --------------------------------------------------------------------------------------------------------------------------------
BROADCASTING--0.9%
Allbritton Communications Co., 11.50% Sr. Sub. Debs., 8/15/04 675,000 710,437
- --------------------------------------------------------------------------------------------------------------------------------
Capstar Broadcasting Partners, Inc., 9.25% Sr. Sub. Nts., 7/1/07 175,000 179,812
- --------------------------------------------------------------------------------------------------------------------------------
Paxson Communications Corp., 11.625% Sr. Sub. Nts., 10/1/02 520,000 559,000
- --------------------------------------------------------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc., 10% Sr. Sub. Nts., 9/30/05 200,000 211,500
- --------------------------------------------------------------------------------------------------------------------------------
Young Broadcasting, Inc.:
8.75% Sr. Sub. Debs., 6/15/07 300,000 298,500
9% Sr. Sub. Nts., Series B, 1/15/06 400,000 402,000
-----------
2,361,249
- --------------------------------------------------------------------------------------------------------------------------------
CABLE TELEVISION--1.2%
Adelphia Communications Corp.:
9.25% Sr. Nts., 10/1/02 150,000 153,750
9.875% Sr. Nts., Series B, 3/1/07 200,000 212,500
- --------------------------------------------------------------------------------------------------------------------------------
EchoStar Communications Corp., 0%/12.875% Sr. Disc. Nts., 6/1/04(11) 250,000 230,000
- --------------------------------------------------------------------------------------------------------------------------------
EchoStar DBS Corp., 12.50% Gtd. Nts., 7/1/02 525,000 569,625
- --------------------------------------------------------------------------------------------------------------------------------
Knology Holdings, Inc., Units (each unit consists of $1,000 principal
amount of 0%/11.875% sr. disc. nts., 10/15/07 and one warrant to
purchase .003734 shares of preferred stock)(5)(11)(12) 200,000 110,000
- --------------------------------------------------------------------------------------------------------------------------------
Optel, Inc., 13% Sr. Nts., Series B, 2/15/05 100,000 106,500
- --------------------------------------------------------------------------------------------------------------------------------
Rogers Communications, Inc., 8.75% Sr. Nts., 7/15/07CAD 600,000 409,445
- --------------------------------------------------------------------------------------------------------------------------------
TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 1,000,000 1,111,644
-----------
2,903,464
</TABLE>
18 Oppenheimer Bond Fund
<PAGE> 20
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE (1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DIVERSIFIED MEDIA--0.6%
Heritage Media Corp., 8.75% Sr. Sub. Nts., 2/15/06 $ 500,000 $ 530,000
- --------------------------------------------------------------------------------------------------------------------------------
Hollywood Theaters, Inc., 10.625% Sr. Sub. Nts., 8/1/07(7) 100,000 106,750
- --------------------------------------------------------------------------------------------------------------------------------
Lamar Advertising Co.:
8.625% Sr. Sub. Nts., 9/15/07 400,000 413,000
9.625% Sr. Sub. Nts., 12/1/06 150,000 162,188
- --------------------------------------------------------------------------------------------------------------------------------
Outdoor Systems, Inc., 8.875% Sr. Sub. Nts., 6/15/07 200,000 209,000
-----------
1,420,938
- --------------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT/FILM--0.1%
Blockbuster Entertainment Corp., 6.625% Sr. Nts., 2/15/98 250,000 250,090
- --------------------------------------------------------------------------------------------------------------------------------
PUBLISHING/PRINTING--0.1%
American Lawyer Media Holdings, Inc., 9.75% Sr. Nts., 12/15/07(7) 250,000 255,000
- --------------------------------------------------------------------------------------------------------------------------------
OTHER--1.2%
- --------------------------------------------------------------------------------------------------------------------------------
CONGLOMERATES--0.0%
Maxxam Group, Inc., 0%/12.25% Sr. Sec. Disc. Nts., 8/1/03(11) 100,000 99,500
- --------------------------------------------------------------------------------------------------------------------------------
SERVICES--1.2%
Archer Daniels Midland Co., 7.125% Debs., 3/1/13 750,000 800,963
- --------------------------------------------------------------------------------------------------------------------------------
ENSCO International, Inc.:
6.75% Nts., 11/15/07 1,000,000 1,007,035
7.20% Nts., 11/15/27 1,000,000 1,018,462
- --------------------------------------------------------------------------------------------------------------------------------
Oxford Automotive, Inc., 10.125% Sr. Unsec. Sub. Nts., 6/15/07 200,000 211,250
-----------
3,037,710
- --------------------------------------------------------------------------------------------------------------------------------
RETAIL--1.7%
- --------------------------------------------------------------------------------------------------------------------------------
DEPARTMENT STORES--0.3%
Sears Canada, Inc., 11.70% Debs., 7/10/00CAD 500,000 397,807
- --------------------------------------------------------------------------------------------------------------------------------
Sears Roebuck & Co., 8.39% Medium-Term Nts., 3/23/99 300,000 308,082
-----------
705,889
- --------------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAILING--0.3%
May Department Stores Cos., 10.625% Debs., 11/1/10 405,000 545,305
- --------------------------------------------------------------------------------------------------------------------------------
Specialty Retailers, Inc., 9% Gtd. Unsec. Sr. Sub. Nts., 7/15/07 100,000 102,500
-----------
647,805
- --------------------------------------------------------------------------------------------------------------------------------
SUPERMARKETS--1.1%
Fleming Cos., Inc., 10.625% Sr. Sub. Nts., 7/31/07(7) 550,000 583,000
- --------------------------------------------------------------------------------------------------------------------------------
Kroger Co., 8.50% Sr. Sec. Debs., 6/15/03 1,000,000 1,050,837
- --------------------------------------------------------------------------------------------------------------------------------
Ralph's Grocery Co., 10.45% Sr. Nts., 6/15/04 300,000 337,500
- --------------------------------------------------------------------------------------------------------------------------------
Randall's Food Markets, Inc., 9.375% Sr. Sub. Nts., 7/1/07(7) 500,000 520,000
- --------------------------------------------------------------------------------------------------------------------------------
Stater Brothers Holdings, Inc., 9% Unsec. Sr. Sub. Nts., 7/1/04 150,000 157,500
-----------
2,648,837
</TABLE>
19 Oppenheimer Bond Fund
<PAGE> 21
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE (1)
- --------------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--3.1%
- --------------------------------------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--2.7%
<S> <C> <C>
Cellular Communications International, Inc., Zero Coupon
Sr. Disc. Nts., 11.198%, 8/15/00(9) $1,450,000 $1,167,250
- --------------------------------------------------------------------------------------------------------------------------------
Dial Call Communications, Inc., 0%/12.25% Sr. Disc. Nts., 4/15/04(11) 300,000 287,250
- --------------------------------------------------------------------------------------------------------------------------------
Dyncorp, Inc., 9.50% Sr. Sub. Nts., 3/1/07 250,000 255,000
- --------------------------------------------------------------------------------------------------------------------------------
General Electric Capital Corp., 8.75% Debs., 5/21/07 1,000,000 1,172,150
- --------------------------------------------------------------------------------------------------------------------------------
Metrocall, Inc., 9.75% Sr. Sub. Nts., 11/1/07(7) 50,000 49,625
- --------------------------------------------------------------------------------------------------------------------------------
Nextel Communications, Inc.:
0%/10.65% Sr. Disc. Nts., 9/15/07(7)(11) 50,000 31,750
0%/11.50% Sr. Disc. Nts., 9/1/03(11) 250,000 250,000
- --------------------------------------------------------------------------------------------------------------------------------
Omnipoint Corp., 11.625% Sr. Nts., 8/15/06 70,000 74,200
- --------------------------------------------------------------------------------------------------------------------------------
ORBCOMM Global LP/ORBCOMM Capital Corp., 14% Sr. Nts., 8/15/04 65,000 70,850
- --------------------------------------------------------------------------------------------------------------------------------
Orion Network Systems, Inc., 0%/12.50% Sr. Disc. Nts., 1/15/07(11) 200,000 149,500
- --------------------------------------------------------------------------------------------------------------------------------
PriCellular Wireless Corp.:
0%/12.25% Sr. Sub. Disc. Nts., 10/1/03(11) 200,000 206,000
0%/14% Sr. Sub. Disc. Nts., 11/15/01(11) 1,050,000 1,170,750
10.75% Sr. Nts., 11/1/04 520,000 565,500
- --------------------------------------------------------------------------------------------------------------------------------
Real Time Data, Inc., Units (each unit consists of $1,000 principal
amount of 0%/13.50% sub. disc. nts., 8/15/06 and one warrant to
purchase six ordinary shares)(5)(11)(12) 1,000,000 380,000
- --------------------------------------------------------------------------------------------------------------------------------
Star Choice Communications, Inc., Units (each unit consists of
$1,000 principal amount of 13% sr. sec. nts., 12/15/05 and one
warrant to buy common stock)(12) 200,000 206,000
- --------------------------------------------------------------------------------------------------------------------------------
Tracor, Inc., 8.50% Sr. Sub. Nts., 3/1/07 200,000 206,000
- --------------------------------------------------------------------------------------------------------------------------------
Unisys Corp., 11.75% Sr. Nts., 10/15/04 300,000 344,250
- --------------------------------------------------------------------------------------------------------------------------------
USA Mobile Communications, Inc. II, 9.50% Sr. Nts., 2/1/04 100,000 98,000
-----------
6,684,075
- --------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS/TECHNOLOGY--0.4%
Brooks Fiber Properties, Inc., 0%/11.875% Sr. Disc. Nts., 11/1/06(11) 145,000 116,725
- --------------------------------------------------------------------------------------------------------------------------------
COLT Telecom Group plc, Units (each unit consists of $1,000 principal
amount of 0%/12% sr. disc. nts., 12/15/06 and one warrant to purchase
7.8 ordinary shares)(11)(12) 350,000 273,000
- --------------------------------------------------------------------------------------------------------------------------------
GST Telecommunications, Inc., 0%/13.875%
Cv. Sr. Sub. Disc. Nts., 12/15/05(7)(11) 100,000 76,813
- --------------------------------------------------------------------------------------------------------------------------------
McLeodUSA, Inc., 0%/10.50% Sr. Disc. Nts., 3/1/07(11) 65,000 47,125
- --------------------------------------------------------------------------------------------------------------------------------
NEXTLINK Communications, Inc., 9.625% Sr. Nts., 10/1/07 100,000 104,000
- --------------------------------------------------------------------------------------------------------------------------------
NTL, Inc., 10% Sr. Nts., 2/15/07 100,000 105,750
- --------------------------------------------------------------------------------------------------------------------------------
Qwest Communications International, Inc., 0%/9.47%
Sr. Disc. Nts., 10/15/07(7)(11) 365,000 248,200
- --------------------------------------------------------------------------------------------------------------------------------
Teleport Communications Group, Inc., 0%/11.125%
Sr. Disc. Nts., 7/1/07(11) 150,000 122,625
-----------
1,094,238
</TABLE>
20 Oppenheimer Bond Fund
<PAGE> 22
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE (1)
- --------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--1.6%
- --------------------------------------------------------------------------------------------------------------------------------
RAILROADS--1.3%
<S> <C> <C>
Canadian Pacific Ltd., 9.45% Debs., 8/1/21 $1,000,000 $ 1,278,950
- --------------------------------------------------------------------------------------------------------------------------------
Kansas City Southern Industries, Inc., 6.625% Nts., 3/1/05 750,000 758,272
- --------------------------------------------------------------------------------------------------------------------------------
Transtar Holdings LP/Transtar Capital Corp., 0%/13.375%
Sr. Disc. Nts., Series B, 12/15/03(11) 1,100,000 968,000
- --------------------------------------------------------------------------------------------------------------------------------
Union Pacific Corp., 9.65% Medium-Term Nts., 4/17/00 100,000 107,286
------------
3,112,508
- --------------------------------------------------------------------------------------------------------------------------------
SHIPPING--0.2%
Navigator Gas Transport plc:
10.50% First Priority Ship Mtg. Nts., 6/30/07(7) 400,000 426,000
Units (each unit consists of $1,000 principal amount of 12%
second priority ship mtg. nts., 6/30/07 and 7.66 warrants)(7)(12) 100,000 113,000
------------
539,000
- --------------------------------------------------------------------------------------------------------------------------------
TRUCKING--0.1%
Coach USA, Inc., 9.375% Gtd. Sr. Sub. Nts., Series B, 7/1/07 350,000 362,250
- --------------------------------------------------------------------------------------------------------------------------------
UTILITIES--2.8%
- --------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.7%
California Energy, Inc., 10.25% Sr. Disc. Nts., 1/15/04 300,000 324,000
- --------------------------------------------------------------------------------------------------------------------------------
Calpine Corp., 8.75% Sr. Nts., 7/15/07(7) 185,000 189,625
- --------------------------------------------------------------------------------------------------------------------------------
Consumers Energy Co., 8.75% First Mtg. Nts., 2/15/98 250,000 250,597
- --------------------------------------------------------------------------------------------------------------------------------
First PV Funding Corp., 10.15% Lease Obligation Bonds,
Series 1986B, 1/15/16(5) 197,000 209,063
- --------------------------------------------------------------------------------------------------------------------------------
Public Service Co. of Colorado, 8.75% First Mtg. Bonds, 3/1/22 250,000 276,115
- --------------------------------------------------------------------------------------------------------------------------------
South Carolina Electric & Gas Co., 9% Mtg. Bonds, 7/15/06 500,000 583,366
------------
1,832,766
- --------------------------------------------------------------------------------------------------------------------------------
GAS UTILITIES--0.8%
Laclede Gas Co., 8.50% First Mtg. Bonds, 11/15/04 500,000 557,739
- --------------------------------------------------------------------------------------------------------------------------------
National Fuel Gas Co., 7.75% Debs., 2/1/04 500,000 532,226
- --------------------------------------------------------------------------------------------------------------------------------
Texas Gas Transmission Corp., 8.625% Nts., 4/1/04 500,000 555,629
- --------------------------------------------------------------------------------------------------------------------------------
Union Gas Ltd., 13% Debs., 6/30/03CAD 464,000 338,197
------------
1,983,791
- --------------------------------------------------------------------------------------------------------------------------------
TELEPHONE UTILITIES--1.3%
GTE Corp., 8.85% Debs., 3/1/98 300,000 301,217
- --------------------------------------------------------------------------------------------------------------------------------
New York Telephone Co., 9.375% Debs., 7/15/31 2,500,000 2,817,648
------------
3,118,865
------------
Total Corporate Bonds and Notes (Cost $103,314,823) 107,739,264
</TABLE>
21 Oppenheimer Bond Fund
<PAGE> 23
STATEMENT OF INVESTMENT (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE (1)
================================================================================================================================
COMMON STOCKS--0.0%
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Optel, Inc. (Cost $0)(5)(13) 100 $ --
================================================================================================================================
PREFERRED STOCKS--1.4%
- --------------------------------------------------------------------------------------------------------------------------------
Allstate Financing I, 7.95% Gtd. Quarterly Income Preferred
Securities, Series A 80,000 2,075,000
- --------------------------------------------------------------------------------------------------------------------------------
CRIIMI MAE, Inc., 10.875% Cum. Cv. Preferred Stock, Series B, Non-Vtg. 13,000 444,437
- --------------------------------------------------------------------------------------------------------------------------------
EchoStar Communications Corp., 12.125% Sr. Redeemable
Exchangeable Preferred Stock, Series B(7)(10) 100 104,750
- --------------------------------------------------------------------------------------------------------------------------------
Fresenius Medical Care Trust, 9% Preferred Securities 505,000 530,250
- --------------------------------------------------------------------------------------------------------------------------------
NEXTLINK Communications, Inc., 14% Sr. Exchangeable Preferred(10) 3,381 210,467
- --------------------------------------------------------------------------------------------------------------------------------
SFX Broadcasting, Inc., 12.625% Cum., Series E, Non-Vtg.(10) 53 60,554
-----------
Total Preferred Stocks (Cost $3,165,304) 3,425,458
UNITS
================================================================================================================================
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- --------------------------------------------------------------------------------------------------------------------------------
American Communications Services, Inc. Wts., Exp. 11/05(5) 300 28,650
- --------------------------------------------------------------------------------------------------------------------------------
Cellular Communications International, Inc. Wts., Exp. 8/03(5) 500 8,500
- --------------------------------------------------------------------------------------------------------------------------------
Gothic Energy Corp. Wts., Exp. 9/04 2,800 5,600
- --------------------------------------------------------------------------------------------------------------------------------
ICG Communications, Inc. Wts., Exp. 9/05(5) 1,980 24,750
- --------------------------------------------------------------------------------------------------------------------------------
NEXTLINK Communications, Inc. Wts., Exp. 2/09(5) 3,050 31
Orion Network Systems, Inc. Wts., Exp. 1/07(5) 200 2,500
-----------
Total Rights, Warrants and Certificates (Cost $3,500) 70,031
FACE AMOUNT(1)
================================================================================================================================
STRUCTURED INSTRUMENTS--0.5%
- --------------------------------------------------------------------------------------------------------------------------------
Bayerische Landesbank Girozentrale (New York Branch)
Lehman Brothers High Yield Bond Index Nts., 12.50%, 2/4/98 $ 500,000 499,200
- --------------------------------------------------------------------------------------------------------------------------------
Shoshone Partners Loan Trust, 7.50% Sr. Nts., 5/31/02(5)(6) 742,000 786,944
------------
Total Structured Instruments (Cost $1,242,000) 1,286,144
================================================================================================================================
REPURCHASE AGREEMENTS--2.1%
- --------------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with First Chicago Capital Markets, 6.60%, dated 12/31/97,
to be repurchased at $5,201,907 on 1/2/98, collateralized by U.S. Treasury
Bonds, 8%-10.625%, 8/15/15-11/15/21, with a value of $3,854,252, and U.S.
Treasury Nts., 5.875%-7.50%, 9/30/01-12/31/01,
with a value of $1,452,554 (Cost $5,200,000) 5,200,000 5,200,000
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $277,840,513) 115.5% 286,563,209
- --------------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (15.5) (38,414,567)
----------- ------------
NET ASSETS 100.0% $248,148,642
=========== ============
</TABLE>
22 Oppenheimer Bond Fund
<PAGE> 24
- --------------------------------------------------------------------------------
1. Face amount is reported in U.S. Dollars, except for those denoted in the
following currency: CAD--Canadian Dollar.
2. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline and prepayment rates increase. Most
other fixed income securities increase in price when interest rates decline. The
principal amount of the underlying pool represents the notional amount on which
current interest is calculated. The price of these securities is typically more
sensitive to changes in prepayment rates than traditional mortgage-backed
securities (for example, GNMA pass-throughs). Interest rates disclosed represent
current yields based upon the current cost basis and estimated timing and amount
of future cash flows.
3. Principal-Only Strips represent the right to receive the monthly principal
payments on an underlying pool of mortgage loans. The value of these securities
generally increases as interest rates decline and prepayment rates rise. The
price of these securities is typically more volatile than that of coupon-bearing
bonds of the same maturity. Interest rates disclosed represent current yields
based upon the current cost basis and estimated timing of future cash flows.
4. When-issued security to be delivered and settled after December 31, 1997.
5. Identifies issues considered to be illiquid or restricted--See Note 8 of
Notes to Financial Statements.
6. Represents the current interest rate for a variable rate security.
7. 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 $10,623,957 or 4.28% of the Fund's net
assets as of December 31, 1997.
8. Securities with an aggregate market value of $929,032 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
9. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
10. Interest or dividend is paid in kind.
11. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
12. Units may be comprised of several components, such as debt and equity and/or
warrants to purchase equity at some point in the future. For units which
represent debt securities, face amount disclosed represents total underlying
principal.
13. Non-income producing security.
See accompanying Notes to Financial Statements.
23 Oppenheimer Bond Fund
<PAGE> 25
STATEMENT OF ASSETS AND LIABILITIES December 31, 1997
<TABLE>
====================================================================================================================
<S> <C>
ASSETS
Investments, at value (cost $277,840,513) $286,563,209
- --------------------------------------------------------------------------------------------------------------------
Cash 390,159
- --------------------------------------------------------------------------------------------------------------------
Unrealized appreciation on forward foreign currency
exchange contracts--Note 5 20,641
- --------------------------------------------------------------------------------------------------------------------
Receivables:
Investments sold 16,365,960
Interest and principal paydowns 3,656,399
Shares of beneficial interest sold 301,417
Daily variation on futures contracts--Note 6 82,564
- --------------------------------------------------------------------------------------------------------------------
Other 5,691
------------
Total assets 307,386,040
===================================================================================================================
LIABILITIES
Payables and other liabilities:
Investments purchased (including $57,811,085 purchased on a
when-issued basis)--Note 1 58,014,647
Dividends 631,775
Shares of beneficial interest redeemed 258,531
Distribution and service plan fees 150,358
Transfer and shareholder servicing agent fees 47,292
Other 134,795
------------
Total liabilities 59,237,398
===================================================================================================================
NET ASSETS $248,148,642
============
===================================================================================================================
COMPOSITION OF NET ASSETS
Paid-in capital $241,988,295
- --------------------------------------------------------------------------------------------------------------------
Undistributed net investment income 6,579
- --------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and
foreign currency transactions (2,819,276)
- --------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 8,973,044
-------------
Net assets $248,148,642
=============
</TABLE>
24 Oppenheimer Bond Fund
<PAGE> 26
<TABLE>
=======================================================================================================================
<S> <C>
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on
net assets of $190,705,711 and 17,383,073 shares of beneficial interest outstanding) $10.97
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $11.52
- -----------------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $48,254,895
and 4,399,924 shares of beneficial interest outstanding) $10.97
- -----------------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $9,188,036
and 837,017 shares of beneficial interest outstanding) $10.98
</TABLE>
See accompanying Notes to Financial Statements.
25 Oppenheimer Bond Fund
<PAGE> 27
STATEMENT OF OPERATIONS For the Year Ended December 31, 1997
<TABLE>
===============================================================================================================
<S> <C>
INVESTMENT INCOME
Interest $19,692,749
- ---------------------------------------------------------------------------------------------------------------
Dividends 196,995
-----------
Total income 19,889,744
===============================================================================================================
EXPENSES
Management fees--Note 4 1,751,986
- ---------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 461,146
Class B 414,137
Class C 61,208
- ---------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 412,037
- ---------------------------------------------------------------------------------------------------------------
Shareholder reports 154,722
- ---------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 49,736
- ---------------------------------------------------------------------------------------------------------------
Legal and auditing fees 18,708
- ---------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 6,839
- ---------------------------------------------------------------------------------------------------------------
Other 15,848
-----------
Total expenses 3,346,367
===============================================================================================================
NET INVESTMENT INCOME 16,543,377
===============================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on:
Investments 2,873,379
Closing of futures contracts--Note 6 (688,832)
Closing and expiration of options written--Note 7 (29,905)
Foreign currency transactions 42,729
-----------
Net realized gain 2,197,371
- ---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 3,870,507
Translation of assets and liabilities denominated in foreign currencies (205,493)
-----------
Net change 3,665,014
-----------
Net realized and unrealized gain 5,862,385
===============================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $22,405,762
===========
</TABLE>
See accompanying Notes to Financial Statements.
26 Oppenheimer Bond Fund
<PAGE> 28
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996
=============================================================================================================================
<S> <C> <C>
OPERATIONS
Net investment income $ 16,543,377 $ 15,830,998
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gain 2,197,371 313,209
- -----------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 3,665,014 (5,325,416)
------------ ------------
Net increase in net assets resulting from operations 22,405,762 10,818,791
=============================================================================================================================
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Class A (13,459,796) (12,577,460)
Class B (2,655,088) (2,405,982)
Class C (389,245) (214,115)
- ------------------------------------------------------------------------------------------------------------------------------
Tax return of capital distribution:
Class A -- (517,955)
Class B -- (103,919)
Class C -- (11,567)
=============================================================================================================================
BENEFICIAL INTEREST TRANSACTIONS
Net increase (decrease) in net assets resulting from
beneficial interest transactions--Note 2:
Class A (7,491,024) 28,392,776
Class B 8,379,500 659,280
Class C 4,696,745 404,645
=============================================================================================================================
NET ASSETS
Total increase 11,486,854 24,444,494
- -----------------------------------------------------------------------------------------------------------------------------
Beginning of period 236,661,788 212,217,294
------------ ------------
End of period (including undistributed net investment
income of $6,579 for the year ended 12/31/97) $248,148,642 $236,661,788
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
27 Oppenheimer Bond Fund
<PAGE> 29
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993
===================================================================================================================================
PER SHARE OPERATING DATA:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.70 $10.98 $10.01 $11.12 $10.74
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .77 .78 .69 .65 .69
Net realized and unrealized gain (loss) .27 (.28) .96 (1.08) .40
---- ---- ---- ---- ----
Total income (loss) from
investment operations 1.04 .50 1.65 (.43) 1.09
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.77) (.75) (.68) (.65) (.71)
Dividends in excess of net
investment income -- -- -- (.03) --
Tax return of capital -- (.03) -- -- --
---- ---- ---- ---- ----
Total dividends and distributions
to shareholders (.77) (.78) (.68) (.68) (.71)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.97 $10.70 $10.98 $10.01 $11.12
====== ====== ====== ====== ======
===================================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 10.13% 4.87% 16.94% (3.87)% 10.30%
===================================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $190,706 $193,515 $169,059 $ 96,640 $110,759
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $187,458 $178,130 $116,940 $102,168 $111,702
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 7.20% 7.35% 6.47% 6.25% 6.20%
Expenses, before voluntary
reimbursement by the Manager 1.27% 1.30% 1.27% 1.06% 1.06%
Expenses, net of voluntary
reimbursement by the Manager N/A N/A 1.26% N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 50.5% 53.7% 175.4% 70.3% 110.1%
</TABLE>
1. For the period from July 11, 1995 (inception of offering) to December 31,
1995.
2. For the period from May 1, 1993 (inception of offering) to December 31, 1993.
3. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
4. Annualized.
28 Oppenheimer Bond Fund
<PAGE> 30
<TABLE>
<CAPTION>
CLASS B CLASS C
-------------------------------------------------------------------------- -------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993(2) 1997 1996 1995(1)
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
$10.69 $10.98 $10.01 $11.11 $11.10 $10.70 $10.99 $10.89
- ---------------------------------------------------------------------------------------------------------------------------------
.69 .70 .63 .58 .40 .69 .70 .28
.28 (.29) .94 (1.08) .03 .28 (.29) .10
---- ---- ----- ---- ---- ---- ---- ----
.97 .41 1.57 (.50) .43 .97 .41 .38
- ---------------------------------------------------------------------------------------------------------------------------------
(.69) (.67) (.60) (.57) (.42) (.69) (.67) (.28)
-- -- -- (.03) -- -- -- --
-- (.03) -- -- -- -- (.03) --
---- ---- ---- ---- ---- ---- ---- ----
(.69) (.70) (.60) (.60) (.42) (.69) (.70) (.28)
- ---------------------------------------------------------------------------------------------------------------------------------
$10.97 $10.69 $10.98 $10.01 $11.11 $10.98 $10.70 $10.99
====== ====== ====== ====== ====== ====== ====== ======
=================================================================================================================================
9.41% 3.99% 16.06% (4.53)% 3.91% 9.39% 4.00% 3.76%
=================================================================================================================================
$48,255 $38,826 $39,187 $3,451 $1,809 $9,188 $4,322 $3,971
- ---------------------------------------------------------------------------------------------------------------------------------
$41,439 $38,068 $12,823 $2,747 $ 922 $6,134 $3,404 $ 979
- ---------------------------------------------------------------------------------------------------------------------------------
6.42% 6.59% 5.84% 5.53% 4.80%(4) 6.36% 6.60% 6.32%(4)
2.02% 2.05% 2.12% 1.78% 1.90%(4) 2.02% 2.05% 2.25%(4)
N/A N/A 2.08% N/A N/A N/A N/A 1.96%(4)
- ---------------------------------------------------------------------------------------------------------------------------------
50.5% 53.7% 175.4% 70.3% 110.1% 50.5% 53.7% 175.4%
</TABLE>
5. The lesser of purchases or sales of portfolio securities for a period,
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 and mortgage
$134,090,911, respectively. For the year ended December 31, 1995, purchases and
sales of investment securities included mortgage "dollar-rolls."
See accompanying Notes to Financial Statements.
29 Oppenheimer Bond Fund
<PAGE> 31
NOTES TO FINANCIAL STATEMENTS
================================================================================
1.SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Bond Fund (the Fund) is a separate fund of Oppenheimer Integrity
Funds, a diversified, open-end management investment company registered under
is to seek a high level of current income by investing mainly in debt
instruments. The Fund's investment advisor is OppenheimerFunds, Inc. (the
Manager). The Fund offers Class A, Class B and Class C shares. Class A shares
are sold with a front-end sales charge. Class B and Class C shares may be
identical rights to earnings, assets and voting privileges, except that each
attributable to that class and exclusive voting rights with respect to matters
affecting that class. Class B shares will automatically convert to Class A
shares six years after the date of purchase. The following is a summary of
significant accounting policies consistently followed by the Fund.
- -------------------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Trustees. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Trustees to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount. Forward foreign currency contracts are valued based on the
closing prices of the forward currency contract rates in the London foreign
exchange markets on a daily basis as provided by a reliable bank or dealer.
Options are valued based upon the last sale price on the principal exchange on
which the option is traded or, in the absence of any transactions that day, the
value is based upon the last sale price on the prior trading date if it is
within the spread between the closing bid and asked prices. If the last sale
price is outside the spread, the closing bid is used.
30 Oppenheimer Bond Fund
<PAGE> 32
================================================================================
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. Delivery and payment for securities
that have been purchased by the Fund on a forward commitment or when-issued
basis can take place a month or more after the transaction date. 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, in a segregated account with its custodian, assets with a market
value equal to 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 December 31, 1997,
the Fund had entered into outstanding when-issued or forward commitments of
$57,811,085.
In connection with its ability to purchase securities on a
when-issued or forward commitment basis, the Fund may enter into mortgage
"dollar-rolls" in which the Fund sells securities for delivery in the current
month and simultaneously contracts with the same counterparty to repurchase
similar (same type, coupon and maturity) but not identical securities on a
specified future date. The Fund records each dollar-roll as a sale and a new
purchase transaction.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on
investments is separately identified from the fluctuations arising from changes
in market values of securities held and reported with all other foreign currency
gains and losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
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.
31 Oppenheimer Bond Fund
<PAGE> 33
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FEDERAL TAXES. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required. At December 31, 1997, the
Fund had available for federal income tax purposes an unused capital loss
carryover of approximately $7,038,000 which expires between 2002 and 2004.
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends separately
for Class A, Class B and Class C shares from net investment income each day the
New York Stock Exchange is open for business and pay such dividends monthly.
Distributions from net realized gains on investments, if any, will be declared
at least once each year.
- --------------------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of paydown gains and losses and the recognition of certain
foreign currency gains (losses) as ordinary income (loss) for tax purposes. The
character of the distributions made during the year from net investment income
or net realized gains may differ from its ultimate characterization for federal
income tax purposes. Also, due to timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the fiscal year in which
the income or realized gain was recorded by the Fund.
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 December 31, 1997, amounts have been reclassified to
reflect a decrease in undistributed net investment income of $32,669, an
increase in accumulated net realized loss of $870,459 and an increase in paid-in
capital of $903,128.
- --------------------------------------------------------------------------------
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.
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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
32 Oppenheimer Bond Fund
<PAGE> 34
================================================================================
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 DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 1996
----------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
Class A:
<S> <C> <C> <C> <C>
Sold 2,678,397 $ 28,887,221 1,955,093 $ 20,810,615
Dividends reinvested 831,219 8,947,815 815,100 8,651,382
Issued in connection with
the acquisition of:
Connecticut Mutual Income
Account--Note 9 -- -- 3,020,216 31,863,280
Jefferson-Pilot Investment Grade
Bond Fund, Inc.--Note 9 -- -- 1,801,334 19,273,967
Redeemed (4,216,384) (45,326,060) (4,901,741) (52,206,468)
----------- ------------- ---------- ------------
Net increase (decrease) (706,768) $ (7,491,024) 2,690,002 $ 28,392,776
=========== ============= ========== ============
- --------------------------------------------------------------------------------------------------------------------------
Class B:
Sold 1,711,754 $ 18,512,789 946,117 $ 10,072,138
Dividends reinvested 168,332 1,813,048 163,467 1,735,740
Issued in connection with
the acquisition of
Connecticut Mutual Income
Account--Note 9 -- -- 8,156 86,045
Redeemed (1,110,660) (11,946,337) (1,057,712) (11,234,643)
----------- ------------- ---------- ------------
Net increase 769,426 $ 8,379,500 60,028 $ 659,280
=========== ============= ========== ============
- --------------------------------------------------------------------------------------------------------------------------
Class C:
Sold 536,735 $ 5,809,737 279,925 $ 2,989,461
Dividends reinvested 25,947 280,265 17,112 181,810
Redeemed (129,410) (1,393,257) (254,743) (2,766,626)
----------- ------------- ---------- ------------
Net increase 433,272 $ 4,696,745 42,294 $ 404,645
=========== ============= ========== ============
</TABLE>
================================================================================
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At December 31, 1997, net unrealized appreciation on investments of $8,722,696
was composed of gross appreciation of $10,899,814, and gross depreciation of
$2,177,118.
33 Oppenheimer Bond Fund
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
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 a fee of 0.75% of the first
$200 million of the Fund's average annual net assets, 0.72% of the next $200
million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60%
of the next $200 million, and 0.50% of average annual net assets in excess of $1
billion.
For the year ended December 31, 1997, commissions (sales
charges paid by investors) on sales of Class A shares totaled $346,782, of
which $134,951 was retained by OppenheimerFunds Distributor, Inc. (OFDI), a
subsidiary of the Manager, as general distributor, and by an affiliated
broker/dealer. Sales charges advanced to broker/dealers by OFDI on sales of the
Fund's Class B shares and C totaled $591,879 and $49,753, respectively, of
which $39,149 and $1,770, respectively, was paid to an affiliated
broker/dealer. During the year ended December 31, 1997, OFDI received
contingent deferred sales charges of $156,781 and $1,757, respectively, upon
redemption of Class B and Class C shares as reimbursement for sales commissions
advanced by OFDI at the time of sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer and shareholder servicing agent for the Fund and for other
registered investment companies. OFS's total costs of providing such services
are allocated ratably to these companies.
The Fund has adopted a Service Plan for Class A shares to
reimburse OFDI for a portion of its costs incurred in connection with the
personal service and maintenance of shareholder accounts that hold Class A
shares. Reimbursement is made quarterly at an annual rate that may not exceed
0.25% of the average annual net assets of Class A shares of the Fund. OFDI uses
the service fee to reimburse brokers, dealers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares. During the year ended
December 31, 1997, OFDI paid $153,632 to an affiliated broker/dealer as
reimbursement for Class A personal service and maintenance expenses.
The Fund has adopted Distribution and Service Plans for
Class B and Class C shares to compensate OFDI for its costs in distributing
Class B and Class C shares and servicing accounts. Under the Plans, the Fund
pays OFDI an annual asset-based sales charge of 0.75% per year on Class B and
Class C shares for its services rendered in distributing Class B and Class C
shares. OFDI also receives a service fee of 0.25% per year to compensate
dealers for providing personal services for accounts that hold Class B and
Class C shares. Each fee is computed on the average annual net assets of Class
B and Class C shares, determined as of the close of each regular business day.
34 Oppenheimer Bond Fund
<PAGE> 36
================================================================================
During the year ended December 31, 1997, OFDI paid $5,726 to an affiliated
broker/dealer as compensation for Class B personal service and maintenance
expenses and retained $333,996 and $31,990, respectively, as compensation for
Class B and Class C sales commissions and service fee advances, as well as
financing costs. If either Plan is terminated by the Fund, the Board of Trustees
may allow the Fund to continue payments of the asset-based sales charge to OFDI
distributing shares before the Plan was terminated. At December 31, 1997, OFDI
had incurred unreimbursed expenses of $1,268,141 for Class B and $120,021 for
Class C.
================================================================================
5. FORWARD CONTRACTS
A forward foreign currency exchange contract (forward contract) is a commitment
to purchase or sell a foreign currency at a future date, at a negotiated rate.
The Fund uses forward contracts to seek to manage foreign
currency risks. They may also be used to tactically shift portfolio currency
risk. The Fund generally enters into forward contracts as a hedge upon the
purchase or sale of a security denominated in a foreign currency. In addition,
the Fund may enter into such contracts as a hedge against changes in foreign
currency exchange rates on portfolio positions.
Forward contracts are valued based on the closing prices of
the forward currency contract rates in the London foreign exchange markets on a
daily basis as provided by a reliable bank or dealer. The Fund will realize a
gain or loss upon the closing or settlement of the forward transaction.
Securities held in segregated accounts to cover net
exposure on outstanding forward contracts are noted in the Statement of
Investments where applicable. Unrealized appreciation or depreciation on forward
contracts is reported in the Statement of Assets and Liabilities. Realized gains
and losses are reported with all other foreign currency gains and losses in the
Fund's Statement of Operations.
Risks include the potential inability of the counterparty
to meet the terms of the contract and unanticipated movements in the value of a
foreign currency relative to the U.S. dollar.
At December 31, 1997, the Fund had outstanding forward contracts as follows:
<TABLE>
<CAPTION>
EXPIRATION CONTRACT AMOUNT VALUATION AS OF UNREALIZED
DATE (000S) DECEMBER 31, 1997 APPRECIATION
- ------------------------------------------------------------------------------------------------------------------------
CONTRACTS TO SELL
<S> <C> <C> <C> <C>
Canadian Dollar (CAD) 1/21/98 600 CAD $419,758 $20,641
</TABLE>
35 Oppenheimer Bond Fund
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
6. FUTURES CONTRACTS
The Fund may buy and sell interest rate futures contracts in order to gain
exposure to or protect against changes in interest rates. The Fund may also buy
or write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against
increases in interest rates and the resulting negative
effect on the value of fixed rate portfolio securities. The Fund may also
purchase futures contracts to gain exposure to changes in interest rates as it
may be more efficient or cost effective than actually buying fixed income
securities.
Upon entering into a futures contract, the Fund is required
to deposit either cash or securities (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 or
payable for the daily mark to market for variation margin.
Risks of entering into futures contracts (and related
options) include the possibility that there may be an illiquid market and that a
change in the value of the contract or option may not correlate with changes in
the value of the underlying securities.
At December 31, 1997, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
VALUATION AS OF UNREALIZED
EXPIRATION NUMBER OF DECEMBER 31, APPRECIATION
DATE CONTRACTS 1997 (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONTRACTS TO PURCHASE
- ---------------------
U.S. Treasury Bonds, 30 yr. 3/98 233 $28,069,219 $ 347,438
----------
CONTRACTS TO SELL
- -----------------
U.S. Treasury Nts., 2 yr. 3/98 10 2,077,500 (4,531)
U.S. Treasury Nts., 5 yr. 3/98 222 24,114,750 (109,406)
U.S. Treasury Nts., 10 yr. 3/98 5 560,781 (2,969)
----------
(116,906)
----------
$ 230,532
==========
</TABLE>
36 Oppenheimer Bond Fund
<PAGE> 38
================================================================================
7. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered
call options to hedge against adverse movements in the
value of portfolio holdings. When an option is written, the Fund receives a
premium and becomes obligated to sell or purchase the underlying securities at a
fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price on
the principal exchange on which the option is traded
and unrealized appreciation or depreciation is recorded. The Fund will realize a
gain or loss upon the expiration or closing of the option transaction. When an
option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option, or the cost of the security for a
purchased put or call option is adjusted by the amount of premium received or
paid.
Securities designated to cover outstanding call options are
noted in the Statement of Investments where applicable. Shares subject to call,
expiration date, exercise price, premium received and market value are detailed
in a footnote to the Statement of Investments. Options written are reported as a
liability in the Statement of Assets and Liabilities. Gains and losses are
reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up
the opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur
a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. The Fund also has the additional risk of not
being able to enter into a closing transaction if a liquid secondary market does
not exist.
Written option activity for the year ended December 31, 1997 was as follows:
<TABLE>
<CAPTION>
CALL OPTIONS PUT OPTIONS
---------------------------- ---------------------------
NUMBER OF AMOUNT OF NUMBER OF AMOUNT OF
OPTIONS PREMIUMS OPTIONS PREMIUMS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at December 31, 1996 -- $ -- -- $ --
Options written 10,100 59,063 9 2,618
Options closed or expired (10,100) (59,063) (9) (2,618)
-------- -------- --------- -------
Options outstanding at December 31, 1997 -- $ -- -- $ --
======== ======== ========= =======
</TABLE>
37 Oppenheimer Bond Fund
<PAGE> 39
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
8. ILLIQUID AND RESTRICTED SECURITIES
At December 31, 1997, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual restrictions on resale, and are valued under methods approved
by the Board of Trustees as reflecting fair value. A security may be considered
illiquid if it lacks a readily available market or if its valuation has not
changed for a certain period of time. The Fund intends to invest no more than
10% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limit. The aggregate value of illiquid or restricted securities
subject to this limitation at December 31, 1997 was $22,939,865, which
represents 9.24% of the Fund's net assets.
================================================================================
9. ACQUISITION OF CONNECTICUT MUTUAL INCOME ACCOUNT AND JEFFERSON-PILOT
INVESTMENT GRADE BOND FUND, INC.
On April 26, 1996, the Fund acquired all the net assets of Connecticut Mutual
Income Account, pursuant to an agreement and plan of reorganization approved by
the Connecticut Mutual Income Account shareholders on March 18, 1996. The Fund
issued 3,020,216 and 8,156 shares of beneficial interest for Class A and Class
B, respectively, valued at $31,863,280 and $86,045, in exchange for the net
assets, resulting in combined Class A net assets of $189,629,984 and Class B net
assets of $6,106,676 on April 26, 1996. The net assets acquired included net
unrealized depreciation of $633,177. The exchange qualified as a tax-free
reorganization for federal income tax purposes.
On December 20, 1996, the Fund acquired all the net assets
of Jefferson-Pilot Investment Grade Bond Fund, Inc.
pursuant to an agreement and plan of reorganization approved by the
Jefferson-Pilot Investment Grade Bond Fund, Inc. shareholders on December 3,
1996. The Fund issued 1,801,334 shares of beneficial interest for Class A,
valued at $19,273,967, in exchange for the net assets, resulting in combined
Class A net assets of $202,088,473 on December 20, 1996. The net assets acquired
included net unrealized appreciation of $1,288,511. The exchange qualified as a
tax-free reorganization for federal income tax purposes.
38 Oppenheimer Bond Fund
<PAGE> 40
================================================================================
10. BANK BORROWINGS
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the year ended December 31, 1997.
39 Oppenheimer Bond Fund
<PAGE> 41
INDEPENDENT AUDITORS' REPORT
================================================================================
The Board of Trustees and Shareholders of
Oppenheimer Bond Fund:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Bond Fund as of December 31, 1997,
the related statement of operations for the year then ended, the statements of
changes in net assets for the years ended December 31, 1997 and 1996, and the
financial highlights for the period January 1, 1993 to December 31, 1997. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at December 31, 1997 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 Bond Fund at December 31, 1997, 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 LLP
Denver, Colorado
January 23, 1998
40 Oppenheimer Bond Fund
<PAGE> 42
FEDERAL INCOME TAX INFORMATION (Unaudited)
================================================================================
In early 1998, shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1997. Regulations of
the U.S. Treasury Department require the Fund to report this information to the
Internal Revenue Service.
Dividends paid by the Fund during the fiscal year ended
December 31, 1997 which are not designated as capital gain distributions should
be multiplied by 1.21% to arrive at the net amount 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 the state and local
tax regulations, we recommend that you consult your tax advisor for specific
guidance.
41 Oppenheimer Bond Fund
<PAGE> 43
OPPENHEIMER BOND FUND
================================================================================
OFFICERS AND TRUSTEES James C. Swain, Chairman and Chief Executive
Officer
Bridget A. Macaskill, President
Robert G. Avis, Trustee
William A. Baker, Trustee
Charles Conrad, Jr., Trustee
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Ned M. Steel, Trustee
George C. Bowen, Vice President, Treasurer and
Assistant Secretary
Andrew J. Donohue, Vice President and Secretary
David P. Negri, Vice President
Jerry Webman, Vice President
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 The Bank of New York
PORTFOLIO SECURITIES
================================================================================
INDEPENDENT AUDITORS Deloitte & Touche LLP
================================================================================
LEGAL COUNSEL Myer, Swanson, Adams & Wolf, P.C.
This is a copy of a report to shareholders of
Oppenheimer Bond Fund. This report must be preceded
by a Prospectus of Oppenheimer Bond Fund. For
material information concerning the Fund, see the
Prospectus. Shares of Oppenheimer funds are not
deposits or obligations of any bank, are not
guaranteed by any bank, and are not insured by the
FDIC or any other agency, and involve investment
risks, including possible loss of the principal
amount invested.
42 Oppenheimer Bond Fund
<PAGE> 44
OPPENHEIMERFUNDS FAMILY
<TABLE>
<S> <C> <C>
==================================================================================================================================
REAL ASSET FUNDS
- ----------------------------------------------------------------------------------------------------------------------------------
Real Asset Fund Gold & Special Minerals Fund
==================================================================================================================================
STOCK FUNDS
- ----------------------------------------------------------------------------------------------------------------------------------
Developing Markets Fund Discovery Fund Growth Fund
International Small Quest Small Cap Value Fund Global Fund
Company Fund MidCap Fund Quest Global Value Fund
Enterprise Fund Capital Appreciation Fund(1) Disciplined Value Fund
International Growth Fund Quest Capital Value Fund Quest Value Fund
==================================================================================================================================
STOCK & BOND FUNDS
- ----------------------------------------------------------------------------------------------------------------------------------
Main Street Income & Quest Growth & Income Disciplined Allocation Fund
Growth Fund Value Fund Multiple Strategies Fund(2)
Quest Opportunity Value Fund Global Growth & Income Fund Bond Fund for Growth
Total Return Fund Equity Income Fund
==================================================================================================================================
BOND FUNDS
- ----------------------------------------------------------------------------------------------------------------------------------
International Bond Fund Champion Income Fund U.S. Government Trust
High Yield Fund Strategic Income Fund Limited-Term Government Fund
Bond Fund
==================================================================================================================================
MUNICIPAL FUNDS
- ----------------------------------------------------------------------------------------------------------------------------------
California Municipal Fund(3) Pennsylvania Municipal Fund(3) Rochester Division:
Florida Municipal Fund(3) Municipal Bond Fund Rochester Fund Municipals
New Jersey Municipal Fund(3) Insured Municipal Fund Limited Term New York
New York Municipal Fund(3) Intermediate Municipal Fund Municipal Fund
==================================================================================================================================
MONEY MARKET FUNDS(4)
- ----------------------------------------------------------------------------------------------------------------------------------
Money Market Fund Cash Reserves
==================================================================================================================================
LIFESPAN
- ----------------------------------------------------------------------------------------------------------------------------------
Growth Fund Balanced Fund Income Fund
</TABLE>
1. On 12/18/96, the Fund's name was changed from "Target Fund."
2. On 3/16/97, the Fund's name was changed from "Asset Allocation Fund."
3. Available only to investors in certain states.
4. An investment in money market funds is neither insured nor guaranteed by the
U.S. government and there can be no assurance that a money market fund will be
able to maintain a stable net asset value of $1.00 per share. Oppenheimer funds
are distributed by OppenheimerFunds Distributor, Inc., Two World Trade Center,
New York, NY 10048-0203.
(C) Copyright 1998 OppenheimerFunds, Inc. All rights reserved.
43 Oppenheimer Bond Fund
