<PAGE> 1
ANNUAL REPORT SEPTEMBER 30, 1997
OPPENHEIMER
INTERMEDIATE
MUNICIPAL FUND
[PHOTO]
[OPPENHEIMERFUNDS LOGO]
THE RIGHT WAY TO INVEST
<PAGE> 2
CONTENTS
3 President's Letter
4 Fund Performance
6 An Interview with the Fund's Managers
8 Statement of Investments
14 Statement of Assets &
Liabilities
16 Statement of Operations
17 Statements of Changes in Net Assets
18 Financial Highlights
20 Notes to Financial Statements
25 Independent Auditors' Report
26 Federal Income Tax Information
27 Officers & Trustees
28 Information & Services
REPORT HIGHLIGHTS
- ------------------------------------------------------------------------------
- - TOP QUARTILE RATING: According to Lipper Analytical Services, the Fund's
Class A shares were ranked 7th out of 133 funds in its category for the
one-year period ended September 30, 1997, affording it top quartile status.(2)
- - 4 REASONS FOR SUCCESS: The Fund's strong performance during the past 12
months can be linked to four distinct factors:
1) an overweighting in slightly lower-quality credits, which added yield and
appreciated in price more quickly than top-quality bonds during the period;
2) the qualification of several Triple-B rated bonds for insurance, which
raised the creditworthiness of the bonds, thereby boosting their prices;
3) an overweighting in noncallable securities, which outperformed as bond prices
rose; and
4) several credit-quality upgrades in the hospital sector.
AVG ANNUAL TOTAL RETURNS
For the 1-year period ended 9/30/97 without sales charges(1)
CLASS A
8.72%
CLASS B
7.88%
CLASS C
7.85%
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. Source: Lipper Analytical Services, 9/30/97. Oppenheimer Intermediate
Municipal Fund was ranked 7 of 133 (1-year), 16 of 41 (5-year), and 1 of 20
funds (10-year)in its category for the periods ended 9/30/97. Oppenheimer
Intermediate Municipal Fund is characterized by Lipper as an intermediate
municipal debt fund. Lipper rankings are based on total return and do not take
sales charges into account.
2 Oppenheimer Intermediate Municipal Fund
<PAGE> 3
[PHOTO]
JAMES C. SWAIN
Chairman
Oppenheimer
Intermediate Municipal Fund
[PHOTO]
BRIDGET A. MACASKILL
President
Oppenheimer
Intermediate Municipal Fund
DEAR SHAREHOLDER,
- ------------------------------------------------------------------------------
As you are no doubt aware, during the end of October and early November many
stock markets around the world recorded their all-time largest point declines,
followed by subsequent gains and continued volatility, leaving investors
uncertain about what would occur next.
To put those events in focus, let's look at a "snapshot" of the two-week
time period. Sharp declines in the overseas stock markets, particularly in
Asia, triggered a series of sell-offs throughout Europe, Latin America and the
United States. In response, the U.S. stock market, as measured by the Dow Jones
Industrial Average, dropped 554 points on October 27, its largest point decline
in history. However, almost as quickly, the U.S. stock market bounced back over
the succeeding few days, regaining nearly all of its losses.
While no one could have predicted the timing or extent of these
fluctuations, many analysts, including our fund managers here at
OppenheimerFunds, had warned of a correction for several months. We believed
that U.S. valuations were too high, stocks were expensive relative to bonds,
recent corporate earnings were somewhat disappointing and that Federal Reserve
Chairman Alan Greenspan could possibly seek a short-term interest rate hike.
As a result, when October 27 arrived, our equity funds held above-average
cash positions relative to many of our competitors. Not only did our higher
cash levels serve as a protection, they also enabled us to buy the stocks of
numerous excellent companies that were selling at more reasonable prices. In
addition, our international and global funds were not as impacted because they
weren't heavily invested in Southeast Asia and Japan. Finally, on the
fixed-income side, our bond funds were generally characterized by
longer-than-normal durations, which allowed us to lock in higher yields.
In conclusion, many of our funds experienced relatively strong performance
during the October-November market shake-ups. We'd like to take this
opportunity to remind shareholders that stock market volatility is a normal and
expected part of the business cycle. As Alan Greenspan suggested, in years to
come this period will likely be remembered as a positive change for a market
that was growing too quickly.
For frequent market updates, please visit our website at
WWW.OPPENHEIMERFUNDS.COM or call 1-800-835-3104 to listen to our recorded
messages. In the meantime, 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.
Sincerely,
/s/ JAMES C. SWAIN /s/ BRIDGET A. MACASKILL
James C. Swain Bridget A. Macaskill
November 7, 1997
3 Oppenheimer Intermediate Municipal Fund
<PAGE> 4
AVG ANNUAL TOTAL RETURNS
For the Period Ended 9/30/97(1)
<TABLE>
<CAPTION>
CLASS A
1 year 5 year 10 year
<S> <C> <C>
4.91% 5.42% 8.15%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
Since
1 year 5 year Inception
<S> <C> <C>
3.88% N/A 5.19%
</TABLE>
<TABLE>
<CAPTION>
CLASS C
Since
1 year 5 year Inception
<S> <C> <C>
6.85% N/A 4.63%
</TABLE>
CUMULATIVE TOTAL RETURN
For the Period Ended 9/30/97(1)
<TABLE>
<CAPTION>
CLASS A
5 year
<S> <C>
30.19% $13,019(4)
</TABLE>
PERFORMANCE UPDATE
- ------------------------------------------------------------------------------
Oppenheimer Intermediate Municipal Fund performed very well during the past
year. So well, that for the one-year period ended September 30, 1997, Lipper
Analytical Services ranked the Fund's Class A shares seventh in its category of
133 funds.(2) During the same period, the Fund's Class A shares provided an
average annual total return of 8.72%, without sales charges.(3)
<TABLE>
<CAPTION>
GROWTH OF $10,000
Over five years
(without sales charges)(4)
Oppenheimer Intermediate Lehman Brothers Municipal
Municipal Fund Class A shares Bond Index
<S> <C>
10,000 10,000
10,156.1 10,181.8
10,467.7 10,599.6
10,677.2 10,905.1
11,003.3 11,273.5
11,133 11,431.7
10,614.9 10,804.2
10,731.5 10,923.8
10,789.2 10,998.5
10,643.7 10,840.6
11,167.6 11,607
11,415.2 11,887.4
11,738 12,229.3
12,071 12,733.6
12,065.9 12,580
12,145.3 12,676.5
12,375 12,968.3
12,683.9 13,298.8
12,730.4 13,267.8
13,083 13,725.2
13,457.3 14,139.1
</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
3.50%. Class A shares were first publicly offered on 11/11/86. The Fund's
maximum sales charge for Class A shares was higher prior to 2/1/92, so actual
performance may have been lower. Class B returns include the applicable
contingent deferred sales charge of 4% (1-year) and 2% (since inception on
9/11/95). Class C returns for the one-year result include the contingent
deferred sales charge of 1%. Class C shares have an inception date of 12/1/93.
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.
4 Oppenheimer Intermediate Municipal Fund
<PAGE> 5
STANDARDIZED YIELDS(5)
For the 30 Days Ended 9/30/97
CLASS A
4.16%
CLASS B
3.56%
CLASS C
3.56%
<TABLE>
<CAPTION>
CREDIT ALLOCATION(6)
<S> <C>
- - AAA 48.3%
- - AA 1.5
- - A 20.1
- - BBB 18.5
- - Not Rated 11.6
</TABLE>
PORTFOLIO REVIEW
- ------------------------------------------------------------------------------
Oppenheimer Intermediate Municipal Fund is for investors looking for a source
of income exempt from federal income taxes with less volatility than a
long-term bond fund.
WHAT WE LOOK FOR
- - REDUCED INTEREST-RATE RISK.
- - Diversification across a WIDE RANGE OF MUNICIPAL SECURITIES.
- - Sectors and regions with high RELATIVE VALUE.
<TABLE>
<CAPTION>
TEN LARGEST POSITIONS BY STATE(6)
.......................................................
<S> <C> <C> <C>
California 15.2% Texas 6.3%
.......................................................
New York 14.6 South Carolina 4.5
.......................................................
Pennsylvania 8.7 Tennessee 3.8
.......................................................
Michigan 8.0 Connecticut 3.8
.......................................................
Illinois 7.7 U.S. Possessions 3.3
.......................................................
</TABLE>
2. Source: Lipper Analytical Services, 9/30/97. Oppenheimer Intermediate
Municipal Fund was ranked 7 of 133 (1-year), 16 of 41 (5-year), and 1 of 20
(10-year) funds in its category for the periods ended 9/30/97. Oppenheimer
Intermediate Municipal Fund is characterized by Lipper as an intermediate
municipal debt fund. Lipper rankings are based on total return and do not take
sales charges into account.
3. 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.
4. Results of a hypothetical $10,000 investment in Class A shares on September
30, 1992. The Lehman Brothers Municipal Bond Index is an unmanaged broad-based
index of investment grade municipal bonds, and cannot be purchased directly by
investors.
5. Standardized yield is based on net investment income for the 30-day period
ended 9/30/97. Falling net asset values will tend to artificially raise yields.
6. Portfolio data are as of 9/30/97, and are subject to change. Portfolio data
are dollar-weighted based on total market value of investments. Securities
rated by any rating organization are included in the equivalent Standard &
Poor's rating category. Average credit quality and allocation include rated
securities and those not rated by a national rating organization (currently
11.6% of total investments) but 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.
5 Oppenheimer Intermediate Municipal Fund
<PAGE> 6
"LOWER-QUALITY BONDS APPRECIATED IN PRICE MORE RAPIDLY THAN TOP-QUALITY BONDS
DURING THE PERIOD."
AN INTERVIEW WITH YOUR FUND'S MANAGERS
- ------------------------------------------------------------------------------
HOW HAS THE FUND PERFORMED DURING THE PAST YEAR?
Oppenheimer Intermediate Municipal Fund's Class A shares provided an average
annual total return of 8.72%, without sales charges,(1) for the one-year period
ended September 30, 1997.
WHAT FACTORS CONTRIBUTED TO THE FUND'S SUCCESS?
Four factors contributed to the Fund's success. The first factor was an
overweighting in a diversified portfolio of slightly lower-quality credits,
which added yield. Lower-rated municipal bonds pay higher interest to
compensate holders for added risk. In addition, lower-quality bonds also
appreciated in price more rapidly than top-quality bonds during the period.
The second factor was the qualification of several Triple B-rated bonds
for insurance. In the past few years, an increasing number of municipal bond
issues have been backed by private insurance. This insurance raises the
creditworthiness of the bond, boosting its price.
The third factor was an overweighting in noncallable securities, which
perform better than callable securities when interest rates are falling. And
fourth, the portfolio was able to enjoy several credit-quality upgrades in the
hospital sector, which represented 6% of the portfolio.
WHAT IS YOUR CURRENT STRATEGY?
We are keeping the portfolio's duration longer than the competition. Duration
represents sensitivity to interest rates. A longer duration suggests that the
portfolio is more sensitive to interest rate changes. This strategy reflects
our view that interest rates are headed downward.
Secondly, we continue to overweight the portfolio with noncallable bonds
in the 10-15 year maturity range. In a period of falling interest rates, a
noncallable bond is more valuable than a callable bond, if all other
factors--like
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.
6 Oppenheimer Intermediate Municipal Fund
<PAGE> 7
[PHOTO]
PORTFOLIO MANAGEMENT TEAM (L TO R)
Bob Patterson
Caryn Halbrecht (Fund Manager)
Jerry Webman
credit quality and maturity--are equal. If a bond is callable, then the issuer
is likely to call the bonds in a period of falling interest rates in order to
refinance debt at lower rates. The holder must reinvest the proceeds, also at
lower rates. However, a noncallable bondholder is able to continue to hold the
bond until maturity.
Thirdly, we are replacing higher coupon bonds with lower coupon and zero
coupon bonds. Zero coupon bonds are sold at a deep discount from their face
value and rather than making periodic interest payments, the interest is paid
upon maturity. In a period of falling interest rates, bonds with lower or zero
interest payments outperform higher coupon bonds because of the power of
compound interest. That is, zero-coupon bonds rise more rapidly in value than
full-coupon bonds, because the bonds have locked in a particular rate of
reinvestment that becomes more attractive the further rates fall.
WHAT IS YOUR OUTLOOK FOR THE FUND?
Our outlook is positive and we are positioned for further upside in bond
prices. We believe that inflation will remain low, thus keeping long-term
interest rates trending lower. In addition, the reduced supply of U.S. Treasury
bonds is also a positive factor in keeping interest rates in check, as the
federal government approaches a balanced budget and has less need for
borrowing.
However, our approach is active and we are constantly on the lookout for
any contrasting signs in the market. We will react quickly to reduce the Fund's
risk if conditions change.
7 Oppenheimer Intermediate Municipal Fund
<PAGE> 8
STATEMENT OF INVESTMENTS September 30, 1997
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/
S&P/FITCH FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
===================================================================================================
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES 106.6%
- ---------------------------------------------------------------------------------------------------
ALASKA--1.0%
North Slope Borough, AK GOB, Series B,
FSA Insured, 7.50%, 6/30/01 Aaa/AAA $1,000,000 $ 1,111,650
- ---------------------------------------------------------------------------------------------------
CALIFORNIA--16.2%
Berkeley, CA HF RRB, Alta Bates Medical
Center, Series A, 6.50%, 12/1/11 A2/A+ 3,000,000 3,368,820
- ---------------------------------------------------------------------------------------------------
CA SCDAU Revenue COP, Cedars-Sinai
Medical Center, MBIA Insured, 6.50%, 8/1/12 Aaa/AAA 1,000,000 1,159,730
- ---------------------------------------------------------------------------------------------------
CA SCDAU Revenue Refunding COP,
Cedars-Sinai Medical Center, 5.40%, 11/1/15 A1/NR 4,000,000 3,900,680
- ---------------------------------------------------------------------------------------------------
Long Beach, CA Aquarium of the Pacific RB,
Series 1995-A, 5.75%, 7/1/05 NR/BBB 1,500,000 1,579,320
- ---------------------------------------------------------------------------------------------------
Pomona, CA USD GORB, Series A,
MBIA Insured, 5.95%, 8/1/10 Aaa/AAA 1,000,000 1,113,250
- ---------------------------------------------------------------------------------------------------
Riverside Cnty., CA Refunding COP, Air Force
Village West, Inc., Series A, 8.125%, 6/15/12 NR/NR 2,290,000 2,496,352
- ---------------------------------------------------------------------------------------------------
Sacramento, CA Cogeneration Authority RB,
Procter & Gamble Project, 6.375%, 7/1/10 NR/BBB- 1,100,000 1,199,220
- ---------------------------------------------------------------------------------------------------
San Joaquin Hills, CA Transportation Corridor
Agency Toll Road CAP RRB, Series A,
MBIA Insured, Zero Coupon, 5.25%, 1/15/11(1) Aaa/AAA 5,450,000 2,754,648
-----------
17,572,020
- ---------------------------------------------------------------------------------------------------
COLORADO--1.5%
Denver, CO City & Cnty. Airport RB,
Series A, 7%, 11/15/99 Baa2/BBB 1,000,000 1,053,580
- ---------------------------------------------------------------------------------------------------
Meridian Metropolitan District, CO GORB,
7.50%, 12/1/11 A3/NR 500,000 549,490
-----------
1,603,070
- ---------------------------------------------------------------------------------------------------
CONNECTICUT--4.1%
CT DAU RB, Mystic Marinelife Aquarium
Project, Series A, 6.875%, 12/1/17 NR/NR 1,000,000 1,043,490
- ---------------------------------------------------------------------------------------------------
Mashantucket, CT Western Pequot Tribe
Special RB, Series A, 6.50%, 9/1/05(2) Baa3/BBB 2,500,000 2,763,275
- ---------------------------------------------------------------------------------------------------
Mashantucket, CT Western Pequot Tribe
Special RB, Sub. Lien, Series B, 5.60%, 9/1/09(2) Baa3/NR 600,000 609,888
-----------
4,416,653
</TABLE>
8 Oppenheimer Intermediate Municipal Fund
<PAGE> 9
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/
S&P/FITCH FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FLORIDA--2.9%
FL HFA RRB, MH, Series C, 6%, 8/1/11 NR/AAA $1,000,000 $1,059,600
- ---------------------------------------------------------------------------------------------------
Grand Haven, FL CDD SPAST RB,
Series A, 6.30%, 5/1/02 NR/NR 2,000,000 2,044,240
-----------
3,103,840
- ---------------------------------------------------------------------------------------------------
GEORGIA--2.0%
GA MEAU RRB, Project One, Sub. Lien,
Series B, AMBAC Insured, 6%, 1/1/06 Aaa/AAA/AAA 2,000,000 2,186,000
- ---------------------------------------------------------------------------------------------------
ILLINOIS--8.2%
Chicago, IL BOE GOB, School Reform Project,
MBIA Insured, 6.25%, 12/1/11 Aaa/AAA 1,000,000 1,131,190
- ---------------------------------------------------------------------------------------------------
Cook Cnty., IL Community College District No.
508 Chicago COP, FGIC Insured, 8.75%, 1/1/03 Aaa/AAA 2,250,000 2,691,855
- ---------------------------------------------------------------------------------------------------
Cook Cnty., IL Community College
District No. 508 Lease COP, Series C,
MBIA Insured, 7.70%, 12/1/07 Aaa/AAA 1,000,000 1,238,760
- ---------------------------------------------------------------------------------------------------
IL HFAU RRB, Franciscan Sisters Health Care
Project, Series C, MBIA Insured, 6%, 9/1/09 Aaa/AAA 2,000,000 2,129,280
- ---------------------------------------------------------------------------------------------------
Southwestern IL DAU Hospital RB,
St. Elizabeth Medical Center, 8%, 6/1/10 NR/A 500,000 540,925
- ---------------------------------------------------------------------------------------------------
Waukegan, IL GOB, MBIA Insured,
7.50%, 12/30/03 A1/NR 1,000,000 1,145,080
-----------
8,877,090
- ---------------------------------------------------------------------------------------------------
INDIANA--1.2%
IN Bond Bank RB, State Revolving Fund
Program, Series A, 6.875%, 2/1/12 NR/A 1,135,000 1,274,083
- ---------------------------------------------------------------------------------------------------
LOUISIANA--1.0%
LA GOB, Series A, AMBAC Insured, 8%, 5/1/99 Aaa/AAA/AAA 1,000,000 1,062,180
- ---------------------------------------------------------------------------------------------------
MAINE--1.2%
ME Educational LMC Student Loan RRB,
Series A-4, 6.05%, 11/1/04 Aaa/NR 750,000 785,767
- ---------------------------------------------------------------------------------------------------
ME SHAU RB, Mtg. Purchase Project,
Series A, 7.50%, 11/15/22 Aaa/AAA 500,000 529,950
-----------
1,315,717
- ---------------------------------------------------------------------------------------------------
MARYLAND--0.4%
Howard Cnty., MD COP, Series A, 8.05%, 2/15/21 Aa1/AA+ 350,000 481,043
</TABLE>
9 Oppenheimer Intermediate Municipal Fund
<PAGE> 10
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/
S&P/FITCH FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MICHIGAN--8.5%
Detroit, MI GORB, Series B,
FGIC Insured, 7%, 4/1/04 Aaa/AAA $2,000,000 $ 2,275,560
- ---------------------------------------------------------------------------------------------------
MI Hospital FAU RRB, Detroit Medical Group,
Series A, AMBAC Insured, 5%, 8/15/05 Aaa/AAA/AAA 2,180,000 2,232,603
- ---------------------------------------------------------------------------------------------------
MI Hospital FAU RRB, Greater Detroit
Sinai Hospital, Series 1995, 6%, 1/1/08 Baa2/NR/BBB 2,500,000 2,584,825
- ---------------------------------------------------------------------------------------------------
MI Strategic Fund SWD RRB, Genesee Power
Station Project, 7.50%, 1/1/21 NR/NR 2,000,000 2,125,240
-----------
9,218,228
- ---------------------------------------------------------------------------------------------------
NEBRASKA--1.9%
NE Higher Education Loan Program,
Series A-6, 5.90%, 6/1/03 A/NR/A 2,000,000 2,082,240
- ---------------------------------------------------------------------------------------------------
NEW MEXICO--0.5%
NM Hospital Equipment Loan Council RB,
San Juan Regional Medical Center, Inc.
Project, 7.90%, 6/1/11 A3/NR 500,000 569,285
- ---------------------------------------------------------------------------------------------------
NEW YORK--15.5%
NYC GOB, Prerefunded, Series F,
8.40%, 11/15/07 Aaa/AAA 2,140,000 2,508,765
- ---------------------------------------------------------------------------------------------------
NYC GOB, Prerefunded, Series H,
7.20%, 2/1/15 NR/BBB+/A- 1,200,000 1,352,976
- ---------------------------------------------------------------------------------------------------
NYC GOB, Unrefunded Balance,
Series F, 8.40%, 11/15/07 Baa1/BBB+ 360,000 412,243
- ---------------------------------------------------------------------------------------------------
NYC GORB, Series A, AMBAC Insured,
7%, 8/1/07 Aaa/AAA 2,000,000 2,349,240
- ---------------------------------------------------------------------------------------------------
NYC GORB, Series B, AMBAC Insured,
6.20%, 8/15/06 Aaa/AAA 1,500,000 1,663,245
- ---------------------------------------------------------------------------------------------------
NYC IDAU SPF RB, Terminal One
Group Assn. Project, 6%, 1/1/08 A/A/A- 2,000,000 2,123,980
- ---------------------------------------------------------------------------------------------------
NYC IDAU SPF RB, Terminal One
Group Assn. Project, 6.10%, 1/1/09 A/A/A- 2,000,000 2,123,480
- ---------------------------------------------------------------------------------------------------
NYC Municipal Assistance Corp. RRB,
Series L, 6%, 7/1/04 Aa2/AA-/AA 1,000,000 1,090,080
- ---------------------------------------------------------------------------------------------------
NYS GORB, 7.80%, 11/15/99 A/A- 1,000,000 1,076,480
- ---------------------------------------------------------------------------------------------------
NYS HFA RRB, NYC HF, Series A,
6.375%, 11/1/04 Baa/BBB+ 2,000,000 2,193,520
-----------
16,894,009
</TABLE>
10 Oppenheimer Intermediate Municipal Fund
<PAGE> 11
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/
S&P/FITCH FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OHIO--2.5%
Cleveland, OH COP, Stadium Project,
AMBAC Insured, 6%, 11/15/09 Aaa/AAA $1,000,000 $ 1,106,800
- ---------------------------------------------------------------------------------------------------
OH Solid Waste RB, Republic Engineered
Steels, Inc. Project, 9%, 6/1/21 NR/NR 1,600,000 1,663,600
-----------
2,770,400
- ---------------------------------------------------------------------------------------------------
OKLAHOMA--1.1%
OK Industrial Authority Health Systems RB,
Baptist Medical Center, Series C,
AMBAC Insured, 7%, 8/15/05 Aaa/AAA/AAA 955,000 1,096,426
- ---------------------------------------------------------------------------------------------------
Oklahoma Cnty., OK Home FAU RB,
7.65%, 1/1/23 NR/AA- 125,000 132,310
-----------
1,228,736
- ---------------------------------------------------------------------------------------------------
OREGON--1.5%
OR Emerald Peoples Utilities District RRB,
FGIC Insured, 7.20%, 11/1/04 Aaa/AAA 1,420,000 1,659,739
- ---------------------------------------------------------------------------------------------------
PENNSYLVANIA--9.2%
PA EDFAU RR RB, Northampton Generating,
Sr. Lien, Series A, 6.40%, 1/1/09 NR/NR 2,000,000 2,061,740
- ---------------------------------------------------------------------------------------------------
PA IDAU ED RB, Escrowed to Maturity,
Series A, 6.80%, 7/1/01 NR/NR/AAA 3,000,000 3,254,400
- ---------------------------------------------------------------------------------------------------
Philadelphia, PA Hospitals & HEFAU RRB,
Jeanes Health System Project, 6.20%, 7/1/00 Baa3/BBB 1,360,000 1,412,659
- ---------------------------------------------------------------------------------------------------
Schuylkill Cnty., PA IDAU RR RRB, Schuylkill
Energy Resources, Inc., 6.50%, 1/1/10 NR/NR 3,265,000 3,321,452
-----------
10,050,251
- ---------------------------------------------------------------------------------------------------
SOUTH CAROLINA--4.8%
Florence Cnty., SC IDV RB, Stone Container
Project, 7.375%, 2/1/07 NR/NR 1,890,000 2,021,242
- ---------------------------------------------------------------------------------------------------
Piedmont, SC MPA Electric RRB,
Escrowed to Maturity, 6.05%, 1/1/04 Aaa/BBB 2,675,000 2,914,546
- ---------------------------------------------------------------------------------------------------
Richland Cnty., SC Hospital Facilities RB,
Community Provider Pooled Loan Program,
Escrowed to Maturity, Series A, FSA
Insured, 7.125%, 7/1/17 Aaa/AAA 250,000 276,040
-----------
5,211,828
</TABLE>
11 Oppenheimer Intermediate Municipal Fund
<PAGE> 12
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/
S&P/FITCH FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SOUTH DAKOTA--1.4%
SD Student Loan Finance RB,
Series A, 5.95%, 8/1/01 NR/A+ $1,500,000 $ 1,555,155
- ---------------------------------------------------------------------------------------------------
TENNESSEE--4.1%
Chattanooga-Hamilton Cnty., TN HA RB,
Erlanger Medical Center, Prerefunded,
6.85%, 5/25/21 Aaa/AAA 3,000,000 3,310,320
- ---------------------------------------------------------------------------------------------------
Memphis Shelby Cnty., TN Airport Authority
RRB, Series A, MBIA Insured, 6.25%, 2/15/11(3) Aaa/AAA 1,000,000 1,109,430
-----------
4,419,750
- ---------------------------------------------------------------------------------------------------
TEXAS--6.7%
Austin, TX ISD GORB, 7%, 8/1/06 Aaa/AAA 2,000,000 2,357,880
- ---------------------------------------------------------------------------------------------------
Humble, TX ISD CAP GORB, Zero Coupon,
5.15%, 2/15/08(1) Aaa/AAA 2,370,000 1,424,133
- ---------------------------------------------------------------------------------------------------
San Antonio, TX Airport System RRB,
AMBAC Insured, 7.125%, 7/1/05 Aaa/AAA/AAA 1,000,000 1,144,940
- ---------------------------------------------------------------------------------------------------
Tarrant Cnty., TX HFDC RB, Texas Health
Resources System, Series A, MBIA
Insured, 5.75%, 2/15/11 Aaa/AAA 2,230,000 2,370,089
-----------
7,297,042
- ---------------------------------------------------------------------------------------------------
UTAH--1.9%
Davis Cnty., UT Solid Waste Management &
Recovery RRB, Special Service District,
6.125%, 6/15/09 Baa2/BBB+ 2,000,000 2,078,500
- ---------------------------------------------------------------------------------------------------
VERMONT--0.9%
VT SAC Educational Loan RB, Series A-3,
FSA Insured, 6.25%, 6/15/03 Aaa/AAA 900,000 949,707
- ---------------------------------------------------------------------------------------------------
WEST VIRGINIA--0.8%
WV School Building Authority RB,
Prerefunded, Series A, MBIA Insured,
7.25%, 7/1/15 Aaa/AAA 750,000 824,363
- ---------------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA--2.0%
DC GORB, Series A, AMBAC Insured,
6.50%, 6/1/06 Aaa/AAA/AAA 1,000,000 1,125,360
- ---------------------------------------------------------------------------------------------------
DC Hospital RRB, Medlantic Healthcare Group,
Series A, MBIA Insured, 6%, 8/15/12 Aaa/AAA 1,000,000 1,097,360
-----------
2,222,720
</TABLE>
12 Oppenheimer Intermediate Municipal Fund
<PAGE> 13
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/
S&P/FITCH FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. POSSESSIONS--3.5%
PR CMWLTH GOB, 6.35%, 7/1/10 Baa1/A $1,500,000 $ 1,637,145
- ---------------------------------------------------------------------------------------------------
PR EPAU RB, Series P, 6.75%, 7/1/03 Baa1/BBB+ 2,000,000 2,179,840
-----------
3,816,985
-----------
Total Municipal Bonds and Notes (Cost $111,059,994) 115,852,284
</TABLE>
<TABLE>
<CAPTION>
DATE STRIKE CONTRACTS
===================================================================================================
<S> <C> <C> <C> <C>
CALL OPTIONS PURCHASE--0.1%
- ---------------------------------------------------------------------------------------------------
U.S. Treasury, 30 yr. Futures, 12/97 Call Opt. 11/97 $118 179 83,906
- ---------------------------------------------------------------------------------------------------
U.S. Treasury, 30 yr. Futures, 12/97 Call Opt. 11/97 $120 89 15,297
-----------
Total Call Options Purchased (Cost $78,295) 99,203
- ---------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $111,138,289) 106.6% 115,951,487
- ---------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (6.6) (7,210,913)
---- -----------
NET ASSETS 100.0% $108,740,574
===== ============
</TABLE>
To simplify the listing of securities, abbreviations are used per the table
below:
<TABLE>
<S> <C> <C> <C>
BOE -- Board of Education IDAU -- Industrial Development Authority
CAP -- Capital Appreciation ISD -- Independent School District
CDD -- Community Development District LMC -- Loan Marketing Corp.
CMWLTH -- Commonwealth MEAU -- Municipal Electric Authority
COP -- Certificates of Participation MH -- Multifamily Housing
DAU -- Development Authority MPA -- Municipal Power Agency
ED -- Economic Development NYC -- New York City
EDFAU -- Economic Development Finance Authority NYS -- New York State
EPAU -- Electric Power Authority RB -- Revenue Bonds
FAU -- Finance Authority RR -- Resource Recovery
GOB -- General Obligation Bonds RRB -- Revenue Refunding Bonds
GORB -- General Obligation Refunding Bonds SAC -- Student Assistance Corp.
HA -- Hospital Authority SCDAU -- Statewide Communities Development
HEFAU -- Higher Educational Facilities Authority Authority
HF -- Health Facilities SHAU -- State Housing Authority
HFA -- Housing Finance Agency SPAST -- Special Asset
HFAU -- Health Facilities Authority SPF -- Special Facilities
HFDC -- Health Facilities Development Corp. SWD -- Solid Waste Disposal
IDV -- Industrial Development USD -- Unified School District
</TABLE>
1. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
2. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities
have been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $3,373,163 or 3.10% of the Fund's net
assets, at September 30, 1997.
3. When-issued security to be delivered and settled after September 30, 1997.
As of September 30, 1997, securities subject to the alternative minimum tax
amounted to $21,087,681 or 19.39% of the Fund's net assets.
See accompanying Notes to Financial Statements.
13 Oppenheimer Intermediate Municipal Fund
<PAGE> 14
STATEMENT OF ASSETS AND LIABILITIES September 30, 1997
<TABLE>
<S> <C>
=================================================================================================
ASSETS
Investments, at value (cost $111,138,289) see accompanying statement $115,951,487
- -------------------------------------------------------------------------------------------------
Receivables:
Investments sold 2,185,560
Interest 1,632,003
Shares of beneficial interest sold 292,136
- -------------------------------------------------------------------------------------------------
Other 33,317
---------------
Total assets 120,094,503
=================================================================================================
LIABILITIES
Bank overdraft 6,443
- -------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 10,526,222
Shares of beneficial interest redeemed 361,845
Dividends 281,137
Distribution and service plan fees 65,836
Transfer and shareholder servicing agent fees 9,345
Other 103,101
---------------
Total liabilities 11,353,929
=================================================================================================
NET ASSETS $108,740,574
===============
=================================================================================================
COMPOSITION OF NET ASSETS
Paid-in capital $104,053,184
- -------------------------------------------------------------------------------------------------
Undistributed net investment income 616,172
- -------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (741,980)
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments Note 3 4,813,198
---------------
Net assets $108,740,574
===============
</TABLE>
14 Oppenheimer Intermediate Municipal Fund
<PAGE> 15
<TABLE>
<S> <C>
====================================================================================================
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$87,110,620 and 5,745,793 shares of beneficial interest outstanding) $15.16
Maximum offering price per share (net asset value plus sales charge of
3.50% of offering price) $15.71
- ----------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $7,689,555 and 507,362 shares of beneficial interest outstanding) $15.16
- ----------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $13,940,399 and 921,116 shares of beneficial interest outstanding) $15.13
</TABLE>
See accompanying Notes to Financial Statements.
15 Oppenheimer Intermediate Municipal Fund
<PAGE> 16
STATEMENT OF OPERATIONS For the Year Ended September 30, 1997
<TABLE>
<S> <C>
=================================================================================================
INVESTMENT INCOME
Interest $6,497,963
=================================================================================================
EXPENSES
Management fees--Note 4 509,834
- -------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 207,364
Class B 47,538
Class C 119,537
- -------------------------------------------------------------------------------------------------
Shareholder reports 97,956
- -------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 94,483
- -------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 32,933
Class B 2,698
Class C 4,973
- -------------------------------------------------------------------------------------------------
Legal and auditing fees 25,463
- -------------------------------------------------------------------------------------------------
Custodian fees and expenses 14,278
- -------------------------------------------------------------------------------------------------
Trustees' fees and expenses 3,853
- -------------------------------------------------------------------------------------------------
Other 6,266
----------
Total expenses 1,167,176
Less expenses paid indirectly--Note 4 (11,636)
----------
Net expenses 1,155,540
=================================================================================================
NET INVESTMENT INCOME 5,342,423
=================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments (160,387)
Closing of futures contracts 8,656
----------
Net realized loss (151,731)
- -------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 3,309,533
----------
Net realized and unrealized gain 3,157,802
=================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $8,500,225
==========
</TABLE>
See accompanying Notes to Financial Statements.
16 Oppenheimer Intermediate Municipal Fund
<PAGE> 17
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1997 1996
===============================================================================================
<S> <C> <C>
OPERATIONS
Net investment income $ 5,342,423 $ 4,872,668
- -----------------------------------------------------------------------------------------------
Net realized gain (loss) (151,731) 635,204
- -----------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 3,309,533 (734,901)
------------ -----------
Net increase in net assets resulting from operations 8,500,225 4,772,971
===============================================================================================
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Class A (4,467,924) (4,349,156)
Class B (209,401) (63,816)
Class C (533,387) (407,791)
===============================================================================================
BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets resulting from beneficial
interest transactions--Note 2:
Class A 1,131,907 2,742,813
Class B 4,656,894 2,744,970
Class C 2,643,754 3,306,779
===============================================================================================
NET ASSETS
Total increase 11,722,068 8,746,770
- -----------------------------------------------------------------------------------------------
Beginning of period 97,018,506 88,271,736
------------ -----------
End of period (including undistributed net investment
income of $616,172 and $658,246, respectively) $108,740,574 $97,018,506
============ ===========
</TABLE>
See accompanying Notes to Financial Statements.
17 Oppenheimer Intermediate Municipal Fund
<PAGE> 18
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1997 1996 1995 1994 1993
==============================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $14.69 $14.69 $14.23 $15.34 $15.09
- --------------------------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .80 .79 .79 .72 .77
Net realized and unrealized
gain (loss) .45 (.01) .42 (1.00) .70
------ ------ ------ -------- -------
Total income (loss) from
investment operations 1.25 .78 1.21 (.28) 1.47
- --------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (.78) (.78) (.75) (.76) (.75)
Distributions from net realized gain -- -- -- -- (.47)
Distributions in excess of net
realized gain -- -- -- (.07) --
------ ------ ------ -------- -------
Total dividends and distributions
to shareholders (.78) (.78) (.75) (.83) (1.22)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.16 $14.69 $14.69 $14.23 $15.34
====== ====== ====== ======== =======
==============================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) 8.72% 5.41% 8.78% (1.92)% 10.31%
==============================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $87,111 $83,253 $80,535 $83,456 $70,136
- --------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $85,590 $82,217 $79,681 $79,076 $48,915
- --------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.35% 5.35% 5.55% 5.05% 5.08%
Expenses(7) 1.02% 1.02% 0.98% 1.00% 1.07%(6)
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 31.1% 53% 55% 51% 21%
</TABLE>
1. For the period from December 1, 1993 (inception of offering) to September
30, 1994.
2. For the period from September 11, 1995 (inception of offering) to September
30, 1995.
3. Per share amounts calculated based on the average shares outstanding during
the period.
4. 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.
5. Annualized.
18 Oppenheimer Intermediate Municipal Fund
<PAGE> 19
<TABLE>
<CAPTION>
CLASS B CLASS C
- ---------------------------------- -----------------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
1997(3) 1996 1995(2) 1997 1996 1995 1994(1)
===============================================================================
<C> <C> <C> <C> <C> <C> <C>
$14.69 $14.69 $14.71 $14.67 $14.67 $14.18 $15.14
- -------------------------------------------------------------------------------
.67 .66 .06 .66 .68 .69 .46
.46 -- (.02) .47 (.01) .43 (.83)
------ ------- ------ ------ -------- ----- -----
1.13 .66 .04 1.13 .67 1.12 (.37)
- -------------------------------------------------------------------------------
(.66) (.66) (.06) (.67) (.67) (.63) (.52)
-- -- -- -- -- -- --
-- -- -- -- -- -- (.07)
------ ------- ------ ------ -------- ----- -----
(.66) (.66) (.06) (.67) (.67) (.63) (.59)
- -------------------------------------------------------------------------------
$15.16 $14.69 $14.69 $15.13 $14.67 $14.67 $14.18
====== ======= ====== ====== ======== ====== ======
===============================================================================
7.88% 4.56% 0.83% 7.85% 4.63% 8.13% (2.54)%
===============================================================================
$7,690 $2,858 $119 $13,940 $10,908 $7,618 $8,511
- -------------------------------------------------------------------------------
$4,763 $1,440 $ 37 $11,970 $ 9,015 $7,437 $4,686
- -------------------------------------------------------------------------------
4.54% 4.51% 3.87%(5) 4.57% 4.56% 4.64% 3.77%(5)
1.79% 1.81% 1.54%(5) 1.77% 1.78% 1.88% 2.24%(5)
- -------------------------------------------------------------------------------
31.1% 53% 55% 31.1% 53% 55% 51%
</TABLE>
6. The expense ratio was 1.05% net of the voluntary assumption by the Manager.
7. Beginning in fiscal 1995, the expense ratio reflects the effect of expenses
paid indirectly by the Fund. Prior year expense ratios have not been adjusted.
8. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended September 30, 1997 were $48,749,221 and $31,937,283,
respectively.
See accompanying Notes to Financial Statements.
19 Oppenheimer Intermediate Municipal Fund
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
==============================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Intermediate Municipal Fund (the Fund) is a separate series of
Oppenheimer Municipal Fund, a diversified, open-end management investment
company registered under the Investment Company Act of 1940, as amended. The
Fund's investment objective is to seek maximum current income exempt from
federal income tax for individual investors that is consistent with the
preservation of capital by investing primarily in intermediate term municipal
bonds. 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 subject to a
contingent deferred sales charge. All classes of shares have identical rights
to earnings, assets and voting privileges, except that each class has its own
distribution and/or service plan, expenses directly attributable to 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. 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.
- ------------------------------------------------------------------------------
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.
20 Oppenheimer Intermediate Municipal Fund
<PAGE> 21
==============================================================================
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 September 30, 1997, the
Fund had available for federal income tax purposes an unused capital loss
carryover of approximately $742,000, expiring in 2003 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 premium amortization on long-term bonds 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 period ended September 30, 1997, amounts have been
reclassified to reflect a decrease in undistributed net investment income of
$173,785, a decrease in accumulated net realized loss on investments of
$547,316, and a decrease in paid-in capital of $373,531.
- ------------------------------------------------------------------------------
OTHER. Investment transactions are accounted for on the date the investments
are purchased or sold (trade date). Original issue discount on securities
purchased is amortized over the life of the respective securities using the
effective yield method, in accordance with federal income tax requirements. For
bonds acquired after April 30, 1993, on disposition or maturity, taxable
ordinary income is recognized to the extent of the lesser of gain or market
discount that would have accrued over the holding period. Realized gains and
losses on investments and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for
federal income tax purposes.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
21 Oppenheimer Intermediate Municipal Fund
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (Continued)
==============================================================================
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 SEPTEMBER 30, 1997 YEAR ENDED SEPTEMBER 30, 1996
-------------------------------- -----------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 1,232,638 $ 18,373,341 974,292 $ 14,353,015
Dividends and
distributions reinvested 202,901 3,016,871 203,597 2,998,589
Redeemed (1,357,416) (20,258,305) (993,272) (14,608,791)
---------- ------------ -------- ------------
Net increase 78,123 $ 1,131,907 184,617 $ 2,742,813
========== ============ ======== ============
- --------------------------------------------------------------------------------------------------------------
Class B:
Sold 337,796 $ 5,030,661 193,861 $ 2,852,627
Dividends and
distributions reinvested 8,821 131,375 2,577 37,785
Redeemed (33,826) (505,142) (9,964) (145,442)
---------- ------------ -------- ------------
Net increase 312,791 $ 4,656,894 186,474 $ 2,744,970
========== ============ ======== ============
- --------------------------------------------------------------------------------------------------------------
Class C:
Sold 397,151 $ 5,901,848 380,233 $ 5,600,605
Dividends and
distributions reinvested 27,933 414,837 20,909 307,116
Redeemed (247,738) (3,672,931) (176,779) (2,600,942)
---------- ------------ -------- ------------
Net increase 177,346 $ 2,643,754 224,363 $ 3,306,779
========== ============ ======== ============
</TABLE>
==============================================================================
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At September 30, 1997, net unrealized appreciation on investments of $4,813,198
was composed of gross appreciation of $5,225,559, and gross depreciation of
$412,361.
==============================================================================
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 0.50% on the first
$100 million of average annual net assets, 0.45% on the next $150 million,
0.425% on the next $250 million and 0.40% on net assets in excess of $500
million.
The Manager acts as the accounting agent for the Fund at an annual
fee of $12,000, plus out-of-pocket costs and expenses reasonably incurred.
For the year ended September 30, 1997, commissions (sales charges
paid by investors) on sales of Class A shares totaled $173,050, of which
$75,561 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
and Class C shares totaled $133,554 and $57,363, respectively, of which $6,814
was paid to an affiliated broker/dealer for Class B shares.
22 Oppenheimer Intermediate Municipal Fund
<PAGE> 23
==============================================================================
During the year ended September 30, 1997, OFDI received contingent deferred
sales charges of $13,462 and $8,862, 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.
Expenses paid indirectly represent a reduction of custodian fees
for earnings on cash balances maintained by the Fund.
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 maintaining accounts
of their customers that hold Class A shares. During the year ended September
30, 1997, OFDI paid $26,107 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 services and 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
shares and Class C shares, as compensation for sales commissions paid from its
own resources at the time of sale and associated financing costs. OFDI also
receives a service fee of 0.25% per year as compensation for costs incurred in
connection with the personal service and maintenance of accounts that hold
shares of the Fund, including amounts paid to brokers, dealers, banks and other
financial institutions. Both fees are computed on the average annual net assets
of Class B and Class C shares, determined as of the close of each regular
business day. During the year ended September 30, 1997, OFDI paid $4,191 to an
affiliated broker/dealer as compensation for Class C personal service and
maintenance expenses and retained $43,231 and $52,002, 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 for distributing shares before the Plan was
terminated. At September 30, 1997, OFDI had incurred unreimbursed expenses of
$167,478 for Class B and $186,693 for Class C.
23 Oppenheimer Intermediate Municipal Fund
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (Continued)
==============================================================================
5. 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.
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.
==============================================================================
6. BANK BORROWINGS
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other OppenheimerFunds 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
September 30, 1997.
24 Oppenheimer Intermediate Municipal Fund
<PAGE> 25
INDEPENDENT AUDITORS' REPORT
==============================================================================
The Board of Trustees and Shareholders of
Oppenheimer Intermediate Municipal Fund:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Intermediate Municipal Fund as of
September 30, 1997, the related statement of operations for the year then
ended, the statements of changes in net assets for the years ended September
30, 1997 and 1996, and the financial highlights for the period October 1, 1992
to September 30, 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 September 30, 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
Intermediate Municipal Fund at September 30, 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
October 21, 1997
25 Oppenheimer Intermediate Municipal Fund
<PAGE> 26
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.
None of the dividends paid by the Fund during the fiscal year ended
September 30, 1997 are eligible for the corporate dividend-received deduction.
The dividends were derived from interest on municipal bonds and are not subject
to federal income tax. To the extent a shareholder is subject to any state or
local tax laws, some or all of the dividends received may be taxable.
The foregoing information is presented to assist shareholders in
reporting distributions received from the Fund to the Internal Revenue Service.
Because of the complexity of the federal regulations which may affect your
individual tax return and the many variations in state and local tax
regulations, we recommend that you consult your tax advisor for specific
guidance.
26 Oppenheimer Intermediate Municipal Fund
<PAGE> 27
OPPENHEIMER INTERMEDIATE MUNICIPAL FUND
A Series of Oppenheimer Municipal Fund
==============================================================================
OFFICERS AND TRUSTEES James C. Swain, Chairman and Chief Executive Officer
Bridget A. Macaskill, Trustee and President
Robert G. Avis, Trustee
William A. Baker, Trustee
Charles Conrad, Jr., Trustee
Jon S. Fossel, Trustee
Sam Freedman, 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
Caryn R. Halbrecht, 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 Citibank, N.A.
PORTFOLIO SECURITIES
==============================================================================
INDEPENDENT AUDITORS Deloitte & Touche LLP
==============================================================================
LEGAL COUNSEL Myer, Swanson, Adams and Wolf, P.C.
This is a copy of a report to shareholders of
Oppenheimer Intermediate Municipal Fund. This
report must be preceded or accompanied by a
Prospectus of Oppenheimer Intermediate
Municipal 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.
27 Oppenheimer Intermediate Municipal Fund
<PAGE> 28
INTERNET
24-hr access to account information
WWW.OPPENHEIMERFUNDS.COM
GENERAL INFORMATION
Mon-Fri 8:30am-9pm ET
Sat 10am-4pm ET
1-800-525-7048
ACCOUNT TRANSACTIONS
Mon-Fri 8:30am-9pm ET
Sat 10am-4pm ET
1-800-852-8457
PHONELINK
24-hr automated information
and automated transactions
1-800-533-3310
TELECOMMUNICATION DEVICE
FOR THE DEAF (TDD)
Mon-Fri 8:30am-2pm ET
1-800-843-4461
OPPENHEIMERFUNDS
INFORMATION HOTLINE
24 hours a day, timely and
insightful messages on the
economy and issues that
affect your investments
1-800-835-3104
INFORMATION AND SERVICES
- ------------------------------------------------------------------------------
As an Oppenheimer fund shareholder, you have some special privileges. Whether
it's automatic investment plans, informative newsletters and hotlines, or ready
account access, you can benefit from services designed to make investing
simple.
And when you need help, our Customer Service Representatives are only a
toll-free phone call away. They can provide information about your account and
handle administrative requests. You can reach them at our General Information
number.
When you want to make a transaction, you can do it easily by calling our
toll-free Telephone Transactions number. And, by enrolling in AccountLink, a
convenient service that "links" your Oppenheimer funds accounts and your bank
checking or savings account, you can use the Telephone Transactions number to
make investments.
For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week.
PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.
You can count on us whenever you need assistance. That's why the
International Customer Service Association, an independent, nonprofit
organization made up of over 3,200 customer service management professionals
from around the country, honored the Oppenheimer funds' transfer agent,
OppenheimerFunds Services, with their Award of Excellence in 1993.
So call us today, or visit us at our website at
www.oppenheimerfunds.com--we're here to help.
[OPPENHEIMERFUNDS LOGO]
RA0860.001.0997 November 28, 1997
