<PAGE> 1
OPPENHEIMER INTERNATIONAL BOND FUND
Annual Report September 30, 1996
[PHOTO]
"We want
our money
to work
as hard
as it can."
[OPPENHEIMERFUNDS LOGO]
<PAGE> 2
YIELD
STANDARDIZED YIELDS
For the 30 Days Ended 9/30/96:(3)
Class A
8.27%
Class B
7.89%
Class C
7.90%
BEAT THE AVERAGE
Cumulative Total Return for the
1-Year Period Ended 9/30/96:
Oppenheimer International
Bond Fund
Class A (at net asset value)(1)
18.82%
Lipper International Income Funds Average for 42 Funds for the 1-Year Period
Ended 9/30/96(4)
9.27%
THIS FUND IS FOR PEOPLE WHO WANT TO TAKE ADVANTAGE OF INTERNATIONAL
OPPORTUNITIES OFFERING THE POTENTIAL FOR GROWTH ALONG WITH INCOME.
HOW YOUR FUND IS MANAGED
Oppenheimer International Bond Fund seeks high total return by investing
primarily in foreign debt securities. The Fund currently emphasizes investments
in government debt securities issued by developed countries such as Germany and
Switzerland as well as emerging market countries such as Malaysia and Brazil.
PERFORMANCE
Total returns at net asset value for the 12 months ended 9/30/96 for Class A, B
and C shares were 18.82%, 17.71% and 17.92%, respectively.(1)
Your Fund's average annual total returns at maximum offering price for
Class A shares for the 1-year period ended 9/30/96 and since inception on
6/15/95 were 13.18% and 14.40%, respectively. For Class B shares, average annual
total returns for the 1-year period ended 9/30/96 and since inception on 6/15/95
were 12.71% and 14.79%, respectively. For Class C shares, average annual total
returns for the 1-year period ended 9/30/96 and since inception on 6/15/95 were
16.92% and 17.75%, respectively.(2)
OUTLOOK
"Our outlook is very positive. We believe the com-ing year will offer many
excellent investment opportunities in the Far East, Latin America and the core
markets of Europe, such as Germany, Denmark and Norway."
Ashwin Vasan, Portfolio Manager
September 30, 1996
Total returns include change in share price and reinvestment of dividends and
capital gains distributions. In reviewing the notes that follow on performance
and rankings, please be aware 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. Based on the change in net asset value per share for the period shown,
without deducting any sales charges. Such performance would have been lower if
sales charges were taken into account.
2. Class A returns show results of hypothetical investments on 9/30/95 and
6/15/95 (inception of class), after deducting the maximum initial sales charge
of 4.75%. Class B returns show results of hypothetical investments on 9/30/95
and 6/15/95 (inception of class), after the deduction of the applicable
contingent deferred sales charge of 5% (1-year) and 4% (since inception). Class
C returns show results of hypothetical investments on 9/30/95 and 6/15/95
(inception of class), after the deduction of the 1% contingent deferred sales
charge for the 1-year result. An explanation of the different returns is in the
Fund's prospectus.
3. Standardized yield is net investment income calculated on a yield-to-maturity
basis for the 30-day period ended 9/30/96, divided by the maximum offering price
at the end of the period, compounded semiannually and then annualized. Falling
net asset values will tend to artificially raise yields.
4. Source: Lipper Analytical Services. The average is shown for comparative
purposes only. Oppenheimer International Bond Fund is characterized as an
international income fund. Lipper performance does not take sales charges into
consideration.
2 Oppenheimer International Bond Fund
<PAGE> 3
[PHOTO]
James C. Swain
Chairman
Oppenheimer
International
Bond Fund
[PHOTO]
Bridget A. Macaskill
President
Oppenheimer
International
Bond Fund
DEAR SHAREHOLDER,
Today more than ever, people are seeking investments that can offer them greater
opportunities for higher income and capital appreciation. After a record
six-year expansion in the U.S. stock market, many experts are now predicting
that an economic slowdown is inevitable. With uncertainties surrounding the U.S.
market, the idea of investing overseas is particularly attractive.
This has been an exciting year for the international fixed-income
market. We've seen the economies of emerging market countries strengthen as the
pace of growth accelerated across the industrialized world. Countries that only
a few short years ago were struggling with major crises--currency devaluations,
large government deficits, high inflation and unemployment rates--have since
taken important steps toward rebuilding their economies.
For example, Mexico, one of the main drivers of growth in Latin
America, managed to rebound from its currency problems of 1994-1995, and has
since begun to expand its economy. The most recent indicator of this rebound is
the stunning gain in Mexico City's bolsa over the past year.
Today, a number of European leaders are preparing their countries' 1997
fiscal budgets and moving to align each of the economies. This move is being
done primarily to meet the criteria established for a European union currency
system which is scheduled to begin in 1998. These strict criteria, which are
beneficial to the bond market, consist of keeping inflation under control,
deficits down and GDP at sustainable levels. While some countries may be fully
prepared to embrace the new system, many others have a long road ahead of them
before their fiscal policies are in place.
While investing in foreign countries does involve greater risks and
expenses, such as political and economic uncertainties, currency rate
fluctuations and liquidity restrictions, these investments can produce excellent
returns provided they are made with long-term objectives in mind. We remain
optimistic that the foreign fixed-income markets will continue to offer the
potential for higher yields, as well as for capital appreciation. And we're
confident that by diversifying investments throughout the world, we will be
positioned to participate in any economic environment.
Your portfolio managers discuss the outlook for your Fund in light of
these broad issues on the following pages. Thank your for your confidence in
OppenheimerFunds. 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
October 21, 1996
3 Oppenheimer International Bond Fund
<PAGE> 4
ASHWIN VASAN
Portfolio Manager
Q + A
AN INTERVIEW WITH YOUR FUND'S MANAGERS.
HOW HAS THE FUND PERFORMED OVER THE PAST YEAR?
The Fund performed very well, ending the period in the top quartile of its peer
group according to Lipper Analytical Services. International Bond Fund was
ranked 3rd out of 42 funds in its category for the 1-year period ended
9/30/96.(1) The Fund's success can be attributed to several key factors:
our overweight positions in emerging markets and European high yielding
markets, which both performed exceptionally well over the past six months;
our ability to use the strength of the U.S. dollar to hedge European
exposures; and our underweighted allocation to the Japanese government bond
market over the past 12 months.
WHAT CHANGES HAVE YOU MADE TO THE PORTFOLIO OVER THE PAST YEAR?
While we continue to maintain an overweighted allocation to emerging markets,
over the last quarter we have begun to restructure that exposure somewhat by
gradually reducing the amount of foreign bonds that are U.S. dollar-denominated
in the portfolio. We've made this change in favor of shorter-maturity European
bonds and local currency instruments in emerging markets. However, international
investments subject the Fund to greater expenses and risks, such as adverse
currency fluctuations, but by diversifying investments across many countries and
industries, we're able to reduce some of those risks.
We have also been reducing our exposure to the higher-yielding European
markets, specifically Italy, Spain, Sweden, and Portugal. As these markets have
rallied, we've been taking profits in those investments that have done very
well.(2)
WHAT AREAS ARE YOU CURRENTLY TARGETING?
Going forward, we are watching three areas very carefully. First, because
interest rate movements in the U.S. generally set the pace for interest rates
within foreign economies, we have been keeping a watchful eye on the U.S.
market. In addition, because Canadian inflation rates tend to be closely related
to those of the U.S., we have purchased some Canadian inflation index bonds.
Second, as mentioned earlier, we've had great results in emerging
markets this past year and we have modified our exposure so the Fund can
continue to take advantage of the strong potential performance in this sector.
Finally, as the dollar starts to move higher and as market conditions
permit, we will begin to re-establish our Yen exposure in Japan, as we have been
underweight in this market for most of 1996.
WHAT IS YOUR OUTLOOK FOR THE FUND?
Our outlook is very positive. We believe the coming year will offer many
excellent investment opportunities in the Far East, Latin America and the core
markets of Europe, such as Germany, Denmark and Norway. By identifying these key
issues and positioning ourselves accordingly, we feel we should be able to take
advantage of these opportunities as they occur.
1. Source: Lipper Analytical Services, 9/30/96. Oppenheimer International Bond
Fund is characterized by Lipper as an international income fund. Lipper does not
take sales charges into consideration.
2. The Fund's portfolio is subject to change.
4 Oppenheimer International Bond Fund
<PAGE> 5
STATEMENT OF INVESTMENTS September 30, 1996
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
===============================================================================================================================
<S> <C> <C>
MORTGAGE-BACKED OBLIGATIONS--0.5%
- -------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Interest-Only
Stripped Mtg.-Backed Security, Trust 240, Cl. 2,
12.405%--14.552%, 9/1/23 (Cost $452,041)(2) $ 1,631,521 $ 563,640
===============================================================================================================================
FOREIGN GOVERNMENT OBLIGATIONS--60.6%
- -------------------------------------------------------------------------------------------------------------------------------
ARGENTINA--7.8%
Argentina (Republic of):
New Money Bonds, 6.50%, 10/25/99(3) 583,333 565,834
Sr. Unsec. Unsub. Bonds, 7.625%, 7/5/99 NLG 2,350,000 1,387,241
Treasury Bills, Zero Coupon, 12.117%, 1/17/97(4) ARP 1,000,000 979,375
Treasury Bills, Zero Coupon, 10.156%, 11/15/96(4) ARP 1,000,000 992,189
Unsec. Unsub. Bonds, 11.50%, 8/14/01 GBP 1,710,000 2,691,792
Banco Hipotecario Nacional (Argentina) Medium-Term Nts.,
10.625%, 8/7/06(5) 600,000 607,500
------------------------------------------------------------------------------------------------------------------------
Buenos Aires (Province of):
Bonds, 10%, 3/5/01 DEM 1,680,000 1,148,810
Sr. Unsec. Unsub. Medium-Term Nts., 11.50%, 10/19/98 50,000 51,906
----------
8,424,647
- -------------------------------------------------------------------------------------------------------------------------------
AUSTRALIA--2.8%
New South Wales Treasury Corp. Gtd. Bonds, 12%, 12/1/01 AUD 3,230,000 3,042,878
- -------------------------------------------------------------------------------------------------------------------------------
BRAZIL--6.2%
Banco Estado Minas Gerais, 8.25%, 2/10/00 650,000 612,625
------------------------------------------------------------------------------------------------------------------------
Banco Nacional de Desenvolvimento Economico e Social Bonds,
9%, 3/12/01 DEM 2,130,000 1,422,313
------------------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Nts., Banco Estado Minas Gerais,
7.875%, 2/10/99 850,000 809,625
------------------------------------------------------------------------------------------------------------------------
Cia Energetica de Sao Paulo Gtd. Unsec. Bonds, 9.25%, 5/10/01 DEM 1,754,000 1,179,576
------------------------------------------------------------------------------------------------------------------------
Comtel Brasileira Ltd. Nts., 10.75%, 9/26/04(6) 100,000 102,375
------------------------------------------------------------------------------------------------------------------------
Telecomunicacoes Brasileiras SA:
Bonds, 13%, 2/5/99 ITL 3,340,000,000 2,297,272
Medium-Term Nts., 11.30%, 12/9/99(3) 200,000 205,750
----------
6,629,536
- -------------------------------------------------------------------------------------------------------------------------------
BULGARIA--4.1%
Bulgaria (Republic of):
Front-Loaded Interest Reduction Bearer Bonds, Tranche A, 2.25%, 7/28/12(5) 3,590,000 1,181,334
Interest Arrears Bonds, 6.688%, 7/28/11(5) 7,110,000 3,270,600
----------
4,451,934
- -------------------------------------------------------------------------------------------------------------------------------
CANADA--5.5%
Canada (Government of) Real Return Debs., 4.517%, 12/1/21(3)(7) CAD 7,810,000 5,919,042
- -------------------------------------------------------------------------------------------------------------------------------
COSTA RICA--0.5%
Central Bank of Costa Rica Interest Claim Bonds:
Series A, 6.344%, 5/21/05(3) 386,773 373,237
Series B, 6.344%, 5/21/05(3) 187,452 180,891
----------
554,128
- -------------------------------------------------------------------------------------------------------------------------------
DENMARK--2.2%
Denmark (Kingdom of) Bonds:
8%, 11/15/01 DKK 3,085,000 576,489
8%, 3/15/06 DKK 9,810,000 1,793,982
----------
2,370,471
- -------------------------------------------------------------------------------------------------------------------------------
FINLAND--0.9%
Finland (Republic of) Bonds, 7.25%, 4/18/06 FIM 4,000,000 909,942
- -------------------------------------------------------------------------------------------------------------------------------
GREAT BRITAIN--4.5%
United Kingdom Treasury Nts., 13%, 7/14/00 GBP 2,565,000 4,807,129
</TABLE>
5 Oppenheimer International Bond Fund
<PAGE> 6
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INDONESIA--0.7%
PT Hutama Karya, Zero Coupon Medium-Term Nts.:
17.514%, 3/19/97(4) IDR 1,000,000,000 $ 399,005
17.668%, 3/26/97(4) IDR 1,000,000,000 398,019
----------
797,024
- -------------------------------------------------------------------------------------------------------------------------------
IRELAND--2.5%
Ireland (Government of) Bonds, 9.25%, 7/11/03 IEP 1,445,000 2,649,750
- -------------------------------------------------------------------------------------------------------------------------------
ITALY--2.8%
Italy (Republic of):
Sr. Unsec. Unsub. Global Bonds, 0.777%, 7/26/99(3) JPY 165,000,000 1,489,259
Treasury Bonds, Buoni del Tesoro Poliennali, 10.50%, 7/15/00 ITL 2,100,000,000 1,497,684
----------
2,986,943
- -------------------------------------------------------------------------------------------------------------------------------
JORDAN--2.3%
Hashemite Kingdom of Jordan:
Disc. Bonds, 6.625%, 12/23/23(3) 500,000 386,250
Interest Arrears Bonds, 6.625%, 12/23/05(3) 2,335,000 2,072,313
----------
2,458,563
- -------------------------------------------------------------------------------------------------------------------------------
MEXICO--5.3%
Banco Nacional de Comercio Exterior SNC
International Finance BV Gtd. Nts., 8%, 8/5/03 900,000 805,500
------------------------------------------------------------------------------------------------------------------------
Mexican Williams Bonds, 6.631%, 11/15/08(3) 500,000 435,000
------------------------------------------------------------------------------------------------------------------------
United Mexican States Bonds, 10.375%, 1/29/03 DEM 6,460,000 4,472,508
----------
5,713,008
- -------------------------------------------------------------------------------------------------------------------------------
NORWAY--1.7%
Norwegian Government Bonds, 9.50%, 10/31/02(8) NOK 10,405,000 1,842,210
- -------------------------------------------------------------------------------------------------------------------------------
PANAMA--1.7%
Panama (Republic of):
Debs., 6.629%, 5/10/02(3) 886,154 850,709
Interest Reduction Bonds, 3.50%, 7/17/14(9) 1,500,000 943,125
----------
1,793,834
- -------------------------------------------------------------------------------------------------------------------------------
POLAND--1.3%
Poland (Republic of) Treasury Bills, Zero Coupon:
21.464%, 10/16/96(4) PLZ 1,000,000 353,419
21.655%, 10/2/96(4) PLZ 570,000 202,620
21.417%, 11/6/96(4) PLZ 1,100,000 384,600
21.294%, 12/18/96(4) PLZ 180,000 61,592
20.376%, 3/19/97(4) PLZ 1,250,000 408,878
----------
1,411,109
- -------------------------------------------------------------------------------------------------------------------------------
PORTUGAL--1.5%
Portugal (Republic of) Gtd. Bonds,
Obrigicion do tes Medio Prazo, 11.875%, 2/23/00 PTE 224,000,000 1,636,403
- -------------------------------------------------------------------------------------------------------------------------------
RUSSIA--1.0%
Russia (Government of) Interest Nts., 6.547%, 12/29/49(3)(10) 1,600,000 1,029,500
- -------------------------------------------------------------------------------------------------------------------------------
SUPRANATIONAL--0.9%
European Bank for Reconstruction & Development
Sr. Unsec. Medium-Term Nts., 10%, 12/20/96 CZK 27,050,000 997,238
- -------------------------------------------------------------------------------------------------------------------------------
SWEDEN--2.6%
Sweden (Kingdom of) Bonds, Series 1030, 13%, 6/15/01 SEK 15,100,000 2,842,326
- -------------------------------------------------------------------------------------------------------------------------------
VENEZUELA--1.8%
Venezuela (Republic of):
Collateralized Par Bonds, Series W-A, 6.75%, 3/31/20 790,000 550,038
Front-Loaded Interest Reduction Bonds, Series A, 6.375%, 3/31/07(3) 960,000 809,400
New Money Bonds, Series A, 6.75%, 12/18/05(3) 750,000 625,313
----------
1,984,751
----------
Total Foreign Government Obligations (Cost $63,963,544) 65,252,366
</TABLE>
6 Oppenheimer International Bond Fund
<PAGE> 7
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
===============================================================================================================================
<S> <C> <C>
LOAN PARTICIPATIONS--5.9%
- -------------------------------------------------------------------------------------------------------------------------------
Algeria (Republic of) Reprofiled Debt Loan Participation, Tranche A:
1.375%, 9/4/06(3)(11) JPY 104,400,000 $ 529,616
6.625%, 9/4/06(3)(11) 2,500,000 1,740,625
------------------------------------------------------------------------------------------------------------------------
Colombia (Republic of) Concorde Loan Participation, 8.625%, 1/31/98(3)(11) 84,000 83,160
------------------------------------------------------------------------------------------------------------------------
Jamaica (Government of) 1990 Refinancing Agreement Nts.:
Tranche A, 6.50%, 10/16/00(3)(11) 219,999 212,300
Tranche B, 6.312%, 11/15/04(3)(11) 1,500,000 1,252,500
------------------------------------------------------------------------------------------------------------------------
Morocco (Kingdom of) Loan Participation Agreement,
Tranche A, 6.437%, 1/1/09(3) 2,025,000 1,592,789
------------------------------------------------------------------------------------------------------------------------
Trinidad & Tobago Loan Participation Agreement:
Tranche A, 1.772%, 9/30/00(3)(11) JPY 21,600,000 172,606
Tranche B, 1.772%, 9/30/00(3)(11) JPY 89,183,523 712,667
----------
Total Loan Participations (Cost $5,766,456) 6,296,263
===============================================================================================================================
CORPORATE BONDS AND NOTES--12.0%
- -------------------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY--4.6%
- -------------------------------------------------------------------------------------------------------------------------------
METALS/MINING--0.2%
Royal Oak Mines, Inc., 11% Sr. Sub. Nts., 8/15/06(6) 200,000 207,000
- -------------------------------------------------------------------------------------------------------------------------------
PAPER--4.4%
Asia Pulp & Paper International Finance Co.,
Zero Coupon Asian Currency Nts.:
16.559%, 5/1/97(4) IDR 1,000,000,000 390,078
16.551%, 5/15/97(4) IDR 550,000,000 213,175
------------------------------------------------------------------------------------------------------------------------
Grupo Industrial Durango SA de CV, 12.625% Nts., 8/1/03 1,000,000 1,066,250
------------------------------------------------------------------------------------------------------------------------
Indah Kiat International Finance Co. BV, 12.50% Sr. Sec. Gtd. Nts.,
Series C, 6/15/06 1,300,000 1,410,500
------------------------------------------------------------------------------------------------------------------------
PT Inti Indorayon Utama, Zero Coupon Promissory Nts.,
17.234%, 2/12/97(4) IDR 800,000,000 324,419
------------------------------------------------------------------------------------------------------------------------
Tjiwi Kimia International Finance Co. BV, 13.25% Sr. Gtd. Nts., 8/1/01 1,160,000 1,302,100
----------
4,706,522
- -------------------------------------------------------------------------------------------------------------------------------
CONSUMER RELATED--0.5%
- -------------------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS--0.1%
TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(6) 150,000 169,875
- -------------------------------------------------------------------------------------------------------------------------------
FOOD/BEVERAGES/TOBACCO--0.2%
Unilever CR spol. s.r.o., guaranteed by Unilever NV,
Rotterdam, The Netherlands, Zero Coupon Promissory Nts.,
11.184%, 10/11/96(4) CZK 5,600,000 207,241
- -------------------------------------------------------------------------------------------------------------------------------
TEXTILE/APPAREL--0.2%
PT Polysindo Eka Perkasa:
13% Sr. Nts., 6/15/01 185,000 203,962
Zero Coupon Promissory Nts., 19.111%, 2/28/97(4) IDR 50,000,000 20,054
----------
224,016
- -------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES--3.3%
- -------------------------------------------------------------------------------------------------------------------------------
BANKS & THRIFTS--3.3%
Banco Bamerindus do Brasil SA:
10.50% Debs., 6/23/97 105,000 103,688
9% Unsec. Unsub. Bonds, 10/29/98 240,000 223,200
9.258% Unsub. Nts., 12/22/97(3) 700,000 687,313
------------------------------------------------------------------------------------------------------------------------
Banco de Colombia, 5.20% Cv. Jr. Sub. Unsec. Nts., 2/1/99 1,150,000 1,069,500
------------------------------------------------------------------------------------------------------------------------
Banco Itamarati SA:
10.50% Medium-Term Nts., 11/29/96 50,000 50,125
11.625% Sr. Unsec. Debs., 11/23/97 350,000 360,500
</TABLE>
7 Oppenheimer International Bond Fund
<PAGE> 8
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BANKS & THRIFTS
(CONTINUED)
Banco Mexicano SA, 8% Sr. Unsec. Unsub.
Exchangeable Medium-Term Nts., 11/4/98 $ 60,000 $ 58,425
------------------------------------------------------------------------------------------------------------------------
Siam City Bank Co. Ltd., Zero Coupon Debs., 11.084%, 10/31/96(4)(10) THB 5,000,000 194,952
------------------------------------------------------------------------------------------------------------------------
Siam Commercial Bank Public Ltd.,
Zero Coupon Debs., 10.581%, 11/18/96(4)(10) THB 20,500,000 795,031
-----------
3,542,734
- -------------------------------------------------------------------------------------------------------------------------------
MEDIA--0.2%
- -------------------------------------------------------------------------------------------------------------------------------
CABLE TELEVISION--0.2%
Rogers Cablesystems Ltd., 10% Sr. Sec. Second Priority Debs., 12/1/07 150,000 150,750
------------------------------------------------------------------------------------------------------------------------
United International Holdings, Inc.,
Zero Coupon Sr. Sec. Disc. Nts., 12.495%, 11/15/99(4) 75,000 52,500
----------
203,250
- -------------------------------------------------------------------------------------------------------------------------------
OTHER--2.4%
- -------------------------------------------------------------------------------------------------------------------------------
SERVICES--2.4%
CE Casecnan Water & Energy, Inc.:
11.45% Sr. Nts., Series A, 11/15/05 500,000 538,750
11.95% Sr. Nts., Series B, 11/15/10 200,000 217,000
------------------------------------------------------------------------------------------------------------------------
Grupo Elektra SA de CV, 12.75% Sr. Nts., 5/15/01(6) 1,000,000 1,050,000
------------------------------------------------------------------------------------------------------------------------
Sociedad Comercial del Plata SA:
11.50% Medium-Term Nts., 5/9/00 560,000 568,750
11.50% Medium-Term Nts., 5/9/00(11) 200,000 203,000
----------
2,577,500
- -------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--0.1%
- -------------------------------------------------------------------------------------------------------------------------------
SHIPPING--0.1%
Gearbulk Holding Ltd., 11.25% Sr. Nts., 12/1/04 150,000 161,250
- -------------------------------------------------------------------------------------------------------------------------------
UTILITIES--0.9%
- -------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.6%
Centragas Natural Gas Transmission System, 10.65% Sr. Sec. Bonds, 12/1/10(6) 579,160 613,730
------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--0.3%
Celcaribe SA, 0%/13.50% Sr. Sec. Nts., 3/15/04(11)(12) 75,000 60,563
------------------------------------------------------------------------------------------------------------------------
Comunicacion Celular SA, 0%/13.125% Sr. Deferred Coupon Bonds, 11/15/03(12) 400,000 248,000
----------
308,563
----------
Total Corporate Bonds and Notes (Cost $12,744,033) 12,921,681
</TABLE>
<TABLE>
<CAPTION>
UNITS
===============================================================================================================================
<S> <C> <C>
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- -------------------------------------------------------------------------------------------------------------------------------
Comunicacion Celular SA Wts., Exp. 11/03(11) 400 2,000
------------------------------------------------------------------------------------------------------------------------
Venezuela Government Wts., Exp. 4/20 3,950 --
----------
Total Rights, Warrants and Certificates (Cost $0) 2,000
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT(1)
===============================================================================================================================
<S> <C> <C>
STRUCTURED INSTRUMENTS--17.2%
- -------------------------------------------------------------------------------------------------------------------------------
Bayerische Landesbank Girozentrale, New York Branch:
6.28% Deutsche Mark Currency Protected Yield Curve CD, 7/25/97 $ 300,000 294,075
14% CD Linked Nts., 12/17/96 (indexed to the cross currency rates
of Greek Drachma and European Currency Unit) 450,000 442,980
</TABLE>
8 Oppenheimer International Bond Fund
<PAGE> 9
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
STRUCTURED INSTRUMENTS
(CONTINUED)
Canadian Imperial Bank of Commerce, New York Branch:
14% CD Linked Nts., 11/25/96 (indexed to the cross currency rates
of Greek Drachma and European Currency Unit) $ 800,000 $ 789,920
16.75% CD Linked Nts., 4/16/97 (indexed to the Federation GKO,
Zero Coupon, 4/9/97) 3,000,000 2,982,000
17% CD Linked Nts., 2/26/97 (indexed to the Federation GKO,
Zero Coupon, 2/19/97) 750,000 747,000
17% CD Linked Nts., 4/2/97 (indexed to the Russian Federation GKO,
Zero Coupon, 3/26/97) 500,000 497,000
17.30% CD Linked Nts., 2/26/97 (indexed to the Federation GKO,
Zero Coupon, 2/19/97) 1,200,000 1,195,200
------------------------------------------------------------------------------------------------------------------------
Internationale Nederlanden Bank NV, Prague Branch,
Zero Coupon Promissory Nts., 10.516%, 4/28/97(4) CZK 6,150,000 214,896
------------------------------------------------------------------------------------------------------------------------
Internationale Nederlanden (U.S.) Capital Holdings Corp.:
Zero Coupon Chilean Peso Linked Nts., 11.122%, 12/11/96(4) 980,000 952,756
Zero Coupon Chilean Peso Linked Nts., 11.813%, 6/23/97(4) 600,000 544,860
Zero Coupon Chilean Peso Linked Nts., 11.741%, 6/24/97(4) 600,000 544,680
Zero Coupon Czech Crown Linked Nts., 11.911%, 6/26/97(4) 600,000 563,220
Zero Coupon Indian Rupee Linked Nts., 15.675%, 12/20/96(4) 1,000,000 965,100
------------------------------------------------------------------------------------------------------------------------
Morgan Guaranty Trust Co. of New York, Nassau Branch,
Zero Coupon Indian Rupee Currency Linked Nts., 17.392%, 11/27/96(4) 900,000 881,479
------------------------------------------------------------------------------------------------------------------------
Salomon Brothers, Inc., Zero Coupon Brazilian Credit Linked Nts.:
12.384%, 1/3/97 (indexed to the Brazilian National Treasury Nts.,
Zero Coupon, 1/2/97)(4) 200,000 194,420
12.38%, 1/3/97 (indexed to the Brazilian National Treasury Nts.,
Zero Coupon, 1/2/97)(4) 200,000 194,420
12.638%, 1/3/97 (indexed to the Brazilian National Treasury Nts.,
Zero Coupon, 1/2/97)(4) 120,000 116,652
12.886%, 1/3/97 (indexed to the Brazilian National Treasury Nts.,
Zero Coupon, 1/2/97)(4) 100,000 97,210
9.896%, 5/2/97 (indexed to the Brazilian National Treasury Nts.,
Zero Coupon, 5/3/97)(4) 450,000 421,515
------------------------------------------------------------------------------------------------------------------------
Salomon Brothers, Inc., Zero Coupon Chilean Peso
Indexed Enhanced Access Nts.:
11.792%, 12/11/96(4) 1,000,000 974,200
12.145%, 12/11/96(4) 1,000,000 974,000
11.406%, 12/13/96(4) 1,000,000 969,800
11.381%, 12/20/96(4) 1,000,000 972,000
------------------------------------------------------------------------------------------------------------------------
Swiss Bank Corp., New York Branch, 6.05% CD Linked Nts.,
6/20/97 (indexed to the closing Nikkei 225 Index on 1/23/97,
5 yr. & 3 mos. Japanese Yen Swap rate & New Zealand Dollar) 400,000 395,940
------------------------------------------------------------------------------------------------------------------------
United Mexican States Linked Nts., 11/27/96 (indexed to the greater
of Cetes Option Amount or USD LIBOR Option Amount, 11/27/96) 1,300,000 1,583,292
-----------
Total Structured Instruments (Cost $18,469,070) 18,508,615
</TABLE>
9 Oppenheimer International Bond Fund
<PAGE> 10
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
DATE STRIKE CONTRACTS SEE NOTE 1
==============================================================================================================================
<S> <C> <C> <C> <C>
PUT OPTIONS PURCHASED--0.2%
- ------------------------------------------------------------------------------------------------------------------------------
Bulgaria (Republic of):
Front-Loaded Interest Reduction Bearer Bonds,
Tranche A, 2.25%, 7/28/12 Put Opt. 10/96 $28.125 1,750 $ 5,250
Front-Loaded Interest Reduction Bearer Bonds,
Tranche A, 2.25%, 7/28/12 Put Opt. 10/96 $28.75 1,750 4,375
Interest Arrears Bonds, 6.688%, 7/28/11 Put Opt. 10/96 $40.875 3,400 1
Interest Arrears Bonds, 6.688%, 7/28/11 Put Opt. 10/96 $41.375 3,400 13
-----------------------------------------------------------------------------------------------------------------------
Italy (Republic of) Treasury Bonds, Buoni del Tesoro
Poliennali, 9.50%, 5/1/01 Put Opt. 7/97 99.96 ITL 1,842 12,714
-----------------------------------------------------------------------------------------------------------------------
Swiss Franc Put Opt. 10/96 1.22 CHF 7,639,344 203,902
-----------
Total Put Options Purchased (Cost $351,770) 226,255
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT(1)
===============================================================================================================================
<S> <C> <C>
REPURCHASE AGREEMENT--3.3%
- -------------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with Goldman, Sachs & Co., 5.62%, dated 9/30/96,
to be repurchased at $3,500,546 on 10/1/96, collateralized by
U.S. Treasury Bonds, 8.875%--11.125%, 8/15/03--8/15/17, with a value
of $3,574,041 (Cost $3,500,000) $3,500,000 3,500,000
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $105,246,914) 99.7% 107,270,820
- -------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.3 347,051
---------- ------------
NET ASSETS 100.0% $107,617,871
========== ============
</TABLE>
1. Face amount is reported in U.S. Dollars, except for those denoted in
the following currencies:
ARP --Argentine Peso IEP--Irish Punt
AUD --Australian Dollar ITL--Italian Lira
CAD --Canadian Dollar JPY--Japanese Yen
CHF --Swiss Franc NLG--Netherlands Guilder
CZK --Czech Koruna NOK--Norwegian Krone
DEM--German Deutsche Mark PLZ--Polish Zloty
DKK --Danish Krone PTE--Portuguese Escudo
FIM --Finnish Markka SEK--Swedish Krona
GBP --British Pound Sterling THB--Thai Baht
IDR --Indonesian Rupiah
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. 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. Represents the current interest rate for a variable rate security.
4. For zero coupon bonds, the interest rate shown is the effective yield
on the date of purchase.
10 Oppenheimer International Bond Fund
<PAGE> 11
5. A sufficient amount of securities has been designated to cover
outstanding written call options, as follows:
<TABLE>
<CAPTION>
FACE SUBJECT EXPIRATION EXERCISE PREMIUM MARKET VALUE
TO CALL DATE PRICE RECEIVED SEE NOTE 1
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Call Option on Banco Hipotecario Nacional
(Argentina) Medium-Term Nts.,
10.625%, 8/7/06 600,000 8/00 $100.00 $ 5,520 $ 9,600
------------------------------------------------------------------------------------------------------------------------
Call Option on Bulgaria (Republic of)
Front-Loaded Interest Reduction
Bearer Bonds, Tranche A, 2.25%, 7/28/12 1,750,000 12/96 32.75 13,125 44,625
------------------------------------------------------------------------------------------------------------------------
Call Option on Bulgaria (Republic of)
Front-Loaded Interest Reduction
Bearer Bonds, Tranche A, 2.25%, 7/28/12 1,750,000 12/96 32.125 9,975 47,250
------------------------------------------------------------------------------------------------------------------------
Call Option on Bulgaria (Republic of)
Interest Arrears Bonds, 6.688%, 7/28/11 3,400,000 11/96 45.375 22,100 39,100
------------------------------------------------------------------------------------------------------------------------
Call Option on Bulgaria (Republic of)
Interest Arrears Bonds, 6.688%, 7/28/11 3,400,000 11/96 45.188 22,100 42,500
------- --------
$72,820 $183,075
======= ========
</TABLE>
6. Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This
security has been determined to be liquid under guidelines established
by the Board of Trustees. These securities amount to $2,142,980 or
1.99% of the Fund's net assets, at September 30, 1996.
7. Indexed instrument for which the principal amount and/or interest
due at maturity is affected by the relative value of a foreign index.
8. A sufficient amount of securities has been designated to cover
outstanding forward foreign currency exchange contracts. See Note 5 of
Notes to Financial Statements.
9. Represents the current interest rate for an increasing rate
security.
10. When-issued security to be delivered and settled after September
30, 1996.
11. Identifies issues considered to be illiquid--See Note 7 of Notes to
Financial Statements.
12. Denotes a step bond: a zero coupon bond that converts to a fixed
rate of interest at a designated future date.
See accompanying Notes to Financial Statements.
11 Oppenheimer International Bond Fund
<PAGE> 12
STATEMENT OF ASSETS AND LIABILITIES September 30, 1996
<TABLE>
================================================================================================================================
<S> <C>
ASSETS
Investments, at value (cost $105,246,914)--see accompanying statement $107,270,820
------------------------------------------------------------------------------------------------------------------------
Cash 615,444
------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation on forward foreign currency
exchange contracts--Note 5 27,610
------------------------------------------------------------------------------------------------------------------------
Receivables:
Investments sold 3,236,083
Interest 2,585,546
Shares of beneficial interest sold 1,312,326
Closed forward foreign currency exchange contracts 112,082
------------------------------------------------------------------------------------------------------------------------
Deferred organization costs--Note 1 11,338
------------------------------------------------------------------------------------------------------------------------
Other 1,862
------------
Total assets 115,173,111
================================================================================================================================
LIABILITIES
Unrealized depreciation on forward foreign currency
exchange contracts--Note 5 8,744
------------------------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $72,820)--
see accompanying statement--Note 6 183,075
------------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 6,611,001
Dividends 267,700
Shares of beneficial interest redeemed 245,867
Closed forward foreign currency exchange contracts 85,378
Distribution and service plan fees 51,307
Transfer and shareholder servicing agent fees 11,276
Other 90,892
------------
Total liabilities 7,555,240
================================================================================================================================
NET ASSETS $107,617,871
============
================================================================================================================================
COMPOSITION OF
NET ASSETS
Paid-in capital $104,210,304
------------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions 1,480,266
------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 1,927,301
------------
Net assets $107,617,871
============
================================================================================================================================
NET ASSET VALUE
PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $52,128,047 and 9,494,568 shares of beneficial interest outstanding) $5.49
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $5.76
------------------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $45,207,455 and 8,246,151 shares of beneficial interest outstanding) $5.48
------------------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $10,282,369 and 1,876,082 shares of beneficial interest outstanding) $5.48
</TABLE>
See accompanying Notes to Financial Statements.
12 Oppenheimer International Bond Fund
<PAGE> 13
STATEMENT OF OPERATIONS For the Year Ended September 30, 1996
<TABLE>
================================================================================================================================
<S> <C>
INVESTMENT INCOME
Interest (net of foreign withholding taxes of $5,130) $4,624,080
================================================================================================================================
EXPENSES
Management fees--Note 4 311,128
------------------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 43,913
Class B 178,039
Class C 40,141
------------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 78,316
------------------------------------------------------------------------------------------------------------------------
Shareholder reports 61,884
------------------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 57,326
------------------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 15,821
Class B 14,817
Class C 3,412
------------------------------------------------------------------------------------------------------------------------
Legal and auditing fees 15,402
------------------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 1,957
------------------------------------------------------------------------------------------------------------------------
Other 11,068
----------
Total expenses 833,224
Less reimbursement of expenses by OppenheimerFunds, Inc.--Note 4 (41,927)
----------
Net expenses 791,297
================================================================================================================================
NET INVESTMENT INCOME 3,832,783
================================================================================================================================
REALIZED AND UNREALIZED
GAIN (LOSS)
Net realized gain (loss) on:
Investments and options written (including premiums on options exercised) 1,466,199
Closing and expiration of options written 102,322
Foreign currency transactions (18,625)
----------
Net realized gain 1,549,896
------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 2,138,504
Translation of assets and liabilities denominated in foreign currencies (299,254)
----------
Net change 1,839,250
----------
Net realized and unrealized gain 3,389,146
================================================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $7,221,929
==========
</TABLE>
See accompanying Notes to Financial Statements.
13 Oppenheimer International Bond Fund
<PAGE> 14
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995(1)
===============================================================================================================================
<S> <C> <C>
OPERATIONS
Net investment income $ 3,832,783 $ 108,803
------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 1,549,896 (189)
------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 1,839,250 88,051
------------ ----------
Net increase in net assets resulting from operations 7,221,929 196,665
===============================================================================================================================
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net investment income:
Class A (1,931,780) (76,404)
Class B (1,609,969) (29,790)
Class C (360,475) (2,609)
===============================================================================================================================
BENEFICIAL INTEREST
TRANSACTIONS
Net increase in net assets resulting from
beneficial interest transactions--Note 2:
Class A 46,551,563 3,923,812
Class B 40,565,844 3,212,495
Class C 9,758,157 198,433
===============================================================================================================================
NET ASSETS
Total increase 100,195,269 7,422,602
------------------------------------------------------------------------------------------------------------------------
Beginning of period 7,422,602 --
------------ ----------
End of period $107,617,871 $7,422,602
============ ==========
</TABLE>
1. For the period from June 15, 1995 (commencement of operations) to
September 30, 1995.
See accompanying Notes to Financial Statements.
14 Oppenheimer International Bond Fund
<PAGE> 15
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------------------------ ------------------------ ------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
1996 1995(1) 1996 1995(1) 1996 1995(1)
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning
of period $5.10 $5.00 $5.10 $5.00 $5.09 $5.00
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .52 .15 .48 .14 .48 .14
Net realized and unrealized gain .40 .10 .39 .10 .39 .09
------- ------- ------- ------- ------- -------
Total income from
investment operations .92 .25 .87 .24 .87 .23
- -----------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders from
net investment income (.53) (.15) (.49) (.14) (.48) (.14)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.49 $5.10 $5.48 $5.10 $5.48 $5.09
======= ======= ======= ======= ======= =======
=============================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) 18.82% 5.13% 17.71% 4.92% 17.92% 4.73%
=============================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $52,128 $3,984 $45,207 $3,238 $10,282 $201
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $19,817 $2,566 $17,891 $1,125 $4,039 $ 97
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 9.60% 9.94%(3) 8.81% 9.20%(3) 8.76% 9.36%(3)
Expenses, before voluntary
reimbursement by the Manager 1.59% 1.59%(3) 2.36% 2.21%(3) 2.36% 2.26%(3)
Expenses, net of voluntary
reimbursement by the Manager 1.49% 0.41%(3) 2.26% 0.89%(3) 2.25% 0.85%(3)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 273.3% 122.0% 273.3% 122.0% 273.3% 122.0%
</TABLE>
1. For the period from June 15, 1995 (commencement of operations) to
September 30, 1995.
2. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period (or commencement of operations), with
all dividends and distributions reinvested in additional shares on the
reinvestment date, and redemption at the net asset value calculated on
the last business day of the fiscal period. Sales charges are not
reflected in the total returns. Total returns are not annualized for
periods of less than one full year.
3. Annualized.
4. 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, 1996 were $161,923,766 and $93,759,294, respectively.
See accompanying Notes to Financial Statements.
15 Oppenheimer International Bond Fund
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
==============================================================================
1. SIGNIFICANT
ACCOUNTING POLICIES
Oppenheimer International Bond Fund (the Fund) is a registered
investment company organized as a Massachusetts Business Trust with a
single series of the same name. The Fund is registered as a
diversified, open-end management investment company under the
Investment Company Act of 1940, as amended. The Fund's investment
objective is to seek high total return (which includes current income
and capital appreciation in the value of its shares) primarily from
foreign debt securities. The Fund's investment adviser is
OppenheimerFunds, Inc. (the Manager). The Fund offers Class A, Class B
and Class C shares. Class B and Class C shares may be subject to a
contingent deferred sales charge. All three classes of shares have
identical rights to earnings, assets and voting privileges, except that
each class has its own distribution and/or service plan, expenses
directly attributable to a particular class and exclusive voting rights
with respect to matters affecting a single class. Class B shares will
automatically convert to Class A shares six years after the date of
purchase. The following is a summary of significant accounting policies
consistently followed by the Fund.
-----------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at 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 the
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 exchange 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.
-----------------------------------------------------------------------
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 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 into 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.
-----------------------------------------------------------------------
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.
-----------------------------------------------------------------------
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.
16 Oppenheimer International Bond Fund
<PAGE> 17
==============================================================================
1. SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
ORGANIZATION COSTS. The Manager advanced $14,488 for organization and
start-up costs of the Fund. Such expenses are being amortized over a
five-year period from the date operations commenced. In the event that
all or part of the Manager's initial investment in shares of the Fund
is withdrawn during the amortization period, the redemption proceeds
will be reduced to reimburse the Fund for any unamortized expenses, in
the same ratio as the number of shares redeemed bears to the number of
initial shares outstanding at the time of such redemption.
-----------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income
(loss) and net realized gain (loss) may differ for financial statement
and tax purposes. The character of the distributions made during the
year from net investment income or net realized gains may differ from
their 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 year that the income or
realized gain (loss) was recorded by the Fund.
During the year ended September 30, 1996, the Fund
adjusted 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 September 30, 1996, amounts have
been reclassified to reflect a decrease in overdistributed net
investment income of $13,482. Accumulated net realized gain on
investments was decreased by the same amount. In addition, to properly
reflect foreign currency gain in the components of capital, $55,959 of
foreign exchange gain determined accord- ing to U.S. federal income tax
rules has been reclassified from net realized gain to net investment
income.
-----------------------------------------------------------------------
OTHER. Investment transactions are accounted for on the date the
investments are purchased or sold (trade date) and dividend income is
recorded on the ex-dividend 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 options written and unrealized appreciation and
depreciation are determined on an identified cost basis, which is the
same basis used for federal income tax purposes. Interest on
payment-in-kind debt instruments is accrued as income at the coupon
rate and a market adjustment is made on the ex-date.
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.
==============================================================================
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, 1996 PERIOD ENDED SEPTEMBER 30, 1995(1)
----------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 9,721,751 $51,914,821 909,822 $4,576,888
Dividends reinvested 246,015 1,320,886 6,117 30,991
Redeemed (1,254,497) (6,684,144) (134,640) (684,067)
---------- ----------- -------- ----------
Net increase 8,713,269 $46,551,563 781,299 $3,923,812
========== =========== ======== ==========
----------------------------------------------------------------------------------------------------------------------------
Class B:
Sold 8,129,566 $43,322,204 633,620 $3,203,816
Dividends reinvested 172,750 925,063 4,019 20,381
Redeemed (691,490) (3,681,423) (2,314) (11,702)
---------- ----------- -------- ----------
Net increase 7,610,826 $40,565,844 635,325 $3,212,495
========== =========== ======== ==========
---------------------------------------------------------------------------------------------------------------------------
Class C:
Sold 1,915,475 $10,177,624 39,665 $ 199,624
Dividends reinvested 35,740 192,431 392 1,981
Redeemed (114,564) (611,898) (626) (3,172)
---------- ------------ -------- ----------
Net increase 1,836,651 $ 9,758,157 39,431 $ 198,433
========== ============ ======== ==========
</TABLE>
1. For the period from June 15, 1995 (commencement of operations) to
September 30, 1995.
17 Oppenheimer International Bond Fund
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS (Continued)
==============================================================================
3. UNREALIZED GAINS AND
LOSSES ON INVESTMENTS
At September 30, 1996, net unrealized appreciation on investments and
options written of $1,913,651 was composed of gross appreciation of
$2,723,838, and gross depreciation of $810,187.
==============================================================================
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 an
annual fee of 0.75% of the first $200 million of average 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
net assets in excess of $1 billion. The Manager has agreed to reimburse
the Fund if aggregate expenses (with specified exceptions) exceed the
most stringent applicable regulatory limit on Fund expenses. Effective
September 20, 1996, the Manager discontinued its voluntary undertaking
to reimburse Fund expenses to the level needed to maintain a stable
dividend.
For the year ended September 30, 1996, commissions
(sales charges paid by investors) on sales of Class A shares totaled
$455,830, of which $126,085 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 $1,115,490 and $77,326, of which $26,260 and $1,600,
respectively, was paid to an affiliated broker/dealer. During the period
ended September 30, 1996, OFDI received contingent deferred sales
charges of $32,060 and $3,260, 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 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 September 30, 1996, OFDI paid $2,532 to an
affiliated broker/dealer as reimbursement for Class A personal service
and maintenance expenses.
The Fund has adopted compensation type 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 on
Class C shares, as compensation for sales commissions paid from its own
resources at the time of sale and associated financing costs. If the
Plans are terminated by the Fund, the Board of Trustees may allow the
Fund to continue payments of the asset-based sales charge to OFDI for
certain expenses it incurred before the Plans were terminated. 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, 1996, OFDI retained $168,499 and $36,849,
respectively, as compensation for Class B and Class C sales commissions
and service fee advances, as well as financing costs. At September 30,
1996, OFDI had incurred unreimbursed expenses of $1,331,917 for Class B
and $119,763 for Class C.
18 Oppenheimer International Bond Fund
<PAGE> 19
==============================================================================
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 designated 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 September 30, 1996, the Fund had outstanding forward contracts to
purchase and sell foreign currencies as follows:
<TABLE>
<CAPTION>
CONTRACT AMOUNT VALUATION AS OF UNREALIZED UNREALIZED
CONTRACTS TO PURCHASE EXPIRATION DATE (000S) SEPTEMBER 30, 1996 APPRECIATION DEPRECIATION
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Danish Krone (DKK) 10/2/96 5,511 DKK $ 941,077 $ -- $1,212
Italian Lira (ITL) 10/1/96 3,854 ITL 2,532 6 --
Japanese Yen (JPY) 10/2/96 60,030 JPY 538,990 -- 7,532
---------- ------- ------
$1,482,599 6 8,744
========== ------- ------
Contracts to Sell
---------------------------------------------------------------------------------------------------------------------------
Finnish Markka (FIM) 10/2/96--12/2/96 16,245 FIM $3,562,197 $14,083 $ --
Japanese Yen (JPY) 10/28/96 28,000 JPY 252,068 8,334 --
Swedish Krona (SEK) 11/1/96 9,260 SEK 1,397,244 4,640 --
Swiss Franc (CHF) 1/3/97 1,630 CHF 1,313,111 547 --
---------- ------- ------
$6,524,620 27,604 --
========== ------- ------
Total Unrealized Appreciation and Depreciation $27,610 $8,744
======= ======
</TABLE>
19 Oppenheimer International Bond Fund
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (Continued)
==============================================================================
6. 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
security 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 September 30, 1996 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
September 30, 1995 245 $ 1,350 -- $ --
Options written 13,149,735 200,591 1,575 54,483
Options closed or expired (12,635,736) (124,987) (1,575) (54,483)
Options exercised (503,344) (4,134) -- --
----------- ---------- ------- ---------
Options outstanding at
September 30, 1996 10,900 $ 72,820 -- $ --
=========== ========== ======= =========
</TABLE>
==============================================================================
7. ILLIQUID AND RESTRICTED
SECURITIES
At September 30, 1996, 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
from time to time) 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
September 30, 1996 was $4,969,037, which represents 4.62% of the Fund's
net assets.
20 Oppenheimer International Bond Fund
<PAGE> 21
INDEPENDENT AUDITORS' REPORT
==============================================================================
The Board of Trustees and Shareholders of Oppenheimer International
Bond Fund:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Oppenheimer International
Bond Fund as of September 30, 1996, the related statement of operations
for the year then ended, and the statements of changes in net assets
and the financial highlights for each of the periods indicated. 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,
1996 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 International Bond Fund at September 30, 1996,
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, 1996
21 Oppenheimer International Bond Fund
<PAGE> 22
FEDERAL INCOME TAX INFORMATION (Unaudited)
==============================================================================
In early 1997, shareholders will receive information regarding all
dividends and distributions paid to them by the Fund during calendar
year 1996. 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, 1996 are eligible for the corporate dividend
received deduction.
The foregoing information is presented to assist
shareholders in reporting distributions received from the Fund to the
Internal Revenue Service. Because of the complexity of the federal
regulations which may affect your individual tax return and the many
variations in state and local tax regulations, we recommend that you
consult your tax adviser for specific guidance.
SHAREHOLDER MEETING (Unaudited)
==============================================================================
On September 26, 1996, a special shareholder meeting was held at which
the eleven Trustees identified below were elected, the selection of
Deloitte & Touche LLP as the independent certified public accountants
and auditors of the Fund for the fiscal year beginning October 1, 1995
was ratified (Proposal No. 1), the approval of a new investment
advisory agreement with OppenheimerFunds, Inc. (Proposal No. 2), the
Fund's amended Class A 12b-1 Distribution and Service Plan was approved
by Class A shareholders (Proposal No. 3), the Fund's amended Class B
12b-1 Distribution and Service Plan was approved by Class B
shareholders (Proposal No. 4) and the Fund's amended Class C 12b-1
Distribution and Service Plan was approved by Class C shareholders
(Proposal No. 5). The following is a report of the votes cast:
<TABLE>
<CAPTION>
NOMINEE/PROPOSAL FOR AGAINST WITHHELD/ABSTAIN TOTAL
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert G. Avis 8,268,105.956 94,830.312 -- 8,362,936.268
William A. Baker 8,284,580.597 78,355.671 -- 8,362,936.268
Charles Conrad, Jr. 8,288,023.846 74,912.422 -- 8,362,936.268
Jon S. Fossel 8,287,101.937 75,834.331 -- 8,362,936.268
Sam Freedman 8,280,155.813 82,780.455 -- 8,362,936.268
Raymond J. Kalinowski 8,287,005.853 75,930.415 -- 8,362,936.268
C. Howard Kast 8,281,408.293 81,527.975 -- 8,362,936.268
Robert M. Kirchner 8,286,171.994 76,764.274 -- 8,362,936.268
Bridget A. Macaskill 8,287,466.702 75,469.566 -- 8,362,936.268
Ned M. Steel 8,284,676.127 78,260.141 -- 8,362,936.268
James C. Swain 8,267,184.047 95,752.221 -- 8,362,936.268
------------------------------------------------------------------------------------------------------------------------
Proposal No. 1 8,181,936.836 23,362.450 177,077.150 8,382,376.436
Proposal No. 2 7,970,833.153 22,855.799 388,687.484 8,382,376.436
Proposal No. 3 3,381,168.164 16,893.996 134,106.169 3,532,168.329
Proposal No. 4 3,606,436.610 48,770.655 285,833.731 3,941,040.996
Proposal No. 5 885,251.055 -- 23,916.056 909,167.111
</TABLE>
22 Oppenheimer International Bond Fund
<PAGE> 23
OPPENHEIMER INTERNATIONAL BOND FUND
A Series of Oppenheimer International Bond 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
Ashwin K. Vasan, Vice President
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
==============================================================================
INVESTMENT ADVISER
OppenheimerFunds, Inc.
==============================================================================
DISTRIBUTOR
OppenheimerFunds Distributor, Inc.
==============================================================================
TRANSFER AND SHAREHOLDER
SERVICING AGENT
OppenheimerFunds Services
==============================================================================
CUSTODIAN OF
PORTFOLIO SECURITIES
The Bank of New York
==============================================================================
INDEPENDENT AUDITORS
Deloitte & Touche LLP
==============================================================================
LEGAL COUNSEL
Myer, Swanson, Adams & Wolf, P.C.
This is a copy of a report to shareholders of Oppenheimer International
Bond Fund. This report must be preceded or accompanied by a Prospectus
of Oppenheimer International 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.
23 Oppenheimer International Bond Fund
<PAGE> 24
INFORMATION
GENERAL INFORMATION
Monday-Friday 8:30 a.m.-9 p.m. ET
Saturday 10 a.m.-2 p.m. ET
1-800-525-7048
TELEPHONE TRANSACTIONS
Monday-Friday 8:30 a.m.-8 p.m. ET
1-800-852-8457
PHONELINK
24 hours a day, automated
information and transactions
1-800-533-3310
TELECOMMUNICATIONS DEVICE
FOR THE DEAF (TDD)
Monday-Friday 8:30 a.m.-8 p.m. 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
RA0880.001.0996 November 30, 1996
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