[cover]
Annual Report September 30, 1997
O P P E N H E I M E R
International
Bond Fund
[photo of Globe]
[Oppenheimerfunds logo]
<PAGE>
Report highlights
- --------------------------------------------------------------------------------
Contents
3 President's Letter
4 Fund Performance
6 An Interview
with the Fund's
Managers
11 Statement of
Investments
22 Statement of
Assets &
Liabilities
24 Statement of
Operations
25 Statements of
Changes in
Net Assets
26 Financial Highlights
28 Notes to Financial
Statements
37 Independent
Auditors' Report
38 Federal Income
Tax Information
39 Officers & Trustees
40 Information &
Services
[bullet] Wide diversification: This Fund was diversified among approximately 50
different countries within the foreign government and corporate bond sectors.(1)
[bullet] The emerging markets of Eastern Europe, Latin America, Asia and Africa
are closely linked to the U.S. dollar, and tend to fluctuate less than the
currencies of many industrialized countries. As a result, we found many positive
opportunities in these regions.
[bullet] By successfully avoiding the currency devaluations which plagued the
markets of Southeast Asia, we were able to improve the Fund's overall
performance.
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. The Fund's portfolio is subject to change.
2. 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.
- ------------------------
Avg Annual Total Returns
- ------------------------
For the 1-year period ended
9/30/97 without sales charges(2)
Class A
- ------------------
11.33%
- ------------------
Class B
- ------------------
10.52%
- ------------------
Class C
- ------------------
10.52%
- ------------------
2 Oppenheimer International Bond Fund
<PAGE>
Dear shareholder,
- --------------------------------------------------------------------------------
[photo of James C. Swain]
James C. Swain
Chairman
Oppenheimer
International Bond Fund
[photo of Bridget A. Macaskill]
Bridget A. Macaskill
President
Oppenheimer
International Bond Fund
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.
/s/ James C. Swain /s/ Bridget A. Macaskill
James C. Swain Bridget A. Macaskill
November 7, 1997
3 Oppenheimer International Bond Fund
<PAGE>
Performance update
- --------------------------------------------------------------------------------
- -------------------------------
Avg Annual Total Returns
- -------------------------------
For the Period Ended 9/30/97(1)
Class A
Since
1 year Inception
- -------------------------------
6.04% 13.05%
- -------------------------------
Class B
Since
1 year Inception
- -------------------------------
5.52% 13.43%
- -------------------------------
Class C
Since
1 year Inception
- -------------------------------
9.52% 14.54%
- -------------------------------
- -------------------------------
Standardized Yields(2)
- -------------------------------
For the 30 Days Ended 9/30/97
Class A
- -------------------------------
9.11%
- -------------------------------
Class B
- -------------------------------
8.80%
- -------------------------------
Class C
- -------------------------------
8.76%
- -------------------------------
Oppenheimer International Bond Fund's Class A shares performed very well during
the past year, providing an average annual total return of 11.33%, without
deducting sales charges, for the one-year period ended September 30, 1997.(3)
The Fund did so well that according to Lipper Analytical Services, the Fund's
Class A shares ranked 5 out of 44 international income funds for the same
period.(4)
Top 15 Holdings by Country(5)
..............................................................
Russia 7.7% New Zealand 3.9%
..............................................................
United States 5.9 Sweden 3.7
..............................................................
Indonesia 5.7 Italy 3.6
..............................................................
Canada 5.2 Argentina 3.0
..............................................................
Colombia 5.1 Brazil 2.8
..............................................................
Mexico 5.1 Venezuela 2.6
..............................................................
Great Britain 4.1 Turkey 2.3
..............................................................
South Africa 4.1
..............................................................
1. Total returns include changes in share price and reinvestment of dividends
and capital gains distributions in a hypothetical investment for the periods
shown. Class A returns include the current maximum initial sales charge of
4.75%. Class A shares were first publicly offered on 6/15/95. Class B returns
include the applicable contingent deferred sales charge of 5% (1-year) and 3%
(since inception on 6/15/95). Class C return for the one-year result includes
the contingent deferred sales charge of 1%. Class C shares have an inception
date of 6/15/95. An explanation of the different performance calculations is in
the Fund's prospectus. Class B and C shares are subject to an annual 0.75%
asset-based sales charge.
2. 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.
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 Oppenheimer International Bond Fund
<PAGE>
Portfolio review
- --------------------------------------------------------------------------------
Asset Allocation (6)
[pie chart]
Foreign Government 61.9%
Foreign Corporate 19.2
Short-term Investments 18.9
Oppenheimer International Bond Fund is for investors looking for high income
and growth potential from foreign bonds.
What We Look For
[bullet] Income advantages over the U.S. market.
[bullet] Diversification to help lower the risks of emerging market volatility
and exchange rate uncertainties of foreign securities by spreading
investments in:
--Both established and emerging market economies
--Currently more than 50 countries worldwide
--A broad range of currencies.
Portfolio Overview(6)
.......................................
Average Credit Rating BBB+
.......................................
Effective Average Duration 3.5 years
.......................................
Effective Average Maturity 4.0 years
.......................................
Number of Issuers 96
.......................................
Number of Issues 146
.......................................
4. Source: Lipper Analytical Services, Inc., 9/30/97. Based on the comparisons
between changes in net asset value without considering sales charges, with
dividends and capital gains distributions of the Fund's Class A shares
reinvested. The Fund's Class A shares were ranked 5 of 44 among international
bond funds for the one-year period ended 9/30/97.
5. Portfolio is subject to change. Percentages are as of September 30, 1997 and
are based on total market value of investments.
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
37.3% 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 International Bond Fund
<PAGE>
An interview with your Fund's managers
- --------------------------------------------------------------------------------
How has the Fund performed during the 12-month period ended September 30, 1997?
Oppenheimer International Bond Fund's Class A shares provided an average annual
total return of 11.33% for the one-year period ended September 30, 1997.(1)
These results reflect changes in share price and income distributions
reinvested, but before sales charges are considered. We also performed well
relative to our peers, ranking 5th of 44 funds in the international bond
category as measured by Lipper Analytical Services for the one-year period ended
September 30, 1997.(2)
How have the international bond markets performed?
Returns have come primarily from two major influences. First, the U.S. dollar
rallied significantly against other major currencies, such as the yen and the
deutschemark. When the U.S. dollar gains strength, the buying power of foreign
currencies in the U.S. declines. As a result, the stronger U.S. dollar tended
to erode foreign investment gains for U.S. shareholders during the period.
Fortunately, our hedging strategies helped us avoid the brunt of the erosion
caused by the relative strength of the U.S. dollar, especially against European
currencies.
- --------------------
"Emerging markets
have benefited
from greater
participation in
the international
business arena."
1. Includes changes in net asset value per share without deducting any sales
charges. Such performance would have been lower if sales charges were taken
into account.
2. Source: Lipper Analytical Services, Inc., 9/30/97. Based on the comparisons
between changes in net asset value without considering sales charges, with
dividends and capital gains distributions of the Fund's Class A shares
reinvested. The Fund's Class A shares were ranked 5 of 44 among international
bond funds for the one-year period ended 9/30/97.
6 Oppenheimer International Bond Fund
<PAGE>
[photo of Steinmetz, Negri, and Vasan]
Portfolio Management
Team (l to r)
Art Steinmetz
David Negri
Ashwin Vasan
(Fund Manager)
The second important influence was the decline of bond yields around the world.
Much of the world appears to have been in a favorable economic environment
characterized by low inflation. The absence of inflationary pressures has helped
keep interest rates low, which has then fueled a speculative boom in financial
assets throughout much of the world.
In what areas of the world did you find the most attractive investment
opportunities?
We continued to find excellent fixed-income opportunities in the emerging
markets of Eastern Europe, Latin America, North East Asia and Africa. Because
the currencies of many developing nations in these regions are closely linked
to the U.S. dollar, they tend to fluctuate less than the currencies of many
industrialized countries.
In the final months of 1996, much of our emerging markets exposure was
in Latin America, an allocation that did quite well for the Fund. As 1997
progressed, we gradually decreased our holdings in Latin America because we
were no longer being adequately compensated for the risks of holding their
bonds. While we continue to regard Latin America positively, yields there have
declined dramatically, and we have shifted assets to other parts of the world.
7 Oppenheimer International Bond Fund
<PAGE>
An interview with your Fund's managers
- --------------------------------------------------------------------------------
What areas of the world did you avoid?
We tended to underweight markets in Europe, because of the currency risks as
the U.S. dollar became stronger. We also maintained a cautious view toward
Japan, because of its persistent economic difficulties.
However, these markets may provide attractive opportunities going
forward. As higher rates of economic growth return to these regions, their
bonds may offer good values. At the same time, more robust growth could cause
their currencies to strengthen against the U.S. dollar, which would further
benefit our U.S. shareholders.
In addition, we had little exposure to the markets of Southeast Asia.
This region of the world experienced severe difficulties in 1997, including the
devaluation of several of their currencies. By successfully avoiding these
devaluations, we were able to help the Fund's performance.
How do you manage the risks of international bond investing?
The key to our risk management discipline is diversification. When constructing
the portfolio, we begin by dividing the world into regions, including Europe,
Asia, Japan and Latin America. We also include a component comprised of Eastern
Europe, Africa and the Middle East, and a U.S. dollar bloc that includes
Australia, New Zealand and Canada. We attempt to find the best values within
each area, and that helps us create a broadly diversified portfolio. By
maintaining investments in about 50 different countries, we have successfully
avoided some of the world's major financial disasters, such as this year's
Asian currency devaluations.
- --------------
"We tended to
underweight
markets in
Europe . . ."
8 Oppenheimer International Bond Fund
<PAGE>
- ------------------
". . . because
of the currency
risks as the U.S.
dollar became
stronger."
What is your outlook for the future of the international bond markets?
We remain optimistic about the prospects for fixed-income investments
throughout most of the world. We continue to find attractive opportunities in
the emerging markets, which have benefited greatly from a fundamental shift to
capitalism and greater participation in the international business arena.
However, over the intermediate term, we expect the developed nations to take
the lead. This is because foreign central banks may begin to raise interest
rates as economic growth becomes more consistent from country to country. This
may eventually cause the U.S. dollar to give up some of its gains relative to
other currencies. In such an environment, owning bonds denominated in foreign
currencies should produce above-average returns for U.S. investors.
9 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
Financials
10 Oppenheimer International Bond Fund
<PAGE>
Statement of Investments September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Mortgage-Backed Obligations--0.0%
- -------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Sr. Unsub. Medium-Term
Nts., 6.50%, 7/10/02(AUD) (Cost $134,497) 180,000 $ 134,657
- -------------------------------------------------------------------------------------------
Foreign Government Obligations--57.0%
- -------------------------------------------------------------------------------------------
Argentina--1.2%
Banco Hipotecario Nacional (Argentina)
Medium-Term Nts., 10.625%, 8/7/06(2) 600,000 665,250
- ---------------------------------------------------------- ---------- -----------
City of Buenos Aires Bonds, 10.50%, 5/28/04(3)(ARP) 2,450,000 2,548,474
-----------
3,213,724
- -------------------------------------------------------------------------------------------
Australia--2.0%
Queensland Treasury Corp. Exchangeable Gtd. Nts.:
8%, 5/14/03(AUD) 130,000 103,787
8%, 8/14/01(AUD) 60,000 47,114
- ---------------------------------------------------------- ---------- -----------
Treasury Corp. of Victoria Gtd. Bonds, 8.25%, 10/15/03(AUD) 6,255,000 5,061,676
-----------
5,212,577
- -------------------------------------------------------------------------------------------
Brazil--2.8%
Brazil (Federal Republic of) Bonds, 10.125%, 5/15/27(2) 2,500,000 2,510,000
- ---------------------------------------------------------- ---------- -----------
Brazil (Federal Republic of) Capitalization Bonds,
8%, 4/15/14(2) 5,849,793 4,980,550
-----------
7,490,550
- -------------------------------------------------------------------------------------------
Canada--2.7%
Canada (Government of) Bonds, 9.50%, 10/1/98(CAD) 5,155,000 3,924,875
- -------------------------------------------------------------------------------------------
Canada (Government of) Debs., 10%, 6/1/08(CAD) 3,475,000 3,340,743
-----------
7,265,618
- -------------------------------------------------------------------------------------------
Costa Rica--0.2%
Central Bank of Costa Rica Interest Claim Bonds:
Series A, 6.539%, 5/21/05(3)(4) 273,605 270,185
Series B, 6.539%, 5/21/05(3)(4) 132,601 130,612
-----------
400,797
- -------------------------------------------------------------------------------------------
Finland--0.4%
Finland (Republic of) Bonds, 9.50%, 3/15/04(FIM) 4,450,000 1,025,243
- -------------------------------------------------------------------------------------------
Germany--2.2%
Germany (Republic of) Bonds, Series JA07, Zero Coupon:
4.26%, 1/4/01(5)(DEM) 8,700,000 4,271,428
5.77%, 1/4/07(5)(DEM) 4,970,000 1,690,901
-----------
5,962,329
11 Oppenheimer International Bond Fund
<PAGE>
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
- ---------------------------------------------------------------------------------------------------
Great Britain--4.1%
United Kingdom Treasury Bonds, 9%, 8/6/12(GBP) 3,400,000 $ 6,729,865
- -------------------------------------------------------------------------------------------
United Kingdom Treasury Nts., 13%, 7/14/00(GBP) 2,300,000 4,284,349
------------
11,014,214
- ---------------------------------------------------------------------------------------------------
Hungary--0.8%
Hungary (Government of) Bonds:
Series 97AA, 23.50%, 11/6/97(HUF) 335,000,000 1,720,887
Series 98/I, 23.50%, 5/17/98(HUF) 55,000,000 288,115
------------
2,009,002
- ---------------------------------------------------------------------------------------------------
Indonesia--0.7%
PT Hutama Karya Promissory Nts., Zero Coupon,
14.63%, 4/9/98(5)(IDR) 5,000,000,000 1,341,487
- ---------------------------------------------------- --------------- ------------
Perusahaan Listr, 17%, 8/21/01(IDR) 2,000,000,000 558,282
------------
1,899,769
- ---------------------------------------------------------------------------------------------------
Italy--3.6%
Italy (Republic of) Treasury Bonds, Buoni del Tesoro
Poliennali, 12%, 1/1/02(2)(ITL) 13,275,000,000 9,500,887
- ---------------------------------------------------------------------------------------------------
Jamaica--0.2%
Jamaica (Government of) Bonds, 9.625%, 7/2/02(6) 600,000 607,500
- ---------------------------------------------------------------------------------------------------
Jordan--2.0%
Hashemite (Kingdom of) Jordan Disc. Bonds, 6.75%,
12/23/23(2)(4) 6,250,000 5,261,719
- ---------------------------------------------------------------------------------------------------
Mexico--2.9%
Bonos de la Tesoreria de la Federacion, Zero Coupon:
26.25%, 10/2/97(5)(MXP) 12,869,330 1,654,403
22.67%, 3/5/98(5)(MXP) 9,500,000 1,127,949
19.94%, 7/2/98(5)(MXP) 10,339,830 1,156,829
21.01%, 7/30/98(5)(MXP) 11,750,000 1,297,745
- ---------------------------------------------------- --------------- ------------
Mexican Williams Bonds, 6.75%, 11/15/08(3)(4) 500,000 470,000
- ---------------------------------------------------- --------------- ------------
Petroleos Mexicanos Debs., 14.50%, 3/31/06(2)(GBP) 1,000,000 2,116,177
------------
7,823,103
- ---------------------------------------------------------------------------------------------------
Moldova--1.6%
Moldova (Republic of) Bonds:
9.875%, 6/13/02(2) 1,300,000 1,345,500
9.875%, 6/13/02(6) 1,300,000 1,345,500
- ---------------------------------------------------- --------------- ------------
Moldova (Republic of) Sr. Unsub. Nts., 8.465%, 12/10/99(2)(4) 1,430,000 1,460,030
------------
4,151,030
12 Oppenheimer International Bond Fund
<PAGE>
- ---------------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
- ---------------------------------------------------------------------------------------
New Zealand--3.8%
New Zealand (Government of) Bonds:
10%, 3/15/02(2)(NZD) 11,730,000 $ 8,445,808
8%, 11/15/06(NZD) 2,300,000 1,608,805
------------
10,054,613
- ---------------------------------------------------------------------------------------
Norway--1.6%
Norway (Government of) Bonds, 9.50%, 10/31/02(NOK) 25,415,000 4,259,728
- ---------------------------------------------------------------------------------------
Pakistan--1.9%
Pakistan (Republic of) Bonds, 9.946%, 5/30/00(2)(4) 4,680,000 4,750,200
- ---------------------------------------------------------- ------------ ------------
Pakistan (Republic of) Debs., 11.50%, 12/22/99 268,000 282,070
------------
5,032,270
- ---------------------------------------------------------------------------------------
Peru--1.5%
Peru (Republic of) Past Due Interest Bonds:
4%, 3/7/17(4) 4,500,000 3,020,625
4%, 3/7/17(4) 1,650,000 1,107,563
------------
4,128,188
- ---------------------------------------------------------------------------------------
Poland--1.2%
Poland (Republic of) Bonds:
12%, 6/12/01(PLZ) 8,300,000 1,887,451
16%, 2/12/99(PLZ) 4,750,000 1,273,626
------------
3,161,077
- ---------------------------------------------------------------------------------------
Portugal--1.3%
Portugal (Republic of) Bonds, Obrigicion do
tes Medio Prazo, 11.875%, 2/23/00PTE 531,500,000 3,400,323
- ---------------------------------------------------------------------------------------
Romania--2.2%
Renel R.A. Nts., 8.50%, 2/21/02(3)(4) 2,000,000 2,008,750
- ---------------------------------------------------------------------------------------
Romanian Commercial Bank SA Bonds,
9.125%, 3/10/00(2) 3,745,000 3,740,319
------------
5,749,069
- ---------------------------------------------------------------------------------------
Russia--1.4%
City of St. Petersburg Sr. Unsub. Nts., 9.50%, 6/18/02(6) 2,720,000 2,808,400
- ----------------------------------------------------------------------------------------
Ministry of Finance (Russian Government) Debs.,
9%, 3/25/04(DEM) 1,650,000 986,999
------------
3,795,399
13 Oppenheimer International Bond Fund
<PAGE>
Statement of Investments (Continued)
- ---------------------------------------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
- ---------------------------------------------------------------------------------------------------------------
South Africa--4.1%
South Africa (Republic of) Bonds:
Series 150, 12%, 2/28/05(ZAR) 26,177,680 $ 5,137,548
Series 162, 12.50%, 1/15/02(ZAR) 16,707,590 3,434,706
Series 175, 9%, 10/15/02(ZAR) 13,202,890 2,338,987
-------------
10,911,241
- ---------------------------------------------------------------------------------------------------------------
Spain--2.1%
Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion
del Estado, 12.25%, 3/25/00(ESP) 710,000,000 5,554,295
- ---------------------------------------------------------------------------------------------------------------
Sweden--3.7%
Sweden (Kingdom of) Bonds, Series 1033,
10.25%, 5/5/03(SEK) 61,500,000 9,851,818
- ---------------------------------------------------------------------------------------------------------------
Turkey--2.3%
Turkey (Government of) Treasury Bills, Zero Coupon:
103.11%, 8/5/98(5)TRL 880,000,000,000 2,493,451
101.23%, 9/16/98(5)TRL 1,399,840,000,000 3,678,656
-------------
6,172,107
- ---------------------------------------------------------------------------------------------------------------
Venezuela--2.5%
Venezuela (Republic of) New Money Bonds, Series A,
6.875%, 12/18/05(4) 750,000 721,875
- --------------------------------------------------------- ------------------ -------------
Venezuela Synthetic Sovereign Sec. Bonds:
10.125%, 12/29/03(2)(DEM) 8,070,000 4,820,469
11.50%, 12/28/07(2)(DEM) 2,190,000 1,320,557
-------------
6,862,901
-------------
Total Foreign Government Obligations (Cost $150,859,806) 151,771,091
- ---------------------------------------------------------------------------------------------------------------
Loan Participations--4.7%
- ---------------------------------------------------------------------------------------------------------------
Algeria (Republic of) Reprofiled Debt Loan Participation,
Tranche A:
1.75%, 9/4/06(4)JPY 104,400,000 723,679
7%, 9/4/06(4) 3,675,000 3,305,203
- --------------------------------------------------------- ------------------ -------------
AO Rostelecom Loan Facility Nts., 9.50%, 2/15/00(3)(4) 2,000,000 2,018,750
- --------------------------------------------------------- ------------------ -------------
Colombia (Republic of) Concorde Loan Participation,
8.625%, 1/31/98(3)(4) 30,000 29,400
- --------------------------------------------------------- ------------------ -------------
Jamaica (Government of) 1990 Refinancing Agreement Nts.:
Tranche A, 6.563%, 10/16/00(3)(4) 139,999 135,800
Tranche B, 6.563%, 11/15/04(3)(4) 2,875,000 2,702,500
14 Oppenheimer International Bond Fund
<PAGE>
- -------------------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
- -------------------------------------------------------------------------------------------
Trinidad & Tobago Loan Participation Agreement:
Tranche A, 1.575%, 9/30/00(3)(4)(5)(JPY) 140,290,909 $ 1,081,261
Tranche B, 1.575%, 9/30/00(3)(4)(5)(JPY) 333,329,913 2,569,066
------------
Total Loan Participations (Cost $11,916,393) 12,565,659
- -------------------------------------------------------------------------------------------
Corporate Bonds and Notes--19.0%
- -------------------------------------------------------------------------------------------
Basic Industry--2.6%
- -------------------------------------------------------------------------------------------
Chemicals--0.8%
Polytama International Finance BV, 11.25% Gtd. Sec. Nts.,
6/15/07(2) 2,085,000 2,069,362
- -------------------------------------------------------------------------------------------
Metals/Mining--0.1%
Royal Oak Mines, Inc., 11% Sr. Sub. Nts., 8/15/06 330,000 321,750
- -------------------------------------------------------------------------------------------
Paper--1.7%
Asia Pulp & Paper International Finance Co., Zero
Coupon Asian Currency Nts., 14.71%, 12/8/97(5)(IDR) 300,000,000 87,935
- -------------------------------------------------------------- ------------ ------------
Indah Kiat International Finance Co. BV, 12.50%
Gtd. Sec. Nts., 6/15/06(2) 2,637,000 2,917,181
- -------------------------------------------------------------- ------------ ------------
Tjiwi Kimia International Finance Co. BV:
13.25% Gtd. Sr. Nts., 8/1/01 200,000 222,000
3.25% Gtd. Sr. Nts., 8/1/01(2) 1,080,000 1,198,800
------------
4,425,916
- -------------------------------------------------------------------------------------------
Consumer Related--0.9%
- -------------------------------------------------------------------------------------------
Consumer Products--0.0%
TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(3)(7) 70,000 82,775
- -------------------------------------------------------------------------------------------
Hotel/Gaming--0.7%
Grupo Posadas SA de CV, 10.375% Bonds, 2/13/02 (2)(3) 1,700,000 1,785,000
- -------------------------------------------------------------------------------------------
Textile/Apparel--0.2%
PT Polysindo Eka Perkasa, Zero Coupon Promissory Nts.,
9.39%, 7/14/98(5) 500,000 456,075
- -------------------------------------------------------------------------------------------
Financial Services--4.8%
- -------------------------------------------------------------------------------------------
Banks & Thrifts--2.6%
Banco de Colombia, 5.20% Cv. Jr. Unsec. Sub. Nts.,
2/1/99(2)(3) 2,050,000 2,121,750
- ------------------------------------------------------------- ------------ ------------
CEI Citicorp Holdings, 11.25% Bonds, 2/14/07(ARP) 2,730,000 2,788,531
- -------------------------------------------------------------- ------------ ------------
Ongko International Finance Co. BV, 10.50% Gtd. Nts.,
3/29/04(6) 850,000 886,125
- ------------------------------------------------------------- ------------ ------------
Tjiwi Kimia Finance Mauritius Ltd., 10% Gtd. Nts.,
8/1/04(2) 1,150,000 1,137,062
------------
6,933,468
15 Oppenheimer International Bond Fund
<PAGE>
Statement of Investments (Continued)
- --------------------------------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
- --------------------------------------------------------------------------------------------------------
Diversified Financial--2.2%
Bakrie Investindo, Zero Coupon Promissory Nts.:
17.38%, 3/16/98(5)(IDR) 5,990,000,000 $1,610,068
26.59%, 7/10/98(5)(IDR) 2,000,000,000 491,464
- ---------------------------------------------------------- -------------- -----------
Pindo Deli Finance Mauritius Ltd., 10.75% Gtd. Nts.,
10/1/07(2)(3)(8) 1,420,000 1,469,700
- ---------------------------------------------------------- -------------- -----------
PT Polysindo Eka Perkasa, Zero Coupon Promissory Nts.:
30.94%, 3/16/98(5)(IDR) 3,000,000,000 821,643
28.80%, 7/10/98(5)(IDR) 2,000,000,000 507,322
9.37%, 7/28/98(5) 1,000,000 908,011
-----------
5,808,208
- --------------------------------------------------------------------------------------------------------
Housing Related--0.7%
- --------------------------------------------------------------------------------------------------------
Homebuilders/Real Estate--0.7%
International de Ceramica SA, 9.75% Gtd. Unsec.
Unsub. Nts., 8/1/02(3) 700,000 708,750
- ---------------------------------------------------------- -------------- -----------
Trizec Hahn Corp., 7.45% Sr. Unsec. Debs., 6/1/04(CAD) 1,600,000 1,206,578
-----------
1,915,328
- --------------------------------------------------------------------------------------------------------
Media--3.4%
- --------------------------------------------------------------------------------------------------------
Broadcasting--2.6%
Azteca Holdings SA, 11% Sr. Nts., 6/15/02(6)(7) 1,980,000 2,093,850
- ---------------------------------------------------------- -------------- -----------
Conecel Holdings Ltd., Units (each unit consists of $1,000
principal amount of 14% sec. nts., 10/1/00 and one warrant
to purchase class B common stock)(2)(3)(8)(9) 1,110,000 1,143,300
- ---------------------------------------------------------- -------------- -----------
Consorcio Ecuatoriano, 14% Nts., 5/1/02(2)(3) 3,415,000 3,696,738
-----------
6,933,888
- --------------------------------------------------------------------------------------------------------
Cable Television--0.3%
Rogers Cablesystems Ltd., 10% Second Priority Sr. Sec.
Debs., 12/1/07 150,000 165,000
- ---------------------------------------------------------- -------------- -----------
Rogers Communications, Inc., 8.75% Sr. Nts., 7/15/07(CAD) 1,000,000 721,839
-----------
886,839
- --------------------------------------------------------------------------------------------------------
Diversified Media--0.5%
ITT Promedia, 9.125% Sr. Sub. Nts., 9/15/07(6)(DEM) 2,100,000 1,241,021
- --------------------------------------------------------------------------------------------------------
Other--0.7%
- --------------------------------------------------------------------------------------------------------
Conglomerates--0.7%
Cia Latino Americana de Infraestructura & Servicios
SA--CLISA, 11.625% Gtd. Sr. Nts., 6/1/04(3) 100,000 106,250
16 Oppenheimer International Bond Fund
<PAGE>
- ----------------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
- ----------------------------------------------------------------------------------------
Mechala Group Jamaica Ltd.:
12% Bonds, 2/15/02(3) $ 250,000 $ 248,750
12.75% Bonds, 12/30/99(2) 1,500,000 1,522,500
------------
1,877,500
- ----------------------------------------------------------------------------------------
Retail--0.6%
- ----------------------------------------------------------------------------------------
Specialty Retailing--0.6%
Central Termica Guemes, 12% Bonds, 11/26/01(3) 1,600,000 1,742,000
- ----------------------------------------------------------------------------------------
Technology--2.7%
- ----------------------------------------------------------------------------------------
Information Technology--1.4%
Celcaribe SA, 0%/13.50% Sr. Sec. Nts., 3/15/04(3)(10) 275,000 265,375
- -------------------------------------------------------- ----------- ------------
Comunicacion Celular SA, 0%/13.125% Sr. Deferred
Coupon Bonds, 11/15/03(10) 2,600,000 2,028,000
- -------------------------------------------------------- ----------- ------------
Occidente y Caribe Celular SA, 0%/14% Sr. Disc. Nts.,
Series B, 3/15/04(2)(10) 2,000,000 1,590,000
------------
3,883,375
- ----------------------------------------------------------------------------------------
Telecommunications/Technology--1.3%
- ----------------------------------------------------------------------------------------
Call-Net Enterprises, Inc., 0%/13.25% Sr. Disc. Nts.,
12/1/04(10)(11) 500,000 452,500
- -------------------------------------------------------- ----------- ------------
PTC International Finance BV, 0%/10.75% Gtd. Sr. Sub.
Unsec. Bonds, 7/1/07(2)(6)(10) 2,448,000 1,499,400
- -------------------------------------------------------- ----------- ------------
Shaw Communications, Inc., 8.54% Debs., 9/30/27(8)(CAD) 2,000,000 1,442,485
------------
3,394,385
- ----------------------------------------------------------------------------------------
Transportation--1.5%
- ----------------------------------------------------------------------------------------
Shipping--0.4%
Transportacion Maritima Mexicana SA de CV, 9.25% Nts.,
5/15/03(2) 1,000,000 1,016,250
- ----------------------------------------------------------------------------------------
Trucking--1.1%
Road King Infrastructure Finance (1997) Ltd., 9.50% Gtd.
Unsec. Unsub. Bonds, 7/15/07(2)(3) 2,900,000 2,878,250
- ----------------------------------------------------------------------------------------
Utilities--1.1%
- ----------------------------------------------------------------------------------------
Electric Utilities--0.8%
Panda Global Energy Co., 12.50% Sr. Nts., 4/15/04(2)(3) 2,150,000 2,096,250
- ----------------------------------------------------------------------------------------
Gas Utilities--0.3%
CE Casecnan Water & Energy, Inc.:
11.45% Sr. Nts., Series A, 11/15/05 500,000 545,000
11.95% Sr. Nts., Series B, 11/15/10 200,000 222,000
------------
767,000
------------
Total Corporate Bonds and Notes (Cost $49,929,176) 50,514,640
17 Oppenheimer International Bond Fund
<PAGE>
Statement of Investments (Continued)
- ------------------------------------------------------------------------------------------
Market Value
Shares See Note 1
- ------------------------------------------------------------------------------------------
Common Stocks--0.1%
- ------------------------------------------------------------------------------------------
Air New Zealand Ltd., Cl. B (Cost $394,974) 145,000 $ 373,080
Units
- -------------------------------------------------------------------------------------------
Rights, Warrants and Certificates--0.0%
- -------------------------------------------------------------------------------------------
Comunicacion Celular SA Wts., Exp. 11/03(3) 1,600 88,000
- ------------------------------------------------------- ------- --------
Occidente y Caribe Celular SA Wts., Exp. 3/04(3) 8,000 80
--------
Total Rights, Warrants and Certificates (Cost $15,000) 88,080
</TABLE>
<TABLE>
<CAPTION>
Face
Amount(1)
-------------
<S> <C> <C>
Structured Instruments--13.5%
- -----------------------------------------------------------------------------------------
Canadian Imperial Bank of Commerce (New York Branch)
Canadian Dollar Three Month Banker's Acceptance Linked
Maximum Rate Nts., 8.66%, 4/13/98 $2,200,000 2,202,200
- --------------------------------------------------------------- ----------- ----------
Canadian Imperial Bank of Commerce:
U.S. Dollar Nts. Linked to the Colombian Peso, 18.25%, 9/29/98 5,000,000 4,924,500
U.S. Dollar Nts. Linked to the Ministry of Finance of the
Russian Federation GKO, Zero Coupon, 9.86%, 9/17/98(2)(5) 2,500,000 2,237,000
- --------------------------------------------------------------- ----------- ----------
Credit Suisse First Boston (Cayman) Ltd., City of Moscow,
Credit & Convertibility Linked Nts., Series EM 215, Zero
Coupon, 12.05%, 12/30/97(2)(5) 4,800,000 4,660,565
- --------------------------------------------------------------- ----------- ----------
ING (U.S.) Financial Holdings Corp.:
U.S. Dollar Hedged GKO Pass-Through Nts., Zero Coupon,
13.16%, 10/29/97(3)(5) 562,983 557,827
U.S. Dollar Hedged GKO Pass-Through Nts., Zero Coupon,
13.09%, 12/3/97(3)(5) 2,100,000 2,058,756
PT Polysindo Linked Nts., Zero Coupon, 10.45%,
7/15/98(3)(5) 1,250,000 1,122,187
- -------------------------------------------------------------- ----------- ----------
Lehman Brothers, Inc., Guatemalan Letras de Tesoreria
Linked Nts., Zero Coupon, 8.31%, 10/27/97(5) 1,650,000 1,639,935
- --------------------------------------------------------------- ----------- ----------
Morgan Guaranty Trust Co. of New York, Japanese
Government Bond 193 Currency Protected Bank Nts.,
8.14%, 4/29/98 115,000 87,515
- --------------------------------------------------------------- ----------- ----------
Salomon, Inc.:
Colombian Peso Linked Nts., Zero Coupon, 18.17%, 8/20/98(5)(8) 2,917,000 2,507,567
Russian S-Account Credit Linked Nts., Zero Coupon:
11.33%, 12/12/97(5) 1,200,000 1,174,080
14.16%, 5/22/98(5) 3,750,000 3,491,625
12.23%, 5/29/98(5) 300,000 278,730
18 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
- --------------------------------------------------------------------------------------------------------
Structured Instruments (continued)
Standard Chartered Bank, Indian Rupee Linked Nts.:
15%, 10/20/97 $ 441,000 $ 434,032
32.641%, 11/28/97 558,000 574,294
35.115%, 11/28/97 558,000 572,229
Zero Coupon, 17.73%, 10/1/02(5)(IDR) 9,231,000,000 1,166,631
- ------------------------------------------------------- --------------- ------------
Standard Chartered Bank:
Korean Wong Principal & Interest Linked Deposit,
11.62%, 6/30/98 976,055 917,492
Korean Wong Principal & Interest Linked Deposit,
11.68%, 7/3/98 1,081,605 1,016,817
Korean Wong Principal & Interest Linked Deposit,
12.86%, 1/12/98 1,224,258 1,165,249
Korean Wong Principal & Interest Linked Deposit,
13.51%, 12/17/97 1,575,192 1,511,869
U.S. Dollar/Chinese Yuan Linked Nts., 12.903%, 12/5/97 1,250,000 1,261,250
- ------------------------------------------------------- --------------- ------------
Union Bank of Switzerland, Indian Rupee Linked Nts.,
5.40%, 11/17/97 294,000 294,764
------------
Total Structured Instruments (Cost $36,252,532) 35,857,114
</TABLE>
<TABLE>
<CAPTION>
Date Strike Contracts
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Call Options Purchased--0.2%
===================================================================================================
Brazil (Federal Republic of)
Capitalization Bonds, 8%, 4/15/14
Call Opt. 10/97 83.625% 3,000 47,400
- --------------------------------------- ----- -------- ----------- -----------
Canadian Dollar Call Opt. 10/97 1.365(CAD) 1,230,000 172
- --------------------------------------- ----- --------- ----------- -----------
German Mark/Japanese Yen Call Opt. 10/97 68.34(DEM/JPY) 8,910,000 53,924
- --------------------------------------- ----- ------------- ----------- -----------
German Mark/Czech Koruna Call Opt. 12/97 19.22(DEM/CZK) 2,305,000 40,107
- --------------------------------------- ----- ------------- ----------- -----------
Finnish Markka/German Mark Call Opt. 1/98 2.949(FIM/DEM) 13,415,000 9,994
- --------------------------------------- ---- ------------- ----------- -----------
Norwegian Krone/German Mark Call Opt. 1/98 4.101(NOK/DEM) 18,900,000 291,211
- --------------------------------------- ---- ------------- ----------- -----------
Russian (Government of) Principal
Loans Debs., 5.80%, 12/29/49 Call Opt. 10/97 69.875% 1,850 91,483
- --------------------------------------- ----- -------- ----------- -----------
Russian (Government of) Principal
Loans Debs., 5.80%, 12/29/49 Call Opt. 11/97 75.125% 3,370 33,700
-----------
Total Call Options Purchased
(Cost $314,822) 567,991
</TABLE>
19 Oppenheimer International Bond Fund
<PAGE>
Statement of Investments (Continued)
<TABLE>
<CAPTION>
Market Value
Date Strike Contracts See Note 1
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Put Options Purchased--0.0%
- ----------------------------------------------------------------------------------------------------
Brazilian Rial Put Opt. 10/97 1.108(BRR) 5,000,000 $ 1,250
German Mark Put Opt. 10/97 1.788(DEM) 17,730,000 13,138
German Mark Put Opt. 10/97 1.87(DEM) 23,390,000 --
German Mark Put Opt. 10/97 1.89(DEM) 36,940,000 --
---------
Total Put Options Purchased
(Cost $638,910) 14,388
</TABLE>
<TABLE>
<CAPTION>
Face
Amount(1)
----------------
<S> <C> <C>
Repurchase Agreements--5.2%
- ----------------------------------------------------------------------------------------------
Repurchase agreement with Goldman, Sachs & Co., 6.125%,
dated 9/30/97, to be repurchased at $13,802,348 on 10/1/97,
collateralized by U.S. Treasury Nts., 5.125%-9.125%, 11/15/98-
9/30/99, with a value of $14,091,620 (Cost $13,800,000) $ 13,800,000 13,800,000
- ----------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $264,256,110) 99.7% 265,686,700
- ----------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 0.3 717,604
------------ -------------
Net Assets 100.0% $266,404,304
============ =============
</TABLE>
1. Face amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
ARP -- Argentine Peso ITL -- Italian Lira
AUD -- Australian Dollar JPY -- Japanese Yen
BRR -- Brazilian Rial MXP -- Mexican Peso
CAD -- Canadian Dollar NOK -- Norwegian Krone
CZK -- Czech Koruna NZD -- New Zealand Dollar
DEM -- German Mark PLZ -- Polish Zloty
ESP -- Spanish Peseta PTE -- Portuguese Escudo
FIM -- Finnish Markka SEK -- Swedish Krona
GBP -- British Pound Sterling TRL -- Turkish Lira
HUF -- Hungarian Forint ZAR -- South African Rand
IDR -- Indonesian Rupiah
20 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
2. A sufficient amount of liquid assets has been designated to cover
outstanding written options, as follows:
<TABLE>
<CAPTION>
Contracts/Face Expiration Exercise Premium Market Value
Subject to Call/Put Date Price Received See Note 1
--------------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Banco Hipotecario Nacional
(Argentina) Medium-Term Nts.,
10.625%, 8/7/06 Call Option $ 600,000 8/7/00 100.00% $ 5,520 $ 72,000
- ----------------------------- ------------ --------- ------- --------- --------
Brazil (Federal Republic of)
Capitalization Bonds,
8%, 4/15/14 Call Option $ 3,000,000 10/6/97 83.625% 36,428 47,400
- ----------------------------- ------------ --------- --------- --------- ------
British Pound Sterling
Call Option 1,615,000 10/6/97 0.625 GBP 18,088 26,728
- ----------------------------- ------------ --------- --------- --------- ------
Canadian Dollar Put Option 1,230,000 10/10/97 1.365 CAD 8,017 19,496
- ----------------------------- ------------ --------- --------- --------- ------
Finnish Markka/German Mark
Cross Currency Put Option 13,415,000 1/22/98 3.00 FIM 15,480 36,449
- ----------------------------- ------------ --------- --------- --------- ------
German Mark Call Option 23,360,000 10/16/97 1.72 DEM 61,129 55,597
- ----------------------------- ------------ --------- -------- --------- ------
German Mark Call Option 4,610,000 10/29/97 1.72 DEM 11,391 10,866
- ----------------------------- ------------ --------- -------- --------- ------
German Mark Put Option 4,610,000 10/22/97 1.80 DEM 10,373 7,122
- ----------------------------- ------------ --------- -------- --------- -----
German Mark Put Option 4,805,000 10/22/97 1.82 DEM 14,389 3,239
- ----------------------------- ------------ --------- -------- --------- -----
Norwegian Krone/German Mark
Cross Currency Put Option 18,900,000 1/23/98 4.18 NOK 30,752 28,293
- ----------------------------- ------------ --------- -------- --------- ------
Russian (Government of)
Principal Loans Debs.,
5.80%, 12/29/49 Call Option $ 1,850,000 10/14/97 69.875% 75,850 91,482
--------- --------
$287,417 $398,672
========= ========
</TABLE>
3. Identifies issues considered to be illiquid or restricted--See Note 8 of
Notes to Financial Statements.
4. Represents the current interest rate for a variable rate security.
5. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
6. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities
have been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $10,481,796 or 3.93% of the Fund's net
assets, at September 30, 1997.
7. Securities with an aggregate market value of $717,275 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
8. When-issued security to be delivered and settled after September 30, 1997.
9. Units may be comprised of several components, such as debt and equity and/or
warrants to purchase equity at some point in the future. For units which
represent debt securities, face amount disclosed represents total underlying
principal.
10. Denotes a step bond: a zero coupon bond that converts to a fixed or
variable interest rate at a designated future date.
11. A sufficient amount of securities has been designated to cover outstanding
forward foreign currency exchange contracts. See Note 5 of Notes to Financial
Statements.
See accompanying Notes to Financial Statements.
21 Oppenheimer International Bond Fund
<PAGE>
Statement of Assets and Liabilities September 30, 1997
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------
Assets
- -----------------------------------------------------------------------------------------
Investments, at value (cost $264,256,110)--see accompanying statement $265,686,700
- -----------------------------------------------------------------------------------------
Cash 1,882,166
- ------------------------------------------------------------------------ ----------
Unrealized appreciation on forward foreign currency
exchange contracts--Note 5 336,653
- ------------------------------------------------------------------------ -------------
Receivables:
Investments sold 10,038,744
Interest and principal paydowns 6,814,820
Shares of beneficial interest sold 1,533,019
Closed forward foreign currency exchange contracts 1,354,787
- ------------------------------------------------------------------------ -------------
Deferred organization costs--Note 1 8,283
- ------------------------------------------------------------------------ -------------
Other 2,331
-------------
Total assets 287,657,503
- -----------------------------------------------------------------------------------------
Liabilities
Unrealized depreciation on forward foreign
currency exchange contracts--Note 5 393,907
- ------------------------------------------------------------------------ -------------
Options written, at value (premiums received $287,417)--see accompanying
statement--Note 7 398,672
- ------------------------------------------------------------------------ -------------
Payables and other liabilities:
Investments purchased (including $10,070,243 purchased on a when-issued
basis)--Note 1 18,636,955
Dividends 765,845
Closed forward foreign currency exchange contracts 416,524
Shares of beneficial interest redeemed 302,482
Distribution and service plan fees 152,572
Transfer and shareholder servicing agent fees 37,239
Daily variation on futures contracts--Note 6 29,570
Other 119,433
-------------
Total liabilities 21,253,199
- -----------------------------------------------------------------------------------------
Net Assets $266,404,304
=============
- -----------------------------------------------------------------------------------------
Composition of Net Assets
Paid-in capital $263,282,243
- ------------------------------------------------------------------------ -------------
Accumulated net realized gain on investment transactions 1,855,055
- ------------------------------------------------------------------------ -------------
Net unrealized appreciation on investments and translation of assets and
liabilities denominated in foreign currencies 1,267,006
-------------
Net assets $266,404,304
=============
</TABLE>
22 Oppenheimer International Bond Fund
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$114,846,834 and 20,850,172 shares of beneficial interest outstanding) $5.51
Maximum offering price per share (net asset value plus sales charge of 4.75%
of offering price) $5.78
- ------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $122,873,538
and 22,347,468 shares of beneficial interest outstanding) $5.50
- ------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $28,683,932
and 5,218,843 shares of beneficial interest outstanding) $5.50
</TABLE>
See accompanying Notes to Financial Statements.
23 Oppenheimer International Bond Fund
<PAGE>
Statement of Operations For the Year Ended September 30, 1997
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------
Investment Income
Interest (net of foreign withholding taxes of $58,572) $20,785,447
- ------------------------------------------------------------------------ ------------
Dividends (net of foreign withholding taxes of $1,428) 8,076
------------
Total income 20,793,523
- ---------------------------------------------------------------------------------------
Expenses
Management fees--Note 4 1,465,181
- ------------------------------------------------------------------------ ------------
Distribution and service plan fees--Note 4:
Class A 213,030
Class B 873,049
Class C 198,232
- ------------------------------------------------------------------------ ------------
Transfer and shareholder servicing agent fees--Note 4 296,229
- ------------------------------------------------------------------------ ------------
Shareholder reports 133,074
- ------------------------------------------------------------------------ ------------
Custodian fees and expenses 86,262
- ------------------------------------------------------------------------ ------------
Registration and filing fees 44,558
- ------------------------------------------------------------------------ ------------
Legal and auditing fees 13,436
- ------------------------------------------------------------------------ ------------
Trustees' fees and expenses 2,660
- ------------------------------------------------------------------------ ------------
Other 12,387
------------
Total expenses 3,338,098
- ---------------------------------------------------------------------------------------
Net Investment Income 17,455,425
- ---------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 9,285,971
Closing of futures contracts (38,899)
Closing and expiration of options written--Note 7 (235,486)
Foreign currency transactions (6,782,396)
------------
Net realized gain 2,229,190
- ---------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 1,429,058
Translation of assets and liabilities denominated in foreign currencies (2,089,353)
------------
Net change (660,295)
------------
Net realized and unrealized gain 1,568,895
- ---------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $19,024,320
============
</TABLE>
See accompanying Notes to Financial Statements.
24 Oppenheimer International Bond Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended September 30,
1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 17,455,425 $ 3,832,783
- ------------------------------------------------------ ------------ ------------
Net realized gain 2,229,190 1,549,896
- ------------------------------------------------------ ------------ ------------
Net change in unrealized appreciation or depreciation (660,295) 1,839,250
------------ ------------
Net increase in net assets resulting from operations 19,024,320 7,221,929
- ------------------------------------------------------------------------------------
Dividends and Distributions to Shareholders
Dividends from net investment income:
Class A (8,439,637) (1,931,780)
Class B (7,638,040) (1,609,969)
Class C (1,735,744) (360,475)
- ------------------------------------------------------ ------------ ------------
Distributions from net realized gain:
Class A (703,789) --
Class B (644,945) --
Class C (147,671) --
- ------------------------------------------------------------------------------------
Beneficial Interest Transactions
Net increase in net assets resulting from beneficial
interest transactions--Note 2:
Class A 62,811,767 46,551,563
Class B 77,812,810 40,565,844
Class C 18,447,362 9,758,157
- ------------------------------------------------------------------------------------
Net Assets
Total increase 158,786,433 100,195,269
- ------------------------------------------------------ ------------ ------------
Beginning of period 107,617,871 7,422,602
------------ ------------
End of period $266,404,304 $107,617,871
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
25 Oppenheimer International Bond Fund
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------
Year Ended September 30,
1997 1996 1995(1)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $5.49 $5.10 $5.00
- ----------------------------------------- -------- ------- ----------
Income from investment operations:
Net investment income .52 .52 .15
Net realized and unrealized gain .08 .40 .10
-------- ------- ----------
Total income from investment operations .60 .92 .25
- ----------------------------------------- -------- ------- ----------
Dividends to shareholders from net
investment income (.53) (.53) (.15)
Distributions from net realized gain (.05) -- --
-------- ------- ----------
Total dividends and distributions to
shareholders (.58) (.53) (.15)
- ---------------------------------------- -------- ------- ----------
Net asset value, end of period $5.51 $5.49 $5.10
======== ======= ==========
- ------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value(2) 11.33% 18.82% 5.13%
- ------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $114,847 $52,128 $3,984
- ----------------------------------------- -------- ------- ----------
Average net assets (in thousands) $ 89,112 $19,817 $2,566
- ----------------------------------------- -------- ------- ----------
Ratios to average net assets:
Net investment income 9.24% 9.60% 9.94%(3)
Expenses, before voluntary
reimbursement by the Manager 1.28% 1.59% 1.59%(3)
Expenses, net of voluntary
reimbursement by the Manager N/A 1.49% 0.41%(3)
- ----------------------------------------- -------- ------- ----------
Portfolio turnover rate(4) 280.1% 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.
26 Oppenheimer International Bond Fund
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
- -------------------------------------------------- -------------------------------------------------------
Year Ended September 30, Year Ended September 30,
1997 1996 1995(1) 1997 1996 1995(1)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$5.48 $5.10 $5.00 $5.48 $5.09 $5.00
-------- ------- ---------- ------- ------- ----------
.48 .48 .14 .48 .48 .14
.07 .39 .10 .07 .39 .09
-------- ------- ---------- ------- ------- ----------
.55 .87 .24 .55 .87 .23
-------- ------- ---------- ------- ------- ----------
(.48) (.49) (.14) (.48) (.48) (.14)
(.05) -- -- (.05) -- --
-------- ------- ---------- ------- ------- ----------
(.53) (.49) (.14) (.53) (.48) (.14)
- -------------------------------------------------------------------------------------------------------
$5.50 $5.48 $5.10 $5.50 $5.48 $5.09
====== ======= ======== ======= ======= =======
- -------------------------------------------------------------------------------------------------------
10.52% 17.71% 4.92% 10.52% 17.92% 4.73%
- -------------------------------------------------------------------------------------------------------
$122,874 $45,207 $3,238 $28,684 $10,282 $201
- -------------------------------------------------------------------------------------------------------
$ 87,557 $17,891 $1,125 $19,883 $ 4,039 $97
- -------------------------------------------------------------------------------------------------------
8.57% 8.81% 9.20%(3) 8.62% 8.76% 9.36%(3)
2.04% 2.36% 2.21%(3) 2.04% 2.36% 2.26%(3)
N/A 2.26% 0.89%(3) N/A 2.25% 0.85%(3)
- -------------------------------------------------------------------------------------------------------
280.1% 273.3% 122.0% 280.1% 273.3% 122.0%
</TABLE>
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, 1997 were $533,744,496 and $409,121,282,
respectively.
See accompanying Notes to Financial Statements.
27 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
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 total return primarily from foreign debt
securities. 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. 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.
28 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
Securities Purchased on a When-Issued Basis. Delivery and payment for
securities that have been purchased by the Fund on a forward commitment or
when-issued basis can take place a month or more after the transaction date.
During this period, such securities do not earn interest, are subject to market
fluctuation and may increase or decrease in value prior to their delivery. The
Fund maintains, in a segregated account with its custodian, assets with a
market value equal to the amount of its purchase commitments. The purchase of
securities on a when-issued or forward commitment basis may increase the
volatility of the Fund's net asset value to the extent the Fund makes such
purchases while remaining substantially fully invested. As of September 30,
1997, the Fund had entered into outstanding when-issued or forward commitments
of $10,070,243.
In connection with its ability to purchase securities on a
when-issued or forward commitment basis, the Fund may enter into mortgage
"dollar-rolls" in which the Fund sells securities for delivery in the current
month and simultaneously contracts with the same counterparty to repurchase
similar (same type coupon and maturity) but not identical securities on a
specified future date. The Fund records each dollar-roll as a sale and a new
purchase transaction.
- --------------------------------------------------------------------------------
Foreign Currency Translation. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on
investments is separately identified from the fluctuations arising from changes
in market values of securities held and reported with all other foreign
currency gains and losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is
required to be at least 102% of the resale price at the time of purchase. If
the seller of the agreement defaults and the value of the collateral declines,
or if the seller enters 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.
29 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. Significant Accounting Policies (continued)
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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 primarily because of the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes. The character of the
distributions made during the year from net investment income or net realized
gains may differ from its ultimate characterization for federal income tax
purposes. Also, due to timing of dividend distributions, the fiscal year in
which amounts are distributed may differ from the fiscal year in which the
income or realized gain was recorded by the Fund.
The Fund adjusts the classification of distributions to
shareholders to reflect the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, during the year ended September 30, 1997, amounts have been
reclassified to reflect a decrease in overdistributed net investment income of
$357,996. Accumulated net realized gain on investments was decreased by the
same amount.
- --------------------------------------------------------------------------------
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.
30 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
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,
Year Ended September 30, 1997 1996
-------------------------------- ---------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 18,015,830 $ 99,555,234 9,721,751 $51,914,821
Dividends and
distributions reinvested 1,145,316 6,327,582 246,015 1,320,886
Redeemed (7,805,542) (43,071,049) (1,254,497) (6,684,144)
----------- ------------- ----------- ------------
Net increase 11,355,604 $ 62,811,767 8,713,269 $46,551,563
=========== ============= =========== ============
- ---------------------------------------------------------------------------------------
Class B:
Sold 18,551,946 $102,345,548 8,129,566 $43,322,204
Dividends and
distributions reinvested 868,156 4,783,353 172,750 925,063
Redeemed (5,318,785) (29,316,091) (691,490) (3,681,423)
----------- ------------- ----------- ------------
Net increase 14,101,317 $ 77,812,810 7,610,826 $40,565,844
=========== ============= =========== ============
- ---------------------------------------------------------------------------------------
Class C:
Sold 4,180,150 $ 23,070,240 1,915,475 $10,177,624
Dividends and
distributions reinvested 235,688 1,298,290 35,740 192,431
Redeemed (1,073,077) (5,921,168) (114,564) (611,898)
----------- ------------- ----------- ------------
Net increase 3,342,761 $ 18,447,362 1,836,651 $ 9,758,157
=========== ============= =========== ============
</TABLE>
- --------------------------------------------------------------------------------
3. Unrealized Gains and Losses on Investments
At September 30, 1997, net unrealized appreciation on investments and options
written of $1,319,335 was composed of gross appreciation of $6,240,483, and
gross depreciation of $4,921,148.
31 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. Management Fees and Other Transactions with Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for 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.
For the year ended September 30, 1997, commissions (sales charges
paid by investors) on sales of Class A shares totaled $1,124,978, of which
$273,182 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 $3,225,657 and $209,570,
respectively, of which $71,982 and $3,333, respectively, was paid to an
affiliated broker/dealer. During the year ended September 30, 1997, OFDI
received contingent deferred sales charges of $202,891 and $12,267,
respectively, upon redemption of Class B and Class C shares as reimbursement
for sales commissions advanced by OFDI at the time of sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is
the transfer and shareholder servicing agent for the Fund and for other
registered investment companies. OFS's total costs of providing such services
are allocated ratably to these companies.
The Fund has adopted a Service Plan for Class A shares to
reimburse OFDI for a portion of its costs incurred in connection with the
personal service and maintenance of shareholder accounts that hold Class A
shares. Reimbursement is made quarterly at an annual rate that may not exceed
0.25% of the average annual net assets of Class A shares of the Fund. OFDI uses
the service fee to reimburse brokers, dealers, banks and other financial
institutions quarterly for providing personal service and maintaining accounts
of their customers that hold Class A shares. During the year ended September
30, 1997, OFDI paid $11,216 to an affiliated broker/dealer as reimbursement for
Class A personal service and maintenance expenses.
32 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
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 $2,328 to an
affiliated broker/dealer as reimbursement for Class B personal service and
maintenance expenses and retained $799,151 and $152,406, 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
$4,441,423 for Class B and $371,816 for Class C.
- --------------------------------------------------------------------------------
5. Forward Contracts
A forward foreign currency exchange contract (forward contract) is a commitment
to purchase or sell a foreign currency at a future date, at a negotiated rate.
The Fund uses forward contracts to seek to manage foreign
currency risks. They may also be used to tactically shift portfolio currency
risk. The Fund generally enters into forward contracts as a hedge upon the
purchase or sale of a security denominated in a foreign currency. In addition,
the Fund may enter into such contracts as a hedge against changes in foreign
currency exchange rates on portfolio positions.
Forward contracts are valued based on the closing prices of the
forward currency contract rates in the London foreign exchange markets on a
daily basis as provided by a reliable bank or dealer. The Fund will realize a
gain or loss upon the closing or settlement of the forward transaction.
Securities held in 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.
33 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. Forward Contracts (continued)
At September 30, 1997, the Fund had outstanding forward contracts as follows:
<TABLE>
<CAPTION>
Expiration Contract Valuation as of Unrealized Unrealized
Date Amount (000s) Sept. 30, 1997 Appreciation Depreciation
- -----------------------------------------------------------------------------------------------------------------
Contracts to Purchase
- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Canadian Dollar (CAD) 10/2/97 2,000 CAD $ 1,446,390 $ 854 $ --
Indonesian Rupiah (IDR) 10/1/97 3,947,213 IDR 1,210,801 -- 36,343
Italian Lira (ITL) 12/17/97 9,265,796 ITL 5,378,619 51,258 --
Japanese Yen (JPY) 10/15/97 78,120 JPY 649,195 88 --
Portuguese Escudo (PTE) 12/17/97 959,726 PTE 5,355,255 27,895 --
Spanish Peseta (ESP) 12/17/97 797,677 ESP 5,368,745 41,385 --
Turkish Lira (TRL) 10/1/97 436,048,800 TRL 2,502,288 -- 2,876
--------- ---------
121,480 39,219
--------- ---------
Contracts to Sell
- -----------------
Australian Dollar (AUD) 10/8/97 1,455 AUD 1,053,874 14,706 --
Canadian Dollar (CAD) 10/16/97-
1/21/98 7,040 CAD 5,106,095 -- 24,953
German Mark (DEM) 10/17/97-
12/19/97 17,955 DEM 10,200,067 15,485 20,519
Hungarian Forint (HUF) 10/2/97 527,646 HUF 2,704,421 4,235 --
Japanese Yen (JPY) 11/12/97 1,155,120 JPY 9,647,584 151,267 --
Mexican Peso (MXP) 10/2/97-
11/3/97 64,930 MXP 8,306,731 865 51,336
New Zealand Dollar (NZD) 11/28/97 5,880 NZD 3,752,225 28,615 --
South African Rand (ZAR) 10/27/97 50,579 ZAR 10,770,741 -- 96,053
Swiss Franc (CHF) 12/17/97 23,190 CHF 16,143,908 -- 161,827
--------- ---------
215,173 354,688
--------- ---------
Total Unrealized Appreciation and Depreciation $336,653 $393,907
========= =========
</TABLE>
6. Futures Contracts
The Fund may buy and sell interest rate futures contracts in order to gain
exposure to or protect against changes in interest rates. The Fund may also buy
or write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against
increases in interest rates and the resulting negative effect on the value of
fixed rate portfolio securities. The Fund may also purchase futures contracts
to gain exposure to changes in interest rates as it may be more efficient or
cost effective than actually buying fixed income securities.
Upon entering into a futures contract, the Fund is required to
deposit either cash or securities (initial margin) in an amount equal to a
certain percentage of the contract value. Subsequent payments (variation
margin) are made or received by the Fund each day. The variation margin
payments are equal to the daily changes in the contract value and are recorded
as unrealized gains and losses. The Fund recognizes a realized gain or loss
when the contract is closed or expires.
34 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
Securities held in collateralized accounts to cover initial margin requirements
on open futures contracts are noted in the Statement of Investments. The
Statement of Assets and Liabilities reflects a receivable or payable for the
daily mark to market for variation margin.
Risks of entering into futures contracts (and related options)
include the possibility that there may be an illiquid market and that a change
in the value of the contract or option may not correlate with changes in the
value of the underlying securities.
At September 30, 1997, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
Number of Valuation as of Unrealized
Contracts to Purchase Expiration Date Contracts September 30, 1997 Depreciation
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nikkei Index 12/97 17 $2,499,378 $19,713
- --------------------------------------------------------------------------------------------
</TABLE>
7. Option Activity
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call
options to hedge against adverse movements in the value of portfolio holdings.
When an option is written, the Fund receives a premium and becomes obligated to
sell or purchase the underlying 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.
35 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. Option Activity (continued)
Written option activity for the year ended September 30, 1997 was as follows:
<TABLE>
<CAPTION>
Call Options Put Options
----------------------------------- ---------------------------------
Number of Amount of Number of Amount of
Options Premiums Options Premiums
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at
September 30, 1996 10,900 $ 72,820 -- $ --
Options written 294,832,747 2,047,821 516,288,196 823,434
Options closed or expired (253,256,347) (1,800,280) (449,177,820) (612,152)
Options exercised (11,996,850) (111,955) (24,150,376) (132,271)
------------- ------------ ------------- ----------
Options outstanding at
September 30, 1997 29,590,450 $ 208,406 42,960,000 $ 79,011
============= ============ ============= ==========
</TABLE>
- --------------------------------------------------------------------------------
8. Illiquid and Restricted Securities
At September 30, 1997, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933,
may have contractual restrictions on resale, and are valued under methods
approved by the Board of Trustees as reflecting fair value. A security may be
considered illiquid if it lacks a readily available market or if its valuation
has not changed for a certain period of time. The Fund intends to invest no
more than 10% of its net assets (determined at the time of purchase and
reviewed periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limit. The aggregate value of illiquid or restricted securities
subject to this limitation at September 30, 1997 was $36,136,536, which
represents 13.56% of the Fund's net assets.
- --------------------------------------------------------------------------------
9. 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.
36 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
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, 1997, the related statement of operations for the year then
ended, and the statements of changes in net assets for the years ended
September 30, 1997 and 1996, and the financial highlights for the period June
15, 1995 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
International Bond 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
37 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
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 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.
38 Oppenheimer International Bond Fund
<PAGE>
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 Vasan, Vice President
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
- --------------------------------------------------------------------------------
Investment Advisor OppenheimerFunds, Inc.
- --------------------------------------------------------------------------------
Distributor OppenheimerFunds Distributor, Inc.
- --------------------------------------------------------------------------------
Transfer and Shareholder OppenheimerFunds Services
Servicing Agent
- --------------------------------------------------------------------------------
Custodian of The Bank of New York
Portfolio Securities
- --------------------------------------------------------------------------------
Independent Auditors Deloitte & Touche LLP
- --------------------------------------------------------------------------------
Legal Counsel Myer, Swanson, Adams & Wolf, P.C.
This is a copy of a report to shareholders of
Oppenheimer 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.
39 Oppenheimer International Bond Fund
<PAGE>
Internet
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- ------------------------
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insightful messages on the
economy and issues that
affect your investments
- ------------------------
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- ------------------------
RA0880.001.0997 November 28, 1997
Information and services
- --------------------------------------------------------------------------------
As an Oppenheimer fund shareholder, you have some special privileges. Whether
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