<PAGE> 1
ANNUAL REPORT SEPTEMBER 30, 1998
OPPENHEIMER
INTERNATIONAL
BOND FUND
[PHOTO]
[OPPENHEIMERFUNDS LOGO]
THE RIGHT WAY TO INVEST
<PAGE> 2
CONTENTS
3 President's Letter
4 An Interview
with Your Fund's
Manager
10 Fund Performance
15 Financial
Statements
38 Independent
Auditors' Report
39 Federal
Income Tax
Information
40 Officers and
Trustees
44 Information and
Services
REPORT HIGHLIGHTS
- -------------------------------------------------------------------------------
- - AS THE ASIAN CRISIS SPREAD TO RUSSIA and other emerging markets, many fixed
income investors shifted their investments away from emerging-market debt.
- - WITH VERY LIMITED EXPOSURE TO ASIA when the crisis began, we now see
opportunities to selectively invest in the region.
- - IN OUR VIEW, DUE TO ITS STRONG GROWTH PROSPECTS from the impending monetary
union, Europe may soon become a preferred region for foreign bonds.
<TABLE>
<CAPTION>
AVG ANNUAL TOTAL RETURNS
For the 1-Year Period
Ended 9/30/98
CLASS A
Without With
Sales Chg.(1) Sales Chg.(2)
- ------------------------------
<S> <C>
- -12.50% -16.65%
- ------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
Without With
Sales Chg.(1) Sales Chg.(2)
- ------------------------------
<S> <C>
- -13.16% -17.08%
- ------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
Without With
Sales Chg.(1) Sales Chg.(2)
- ------------------------------
<S> <C>
- -13.16% -13.94%
- ------------------------------
</TABLE>
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. BECAUSE OF ONGOING
MARKET VOLATILITY, THE FUND'S PERFORMANCE MAY BE SUBJECT TO SUBSTANTIAL
SHORT-TERM CHANGES. FOR UPDATES ON THE FUND'S PERFORMANCE, PLEASE CONTACT YOUR
FINANCIAL ADVISOR, CALL US AT 1-800-525-7048 OR VISIT OUR WEBSITE,
WWW.OPPENHEIMERFUNDS.COM.
1. Includes changes in net asset value per share without deducting any sales
charges.
2. Class A return includes the current maximum initial sales charge of 4.75%.
Class B return includes the applicable contingent deferred sales charge of 5%.
Class C return includes the contingent deferred sales charge of 1%. Class B and
C shares are subject to a 0.75% asset-based sales charge. An explanation of the
different performance calculations is in the Fund's prospectus.
2 Oppenheimer International Bond Fund
<PAGE> 3
[PHOTO]
JAMES C. SWAIN
Chairman
Oppenheimer
International Bond Fund
[PHOTO]
BRIDGET A. MACASKILL
President
Oppenheimer
International Bond Fund
DEAR SHAREHOLDER,
- -------------------------------------------------------------------------------
The performance of the financial markets over the past several months could be
viewed as "A Tale of Two Markets." Until mid-July, the excitement surrounding
the stock market's continued ascent to new record highs overshadowed the
favorable economic environment that existed for bonds: low inflation and
declining interest rates. However, since late summer, amid heightened global
concern, stocks declined sharply. Yet, despite continued economic concerns
worldwide, the bond market appeared ready to benefit.
Why have the stock and bond markets responded differently? The financial
crises in Asia and Russia have weakened the earnings of some large U.S.
corporations and have contributed to a slowdown in U.S. economic growth.
Although this slowing economic growth has negatively impacted stocks, it
created a positive environment for bonds. That's because slowing economic
growth generally means fewer inflationary pressures and, as we've recently
seen, interest rates also tend to decline.
What should you do during this period of relative uncertainty? If you have
well-defined, long-term financial goals and an investment strategy designed to
achieve them, we encourage you to stay the course. However, if you feel your
financial plan is out-of-date or incomplete, now is the time to make
improvements. The best way to cope with short-term volatility is to adhere to a
long-term plan that contains proven strategies, such as diversification among
various financial markets, geographic regions, investment styles and individual
securities. A long-term plan will give you the focus and perspective you need
to put short-term volatility in its proper context.
As longstanding advocates of financial planning, we have been encouraged by
our shareholders' rational responses to the latest market events. Many of you
tell us that you have a long-term strategy in place, which includes
diversifying your investment portfolio among a number of different asset
classes in accordance with your tolerance for risk. At OppenheimerFunds, our
portfolio management teams include seasoned professionals who have encountered
extreme market volatility in the past, giving them the perspective required to
address risks and take advantage of opportunities in turbulent markets. In our
view, having a well-defined set of financial goals, a disciplined long-term
strategy and the help of experienced investment professionals are all
fundamental parts of The Right Way to Invest.
Sincerely,
/s/ JAMES C. SWAIN /s/ BRIDGET A. MACASKILL
James C. Swain Bridget A. Macaskill
October 21, 1998
3 Oppenheimer International Bond Fund
<PAGE> 4
"THE FUND IS DIFFERENT... IN THAT IT INVESTS IN BOTH DEVELOPED MARKETS AND
EMERGING MARKETS."
AN INTERVIEW WITH YOUR FUND'S MANAGER
- -------------------------------------------------------------------------------
HOW DID THE FUND PERFORM DURING THE LAST 12 MONTHS?
Oppenheimer International Bond Fund experienced the ill effects of instability
in the currencies of the emerging markets during the fiscal year that ended
September 30, 1998. We attribute the Fund's weak performance to the effects of
currency devaluations in Asian countries that worsened when Russia devalued the
ruble. The net result of these devaluations was that the fixed income
environment was extremely volatile over this period.
HOW DID THE ASIAN CURRENCY CRISIS AFFECT THE FUND'S INVESTMENTS?
The crisis really had two stages, the first of which began with the Asian
currency devaluations in the fourth quarter of 1997, while the second stage
emerged with the Russian devaluation in August of 1998. As a developing region,
Asia had prospered for years. However in recent decades, many local businesses
began investing in speculative real estate ventures, incurring massive debts as
a result. As the investments failed and those Asian companies were unable to
repay their obligations, economic growth in the region slowed. Toward the end
of 1997, several countries, including Thailand, Indonesia, Malaysia and the
Philippines, were then forced to devalue their currencies to spur sales of
exports and stimulate their economies.
4 Oppenheimer International Bond Fund
<PAGE> 5
[PHOTO]
PORTFOLIO MANAGEMENT
TEAM (L TO R)
Art Steinmetz
David Negri
Ashwin Vasan (Portfolio
Manager)
We avoided the Asian leg of the crisis since the Fund had very limited exposure
to Asia at the time the crisis erupted. Although not directly impacted by Asia,
the value of the Fund's investments in Latin America, Eastern Europe,
Australia, New Zealand and other emerging markets declined as a result of the
spreading influence of Asia's troubles. The Russian currency devaluation
further contributed to volatility in the world's financial markets. That
devaluation was the first the Fund was directly caught in, and its investments
there, though minor, declined in value as well.
WHAT STRATEGIES HAVE YOU USED TO TAKE ADVANTAGE OF OPPORTUNITIES IN FOREIGN
BONDS?
We are starting to see signs that Asia may be preparing to begin the long
process leading to its recovery. Consequently, we have been carefully building
a portfolio from a number of attractive opportunities we have discovered there.
We have also progressively reduced the Fund's exposure in certain other
emerging markets, such as Latin America, that fared significantly better than
Asia early in the period. We used those proceeds to gradually increase our
investments in Europe. We expect that the Euro will appreciate against the U.S.
dollar as European economies are strengthened by the impending monetary union.
5 Oppenheimer International Bond Fund
<PAGE> 6
<TABLE>
<CAPTION>
AVG ANNUAL TOTAL RETURNS
For the Periods Ended 9/30/98(1)
CLASS A
Since
1-year Inception
- ------------------------
<S> <C>
- -16.65% 4.59%
- ------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
Since
1-year Inception
- ------------------------
<S> <C>
- -17.08% 4.59%
- ------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
Since
1-year Inception
- ------------------------
<S> <C>
- -13.94% 5.30%
- ------------------------
</TABLE>
AN INTERVIEW WITH YOUR FUND'S MANAGER
- -------------------------------------------------------------------------------
In general, over the last six months, we invested in the four regions that make
up our emerging market universe: Asia; Eastern Europe; Latin America and the
Middle East/North Africa. Within developed markets, we invested in three
regions: Europe; Japan and the dollar-bloc currency markets of Canada, New
Zealand and Australia. As of the close of the reporting period, we had
allocated about 40% of the Fund's portfolio to developed countries, 50% to
emerging markets and 10% to cash equivalents.(2)
WHAT ARE THE BENEFITS OF INVESTING WITH THE FUND IN THE CURRENT MARKET
ENVIRONMENT?
As Asia and Russia demonstrated, the world's financial markets can become very
volatile seemingly overnight. What can help balance an investment portfolio is
diversifying across many currencies and countries. This increases the chances
that all of a portfolio's holdings will not decline in a turbulent market.
Oppenheimer International Bond Fund is a diversified fund. At any given time,
the Fund may contain bonds from dozens of countries, but of course, that number
can change. It's also different from most other international bond funds in
that it invests in both developed markets such as Germany and Sweden, as well
as emerging markets such as Mexico and Poland.
6 Oppenheimer International Bond Fund
<PAGE> 7
By balancing the relative stability of developed markets with the above-average
growth of potential emerging markets, we strive to provide broad
diversification that offers the opportunity for attractive returns with less
risk.
WHAT IS YOUR OUTLOOK FOR THESE MARKETS OVER THE COMING YEAR?
We are cautiously optimistic regarding the international bond markets in the
coming year. Clearly, this has been a difficult 12 months. Since the Asian
crisis began, there has been less money available overall to finance
governments around the world. Consequently, we believe we'll see a
slower-growth period ahead with much less volatility. In our view, this should
enable the international fixed income markets to return to more normal
conditions.
Until then, we will continue to be more selective about our investments
within the emerging markets. For example, we've been seeking out countries with
fiscal discipline, balanced budgets or even surpluses.
1. Total returns include changes in share price and reinvestment of dividends
and capital gains distributions in a hypothetical investment for the periods
shown. The Fund has an inception date (all classes) of 6/15/95. Class A returns
include the current maximum initial sales charge of 4.75%. Class B returns
include the applicable contingent deferred sales charge of 5% (1-year) and 3%
(since inception). Class C returns for the one-year result include the
contingent deferred sales charge of 1%. Class B and C shares are subject to an
annual 0.75% asset-based sales charge. An explanation of the different
performance calculations is in the Fund's prospectus.
2. The Fund's portfolio is subject to change.
7 Oppenheimer International Bond Fund
<PAGE> 8
<TABLE>
<CAPTION>
STANDARDIZED YIELDS
For the 30 Days Ended 9/30/98(3)
- --------------------------------
<S> <C>
CLASS A 12.90%
- --------------------------------
CLASS B 12.83
- --------------------------------
CLASS C 12.80
- --------------------------------
</TABLE>
AN INTERVIEW WITH YOUR FUND'S MANAGER
- -------------------------------------------------------------------------------
Countries that we believe meet these criteria include Peru, South Korea,
Bulgaria, and the Ivory Coast. Accordingly, we are adding to our holdings in
these countries.
Within the developed markets, we believe Europe may soon become a preferred
region for foreign bonds. Monetary union will result in a stronger European
currency, versus the U.S. dollar, so that eventually the Fund's European
holdings should appreciate. Elsewhere, we expect the dollar will be stronger
versus the Japanese yen and probably stronger versus the Canadian and
Australian dollars, as these are commodity currencies that are cyclical in
nature. In other words, the value of these currencies may decrease when growth
slows.
As for Japan, we remain cautious about investing there. Japan needs to put
in place credible measures that will convince the financial markets it is
serious about addressing its banking problems. We don't expect the situation to
turn around tomorrow, but we believe Japan does have the resources to stage a
long-term recovery.
8 Oppenheimer International Bond Fund
<PAGE> 9
REGIONAL ALLOCATION(4)
[PIE CHART]
<TABLE>
<S> <C>
- - Developed Europe 24.6%
- - United States/
Canada 19.3
- - Asia, excl. Japan 17.5
- - Middle East/
Africa 14.8
- - Latin America 13.9
- - Emerging Europe 9.5
- - Supranational 0.4
</TABLE>
Whatever the international fixed income markets hold in store for the
future, we will continue to provide a broadly diversified portfolio of
international bonds that offers the opportunity for high income and growth with
less risk.(5) It's what makes Oppenheimer International Bond Fund part of The
Right Way to Invest.
<TABLE>
<CAPTION>
10 LARGEST COUNTRY HOLDINGS(4)
- ---------------------------------------------------------
<S> <C>
United States 17.1%
- ---------------------------------------------------------
Spain 6.9
- ---------------------------------------------------------
Argentina 6.6
- ---------------------------------------------------------
Turkey 6.1
- ---------------------------------------------------------
Italy 5.8
- ---------------------------------------------------------
South Korea 5.8
- ---------------------------------------------------------
Ivory Coast 4.5
- ---------------------------------------------------------
Algeria 4.0
- ---------------------------------------------------------
Jordan 3.0
- ---------------------------------------------------------
Norway 2.8
- ---------------------------------------------------------
</TABLE>
3. Standardized yield is based on net investment income for the 30-day period
ended 9/30/98. Falling share prices will tend to artificially raise yields.
4. Portfolio is subject to change. Percentages are as of September 30, 1998,
and are based on total market value of investments.
5. Investing in foreign bonds entails higher expenses and risks, such as
foreign currency fluctuations. Investing in junk bonds carries a greater risk
of default.
9 Oppenheimer International Bond Fund
<PAGE> 10
FUND PERFORMANCE
- -------------------------------------------------------------------------------
HOW HAS THE FUND PERFORMED? Below is a discussion by the Manager of the Fund's
performance during its fiscal year ended September 30, 1998, followed by a
graphical comparison of the Fund's performance to two appropriate broad-based
market indices.
- MANAGEMENT'S DISCUSSION OF PERFORMANCE During the Fund's fiscal year that
ended September 30, 1998, Oppenheimer International Bond Fund's weak
performance was primarily attributed to the spreading effect of the Asian
economic crisis. Though the Fund had very limited exposure to Asia at the
beginning of the crisis, the Fund's investments in Latin America, Eastern
Europe, Australia, New Zealand, Russia and other emerging markets were
negatively affected by Asia's troubles. Russia's currency devaluation toward
the end of the Fund's fiscal year further contributed to the volatility of
global financial markets.
The Fund continued to follow a strategy of holding a diversified portfolio
of foreign bonds that provide the potential for high income and growth. The
Fund also selectively began to increase its exposure to Asia and other emerging
market countries. In the developed markets, the Fund increased its holdings in
Europe where strong growth is expected. The Fund's portfolio holdings,
allocations and strategies are subject to change.
- COMPARING THE FUND'S PERFORMANCE TO THE MARKET The graphs that follow show
the performance of a hypothetical $10,000 investment in Class A, Class B and
Class C shares of the Fund from the inception date of June 15, 1995, held until
September 30, 1998. Performance is measured over a one-year period and the life
of the class. The graphs assume that all dividends and capital gains
distributions were reinvested in additional shares. The Fund's performance
reflects the deduction of the 4.75% maximum initial sales charge on Class A
shares, the 5% (1-year) and 3% (since inception) applicable contingent deferred
sales charge for Class B, and the 1% (1-year) contingent deferred sales charge
for Class C shares.
10 Oppenheimer International Bond Fund
<PAGE> 11
The performance of each class of the Fund's shares is compared to two
indices because the Fund invests in debt securities issued by governments in
both developed countries and emerging market countries and in debt securities
issued by companies located in those countries. In the Manager's view, no one
index adequately combines both types of investments.
Performance is compared to the Salomon Brothers Non-U.S. Dollar World
Government Bond Index, a subset of the Salomon Brothers World Government Bond
Index. The Salomon Brothers Non-U.S. Dollar World Government Bond Index is a
market capitalization weighted benchmark that tracks the performance of 13
government bond markets including Australia, Canada, Japan and 10 European
countries. Thus, the Salomon Brothers Non-U.S. Dollar World Government Bond
Index does not reflect the performance of the fixed income markets in either
the United States or in any emerging market countries. In addition, it is
comprised of only government bonds and does not reflect the performance of
corporate bonds.
Performance is also compared to the performance of the Salomon Brothers
Brady Bond Index, which provides a total return benchmark for emerging market
country bonds. It is designed to allow direct comparison of the developing
country debt market with other markets. A Brady Bond is a bond that is
exchanged for debt or new money under the debt-restructuring program initiated
in 1990 by the U.S. Department of the Treasury.
Index performance reflects the reinvestment of dividends but does not
consider the effect of capital gains or transaction costs, and none of the data
in the graphs that follow shows the effect of taxes. The Fund's performance
reflects the effects of Fund business and operating expenses. While index
comparisons may be useful to provide a benchmark for the Fund's performance, it
must be noted that the Fund's investments are not limited to the securities or
countries in the indices.
11 Oppenheimer International Bond Fund
<PAGE> 12
FUND PERFORMANCE
- -------------------------------------------------------------------------------
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer International Bond Fund (Class A), Salomon Brothers Non-U.S. Dollar
World Government Bond Index and Salomon Brothers Brady Bond Index.
<TABLE>
<CAPTION>
Salomon
Oppenheimer Brothers
International Non-U.S. Dollar
Bond Fund World Goverment Salomon Brothers
Class A Bond Index Bond Index
<S> <C> <C> <C>
6.15.95 9525 10000 10000
9.30.95 10014 9806 10906
9.30.96 11898 10200 15007
9.30.97 13247 10113 19143
9.30.98 11591 11160 16056
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN OF CLASS A SHARES OF THE FUND AT 9/30/98(1)
<S> <C>
1 YEAR -16.65% LIFE 4.59%
</TABLE>
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer International Bond Fund (Class B), Salomon Brothers Non-U.S. Dollar
World Government Bond Index and Salomon Brothers Brady Bond Index.
<TABLE>
<CAPTION>
Salomon
Oppenheimer Brothers
International Non-U.S. Dollar
Bond Fund World Goverment Salomon Brothers
Class B Bond Index Bond Index
<S> <C> <C> <C>
6.15.95 10000 10000 10000
9.30.95 10492 9806 10906
9.30.96 12350 10200 15007
9.30.97 13649 10113 19143
9.30.98 11593 11160 16056
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN OF CLASS B SHARES OF THE FUND AT 9/30/98(2)
<S> <C>
1 YEAR -17.08% LIFE 4.59%
</TABLE>
12 Oppenheimer International Bond Fund
<PAGE> 13
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer International Bond Fund (Class C), Salomon Brothers Non-U.S. Dollar
World Government Bond Index and Salomon Brothers Brady Bond Index.
<TABLE>
<CAPTION>
Salomon
Oppenheimer Brothers
International Non-U.S. Dollar
Bond Fund World Goverment Salomon Brothers
Class C Bond Index Bond Index
<S> <C> <C> <C>
6.15.95 10000 10000 10000
9.30.95 10473 9806 10906
9.30.96 12350 10200 15007
9.30.97 13649 10113 19143
9.30.98 11853 11160 16056
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN OF CLASS C SHARES OF THE FUND AT 9/30/98(3)
<S> <C>
1 YEAR -13.94% LIFE 5.30%
</TABLE>
The returns and the ending account values in the graphs show change in share
value and include reinvestment of all dividends and capital gains
distributions. The performance information for both indices in each graph
begins on 5/31/95.
1. The inception date of the Fund's Class A shares was 6/15/95. The average
annual total returns are shown net of the applicable 4.75% maximum initial
sales charge.
2. Class B shares of the Fund were first publicly offered on 6/15/95. The
average annual total returns are shown net of the applicable 5% and 3%
contingent deferred sales charges, respectively, for the one-year period and
the life of the class. The ending account value in the graph is net of the
applicable 3% contingent deferred sales charge.
3. Class C shares of the Fund were first publicly offered on 6/15/95. The
average annual total returns are shown net of the applicable 1% contingent
deferred sales charge for the one-year period. Past performance is not
predictive of future performance.
13 Oppenheimer International Bond Fund
<PAGE> 14
FINANCIALS
- -------------------------------------------------------------------------------
14 Oppenheimer International Bond Fund
<PAGE> 15
STATEMENT OF INVESTMENTS September 30, 1998
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
========================================================================================================================
<S> <C> <C>
FOREIGN GOVERNMENT OBLIGATIONS--56.6%
- ------------------------------------------------------------------------------------------------------------------------
ARGENTINA--4.2%
Argentina (Republic of):
Bonds, Bonos de Consolidacion de Deudas, Series I, 2.974%, 4/1/07(2) (ARP) 8,915,676 $ 5,117,623
Nts., 9.15%, 11/30/02(2) (9) 4,060,000 3,582,950
- ------------------------------------------------------------------------------------------------------------------------
Banco Hipotecario Nacional (Argentina)
Medium-Term Nts., 10.625%, 8/7/06 600,000 522,000
- ------------------------------------------------------------------------------------------------------------------------
Buenos Aires (Province of) Bonds, Series PBA1, 2.974%, 4/1/07(2) (ARP) 2,125,041 1,061,586
-----------
10,284,159
- ------------------------------------------------------------------------------------------------------------------------
BRAZIL--1.6%
Banco Nac de Desen Econo Bonds, 10.30%, 6/16/08(2) (4) 2,820,000 1,952,850
- ------------------------------------------------------------------------------------------------------------------------
Banco Nac de Desen Econo Nts., 10.80%, 6/16/08(2) 2,730,000 1,890,525
-----------
3,843,375
- ------------------------------------------------------------------------------------------------------------------------
BULGARIA--1.5%
Bulgaria (Republic of):
Disc. Bonds, Tranche A, 6.688%, 7/28/24(2) 660,000 424,875
Front-Loaded Interest Reduction Bearer Bonds,
Tranche A, 2.50%, 7/28/12(5) 6,850,000 3,296,563
-----------
3,721,438
- ------------------------------------------------------------------------------------------------------------------------
CANADA--1.2%
Canada (Government of) Bonds, 10.25%, 12/1/98(CAD) 4,360,000 2,881,142
- ------------------------------------------------------------------------------------------------------------------------
COSTA RICA--0.1%
Banco Central Costa Rica Interest Claim Bonds, Series A,
6.568%, 5/21/05(2) 132,525 129,212
- ------------------------------------------------------------------------------------------------------------------------
Banco Central of Costa Rica Interest Claim Bonds, Series B,
6.568%, 5/21/05(2) 71,575 69,697
-----------
198,909
- ------------------------------------------------------------------------------------------------------------------------
CROATIA--0.5%
Croatia (Government of) Bonds, Series B, 6.563%, 7/31/06(2) 1,755,271 1,215,525
- ------------------------------------------------------------------------------------------------------------------------
DENMARK--2.2%
Denmark (Kingdom of) Bonds:
7%, 12/15/04(DKK) 16,580,000 2,955,176
8%, 5/15/03(DKK) 13,720,000 2,479,312
-----------
5,434,488
- ------------------------------------------------------------------------------------------------------------------------
FRANCE--1.2%
France (Government of) Bonds, Obligations Assimilables du Tresor
Coupon Strip, Series OC08, Zero Coupon, 4.83%, 10/25/08(6) (FRF) 25,060,000 2,976,165
</TABLE>
15 Oppenheimer International Bond Fund
<PAGE> 16
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GERMANY--2.6%
Germany (Republic of):
Bonds, 6.25%, 4/26/06(DEM) 5,755,000 $ 3,951,205
Nts., Series 96, 3.50%, 12/18/98(DEM) 4,000,000 2,393,269
------------
6,344,474
- ------------------------------------------------------------------------------------------------------------------------
GREAT BRITAIN--2.4%
United Kingdom Treasury Bonds, 6.75%, 11/26/04(GBP) 3,160,000 5,851,745
- ------------------------------------------------------------------------------------------------------------------------
INDONESIA--1.0%
Perusahaan Listr, 17%, 8/21/01(7) (IDR) 2,000,000,000 105,140
- ------------------------------------------------------------------------------------------------------------------------
PT Bank Negara Indonesia Sr. Nts., 7.625%, 2/15/07(8) 5,653,000 2,331,863
- ------------------------------------------------------------------------------------------------------------------------
PT Hutama Karya Promissory Nts., Zero Coupon, 4/9/99(7) (11) (IDR) 5,000,000,000 116,822
------------
2,553,825
- ------------------------------------------------------------------------------------------------------------------------
ITALY--5.7%
Italy (Republic of) Treasury Bonds, Buoni del
Tesoro Poliennali, 8.50%, 1/1/04(ITL) 19,000,000,000 13,880,480
- ------------------------------------------------------------------------------------------------------------------------
IVORY COAST--4.4%
Ivory Coast (Government of) Past Due Interest Bonds:
2%, 3/29/18(5) 7,000,000 1,487,500
2%, 3/29/18(2) (4) 16,865,000 4,595,713
Series 20 yr., 2%, 3/29/18(5) 3,960,000 1,079,100
Series F, 1.90%, 3/29/18(5) (FRF) 84,920,000 3,598,433
------------
10,760,746
- ------------------------------------------------------------------------------------------------------------------------
JORDAN--3.0%
Hashemite (Kingdom of Jordan):
Bonds, Series DEF, 5%, 12/23/23(5) 8,190,000 4,279,275
Disc. Bonds, 6.563%, 12/23/23(2) 5,250,000 2,953,125
------------
7,232,400
- ------------------------------------------------------------------------------------------------------------------------
KOREA, REPUBLIC OF (SOUTH)--4.1%
Export-Import Bank of Korea Unsec. Unsub. Bonds, 7.125%, 9/20/01 3,600,000 2,799,000
- ------------------------------------------------------------------------------------------------------------------------
Industrial Bank of Korea Unsec. Unsub. Nts.,
Series 1BR, 2.80%, 7/5/01(7) (JPY) 446,900,000 2,520,051
- ------------------------------------------------------------------------------------------------------------------------
Korea (Republic of) Nts.:
8.031%, 4/7/99(2) (7) 1,000,000 944,375
8.281%, 4/8/00(2) (7) 2,920,000 2,580,550
- ------------------------------------------------------------------------------------------------------------------------
Korea Electric Power Nts., 7%, 10/1/02(9) 1,520,000 1,202,954
------------
10,046,930
- ------------------------------------------------------------------------------------------------------------------------
MEXICO--1.1%
Mexican Williams Bonds, 6.25%, 11/15/08(2) (7) 500,000 410,000
- ------------------------------------------------------------------------------------------------------------------------
Petroleos Mexicanos Debs., 14.50%, 3/31/06(GBP) 1,280,000 2,349,255
------------
2,759,255
</TABLE>
16 Oppenheimer International Bond Fund
<PAGE> 17
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NEW ZEALAND--1.1%
New Zealand (Government of) Bonds, 10%, 3/15/02(NZD) 4,920,000 $ 2,795,716
- ------------------------------------------------------------------------------------------------------------------------
NIGERIA--1.8%
Central Bank of Nigeria Gtd. Bonds, Series WW, 6.25%, 11/15/20 4,000,000 2,290,000
- ------------------------------------------------------------------------------------------------------------------------
Nigeria (Federal Republic of) Promissory Nts., Series RC,
5.092%, 1/5/10 3,839,768 2,038,579
------------
4,328,579
- ------------------------------------------------------------------------------------------------------------------------
NORWAY--2.7%
Norway (Government of) Bonds, 9.50%, 10/31/02(NOK) 43,710,000 6,715,434
- ------------------------------------------------------------------------------------------------------------------------
PERU--2.3%
Peru (Republic of):
Front-Loaded Interest Reduction Bonds, 3.25%, 3/7/17(2) 2,630,000 1,190,075
Sr. Nts., Zero Coupon, 4.53%, 2/28/16(6) 11,801,797 4,524,809
------------
5,714,884
- ------------------------------------------------------------------------------------------------------------------------
PHILIPPINES--0.5%
Philippines (Republic of) Debs., 6.563%, 12/1/09(2) 1,858,400 1,305,526
- ------------------------------------------------------------------------------------------------------------------------
POLAND--0.5%
Poland (Republic of) Treasury Bills, Series 26, Zero Coupon,
12.64%, 2/10/99(6) (PLZ) 4,400,000 1,162,981
- ------------------------------------------------------------------------------------------------------------------------
RUSSIA--0.4%
City of St. Petersburg Unsec. Nts., 9.50%, 6/18/02 1,700,000 340,000
- ------------------------------------------------------------------------------------------------------------------------
Russia (Government of) Unsec. Unsub. Bonds, 8.75%, 10/3/02(7) 3,570,000 714,000
------------
1,054,000
- ------------------------------------------------------------------------------------------------------------------------
SPAIN--6.7%
Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado:
6%, 1/31/29(ESP) 953,260,000 7,263,603
6.75%, 4/15/00(ESP) 480,600,000 3,542,718
10%, 2/28/05(ESP) 604,550,000 5,669,105
------------
16,475,426
- ------------------------------------------------------------------------------------------------------------------------
TURKEY--3.1%
Turkey (Republic of) Treasury Bills, Zero Coupon:
78.52%, 2/3/99(6) (TRL) 1,065,760,000,000 2,823,266
79.74%, 1/27/99(6) (TRL) 1,044,300,000,000 3,068,338
83.91%, 11/4/98(6) (TRL) 497,400,000,000 1,628,189
------------
7,519,793
- ------------------------------------------------------------------------------------------------------------------------
VIETNAM--0.7%
Vietnam (Government of) Bonds, 3%, 3/12/28(2) 7,095,000 1,720,538
------------
Total Foreign Government Obligations (Cost $156,255,093) 138,777,933
</TABLE>
17 Oppenheimer International Bond Fund
<PAGE> 18
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
========================================================================================================================
<S> <C> <C>
LOAN PARTICIPATIONS--5.2%
- ------------------------------------------------------------------------------------------------------------------------
Algeria (Republic of) Reprofiled Debt Loan Participation Nts.:
Tranche 1, 6.375%, 9/4/06(2) $ 8,634,363 $ 4,101,323
Tranche A, 1.438%, 9/4/06(2) (JPY) 56,945,454 156,386
Tranche A, 2.125%, 3/4/00(2) (JPY) 28,472,727 140,748
Tranche A, 7.188%, 3/4/00(2) 3,865,181 2,850,572
- ------------------------------------------------------------------------------------------------------------------------
Algeria (Republic of) Unrestructured Nts., 6.615%, 1/22/01(7) (JPY) 476,833,318 2,374,563
- ------------------------------------------------------------------------------------------------------------------------
Jamaica (Government of) 1990 Refinancing Agreement Nts.,
Tranche A, 6.50%, 10/16/00(2) (7) 89,999 81,675
- ------------------------------------------------------------------------------------------------------------------------
Trinidad & Tobago Loan Participation Agreement:
Tranche A, 1.807%, 9/30/00(2) (7) (JPY) 116,909,091 697,773
Tranche B, 1.807%, 9/30/00(2) (7) (JPY) 389,658,566 2,325,681
----------
Total Loan Participations (Cost $17,023,742) 12,728,721
========================================================================================================================
CORPORATE BONDS AND NOTES--8.2%
- ------------------------------------------------------------------------------------------------------------------------
Bakrie Investindo, Zero Coupon Promissory Nts.:
3/16/99(7) (11) (IDR) 5,990,000,000 139,953
7/10/98(7) (11) (IDR) 2,000,000,000 46,729
- ------------------------------------------------------------------------------------------------------------------------
Cellular Communications International, Inc.,
0%/9.50% Bonds, 4/1/05(3) (9) (10) (XEU) 1,340,000 1,143,964
- ------------------------------------------------------------------------------------------------------------------------
Empresa Electric Del Norte, 10.50% Sr. Debs., 6/15/05(7) 890,000 609,650
- ------------------------------------------------------------------------------------------------------------------------
European Bank Reconstruction & Development, Zero Coupon
Sr. Unsub. Nts., Series EMTN, 13.59%, 12/31/18(6) (ZAR) 96,550,000 903,101
- ------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.875% Sr. Unsec. Nts., 6/7/02(GBP) 3,250,000 5,685,299
- ------------------------------------------------------------------------------------------------------------------------
Industrial Finance Corp. (Thailand), 6.875% Sr. Nts., 4/1/03(4) 1,940,000 1,411,752
- ------------------------------------------------------------------------------------------------------------------------
Internacional de Ceramica SA:
9.75% Unsec. Unsub. Nts., 8/1/02(3) (4) (9) 700,000 469,000
9.75% Unsec. Unsub. Nts., 8/1/02 750,000 502,500
- ------------------------------------------------------------------------------------------------------------------------
Mechala Group Jamaica Ltd., 12% Bonds, 2/15/02(7) (8) 250,000 163,125
- ------------------------------------------------------------------------------------------------------------------------
Netia Holdings BV, 0%/11% Sr. Disc. Nts., 11/1/07(10) (DEM) 1,300,000 351,960
- ------------------------------------------------------------------------------------------------------------------------
NTL, Inc., 9.50% Sr. Unsub. Nts., Series REGS, 4/1/08(GBP) 580,000 813,164
- ------------------------------------------------------------------------------------------------------------------------
Ongko International Finance Co. BV, 10.50% Gtd. Nts., 3/29/04(4) (11) 365,000 20,075
- ------------------------------------------------------------------------------------------------------------------------
PT Polysindo Eka Perkasa:
Zero Coupon Nts., Series 2, 7/15/98(7) (11) (IDR) 4,107,500,000 38,388
Zero Coupon Promissory Nts., 7/28/98(7) (11) 1,000,000 100,000
Zero Coupon Promissory Nts., 7/14/98(7) (11) 500,000 50,000
Zero Coupon Promissory Nts., 3/16/99(7) (11) (IDR) 3,000,000,000 28,037
Zero Coupon Promissory Nts., 7/10/98(7) (11) (IDR) 2,000,000,000 18,692
- ------------------------------------------------------------------------------------------------------------------------
Reliance Industries Ltd., 10.50% Bonds, 8/6/46(4) 1,937,000 1,488,978
- ------------------------------------------------------------------------------------------------------------------------
Shaw Communications, Inc., 8.54% Debs., 9/30/27(9) CAD 2,000,000 1,342,281
- ------------------------------------------------------------------------------------------------------------------------
Snap Ltd., 11.50% Sec. Bonds, 1/29/09(DEM) 7,562,499 3,665,067
- ------------------------------------------------------------------------------------------------------------------------
TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(7) (9) 70,000 82,558
- ------------------------------------------------------------------------------------------------------------------------
Trizec Hahn Corp., 7.45% Sr. Unsec. Debs., 6/1/04(CAD) 1,600,000 1,038,226
----------
Total Corporate Bonds and Notes (Cost $27,627,274) 20,112,499
</TABLE>
18 Oppenheimer International Bond Fund
<PAGE> 19
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
========================================================================================================================
<S> <C> <C>
COMMON STOCKS--0.0%
- ------------------------------------------------------------------------------------------------------------------------
Air New Zealand Ltd., Cl. B (Cost $394,974) 145,000 $ 114,780
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT(1)
========================================================================================================================
<S> <C> <C>
STRUCTURED INSTRUMENTS--14.3%
- ------------------------------------------------------------------------------------------------------------------------
Citibank, Argentine Peso Linked Nts., 10.75%, 10/30/98 $ 2,800,000 2,798,880
- ------------------------------------------------------------------------------------------------------------------------
Citibank, Greek Drachma Linked Nts., 11.30%, 11/30/98 1,400,000 1,405,040
- ------------------------------------------------------------------------------------------------------------------------
Deutsche Morgan Grenfell, GKO Linked Nts.,
Zero Coupon, 5/19/99(7) (11) (RUR) 14,515,000 181,154
- ------------------------------------------------------------------------------------------------------------------------
Hong Kong & Shanghai Banking Corp. Linked Receipt Nts.,
Linked to the Korean Exchange Bank Floating Rate Nts.
due 12/23/29, Zero Coupon, 13.25%, 12/28/99(6) 2,900,000 2,431,650
- ------------------------------------------------------------------------------------------------------------------------
J.P. Morgan & Co., Inc., Turkish Lira Linked Nts., 84%, 10/2/98 7,200,000 7,200,684
- ------------------------------------------------------------------------------------------------------------------------
Korea Development Bank, Industrial Bank Finance Linked Nts.,
Zero Coupon, 11.50%, 3/5/99(6)(7) 1,350,000 1,352,025
- ------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc.:
Argentine Peso Linked Nts., 15%, 10/23/98 2,820,881 2,824,040
Russian S-Account Credit Linked Nts., Zero Coupon, 1/20/99(7) (11)(RUR) 11,515,000 427,472
- ------------------------------------------------------------------------------------------------------------------------
Standard Chartered Bank:
Chinese Renminbi Currency Linked Nts.:
9.50%, 11/5/98 2,820,000 2,820,000
10%, 11/4/98 2,820,000 2,814,642
New Taiwan Dollar/Japanese Yen Linked Nts., 23.50%, 10/2/98 1,405,000 1,370,718
Philippines Peso/Japanese Yen Linked Nts.:
20.25%, 11/9/98 1,420,000 1,311,370
22.20%, 10/13/98 487,000 448,965
22.25%, 10/13/98 1,705,000 1,576,955
22.70%, 10/21/98 610,000 563,579
22.83%, 1/19/99 1,410,000 1,299,597
Thai Baht/Japanese Yen Linked Nts.:
21.70%, 11/9/98 1,400,000 1,372,420
23.80%, 11/4/98 1,400,000 1,396,780
27.30%, 11/13/98 1,400,000 1,402,100
------------
Total Structured Instruments (Cost $37,531,109) 34,998,071
</TABLE>
19 Oppenheimer International Bond Fund
<PAGE> 20
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
DATE STRIKE CONTRACTS SEE NOTE 1
================================================================================================================================
<S> <C> <C> <C> <C>
CALL OPTIONS PURCHASED--0.0%
- --------------------------------------------------------------------------------------------------------------------------------
British Pound Sterling/German Mark Call Opt. 10/98 2.899(GBP/DEM) 3,955,000 $ 93,065
- --------------------------------------------------------------------------------------------------------------------------------
Russia (Government of) Principal Loan
Debs., Series 24 yr.:
6.625%, 12/15/20 Call Opt. 11/98 22.000% 2,810 --
6.625%, 12/15/20 Call Opt. 11/98 33.500 2,820 --
6.625%, 12/15/20 Call Opt. 11/98 38.875 5,630 --
------------
Total Call Options Purchased (Cost $529,900) 93,065
================================================================================================================================
PUT OPTIONS PURCHASED--0.9%
- --------------------------------------------------------------------------------------------------------------------------------
Brazilian Real Put Opt. 12/98 1.24(BRR) 2,810,000 153,426
- --------------------------------------------------------------------------------------------------------------------------------
Brazilian Real Put Opt. 4/99 1.285(BRR) 5,360,000 793,548
- --------------------------------------------------------------------------------------------------------------------------------
British Pound Sterling/German Mark Put Opt. 11/98 2.80(GBP/DEM) 3,335,000 86,710
- --------------------------------------------------------------------------------------------------------------------------------
Hong Kong Dollar Put Opt. 3/99 7.96(HKD) 44,714,000 92,683
- --------------------------------------------------------------------------------------------------------------------------------
Japanese Yen Put Opt. 12/98 137(JPY) 1,918,000,000 501,883
- --------------------------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Index Futures,
11/98 Put Opt. 11/98 $1,025 35 456,750
------------
Total Put Options Purchased (Cost $1,209,979) 2,085,000
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT (1)
================================================================================================================================
<S> <C> <C>
REPURCHASE AGREEMENTS--12.8%
- --------------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with J.P. Morgan Securities, Inc., 5.40%, dated
9/30/98, to be repurchased at $31,304,695 on 10/1/98, collateralized by
U.S. Treasury Bonds, 6.25%-10.625%, 8/15/15-8/15/25, with a value
of $29,743,076, and U.S. Treasury Nts., 5.625%, 5/15/08, with a value
of $2,487,117 (Cost $31,300,000) $31,300,000 31,300,000
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $271,872,071) 98.0% 240,210,069
- --------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 2.0 4,827,997
----------- ------------
NET ASSETS 100.0% $245,038,066
=========== ============
</TABLE>
20 Oppenheimer International Bond Fund
<PAGE> 21
- -------------------------------------------------------------------------------
1. Face amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
ARP--Argentine Peso ITL--Italian Lira
BRR--Brazilian Real JPY--Japanese Yen
CAD--Canadian Dollar NOK--Norwegian Krone
DEM--German Mark NZD--New Zealand Dollar
DKK--Danish Krone PLZ--Polish Zloty
ESP--Spanish Peseta RUR--Russian Ruble
FRF--French Franc TRL--Turkish Lira
GBP--British Pound Sterling XEU--European Currency Units
HKD--Hong Kong Dollar ZAR--South African Rand
IDR--Indonesian Rupiah
2. Represents the current interest rate for a variable rate security.
3. A sufficient amount of securities has been designated to cover outstanding
forward foreign currency exchange contracts. See Note 5 of Notes to Financial
Statements.
4. 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 $9,938,368 or 4.06% of the Fund's net
assets as of September 30, 1998.
5. Represents the current interest rate for an increasing rate security.
6. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
7. Identifies issues considered to be illiquid or restricted--See Note 8 of
Notes to Financial Statements.
8. Securities with an aggregate market value of $1,917,488 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
9. A sufficient amount of liquid assets has been designated to cover
outstanding 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>
Brazilian Real Call Option 5,360,000 4/6/99 1.218(BRR) $ 58,960 $ 47,972
- -----------------------------------------------------------------------------------------------------------------------
Brazilian Real Put Option 5,360,000 4/6/99 1.414(BRR) 122,207 644,004
- -----------------------------------------------------------------------------------------------------------------------
British Pound Sterling Call Option 3,290,000 12/30/98 0.589(GBP) 83,895 85,540
- -----------------------------------------------------------------------------------------------------------------------
British Pound Sterling/German
Mark Call Option 3,955,000 10/1/98 2.92(GBP/DEM) 49,975 --
- -----------------------------------------------------------------------------------------------------------------------
British Pound Sterling/German
Mark Call Option 3,335,000 11/13/98 2.90(GBP/DEM) 34,418 35,685
- -----------------------------------------------------------------------------------------------------------------------
Japanese Yen Call Option 1,767,500,000 12/18/98 126.25(JPY) 177,100 167,647
- -----------------------------------------------------------------------------------------------------------------------
Japanese Yen Put Option 2,100,000,000 12/18/98 150.00(JPY) 53,899 88,683
- -----------------------------------------------------------------------------------------------------------------------
Russia (Government of) Principal
Loan Debs., Series 24 yr., 6.625%,
12/15/20 Put Option $2,820 11/9/98 29.50% 142,410 657,060
-------- ----------
$722,864 $1,726,591
======== ==========
</TABLE>
10. Denotes a step bond: a zero coupon bond that converts to a fixed or
variable interest rate at a designated future date.
11. Non-income producing--issuer is in default.
See accompanying Notes to Financial Statements.
21 Oppenheimer International Bond Fund
<PAGE> 22
STATEMENT OF ASSETS AND LIABILITIES September 30, 1998
<TABLE>
==========================================================================================================
<S> <C>
ASSETS
Investments, at value (cost $271,872,071)--see accompanying statement $240,210,069
- ----------------------------------------------------------------------------------------------------------
Cash 2,390,066
- ----------------------------------------------------------------------------------------------------------
Unrealized appreciation on forward foreign currency exchange contracts--Note 5 640,820
- ----------------------------------------------------------------------------------------------------------
Receivables:
Investments sold 23,975,521
Interest and principal paydowns 4,521,014
Shares of beneficial interest sold 1,274,547
Closed forward foreign currency exchange contracts 369,355
Daily variation on futures contracts--Note 6 39,994
- ----------------------------------------------------------------------------------------------------------
Deferred organization costs--Note 1 5,228
- ----------------------------------------------------------------------------------------------------------
Other 13,310
-----------
Total assets 273,439,924
==========================================================================================================
LIABILITIES
Unrealized depreciation on forward foreign currency
exchange contracts--Note 5 772,323
- ----------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $722,864)--see
accompanying statement--Note 7 1,726,591
- ----------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 23,485,950
Dividends 1,000,278
Closed forward foreign currency exchange contracts 704,299
Shares of beneficial interest redeemed 379,518
Distribution and service plan fees 162,999
Transfer and shareholder servicing agent fees 51,702
Shareholder reports 49,358
Other 68,840
----------
Total liabilities 28,401,858
==========================================================================================================
NET ASSETS $245,038,066
============
==========================================================================================================
COMPOSITION OF NET ASSETS
Paid-in capital $306,789,887
- ----------------------------------------------------------------------------------------------------------
Undistributed net investment income 1,061,401
- ----------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and
foreign currency transactions (30,686,813)
- ----------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments and translation of
assets and liabilities denominated in foreign currencies (32,126,409)
------------
Net assets $245,038,066
============
</TABLE>
22 Oppenheimer International Bond Fund
<PAGE> 23
<TABLE>
<S> <C>
=============================================================================================================
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$97,404,045 and 22,544,112 shares of beneficial interest outstanding) $4.32
Maximum offering price per share (net asset value plus sales charge of
4.75% of offering price) $4.54
- -------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $119,997,680
and 27,840,326 shares of beneficial interest outstanding) $4.31
- -------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $27,636,341
and 6,414,811 shares of beneficial interest outstanding) $4.31
See accompanying Notes to Financial Statements.
</TABLE>
23 Oppenheimer International Bond Fund
<PAGE> 24
STATEMENT OF OPERATIONS For the Year Ended September 30, 1998
<TABLE>
<S> <C>
==========================================================================================================
INVESTMENT INCOME
Interest (net of foreign withholding taxes of $703,296) $ 32,824,616
- ----------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $5,114) 23,038
----------
Total income 32,847,654
==========================================================================================================
EXPENSES
Management fees--Note 4 1,978,423
- ----------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 261,481
Class B 1,287,968
Class C 293,391
- ----------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 390,395
- ----------------------------------------------------------------------------------------------------------
Custodian fees and expenses 122,264
- ----------------------------------------------------------------------------------------------------------
Shareholder reports 109,437
- ----------------------------------------------------------------------------------------------------------
Legal, auditing and other professional fees 17,617
- ----------------------------------------------------------------------------------------------------------
Registration and filing fees 12,579
- ----------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 2,216
- ----------------------------------------------------------------------------------------------------------
Other 26,308
----------
Total expenses 4,502,079
==========================================================================================================
NET INVESTMENT INCOME 28,345,575
==========================================================================================================
REALIZED AND UNREALIZED LOSS
Net realized loss on:
Investments (20,968,555)
Closing of futures contracts (1,301,855)
Foreign currency transactions (9,802,511)
----------
Net realized loss (32,072,921)
- ----------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments (31,094,487)
Translation of assets and liabilities denominated in foreign currencies (2,298,928)
----------
Net change (33,393,415)
----------
Net realized and unrealized loss (65,466,336)
==========================================================================================================
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(37,120,761)
============
</TABLE>
See accompanying Notes to Financial Statements.
24 Oppenheimer International Bond Fund
<PAGE> 25
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED ENDED SEPTEMBER 30,
1998 1997
======================================================================================================
<S> <C> <C>
OPERATIONS
Net investment income $ 28,345,575 $ 17,455,425
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) (32,072,921) 2,229,190
- ------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (33,393,415) (660,295)
------------ ------------
Net increase (decrease) in net assets resulting from operations (37,120,761) 19,024,320
======================================================================================================
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Class A (11,278,509) (8,439,637)
Class B (12,501,126) (7,638,040)
Class C (2,851,020) (1,735,744)
- ------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (464,690) (703,789)
Class B (544,637) (644,945)
Class C (123,007) (147,671)
======================================================================================================
BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets resulting from beneficial
interest transactions--Note 2:
Class A 8,857,621 62,811,767
Class B 28,481,664 77,812,810
Class C 6,178,227 18,447,362
======================================================================================================
NET ASSETS
Total increase (decrease) (21,366,238) 158,786,433
- ------------------------------------------------------------------------------------------------------
Beginning of period 266,404,304 107,617,871
--------------- ------------
End of period (including undistributed net investment
income of $1,061,401 for the period ended 9/30/98) $245,038,066 $266,404,304
=============== ============
</TABLE>
See accompanying Notes to Financial Statements.
25 Oppenheimer International Bond Fund
<PAGE> 26
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1998 1997 1996 1995(1)
=========================================================================================================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $5.51 $5.49 $5.10 $5.00
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .56 .52 .52 .15
Net realized and unrealized gain (loss) (1.20) .08 .40 .10
----- ----- ----- -----
Total income (loss) from investment operations (.64) .60 .92 .25
- -------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (.53) (.53) (.53) (.15)
Distributions from net realized gain (.02) (.05) -- --
----- ----- ----- -----
Total dividends and distributions to shareholders (.55) (.58) (.53) (.15)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.32 $5.51 $5.49 $5.10
===== ===== ===== =====
=========================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) (12.50)% 11.33% 18.82% 5.13%
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 97,404 $114,847 $52,128 $3,984
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $108,264 $ 89,112 $19,817 $2,566
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 11.09% 9.24% 9.60% 9.94%(3)
Expenses, before voluntary reimbursement
by the Manager 1.24% 1.28% 1.59% 1.59%(3)
Expenses, net of voluntary reimbursement
by the Manager N/A N/A 1.49% 0.41%(3)
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 446.1% 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.
3. Annualized.
26 Oppenheimer International Bond Fund
<PAGE> 27
<TABLE>
<CAPTION>
CLASS B CLASS C
- ------------------------------------------------ -----------------------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
1998 1997 1996 1995(1) 1998 1997 1996 1995(1)
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
$5.50 $5.48 $5.10 $5.00 $5.50 $5.48 $5.09 $5.00
- -------------------------------------------------------------------------------------------------------------------------
.52 .48 .48 .14 .52 .48 .48 .14
(1.20) .07 .39 .10 (1.20) .07 .39 .09
----- ----- ----- ----- ----- ----- ----- -----
(.68) .55 .87 .24 (.68) .55 .87 .23
- -------------------------------------------------------------------------------------------------------------------------
(.49) (.48) (.49) (.14) (.49) (.48) (.48) (.14)
(.02) (.05) -- -- (.02) (.05) -- --
----- ----- ----- ----- ----- ----- ----- -----
(.51) (.53) (.49) (.14) (.51) (.53) (.48) (.14)
- -------------------------------------------------------------------------------------------------------------------------
$4.31 $5.50 $5.48 $5.10 $4.31 $5.50 $5.48 $5.09
===== ===== ===== ===== ===== ===== ===== =====
=========================================================================================================================
(13.16)% 10.52% 17.71% 4.92% (13.16)% 10.52% 17.92% 4.73%
=========================================================================================================================
$119,998 $122,874 $45,207 $3,238 $27,636 $28,684 $10,282 $ 201
- -------------------------------------------------------------------------------------------------------------------------
$128,789 $ 87,557 $17,891 $1,125 $29,336 $19,883 $ 4,039 $ 97
- -------------------------------------------------------------------------------------------------------------------------
10.33% 8.57% 8.81% 9.20%(3) 10.33% 8.62% 8.76% 9.36%(3)
2.00% 2.04% 2.36% 2.21%(3) 2.00% 2.04% 2.36% 2.26%(3)
N/A N/A 2.26% 0.89%(3) N/A N/A 2.25% 0.85%(3)
- -------------------------------------------------------------------------------------------------------------------------
446.1% 280.1% 273.3% 122.0% 446.1% 280.1% 273.3% 122.0%
</TABLE>
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, 1998 were $866,084,106 and $851,580,023,
respectively.
See accompanying Notes to Financial Statements.
27 Oppenheimer International Bond Fund
<PAGE> 28
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> 29
===============================================================================
STRUCTURED NOTES. The Fund invests in foreign currency-linked structured notes
whereby the market value and redemption price are linked to foreign currency
exchange rates. The Fund also invests in index-linked notes whereby the
principal and/or interest payment depend on one or more market indices. The
structured notes may be leveraged, which increases the notes' volatility
relative to the face of the security. Fluctuations in values of the securities
are recorded as unrealized gains and losses in the accompanying financial
statements. During the year ended September 30, 1998, the market value of these
securities comprised an average of 12% of the Fund's net assets, and resulted
in realized and unrealized losses of $15,519,664.
- -------------------------------------------------------------------------------
SECURITY CREDIT RISK. The Fund invests in high yield securities, which may be
subject to a greater degree of credit risk, greater market fluctuations and
risk of loss of income and principal, and may be more sensitive to economic
conditions than lower yielding, higher rated fixed income securities. The Fund
may acquire securities in default, and is not obligated to dispose of
securities whose issuers subsequently default. As of September 30, 1998,
securities with an aggregate market value of $1,167,322 representing 0.48% of
the Fund's net assets, were in default.
- -------------------------------------------------------------------------------
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, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), 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> 30
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. As of September 30, 1998,
the Fund had available for federal income tax purposes an unused capital loss
carryover of approximately $2,105,000 expiring in 2006.
- -------------------------------------------------------------------------------
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, 1998, amounts have been
reclassified to reflect a decrease in paid-in capital of $9,868, a decrease in
undistributed net investment income of $653,519, and a decrease in accumulated
net realized loss on investments of $663,387.
30 Oppenheimer International Bond Fund
<PAGE> 31
===============================================================================
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 periodically.
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, 1998 YEAR ENDED SEPTEMBER 30, 1997
----------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 11,871,238 $ 60,193,894 18,015,830 $ 99,555,234
Dividends and
distributions reinvested 1,567,641 7,767,951 1,145,316 6,327,582
Redeemed (11,744,939) (59,104,224) (7,805,542) (43,071,049)
----------- ------------ ---------- ------------
Net increase 1,693,940 $ 8,857,621 11,355,604 $ 62,811,767
=========== ============ ========== ============
- ----------------------------------------------------------------------------------------------------------
Class B:
Sold 12,461,105 $ 62,756,778 18,551,946 $102,345,548
Dividends and
distributions reinvested 1,334,005 6,596,728 868,156 4,783,353
Redeemed (8,302,252) (40,871,842) (5,318,785) (29,316,091)
----------- ------------ ---------- ------------
Net increase 5,492,858 $ 28,481,664 14,101,317 $ 77,812,810
=========== ============ ========== ============
- ----------------------------------------------------------------------------------------------------------
Class C:
Sold 3,210,030 $ 16,168,643 4,180,150 $ 23,070,240
Dividends and
distributions reinvested 387,861 1,917,981 235,688 1,298,290
Redeemed (2,401,923) (11,908,397) (1,073,077) (5,921,168)
----------- ------------ ---------- ------------
Net increase 1,195,968 $ 6,178,227 3,342,761 $ 18,447,362
=========== ============ ========== ============
</TABLE>
31 Oppenheimer International Bond Fund
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS (Continued)
===============================================================================
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
As of September 30, 1998, net unrealized depreciation on investments and
options written of $32,665,730 was composed of gross appreciation of
$6,507,875, and gross depreciation of $39,173,605.
===============================================================================
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 annual net assets, 0.72% of the next $200
million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60%
of the next $200 million and 0.50% of average annual net assets in excess of $1
billion. The Fund's management fee for the year ended September 30, 1998 was
0.74% of average annual net assets for Class A, Class B and Class C shares.
For the year ended September 30, 1998, commissions (sales charges paid
by investors) on sales of Class A shares totaled $758,818, of which $197,195
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 $2,036,881 and $145,913, respectively, of which $51,677
and $1,297, respectively, was paid to an affiliated broker/dealer for Class B
and Class C shares. During the year ended September 30, 1998, OFDI received
contingent deferred sales charges of $459,667 and $18,589, 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 other Oppenheimer
funds. OFS's total costs of providing such services are allocated ratably to
these funds.
32 Oppenheimer International Bond Fund
<PAGE> 33
===============================================================================
The Fund has adopted a Service Plan for Class A shares to reimburse OFDI for a
portion of its costs incurred in connection with the personal service and
maintenance of shareholder accounts that hold Class A shares. Reimbursement is
made quarterly at an annual rate that may not exceed 0.25% of the average
annual net assets of Class A shares of the Fund. OFDI uses the service fee to
reimburse brokers, dealers, banks and other financial institutions quarterly
for providing personal service and maintenance of accounts of their customers
that hold Class A shares. During the year ended September 30, 1998, OFDI paid
$17,549 to an affiliated broker/dealer as reimbursement for Class A personal
service and maintenance expenses.
The Fund has adopted Distribution and Service Plans for Class B and
Class C shares to compensate OFDI for its costs in distributing Class B and
Class C shares and servicing accounts. Under the Plans, the Fund pays OFDI an
annual asset-based sales charge of 0.75% per year on Class B and Class C shares
for its services rendered in distributing Class B and Class C shares. OFDI
also receives a service fee of 0.25% per year to compensate dealers for
providing personal services for accounts that hold Class B and Class C shares.
Each fee is computed on the average annual net assets of Class B or Class C
shares, determined as of the close of each regular business day. During the
year ended September 30, 1998, OFDI paid $5,333 and $1,830, respectively, to an
affiliated broker/dealer as compensation for Class B and Class C personal
service and maintenance expenses and retained $1,121,715 and $193,024,
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. As of September 30, 1998, OFDI had incurred excess distribution
and servicing costs of $5,581,385 for Class B and $492,685 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.
33 Oppenheimer International Bond Fund
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS (Continued)
===============================================================================
5. FORWARD CONTRACTS (CONTINUED)
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.
As of September 30, 1998, the Fund had outstanding forward contracts as
follows:
<TABLE>
<CAPTION>
VALUATION
CONTRACT AS OF
EXPIRATION AMOUNT SEPTEMBER UNREALIZED UNREALIZED
DATES (000'S) 30, 1998 APPRECIATION DEPRECIATION
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONTRACTS TO PURCHASE
- ---------------------
Danish Krone (DKK) 10/1/98 17,932 DKK $ 2,821,716 $ 7,525 $ --
German Mark (DEM) 10/26/98-
11/17/98 17,504 DEM 10,518,903 494,287 --
Polish Zloty (PLZ) 10/1/98 4,153 PLZ 1,162,202 -- 3,597
-------- --------
501,812 3,597
-------- --------
CONTRACTS TO SELL
- -----------------
Brazilian Real (BRR) 11/16/98-
3/4/99 11,522 BRR 8,648,209 -- 388,118
Canadian Dollar (CAD) 10/5/98 8,460 CAD 5,533,692 53,222 --
German Mark (DEM) 10/1/98-
11/24/98 5,243 DEM 3,137,637 -- 30,460
Hungary Forints (HUF) 10/1/98 294,600 HUF 1,347,668 -- 6,137
New Zealand Dollar (NZD) 10/5/98 5,505 NZD 2,758,097 85,786 --
Norwegian Krone (NOK) 10/26/98 47,830 NOK 6,449,322 -- 267,419
South African Rand (ZAR) 10/5/98 6,610 ZAR 1,121,487 -- 76,592
-------- --------
139,008 768,726
-------- --------
Total Unrealized Appreciation and Depreciation $640,820 $772,323
======== ========
</TABLE>
34 Oppenheimer International Bond Fund
<PAGE> 35
===============================================================================
6. FUTURES CONTRACTS
The Fund may buy and sell interest rate futures contracts in order to gain
exposure to or protect against changes in interest rates. The Fund may also buy
or write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against
increases in interest rates and the resulting negative effect on the value of
fixed rate portfolio securities. The Fund may also purchase futures contracts
to gain exposure to changes in interest rates as it may be more efficient or
cost effective than actually buying fixed income securities.
Upon entering into a futures contract, the Fund is required to
deposit either cash or securities (initial margin) in an amount equal to a
certain percentage of the contract value. Subsequent payments (variation
margin) are made or received by the Fund each day. The variation margin
payments are equal to the daily changes in the contract value and are recorded
as unrealized gains and losses. The Fund recognizes a realized gain or loss
when the contract is closed or expires.
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a receivable or
payable for the daily mark to market for variation margin.
Risks of entering into futures contracts (and related options)
include the possibility that there may be an illiquid market and that a change
in the value of the contract or option may not correlate with changes in the
value of the underlying securities.
As of September 30, 1998, the Fund had outstanding futures contracts as
follows:
<TABLE>
<CAPTION>
NUMBER OF VALUATION AS OF UNREALIZED
EXPIRATION DATE CONTRACTS SEPTEMBER 30, 1998 DEPRECIATION
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONTRACTS TO PURCHASE
- ---------------------
German Mark 12/98 79 $5,937,838 $398,950
United Kingdom Gilt 12/98 8 1,576,638 52,478
--------
$451,428
========
</TABLE>
35 Oppenheimer International Bond Fund
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS (Continued)
===============================================================================
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.
Written option activity for the year ended September 30, 1998, 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 as of
September 30, 1997 29,590,450 $ 208,406 42,960,000 $ 79,011
Options written 8,085,760,845 1,815,995 7,318,836,969 2,277,972
Options closed or expired (6,326,339,235) (1,408,071) (2,455,369,149) (1,692,828)
Options exercised (5,572,060) (211,982) (2,801,065,000) (345,639)
-------------- ----------- --------------- -----------
Options outstanding as of
September 30, 1998 1,783,440,000 $ 404,348 2,105,362,820 $ 318,516
============== =========== =============== ===========
</TABLE>
36 Oppenheimer International Bond Fund
<PAGE> 37
===============================================================================
8. ILLIQUID AND RESTRICTED SECURITIES
As of September 30, 1998, 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 as of September 30, 1998, was $16,108,413 which
represents 6.57% 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 Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the year ended
September 30, 1998.
37 Oppenheimer International Bond Fund
<PAGE> 38
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, 1998, the related statement of operations for the year then
ended, and the statements of changes in net assets for the years ended
September 30, 1998 and 1997, and the financial highlights for the period June
15, 1995, to September 30, 1998. 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, 1998, 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, 1998, 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 28, 1998
38 Oppenheimer International Bond Fund
<PAGE> 39
FEDERAL INCOME TAX INFORMATION (Unaudited)
===============================================================================
In early 1999, shareholders will receive information regarding all dividends
and distributions paid to them by the Fund during calendar year 1998.
Regulations of the U.S. Treasury Department require the Fund to report this
information to the Internal Revenue Service.
Distributions of $0.0664, $0.0631 and $0.0631 per share were paid to
Class A, Class B and Class C shareholders, respectively, on December 31, 1997,
of which, for each class of shares, $0.0036 was designated as a capital gain
distribution in the "28% Rate Group" for federal income tax purposes. Whether
received in stock or cash, the capital gain distribution should be treated by
shareholders as a gain from the sale of capital assets.
None of the dividends paid by the Fund during the fiscal year ended
September 30, 1998, 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.
39 Oppenheimer International Bond Fund
<PAGE> 40
OPPENHEIMER INTERNATIONAL BOND FUND
A Series of Oppenheimer International Bond Fund
<TABLE>
=========================================================================================================
<S> <C>
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, Trustee, 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.
</TABLE>
40 Oppenheimer International Bond Fund
<PAGE> 41
OPPENHEIMERFUNDS FAMILY
<TABLE>
=========================================================================================================
<S> <C> <C>
REAL ASSET FUNDS
- ---------------------------------------------------------------------------------------------------------
Real Asset Fund Gold & Special Minerals Fund
=========================================================================================================
GLOBAL STOCK FUNDS
- ---------------------------------------------------------------------------------------------------------
Developing Markets Fund International Growth Fund Quest Global Value Fund
International Small Global Fund Global Growth &Income Fund
Company Fund
=========================================================================================================
STOCK FUNDS
- ---------------------------------------------------------------------------------------------------------
Enterprise Fund MidCap Fund Growth Fund
Discovery Fund Capital Appreciation Fund Disciplined Value Fund
Quest Small Cap Value Fund Quest Capital Value Fund Quest Value Fund
=========================================================================================================
STOCK & BOND FUNDS
- ---------------------------------------------------------------------------------------------------------
Main Street Income & Total Return Fund Disciplined Allocation Fund
Growth Fund Quest Balanced Multiple Strategies Fund
Quest Opportunity Value Fund(1) Convertible Securities Fund(2)
Value Fund Equity Income Fund
=========================================================================================================
TAXABLE BOND FUNDS
- ---------------------------------------------------------------------------------------------------------
International Bond Fund Champion Income Fund U.S. Government Trust
World Bond Fund Strategic Income Fund Limited-Term Government Fund
High Yield Fund Bond Fund
=========================================================================================================
MUNICIPAL BOND FUNDS
- ---------------------------------------------------------------------------------------------------------
California Municipal Fund(3) Pennsylvania Municipal Fund(3) Rochester Division:
Florida Municipal Fund(3) Municipal Bond Fund Rochester Fund Municipals
New Jersey Municipal Fund(3) Insured Municipal Fund Limited Term New York
New York Municipal Fund(3) Intermediate Municipal Fund Municipal Fund
=========================================================================================================
MONEY MARKET FUNDS(4)
- ---------------------------------------------------------------------------------------------------------
Money Market Fund Cash Reserves
</TABLE>
1. On 5/18/98, the Fund's name was changed from "Quest Growth & Income Value
Fund."
2. On 4/28/98, the Fund's name was changed from "Bond Fund for Growth."
3. Available only to investors in certain states.
4. An investment in money market funds is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
these funds may seek to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in these funds.
Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc., Two
World Trade Center, New York, NY 10048-0203.
(C) Copyright 1998 OppenheimerFunds, Inc. All rights reserved.
41 Oppenheimer International Bond Fund
<PAGE> 42
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<PAGE> 43
INTERNET
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INFORMATION AND SERVICES
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As an Oppenheimer fund shareholder, you have some special privileges. Whether
it's automatic investment plans, informative newsletters and hotlines, or ready
account access, you can benefit from services designed to make investing
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And when you need help, our Customer Service Representatives are only a
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When you want to make a transaction, you can do it easily by calling our
toll-free Telephone Transactions number or by visiting our website. And, by
enrolling in AccountLink, a convenient service that "links" your Oppenheimer
funds accounts and your bank checking or savings account, you can use the
Telephone Transactions number or website to make investments.
For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week.
PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.
You can count on us whenever you need assistance. That's why the
International Customer Service Association, an independent, nonprofit
organization made up of over 3,200 customer service management professionals
from around the country, honored the Oppenheimer funds' transfer agent,
OppenheimerFunds Services, with their Award of Excellence in 1993.
So call us today, or visit us at our website at
www.oppenheimerfunds.com--we're here to help.
[OPPENHEIMERFUNDS LOGO]
RA0880.001.0998 November 27, 1998
