UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-21268
Oppenheimer Total Return Bond Fund
(Exact name of registrant as specified in charter)
6803 South Tucson Way, Centennial, Colorado 80112-3924
(Address of principal executive offices)
(Zip code)
Robert G. Zack, Esq.
OppenheimerFunds, Inc.
Two World Financial Center, New York, New York 10281-1008
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(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 768-3200
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Date of fiscal year end: April 30
Date of reporting period: May 1, 2003 - April 30, 2004
Item 1. Reports to Stockholders.
FUND PERFORMANCE DISCUSSION
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HOW HAS THE FUND PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS, INC., OF
THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR ENDED APRIL 30, 2004, FOLLOWED BY
A GRAPHICAL COMPARISON OF THE FUND'S PERFORMANCE TO AN APPROPRIATE BROAD-BASED
MARKET INDEX.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. For its fiscal year ended April 30,
2004, Oppenheimer Total Return Bond Fund's favorable performance was driven by
several key factors. First, the portfolio's mortgage positioning--which
emphasized higher-coupon mortgages throughout the period--was a strong supporter
of performance. Because we believed that the market was over-penalizing
higher-coupon mortgages and reflecting, or "pricing in," too strong of an
expectation that refinancing rates would surge, we believed that emphasizing
higher-coupon mortgages offered us an opportunity to capitalize on that
discrepancy. As it turned out, our expectations were correct. While this
positioning hurt us at the very beginning of the period when Treasury securities
rallied, this specific mortgage exposure served us well for the bulk of the
period.
Another key factor driving the Fund's solid performance this period was
the portfolio's credit exposure. Last year was a very strong year for credit,
particularly for the lower-quality segment of the investment-grade universe.
During most of the period, higher-beta, or lower-credit quality corporate bonds,
performed best. Hence, our overweighted exposure to these types of bonds helped
performance.
Active management of the portfolio's interest rate exposure provided
another boost to performance for the Fund's fiscal year. As the period began, we
held less duration, or interest-rate sensitivity, than many of our peers. Since
the period commenced with a substantial rally for Treasuries, this positioning
hurt us quite significantly during those first few weeks. However, as the period
progressed, the market experienced a widespread sell-off of Treasuries that
lasted from June until August. During that time, we more than recouped our
previous losses and enjoyed a strong boost to performance as a result of our
lower duration.
Then, from August through nearly the end of the fiscal year, we shifted to
and maintained a neutral duration position versus our peers, which also worked
well for us, as rates remained largely static. At the very end of the period, we
believed that the market had again overblown its pessimism in terms of
employment rate prospects and the ultimate recovery of the U.S. economy. In
light of this, we reduced the portfolio's duration versus its peers. Soon after,
rates backed up quite dramatically. This decision was a very profitable one, and
helped add to performance, particularly on a relative basis. Finally, at the end
of the reporting period, we adjusted our duration back to neutral versus our
benchmark, seeing little opportunity to gain from a specific interest-rate
positioning at that time.
9 | OPPENHEIMER TOTAL RETURN BOND FUND
FUND PERFORMANCE DISCUSSION
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In terms of the portfolio's composition, we entered the period with a
fairly strong overweight in corporate bonds, a posture that we had held since
the Fund's inception. However, when we became convinced that the value of many
corporate bonds had, in our opinion, become too rich, we began trimming our
exposure and consequently, harvested gains for the Fund's portfolio. We entered
2004 still overweighted in our exposure to corporate debt, but ended the period
nominally underweight our benchmark. Overall, this strategy added to performance
throughout the period, as we sold off many of these holdings at very attractive
levels relative to what we paid for them.
Moving forward, we intend to maintain our current overweighted mortgage
positioning, still favoring higher-coupon mortgages. We believe this positions
the portfolio well for the months ahead, since higher-coupon mortgages typically
outperform in a rising interest-rate environment. In addition, we are exploring
from a risk-adjusted perspective the value offered by shorter-dated corporate
bonds, which currently appear attractive from a structural standpoint. We have
begun increasing our exposure to this segment of the credit markets, and will
continue to do so if we perceive reasonable potential for future gains. In
general, we will continue to seek a diverse mix of fixed-income securities,
preserving the Fund's unique ability to serve as a viable, core bond holding for
a well-diversified portfolio.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each class of shares of the
Fund held until April 30, 2004. In the case of Class A, B, C and N shares
performance is measured from the inception of each class on February 21, 2003.
The Fund's performance reflects the deduction of the maximum initial sales
charge on Class A shares, the applicable contingent deferred sales charge on
Class B, Class C and Class N shares, and reinvestments of all dividends and
capital gains distributions. Past performance cannot guarantee future results.
The Fund's performance is compared to the performance of the Citigroup
Broad Investment Grade Index, a market-capitalization weighted index that
includes fixed-rate Treasury, government-sponsored, corporate and mortgage
securities. Index performance reflects the reinvestment of income but does not
consider the effect of transaction costs, and none of the data in the graphs
shows the effect of taxes. The Fund's performance reflects the effects of the
Fund's 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 investments in the index.
10 | OPPENHEIMER TOTAL RETURN BOND FUND
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Total Return Bond Fund (Class A)
Citigroup Broad Investment Grade Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Value of Investment Citigroup Broad Investment
Date In Fund Grade Index
02/21/2003 9,525 10,000
04/30/2003 9,633 10,079
07/31/2003 9,483 9,900
10/31/2003 9,716 10,135
01/31/2004 9,939 10,351
04/30/2004 9,888 10,268
AVERAGE ANNUAL TOTAL RETURN OF CLASS A SHARES WITH SALES CHARGE OF THE FUND AT
04/30/04
1 Year -2.23% Since Inception -0.94% Inception Date 2/21/03
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE 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 THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 4.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
WITHOUT A VOLUNTARY EXPENSE LIMIT THAT CAN BE TERMINATED AT ANY TIME, FUND
PERFORMANCE WOULD HAVE BEEN LOWER. SEE PAGE 15 FOR FURTHER INFORMATION.
11 | OPPENHEIMER TOTAL RETURN BOND FUND
FUND PERFORMANCE DISCUSSION
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CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Total Return Bond Fund (Class B)
Citigroup Broad Investment Grade Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Value of Investment Citigroup Broad Investment
Date In Fund Grade Index
02/21/2003 10,000 10,000
04/30/2003 10,097 10,079
07/31/2003 9,915 9,900
10/31/2003 10,132 10,135
01/31/2004 10,342 10,351
04/30/2004 9,868 10,268
AVERAGE ANNUAL TOTAL RETURN OF CLASS B SHARES WITH SALES CHARGE OF THE FUND AT
04/30/04
1 Year -3.27% Since Inception -1.10% Inception Date 2/21/03
12 | OPPENHEIMER TOTAL RETURN BOND FUND
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Total Return Bond Fund (Class C)
Citigroup Broad Investment Grade Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Value of Investment Citigroup Broad Investment
Date In Fund Grade Index
02/21/2003 10,000 10,000
04/30/2003 10,096 10,079
07/31/2003 9,917 9,900
10/31/2003 10,122 10,135
01/31/2004 10,342 10,351
04/30/2004 10,258 10,268
AVERAGE ANNUAL TOTAL RETURN OF CLASS C SHARES OF THE FUND AT 04/30/04
1 Year 0.61% Since Inception 2.16% Inception Date 2/21/03
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE 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 THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 4.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
WITHOUT A VOLUNTARY EXPENSE LIMIT THAT CAN BE TERMINATED AT ANY TIME, FUND
PERFORMANCE WOULD HAVE BEEN LOWER. SEE PAGE 15 FOR FURTHER INFORMATION.
13 | OPPENHEIMER TOTAL RETURN BOND FUND
FUND PERFORMANCE DISCUSSION
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CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Total Return Bond Fund (Class N)
Citigroup Broad Investment Grade Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Value of Investment Citigroup Broad Investment
Date In Fund Grade Index
02/21/2003 10,000 10,000
04/30/2003 10,108 10,079
07/31/2003 9,938 9,900
10/31/2003 10,168 10,135
01/31/2004 10,391 10,351
04/30/2004 10,231 10,268
AVERAGE ANNUAL TOTAL RETURN OF CLASS N SHARES OF THE FUND AT 04/30/04
1 Year 1.21% Since Inception 1.93% Inception Date 2/21/03
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE 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 THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 4.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
WITHOUT A VOLUNTARY EXPENSE LIMIT THAT CAN BE TERMINATED AT ANY TIME, FUND
PERFORMANCE WOULD HAVE BEEN LOWER. SEE PAGE 15 FOR FURTHER INFORMATION.
14 | OPPENHEIMER TOTAL RETURN BOND FUND
NOTES
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TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND
CAPITAL GAINS DISTRIBUTIONS IN A HYPOTHETICAL INVESTMENT FOR THE PERIODS SHOWN.
CUMULATIVE TOTAL RETURNS ARE NOT ANNUALIZED. THE FUND'S TOTAL RETURNS SHOWN DO
NOT REFLECT THE DEDUCTION OF INCOME TAXES ON AN INDIVIDUAL'S INVESTMENT. TAXES
MAY REDUCE YOUR ACTUAL INVESTMENT RETURNS ON INCOME OR GAINS PAID BY THE FUND OR
ANY GAINS YOU MAY REALIZE IF YOU SELL YOUR SHARES.
INVESTORS SHOULD CONSIDER THE FUND'S INVESTMENT OBJECTIVES, RISKS, AND OTHER
CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE FUND'S PROSPECTUS CONTAINS
THIS AND OTHER INFORMATION ABOUT THE FUND, AND MAY BE OBTAINED BY ASKING YOUR
FINANCIAL ADVISOR, CALLING US AT 1.800.525.7048 OR VISITING OUR WEBSITE AT
WWW.OPPENHEIMERFUNDS.COM. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
Please remember this Fund has a limited operating history.
CLASS A shares of the Fund were first publicly offered on 2/21/03. Unless
otherwise noted, Class A returns include the current maximum initial sales
charge of 4.75%.
CLASS B shares of the Fund were first publicly offered on 2/21/03. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 2% (5-year). Class B shares are subject to an
annual 0.75% asset-based sales charge.
CLASS C shares of the Fund were first publicly offered on 2/21/03. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
CLASS N shares of the Fund were first publicly offered on 2/21/03. Class N
shares are offered only through retirement plans. Unless otherwise noted, Class
N returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
An explanation of the calculation of performance is in the Fund's Statement of
Additional Information.
15 | OPPENHEIMER TOTAL RETURN BOND FUND
STATEMENT OF INVESTMENTS April 30, 2004
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PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
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ASSET-BACKED SECURITIES--16.6%
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Bank One Auto Securitization Trust, Automobile Receivable Certificates,
Series 2003-1, Cl. A2, 1.29%, 8/21/06 $ 187,573 $ 187,545
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BMW Vehicle Owner Trust, Automobile Loan Certificates, Series 2003-A,
Cl. A2, 1.45%, 11/25/05 110,675 110,803
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Capital Auto Receivables Asset Trust, Automobile Mtg.-Backed Nts.,
Series 2003-2, Cl. A2A, 1.20%, 5/16/05 103,595 103,662
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Caterpillar Financial Asset Trust, Equipment Loan Pass-Through
Certificates, Series 2003-A, Cl. A2, 1.25%, 10/25/05 75,607 75,650
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Centex Home Equity Co. LLC, Home Equity Loan Asset-Backed Certificates:
Series 2003-A, Cl. AF1, 1.836%, 10/25/17 13,327 13,330
Series 2003-B, Cl. AF1, 1.64%, 2/25/18 29,286 29,274
Series 2003-C, Cl. AF1, 2.14%, 7/25/18 292,382 292,756
Series 2004-A, Cl. AF1, 2.03%, 6/25/19 118,632 118,686
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Chase Funding Mortgage Loan Asset-Backed Certificates,
Home Equity Mtg. Obligations:
Series 2003-3, Cl. 1A1, 1.18%, 8/25/17 1 54,366 54,391
Series 2003-4, Cl. 1A1, 1.22%, 9/25/17 1 133,950 134,033
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Chase Manhattan Auto Owner Trust, Automobile Loan Pass-Through Certificates:
Series 2003-A, Cl. A2, 1.26%, 1/16/06 49,101 49,128
Series 2003-B, Cl. A2, 1.28%, 3/15/06 73,116 73,143
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Citibank Credit Card Issuance Trust, Credit Card Receivable Nts.,
Series 2002-A3, Cl. A3, 4.40%, 5/15/07 160,000 164,290
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CitiFinancial Mortgage Securities, Inc., Home Equity Collateralized
Mtg. Obligations:
Series 2003-1, Cl. AF1, 1.94%, 1/25/33 24,275 24,280
Series 2003-2, Cl. AF1, 1.20%, 5/25/33 1 49,577 49,599
Series 2003-3, Cl. AF1, 1.22%, 8/25/33 1,2 112,098 112,152
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DaimlerChrysler Auto Trust, Automobile Loan Pass-Through Certificates:
Series 2003-A, Cl. A2, 1.52%, 12/8/05 320,000 320,405
Series 2003-B, Cl. A2, 1.61%, 7/8/06 390,000 390,316
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Harley-Davidson Motorcycle Trust, Motorcycle Receivable Nts.:
Series 2002-2, Cl. A1, 1.91%, 4/16/07 31,566 31,634
Series 2003-3, Cl. A1, 1.50%, 1/15/08 221,908 222,013
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Honda Auto Receivables Owner Trust, Automobile Receivable Obligations:
Series 2003-2, Cl. A2, 1.34%, 12/21/05 136,306 136,407
Series 2003-3, Cl. A2, 1.52%, 4/21/06 360,000 360,352
Series 2003-4, Cl. A2, 1.58%, 7/17/06 330,000 330,272
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Household Automotive Trust, Automobile Loan Certificates,
Series 2003-2, Cl. A2, 1.56%, 12/18/06 170,000 170,051
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M&I Auto Loan Trust, Automobile Loan Certificates:
Series 2002-1, Cl. A3, 2.49%, 10/22/07 190,988 192,161
Series 2003-1, Cl. A2, 1.60%, 7/20/06 280,000 280,325
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National City Auto Receivables Trust, Automobile Receivable
Obligations, Series 2004-A, Cl. A2, 1.50%, 2/15/07 160,000 159,850
16 | OPPENHEIMER TOTAL RETURN BOND FUND
PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
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ASSET-BACKED SECURITIES Continued
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Nissan Auto Lease Trust, Automobile Lease Obligations, Series 2003-A,
Cl. A2, 1.69%, 12/15/05 $ 220,000 $ 220,378
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Nissan Auto Receivables Owner Trust, Automobile Receivable Nts.:
Series 2002-C, Cl. A3, 2.60%, 8/15/06 239,095 240,653
Series 2003-B, Cl. A2, 1.20%, 11/15/05 223,130 223,253
Series 2004-A, Cl. A2, 1.40%, 7/17/06 180,000 179,644
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Residential Funding Mortgage Securities II, Inc., Home Equity Loan
Pass-Through Certificates, Series 2003-HS1, Cl. AI2, 1.20%, 1/25/33 1 208 208
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Toyota Auto Receivables Owner Trust, Automobile Mtg.-Backed Obligations:
Series 2002-B, Cl. A3, 3.76%, 6/15/06 56,093 56,633
Series 2003-A, Cl. A2, 1.28%, 8/15/05 117,446 117,540
Series 2003-B, Cl. A2, 1.43%, 2/15/06 240,000 240,056
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USAA Auto Owner Trust, Automobile Loan Asset-Backed Nts.:
Series 2002-1, Cl. A3, 2.41%, 10/16/06 90,698 91,166
Series 2003-1, Cl. A2, 1.22%, 4/17/06 109,464 109,512
Series 2004-1, Cl. A2, 1.43%, 9/15/06 430,000 429,172
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Volkswagen Auto Loan Enhanced Trust, Automobile Loan Receivable Certificates:
Series 2003-1, Cl. A2, 1.11%, 12/20/05 271,988 271,964
Series 2003-2, Cl. A2, 1.55%, 6/20/06 190,000 190,154
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Whole Auto Loan Trust, Automobile Loan Receivable Certificates:
Series 2002-1, Cl. A2, 1.88%, 6/15/05 92,350 92,499
Series 2003-1, Cl. A2A, 1.40%, 4/15/06 340,000 340,176
-----------
Total Asset-Backed Securities (Cost $6,987,981) 6,989,516
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MORTGAGE-BACKED OBLIGATIONS--66.0%
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Government Agency--63.6%
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HLMC/FNMA/Sponsored--63.4%
Fannie Mae Whole Loan, Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Trust 2003-W6, Cl. 2A1, 2.232%, 9/25/42 254,110 254,212
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Federal Home Loan Mortgage Corp.:
5%, 5/15/34 3 757,000 734,054
5.50%, 1/1/34 109,588 109,545
7%, 9/1/33-11/1/33 428,698 453,779
7%, 5/1/34 3 3,429,000 3,621,881
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Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg. Investment
Conduit Multiclass Pass-Through Certificates:
Series 1669, Cl. G, 6.50%, 2/15/23 95,026 96,679
Series 2055, Cl. ZM, 6.50%, 5/15/28 159,195 168,227
Series 2080, Cl. Z, 6.50%, 8/15/28 105,747 110,837
Series 2102, Cl. VA, 6%, 10/15/09 77,851 78,344
Series 2387, Cl. PD, 6%, 4/15/30 241,000 249,370
Series 2466, Cl. PD, 6%, 4/15/30 189,478 194,721
Series 2491, Cl. PE, 6%, 12/15/27 136,891 138,038
Series 2498, Cl. PC, 5.50%, 10/15/14 39,192 40,166
Series 2500, Cl. FD, 1.60%, 3/15/32 1 62,348 62,676
17 | OPPENHEIMER TOTAL RETURN BOND FUND
STATEMENT OF INVESTMENTS Continued
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PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg. Investment
Conduit Multiclass Pass-Through Certificates: Continued
Series 2526, Cl. FE, 1.50%, 6/15/29 1 $ 54,685 $ 54,935
Series 2551, Cl. FD, 1.50%, 1/15/33 1 47,509 47,729
Series 2551, Cl. TA, 4.50%, 2/15/18 268,989 270,684
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Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed Security:
Series 176, Cl. IO, 3.269%, 6/1/26 4 102,380 20,369
Series 177, Cl. B, 0.699%, 7/1/26 4 178,648 38,168
Series 183, Cl. IO, 2.394%, 4/1/27 4 171,920 35,257
Series 184, Cl. IO, 4.624%, 12/1/26 4 166,591 33,670
Series 192, Cl. IO, 10.245%, 2/1/28 4 49,233 10,445
Series 200, Cl. IO, 8.687%, 1/1/29 4 58,292 11,896
Series 2130, Cl. SC, 38.228%, 3/15/29 4 133,890 14,120
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Federal Home Loan Mortgage Corp., Principal-Only Stripped
Mtg.-Backed Security:
Series 176, Cl. PO, 5.905%, 6/1/26 5 50,292 43,006
Series 177, Cl. PO, 5.781%, 7/1/26 5 178,648 150,950
Series 199, Cl. PO, 5.38%, 8/1/28 5 101,663 84,689
Series 203, Cl. PO, 5.077%, 6/1/29 5 60,990 50,515
Series 217, Cl. PO, 6.955%, 2/1/32 5 64,136 53,170
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Federal Home Loan Mortgage Corp., Structured Pass-Through Securities,
Collateralized Mtg. Obligations:
Series H006, Cl. A1, 1.724%, 4/15/08 9,362 9,349
Series T-42, Cl. A2, 5.50%, 2/25/42 15,256 15,385
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Federal National Mortgage Assn.:
5%, 5/1/34 3 1,854,000 1,796,641
5.50%, 7/1/33-12/1/34 1,193,051 1,191,559
5.50%, 6/18/19-5/13/34 3 5,755,000 5,787,279
6.50%, 10/1/30 62,846 65,515
6.50%, 5/25/34 3 3,792,000 3,947,237
7%, 7/1/32-11/1/33 657,908 699,930
7%, 5/25/34 3 4,030,000 4,261,725
8.50%, 7/1/32 15,959 17,246
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Federal National Mortgage Assn., Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates:
Trust 1998-63, Cl. PG, 6%, 3/25/27 85,469 86,982
Trust 2001-50, Cl. NE, 6%, 8/25/30 143,417 148,594
Trust 2001-70, Cl. LR, 6%, 9/25/30 128,087 133,971
Trust 2001-70, Cl. PD, 6%, 3/25/29 140,000 143,217
Trust 2001-72, Cl. NH, 6%, 4/25/30 114,243 118,189
Trust 2001-74, Cl. PD, 6%, 5/25/30 50,000 52,047
Trust 2002-50, Cl. PD, 6%, 9/25/27 110,000 113,687
Trust 2002-73, Cl. PA, 5%, 1/25/17 79,700 80,037
Trust 2002-77, Cl. WF, 1.50%, 12/18/32 1 78,200 78,482
Trust 2002-94, Cl. MA, 4.50%, 8/25/09 185,298 187,595
Trust 2003-21, Cl. FK, 1.50%, 3/25/33 1 136,882 137,336
Trust 2003-81, Cl. PA, 5%, 2/25/12 62,681 63,812
18 | OPPENHEIMER TOTAL RETURN BOND FUND
PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
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FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates Interest-Only Stripped Mtg.-Backed Security:
Trust 2002-47, Cl. NS, 29.85%, 4/25/32 4 $ 242,601 $ 26,311
Trust 2002-51, Cl. S, 29.849%, 8/25/32 4 222,782 23,802
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Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security:
Trust 2002-52, Cl. SD, 21.759%, 9/25/32 4 301,712 32,548
Trust 2002-9, Cl. MS, 31.233%, 3/25/32 4 157,830 16,395
Trust 222, Cl. 2, 2.692%, 6/1/23 4 216,684 46,495
Trust 240, Cl. 2, 2.128%, 9/1/23 4 489,724 108,411
Trust 252, Cl. 2, (2.05)%, 11/1/23 4 249,445 55,414
Trust 254, Cl. 2, 1.453%, 1/1/24 4 126,900 26,595
Trust 273, Cl. 2, 3.541%, 7/1/26 4 73,967 15,112
Trust 342, Cl. 2, 4.788%, 9/1/33 4 124,296 29,632
------------
26,748,662
- ----------------------------------------------------------------------------------------------------------------
GNMA/GUARANTEED--0.2%
Government National Mortgage Assn., Interest-Only Stripped
Mtg.-Backed Security:
Series 2002-15, Cl. SM, 31.376%, 2/16/32 4 403,472 38,776
Series 2002-76, Cl. SY, 31.715%, 12/16/26 4 465,155 43,085
Series 2004-11, Cl. SM, 32.747%, 1/17/30 4 193,003 19,251
------------
101,112
- ----------------------------------------------------------------------------------------------------------------
PRIVATE--2.4%
- ----------------------------------------------------------------------------------------------------------------
COMMERCIAL--2.2%
Bear Stearns Commercial Mortgage Securities, Inc., Commercial Mtg.
Obligations, Series 2003-T10, Cl. A1, 4%, 3/13/40 254,481 251,221
- ----------------------------------------------------------------------------------------------------------------
First Union/Lehman Brothers/Bank of America, Commercial Mtg.
Pass-Through Certificates, Series 1998-C2, Cl. A2, 6.56%, 11/18/35 110,000 120,475
- ----------------------------------------------------------------------------------------------------------------
GE Capital Commercial Mortgage Corp., Commercial Mtg. Obligations,
Series 2003-C1, Cl. A2, 4.093%, 1/10/38 215,000 213,484
- ----------------------------------------------------------------------------------------------------------------
J.P. Morgan Chase Commercial Mortgage Securities Corp., Commercial
Mtg. Pass-Through Certificates, Series 2003-ML1A, Cl. A1, 3.972%, 3/12/39 154,703 153,117
- ----------------------------------------------------------------------------------------------------------------
Prudential Mortgage Capital Co. II LLC, Commercial Mtg. Pass-Through
Certificates, Series PRU-HTG 2000-C1, Cl. A2, 7.306%, 10/6/15 182,000 206,051
------------
944,348
- ----------------------------------------------------------------------------------------------------------------
OTHER--0.2%
CIT Equipment Collateral, Equipment Receivable-Backed Nts.,
Series 2003-EF1, Cl. A2, 1.49%, 12/20/05 90,000 90,074
------------
Total Mortgage-Backed Obligations (Cost $27,943,094) 27,884,196
19 | OPPENHEIMER TOTAL RETURN BOND FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--25.1%
- ---------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. Unsec. Nts.:
2.75%, 8/15/06 $ 370,000 $ 370,888
4.50%, 1/15/13 455,000 443,721
4.875%, 11/15/13 340,000 337,532
5.50%, 7/15/06 6 1,435,000 1,523,713
6.875%, 9/15/10 300,000 341,370
- ---------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Unsec. Nts.:
4.25%, 7/15/07 1,150,000 1,185,268
5.50%, 2/15/06 550,000 580,148
6%, 5/15/11 80,000 87,000
7.25%, 5/15/30 200,000 239,779
- ---------------------------------------------------------------------------------------------------------------
Tennessee Valley Authority Bonds:
5.375%, 11/13/08 110,000 117,093
Series C, 4.75%, 8/1/13 145,000 143,856
Series C, 6%, 3/15/13 140,000 152,148
- ---------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
5.375%, 2/15/31 417,000 422,604
5.50%, 8/15/28 165,000 167,701
6.875%, 8/15/25 1,310,000 1,563,557
STRIPS, 1.30%, 2/15/11 7 555,000 417,810
STRIPS, 3.63%, 2/15/13 7 1,389,000 925,999
- ---------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
3%, 2/15/08 1,000,000 993,165
4%, 2/15/14 374,000 359,391
5.75%, 8/15/10 202,000 222,090
------------
Total U.S. Government Obligations (Cost $10,938,372) 10,594,833
- ---------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS--0.2%
- ---------------------------------------------------------------------------------------------------------------
United Mexican States Nts., 7.50%, 1/14/12 (Cost $82,908) 75,000 81,938
- ---------------------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--20.4%
- ---------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--6.3%
- ---------------------------------------------------------------------------------------------------------------
AUTO COMPONENTS--0.4%
Delphi Corp., 6.55% Nts., 6/15/06 80,000 84,908
- ---------------------------------------------------------------------------------------------------------------
Lear Corp., 7.96% Sr. Unsec. Nts., Series B, 5/15/05 67,000 70,853
------------
155,761
- ---------------------------------------------------------------------------------------------------------------
AUTOMOBILES--2.2%
American Honda Finance Corp., 3.85% Nts., 11/6/08 50,000 49,754
- ---------------------------------------------------------------------------------------------------------------
DaimlerChrysler North America Holding Corp., 4.75% Unsec. Nts., 1/15/08 175,000 177,682
- ---------------------------------------------------------------------------------------------------------------
Ford Holdings, Inc., 9.30% Unsec. Unsub. Debs., 3/1/30 55,000 61,860
- ---------------------------------------------------------------------------------------------------------------
Ford Motor Co., 8.90% Unsec. Unsub. Debs., 1/15/32 105,000 116,907
- ---------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 6.875% Unsec. Unsub. Nts., 8/28/12 310,000 323,735
- ---------------------------------------------------------------------------------------------------------------
General Motors Corp., 8.375% Sr. Unsec. Debs., 7/15/33 15,000 16,269
20 | OPPENHEIMER TOTAL RETURN BOND FUND
PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------------------------
AUTOMOBILES Continued
Hertz Corp. (The):
7.625% Sr. Nts., 6/1/12 $ 100,000 $ 107,005
7.625% Sr. Unsec. Nts., 8/15/07 75,000 81,431
------------
934,643
- -------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--0.9%
Caesars Entertainment, Inc., 7% Sr. Unsec. Sub. Nts., 7/15/04 75,000 75,844
- -------------------------------------------------------------------------------------------------
Hilton Hotels Corp., 7.95% Sr. Nts., 4/15/07 75,000 82,688
- -------------------------------------------------------------------------------------------------
Yum! Brands, Inc., 8.50% Sr. Unsec. Nts., 4/15/06 195,000 215,319
------------
373,851
- -------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES--0.8%
Beazer Homes USA, Inc., 8.625% Sr. Unsec. Nts., 5/15/11 90,000 97,875
- -------------------------------------------------------------------------------------------------
D.R. Horton, Inc., 9.375% Sr. Unsec. Sub. Nts., 3/15/11 85,000 95,200
- -------------------------------------------------------------------------------------------------
Pulte Homes, Inc., 8.375% Sr. Nts., 8/15/04 35,000 35,439
- -------------------------------------------------------------------------------------------------
Toll Corp., 8.25% Sr. Sub. Nts., 12/1/11 90,000 99,900
------------
328,414
- -------------------------------------------------------------------------------------------------
MEDIA--1.4%
Liberty Media Corp., 3.50% Nts., 9/25/06 90,000 90,225
- -------------------------------------------------------------------------------------------------
TCI Communications, Inc., 9.80% Sr. Unsec. Debs., 2/1/12 220,000 281,256
- -------------------------------------------------------------------------------------------------
Time Warner Cos., Inc., 9.125% Debs., 1/15/13 90,000 111,198
- -------------------------------------------------------------------------------------------------
Walt Disney Co. (The), 4.875% Nts., 7/2/04 100,000 100,579
------------
583,258
- -------------------------------------------------------------------------------------------------
MULTILINE RETAIL--0.4%
J.C. Penney Co., Inc., 7.60% Nts., 4/1/07 150,000 165,375
- -------------------------------------------------------------------------------------------------
SPECIALTY RETAIL--0.2%
Gap, Inc. (The), 6.90% Nts., 9/15/07 80,000 88,400
- -------------------------------------------------------------------------------------------------
CONSUMER STAPLES--1.7%
- -------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--1.1%
Food Lion, Inc., 7.55% Nts., 4/15/07 125,000 135,806
- -------------------------------------------------------------------------------------------------
Kroger Co. (The), 7.80% Sr. Nts., 8/15/07 135,000 152,173
- -------------------------------------------------------------------------------------------------
Safeway, Inc.:
2.50% Nts., 11/1/05 45,000 45,014
3.80% Sr. Unsec. Nts., 8/15/05 150,000 152,472
-----------
485,465
- -------------------------------------------------------------------------------------------------
FOOD PRODUCTS--0.6%
Kraft Foods, Inc., 5.25% Nts., 6/1/07 230,000 241,854
21 | OPPENHEIMER TOTAL RETURN BOND FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------
ENERGY--0.3%
- ---------------------------------------------------------------------------------------------------------
OIL & GAS--0.3%
Petroleos Mexicanos, 9.50% Sr. Sub. Nts., 9/15/27 $ 60,000 $ 69,000
- ---------------------------------------------------------------------------------------------------------
PF Export Receivables Master Trust, 3.748% Sr. Nts., Series B, 6/1/13 8 65,000 62,526
------------
131,526
- ---------------------------------------------------------------------------------------------------------
FINANCIALS--2.9%
- ---------------------------------------------------------------------------------------------------------
CAPITAL MARKETS--0.0%
Bankers Trust Corp., 7.375% Unsec. Sub. Nts., 5/1/08 15,000 16,887
- ---------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--0.8%
CIT Group, Inc., 7.75% Sr. Unsec. Unsub. Nts., 4/2/12 75,000 86,738
- ---------------------------------------------------------------------------------------------------------
Franklin Resources, Inc., 3.70% Nts., 4/15/08 50,000 49,395
- ---------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 4.125% Nts., Series C, 1/15/09 105,000 104,869
- ---------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co., 6.60% Nts., 4/1/12 70,000 77,169
------------
318,171
- ---------------------------------------------------------------------------------------------------------
INSURANCE--1.5%
AXA, 8.60% Unsec. Sub. Nts., 12/15/30 90,000 112,190
- ---------------------------------------------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The), 2.375% Nts., 6/1/06 50,000 49,436
- ---------------------------------------------------------------------------------------------------------
John Hancock Global Funding II, 7.90% Nts., 7/2/10 8 140,000 163,756
- ---------------------------------------------------------------------------------------------------------
Prudential Holdings LLC, 8.695% Bonds, Series C, 12/18/23 8 105,000 128,546
- ---------------------------------------------------------------------------------------------------------
Prudential Insurance Co. of America, 8.30% Nts., 7/1/25 8 145,000 176,345
------------
630,273
- ---------------------------------------------------------------------------------------------------------
REAL ESTATE--0.6%
EOP Operating LP, 6.763% Sr. Unsec. Nts., 6/15/07 98,000 107,150
- ---------------------------------------------------------------------------------------------------------
Spieker Properties LP, 6.80% Unsec. Unsub. Nts., 5/1/04 55,000 55,000
- ---------------------------------------------------------------------------------------------------------
Vornado Realty LP, 5.625% Sr. Unsec. Unsub. Nts., 6/15/07 100,000 106,838
------------
268,988
- ---------------------------------------------------------------------------------------------------------
HEALTH CARE--1.3%
- ---------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--1.3%
Aetna, Inc., 7.375% Sr. Unsec. Nts., 3/1/06 190,000 206,109
- ---------------------------------------------------------------------------------------------------------
CIGNA Corp., 7.40% Unsec. Nts., 5/15/07 225,000 249,005
- ---------------------------------------------------------------------------------------------------------
Health Net, Inc., 8.375% Sr. Unsec. Unsub. Nts., 4/15/11 75,000 88,656
------------
543,770
- ---------------------------------------------------------------------------------------------------------
INDUSTRIALS--2.1%
- ---------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.6%
Boeing Capital Corp., 5.65% Sr. Unsec. Nts., 5/15/06 29,000 30,611
- ---------------------------------------------------------------------------------------------------------
Northrop Grumman Corp., 7.125% Sr. Nts., 2/15/11 75,000 84,443
- ---------------------------------------------------------------------------------------------------------
Raytheon Co., 6.50% Unsec. Nts., 7/15/05 120,000 125,862
------------
240,916
22 | OPPENHEIMER TOTAL RETURN BOND FUND
PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS--0.5%
FedEx Corp., 2.65% Nts., 4/1/07 8 $ 215,000 $ 210,409
- --------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.4%
Allied Waste North America, Inc., 8.875% Sr. Nts., Series B, 4/1/08 85,000 94,775
- --------------------------------------------------------------------------------------------------------
Waste Management, Inc., 7% Sr. Nts., 7/15/28 70,000 73,920
------------
168,695
- --------------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--0.4%
Hutchison Whampoa International Ltd., 7.45% Sr. Bonds, 11/24/33 8 75,000 72,407
- --------------------------------------------------------------------------------------------------------
Tyco International Group SA:
5.875% Unsec. Unsub. Nts., 11/1/04 21,000 21,416
6.75% Sr. Unsub. Nts., 2/15/11 61,000 65,875
------------
159,698
- --------------------------------------------------------------------------------------------------------
ROAD & RAIL--0.2%
CSX Corp., 6.25% Unsec. Nts., 10/15/08 85,000 91,763
- --------------------------------------------------------------------------------------------------------
MATERIALS--0.3%
- --------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.3%
Weyerhaeuser Co., 5.50% Unsec. Unsub. Nts., 3/15/05 130,000 133,987
- --------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--2.1%
- --------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.7%
British Telecommunications plc, 7.875% Nts., 12/15/05 120,000 129,929
- --------------------------------------------------------------------------------------------------------
Citizens Communications Co., 9.25% Sr. Nts., 5/15/11 34,000 35,829
- --------------------------------------------------------------------------------------------------------
Deutsche Telekom International Finance BV, 8.50% Unsub. Nts., 6/15/10 125,000 147,877
- --------------------------------------------------------------------------------------------------------
France Telecom SA:
9% Sr. Unsec. Nts., 3/1/11 50,000 59,188
9.50% Sr. Unsec. Nts., 3/1/31 1 55,000 70,739
- --------------------------------------------------------------------------------------------------------
Sprint Capital Corp.:
7.125% Sr. Unsec. Nts., 1/30/06 100,000 107,318
8.75% Nts., 3/15/32 80,000 95,840
- --------------------------------------------------------------------------------------------------------
Telefonos de Mexico SA de CV, 8.25% Sr. Unsec. Nts., 1/26/06 75,000 81,545
------------
728,265
- --------------------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.4%
AT&T Wireless Services, Inc., 7.50% Sr. Unsec. Nts., 5/1/07 140,000 155,567
- --------------------------------------------------------------------------------------------------------
UTILITIES--3.4%
- --------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--2.8%
CenterPoint Energy, Inc.:
5.875% Nts., 6/1/08 105,000 107,031
8.125% Unsec. Nts., Series B, 7/15/05 50,000 53,066
- --------------------------------------------------------------------------------------------------------
Conectiv, Inc., 5.30% Unsec. Unsub. Nts., Series B, 6/1/05 26,000 26,788
- --------------------------------------------------------------------------------------------------------
Dominion Resources, Inc., 8.125% Sr. Unsub. Nts., 6/15/10 80,000 93,814
23 | OPPENHEIMER TOTAL RETURN BOND FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES Continued
DTE Energy Co.:
6% Sr. Unsec. Unsub. Nts., 6/1/04 $ 40,000 $ 40,127
6.375% Sr. Nts., 4/15/33 85,000 81,203
6.45% Sr. Unsub. Nts., 6/1/06 100,000 106,287
- -------------------------------------------------------------------------------------------------------------------
Edison International, Inc., 6.875% Unsec. Nts., 9/15/04 9,000 9,169
- -------------------------------------------------------------------------------------------------------------------
FirstEnergy Corp., 5.50% Sr. Unsub. Nts., Series A, 11/15/06 195,000 203,590
- -------------------------------------------------------------------------------------------------------------------
MidAmerican Energy Holdings Co., 5.875% Sr. Unsec. Nts., 10/1/12 130,000 134,600
- -------------------------------------------------------------------------------------------------------------------
Niagara Mohawk Power Corp., 5.375% Sr. Unsec. Nts., 10/1/04 55,000 55,866
- -------------------------------------------------------------------------------------------------------------------
PSEG Energy Holdings LLC, 7.75% Unsec. Nts., 4/16/07 95,000 99,750
- -------------------------------------------------------------------------------------------------------------------
TECO Energy, Inc., 10.50% Sr. Unsec. Nts., 12/1/07 65,000 73,450
- -------------------------------------------------------------------------------------------------------------------
TXU Corp., 6.375% Sr. Unsec. Nts., Series C, 1/1/08 80,000 85,900
-------------
1,170,641
- -------------------------------------------------------------------------------------------------------------------
GAS UTILITIES--0.6%
Kinder Morgan, Inc., 6.50% Sr. Unsec. Nts., 9/1/12 90,000 97,027
- -------------------------------------------------------------------------------------------------------------------
NiSource Finance Corp.:
3.20% Nts., 11/1/06 30,000 30,023
7.875% Sr. Unsec. Nts., 11/15/10 125,000 145,702
-------------
272,752
-------------
Total Corporate Bonds and Notes (Cost $8,599,298) 8,599,329
- -------------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES--1.1%
- -------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank, TRAC-X NA High Yield T2 Credit Linked Nts.,
6.05%, 3/25/09 8 (Cost $460,000) 460,000 453,100
- -------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--19.3% 9
- -------------------------------------------------------------------------------------------------------------------
Undivided interest of 1.47% in joint repurchase agreement (Principal Amount/
Market Value $554,815,000, with a maturity value of $554,860,310) with
PaineWebber, Inc., 0.98%, dated 4/30/04, to be repurchased at $8,144,665
on 5/3/04, collateralized by Federal National Mortgage Assn., 5.50%--6.50%,
7/1/32--11/1/33, with a value of $566,733,053 (Cost $8,144,000) 8,144,000 8,144,000
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $63,155,653) 148.7% 62,746,912
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (48.7) (20,554,327)
---------------------------------
NET ASSETS 100.0% $ 42,192,585
=================================
24 | OPPENHEIMER TOTAL RETURN BOND FUND
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Represents the current interest rate for a variable or increasing rate
security.
2. Identifies issues considered to be illiquid. See Note 8 of Notes to Financial
Statements.
3. When-issued security to be delivered and settled after April 30, 2004. See
Note 1 of Notes to Financial Statements.
4. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows. These securities amount to $645,752 or 1.53% of the Fund's net assets as
of April 30, 2004.
5. Principal-Only Strips represent the right to receive the monthly principal
payments on an underlying pool of mortgage loans. The value of these securities
generally increases as interest rates decline and prepayment rates rise. The
price of these securities is typically more volatile than that of coupon-bearing
bonds of the same maturity. Interest rates disclosed represent current yields
based upon the current cost basis and estimated timing of future cash flows.
6. Securities with an aggregate market value of $212,364 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
7. Zero coupon bond reflects effective yield on the date of purchase.
8. 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 $1,267,089 or 3% of the Fund's net assets
as of April 30, 2004.
9. The Fund may have elements of risk due to concentrated investments. Such
concentrations may subject the Fund to additional risks.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | OPPENHEIMER TOTAL RETURN BOND FUND
STATEMENT OF ASSETS AND LIABILITIES April 30, 2004
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------------------------------------
Investments, at value (including cost and market value of $8,144,000 in repurchase agreements)
(cost $63,155,653)--see accompanying statement of investments $ 62,746,912
- -----------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold (including $4,216,833 sold on a when-issued basis) 4,326,980
Interest, dividends and principal paydowns 372,551
Shares of beneficial interest sold 77,188
Other 4,702
-------------
Total assets 67,528,333
- -----------------------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------------
Bank overdraft 259,454
- -----------------------------------------------------------------------------------------------------------------
Unrealized depreciation on swap contracts 24,851
- -----------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $24,536,911 purchased on a when-issued basis) 24,948,130
Dividends 50,917
Shareholder communications 19,479
Distribution and service plan fees 3,071
Transfer and shareholder servicing agent fees 2,689
Futures margins 1,411
Trustees' compensation 915
Shares of beneficial interest redeemed 122
Other 24,709
-------------
Total liabilities 25,335,748
- -----------------------------------------------------------------------------------------------------------------
NET ASSETS $ 42,192,585
=============
- -----------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 4,221
- -----------------------------------------------------------------------------------------------------------------
Additional paid-in capital 42,387,455
- -----------------------------------------------------------------------------------------------------------------
Accumulated net investment income 7,543
- -----------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 262,087
- -----------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments (468,721)
-------------
NET ASSETS $ 42,192,585
=============
26 | OPPENHEIMER TOTAL RETURN BOND FUND
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- -----------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$35,522,245 and 3,553,809 shares of beneficial interest outstanding) $10.00
Maximum offering price per share (net asset value plus sales charge of 4.75% offfering price) $10.50
- -----------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $2,896,024 and 289,732 shares of
beneficial interest outstanding) $10.00
- -----------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $2,942,851 and 294,497 shares of
beneficial interest outstanding) $ 9.99
- -----------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $831,465 and 83,162 shares of
beneficial interest outstanding) $10.00
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | OPPENHEIMER TOTAL RETURN BOND FUND
STATEMENT OF OPERATIONS For the Year Ended April 30, 2004
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
INVESTMENT INCOME
- -----------------------------------------------------------------------------------------
Interest $ 1,028,492
- -----------------------------------------------------------------------------------------
Fee income 231,558
- -----------------------------------------------------------------------------------------
Dividends 47,030
------------
Total investment income 1,307,080
- -----------------------------------------------------------------------------------------
EXPENSES
- -----------------------------------------------------------------------------------------
Management fees 185,574
- -----------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 7,454
Class B 24,421
Class C 16,745
Class N 1,922
- -----------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 12,698
Class B 9,362
Class C 5,010
Class N 365
- -----------------------------------------------------------------------------------------
Shareholder communications:
Class A 23,030
Class B 4,593
Class C 2,801
Class N 343
- -----------------------------------------------------------------------------------------
Legal, auditing and other professional fees 38,161
- -----------------------------------------------------------------------------------------
Trustees' compensation 9,700
- -----------------------------------------------------------------------------------------
Custodian fees and expenses 1,184
- -----------------------------------------------------------------------------------------
Other 7,374
------------
Total expenses 350,737
Less reduction to custodian expenses (343)
Less voluntary reimbursement of expenses:
Class A (16,812)
Class B (12,693)
Class C (7,815)
Class N (721)
Less voluntary waiver of transfer and shareholder servicing agent fees:
Class A (36)
Class B (853)
Class C (3)
------------
Net expenses 311,461
- -----------------------------------------------------------------------------------------
NET INVESTMENT INCOME 995,619
28 | OPPENHEIMER TOTAL RETURN BOND FUND
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments $ 284,411
Closing of futures contracts 242,515
Foreign currency transactions (183)
----------
Net realized gain 526,743
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (672,382)
Futures contracts 1,880
Swap contracts (24,851)
----------
Net change in unrealized depreciation (695,353)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 827,009
==========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | OPPENHEIMER TOTAL RETURN BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED APRIL 30, 2004 2003 1
- -----------------------------------------------------------------------------------------------------------------
OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
Net investment income $ 995,619 $ 87,633
- -----------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 526,743 (718)
- -----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (695,353) 226,632
--------------------------------
Net increase in net assets resulting from operations 827,009 313,547
- -----------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (937,199) (87,071)
Class B (49,017) (550)
Class C (34,611) (143)
Class N (9,716) (16)
- -----------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (179,397) --
Class B (14,472) --
Class C (10,826) --
Class N (2,729) --
- -----------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest transactions:
Class A 8,253,430 27,282,368
Class B 2,136,318 790,499
Class C 2,587,144 383,530
Class N 821,065 20,422
- -----------------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
Total increase 13,386,999 28,702,586
- -----------------------------------------------------------------------------------------------------------------
Beginning of period 28,805,586 103,000 2
--------------------------------
End of period (including accumulated net investment income
of $7,543 and $9,712, respectively) $ 42,192,585 $ 28,805,586
================================
1. For the period from February 21, 2003 (commencement of operations) to April
30, 2003.
2. Reflects the value of the Manager's initial seed money investment on February
6, 2003.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30 | OPPENHEIMER TOTAL RETURN BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A CLASS B
YEAR ENDED APRIL 30 2004 2003 1 2004 2003 1
- -----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.08 $ 10.00 $10.08 $10.00
- -----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .28 .03 .19 .02
Net realized and unrealized gain (loss) (.02) .08 (.02) .08
---------------------------------------------------
Total from investment operations .26 .11 .17 .10
- -----------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.29) (.03) (.20) (.02)
Distributions from net realized gain (.05) -- (.05) --
---------------------------------------------------
Total dividends and/or distributions
to shareholders (.34) (.03) (.25) (.02)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.00 $ 10.08 $10.00 $10.08
===================================================
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 2.64% 1.14% 1.69% 0.97%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $35,522 $27,598 $2,896 $ 798
- -----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $32,578 $26,027 $2,444 $ 340
- -----------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 2.78% 1.77% 1.91% 0.85%
Total expenses 0.79% 1.29% 2.20% 2.36%
Expenses after expense reimbursement or fee waiver
and reduction to custodian expenses 0.73% 0.90% 1.65% 1.65%
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 131% 4 77% 131% 4 77%
1. For the period from February 21, 2003 (commencement of operations) to April
30, 2003.
2. Assumes an investment at net asset value on the business day before the first
day of the fiscal period, 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. Returns do not reflect the deduction of
taxes a shareholder would pay on Fund distributions or the redemption of Fund
shares.
3. Annualized for periods of less than one full year.
4. The Portfolio Turnover excludes purchase transactions and sales transactions
of To Be Announced (TBA) mortgage-related securities of $198,777,129 and
$189,672,219, respectively.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31 | OPPENHEIMER TOTAL RETURN BOND FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS C CLASS N
YEAR ENDED APRIL 30 2004 2003 1 2004 2003 1
- ------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.08 $10.00 $10.08 $10.00
- ------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .19 .02 .24 .03
Net realized and unrealized gain (loss) (.03) .08 (.02) .08
-------------------------------------------------
Total from investment operations .16 .10 .22 .11
- ------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.20) (.02) (.25) (.03)
Distributions from net realized gain (.05) -- (.05) --
-------------------------------------------------
Total dividends and/or distributions
to shareholders (.25) (.02) (.30) (.03)
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.99 $10.08 $10.00 $10.08
=================================================
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 1.60% 0.96% 2.20% 1.08%
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $2,943 $ 388 $ 831 $ 22
- ------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $1,679 $ 126 $ 386 $ 6
- ------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.95% 0.59% 2.40% 1.50%
Total expenses 2.12% 2.28% 1.34% 2.63%
Expenses after expense reimbursement or fee waiver
and reduction to custodian expenses 1.65% 1.65% 1.15% 1.15%
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 131% 4 77% 131% 4 77%
1. For the period from February 21, 2003 (commencement of operations) to April
30, 2003.
2. Assumes an investment at net asset value on the business day before the first
day of the fiscal period, 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. Returns do not reflect the deduction of
taxes a shareholder would pay on Fund distributions or the redemption of Fund
shares.
3. Annualized for periods of less than one full year.
4. The Portfolio Turnover excludes purchase transactions and sales transactions
of To Be Announced (TBA) mortgage-related securities of $198,777,129 and
$189,672,219, respectively.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32 | OPPENHEIMER TOTAL RETURN BOND FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Total Return Bond Fund (the Fund) is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment objective is to seek to maximize total return through both
capital appreciation and income. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B, Class C and Class N shares. Class A
shares are sold at their offering price, which is normally net asset value plus
a front-end sales charge. As of April 30, 2004, the Manager owned 70% of the
Fund's shares. Class B, Class C and Class N shares are sold without a front-end
sales charge but may be subject to a contingent deferred sales charge (CDSC).
Class N shares are sold only through retirement plans. Retirement plans that
offer Class N shares may impose charges on those accounts. All classes of shares
have identical rights and voting privileges with respect to the Fund in general
and exclusive voting rights on matters that affect that class alone. Earnings,
net assets and net asset value per share may differ by minor amounts due to each
class having its own expenses directly attributable to that class. Classes A, B,
C and N have separate distribution and/or service plans. 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.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities listed
or traded on National Stock Exchanges or other domestic or foreign exchanges are
valued based on the last sale price of the security traded on that exchange
prior to the time when the Fund's assets are valued. Securities traded on NASDAQ
are valued based on the closing price provided by NASDAQ prior to the time when
the Fund's assets are valued. In the absence of a sale, the security is valued
at the last sale price on the prior trading day, if it is within the spread of
the closing bid and asked prices, and if not, at the closing bid price.
Securities may be valued primarily using dealer-supplied valuations or a
portfolio pricing service authorized by the Board of Trustees. Securities
(including restricted securities) for which market quotations are not readily
available are valued at their fair value. Foreign securities whose values have
been materially affected by what the Manager identifies as a significant event
occurring before the Fund's assets are valued but after the close of their
respective foreign exchanges will be fair valued. Fair value is determined in
good faith using consistently applied procedures under the supervision of the
Board of Trustees. Short-term "money market type" debt securities with remaining
maturities of sixty days or less are valued at amortized cost (which
approximates market value).
- --------------------------------------------------------------------------------
STRUCTURED NOTES. The Fund invests in structured notes whose market values,
interest rates and/or redemption prices are linked to the performance of
underlying foreign
33 | OPPENHEIMER TOTAL RETURN BOND FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
currencies, interest rate spreads, stock market indices, prices of individual
securities, commodities or other financial instruments or the occurrence of
other specific events. The structured notes are often leveraged, increasing the
volatility of each note's market value relative to the change in the underlying
linked financial element or event. Fluctuations in value of these securities are
recorded as unrealized gains and losses in the accompanying financial
statements. The Fund records a realized gain or loss when a structured note is
sold or matures. As of April 30, 2004, the market value of these securities
comprised 1.1% of the Fund's net assets and resulted in unrealized cumulative
losses of $6,900.
- --------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED (OR FORWARD COMMITMENT) BASIS. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis can
take place ten days or more after the trade date. Normally the settlement date
occurs within six months after the trade date; however, the Fund may, from time
to time, purchase securities whose settlement date extends six months or more
beyond trade date. During this period, such securities do not earn interest, are
subject to market fluctuation and may increase or decrease in value prior to
their delivery. The Fund maintains segregated assets with a market value equal
to or greater than the amount of its purchase commitments. As of April 30, 2004,
the value of the segregated assets was $20,523,370. The purchase of securities
on a when-issued (or forward commitment) basis may increase the volatility of
the Fund's net asset value to the extent the Fund executes such transactions
while remaining substantially fully invested. The Fund may also sell securities
that it purchased on a when-issued basis prior to settlement of the original
purchase. As of April 30, 2004, the Fund had purchased $24,536,911 of securities
on a when-issued basis and sold $4,216,833 of securities issued on a when-issued
basis.
In connection with its ability to purchase or sell securities on a
when-issued basis, the Fund may enter into forward roll transactions with
respect to mortgage-related securities. Forward roll transactions require the
sale of securities for delivery in the current month, and a simultaneous
agreement with the same counterparty to repurchase similar (same type, coupon
and maturity) but not identical securities on a specified future date. The Fund
records the incremental difference between the forward purchase and sale of each
forward roll as realized gain (loss) on investments or as fee income in the case
of such transactions that have an associated fee in lieu of a difference in the
forward purchase and sale price.
Risks of entering into forward roll transactions include the potential
inability of the counterparty to meet the terms of the agreement; the potential
of the Fund to receive inferior securities at redelivery as compared to the
securities sold to the counterparty; counterparty credit risk; and the potential
pay down speed variance between the mortgage-related pools.
34 | OPPENHEIMER TOTAL RETURN BOND FUND
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records 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.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
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.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal. In the event of default by the other party to the agreement,
retention of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
35 | OPPENHEIMER TOTAL RETURN BOND FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
NET UNREALIZED
DEPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1 TAX PURPOSES
----------------------------------------------------------------------
$265,133 $53,656 $78,136 $433,591
1. As of April 30, 2004, the Fund had $78,136 of post-October losses available
to offset future realized capital gains, if any. Such losses, if unutilized,
will expire in 2013.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund.
Accordingly, the following amounts have been reclassified for April 30, 2004.
Net assets of the Fund were unaffected by the reclassifications.
REDUCTION TO
REDUCTION TO ACCUMULATED NET
INCREASE TO ACCUMULATED NET REALIZED GAIN ON
PAID-IN CAPITAL INVESTMENT LOSS INVESTMENTS 2
------------------------------------------------------------------
$23,759 $32,755 $56,514
2. $23,759, including $4,310 of long-term capital gain, was distributed in
connection with Fund share redemptions.
The tax character of distributions paid during the years ended April 30, 2004
and April 30, 2003 was as follows:
YEAR ENDED PERIOD ENDED
APRIL 30, 2004 APRIL 30, 2003 3
------------------------------------------------------------------
Distributions paid from:
Ordinary income $1,099,958 $ 87,780
Long-term capital gain 138,009 --
--------------------------------
Total $1,237,967 $ 87,780
================================
3. For the period from February 21, 2003 (commencement of operations) to April
30, 2003.
36 | OPPENHEIMER TOTAL RETURN BOND FUND
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of April 30, 2004 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.
Federal tax cost of securities $ 63,155,653
Federal tax cost of other investments 4,522,265
------------
Total federal tax cost $ 67,677,918
============
Gross unrealized appreciation $ 192,927
Gross unrealized depreciation (626,518)
------------
Net unrealized depreciation $ (433,591)
============
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income distributions, if any, are declared
daily and paid monthly. Capital gain distributions, if any, are declared and
paid annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable,
represents earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. 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.
In the ordinary course of business, the Fund enters into contracts that
contain a variety of indemnifications. The Fund's maximum exposure under these
arrangements is unknown. However, the Fund has not had prior claims or losses
pursuant to these contracts and expects the risk of loss to be remote.
37 | OPPENHEIMER TOTAL RETURN BOND FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED APRIL 30, 2004 PERIOD ENDED APRIL 30, 2003 1,2
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------
CLASS A
Sold 1,097,321 $ 11,099,906 2,736,090 $ 27,361,875
Dividends and/or
distributions reinvested 23,011 231,801 275 2,768
Redeemed (304,660) (3,078,277) (8,228) (82,275)
-----------------------------------------------------------------------
Net increase 815,672 $ 8,253,430 2,728,137 $ 27,282,368
=======================================================================
- --------------------------------------------------------------------------------------------------------
CLASS B
Sold 338,504 $ 3,425,891 88,955 $ 888,971
Dividends and/or
distributions reinvested 5,465 55,025 36 365
Redeemed (133,432) (1,344,598) (9,896) (98,837)
-----------------------------------------------------------------------
Net increase 210,537 $ 2,136,318 79,095 $ 790,499
=======================================================================
- --------------------------------------------------------------------------------------------------------
CLASS C
Sold 299,731 $ 3,028,348 39,178 $ 391,527
Dividends and/or
distributions reinvested 4,441 44,736 10 103
Redeemed (48,158) (485,940) (805) (8,100)
-----------------------------------------------------------------------
Net increase 256,014 $ 2,587,144 38,383 $ 383,530
=======================================================================
- --------------------------------------------------------------------------------------------------------
CLASS N
Sold 97,335 $ 983,787 2,032 $ 20,408
Dividends and/or
distributions reinvested 1,242 12,515 1 14
Redeemed (17,548) (175,237) -- --
-----------------------------------------------------------------------
Net increase 81,029 $ 821,065 2,033 $ 20,422
=======================================================================
1. For the period from February 21, 2003 (commencement of operations) to April
30, 2003.
2. The Fund sold 10,000 shares of Class A and 100 shares of Class B, Class C and
Class N to the Manager upon seeding of the Fund on February 6, 2003.
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than U.S. government obligations and short-term obligations, for the year ended
April 30, 2004, were $24,800,241 and $15,884,487, respectively. There were
purchases of $21,744,828 and sales of $21,337,048 of U.S. government and
government agency obligations for the year ended April 30, 2004.
38 | OPPENHEIMER TOTAL RETURN BOND FUND
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of 0.50% of the first $250 million of average annual net assets of
the Fund, 0.475% of the next $500 million, and 0.45% of average annual net
assets in excess of $750 million. The Manager has voluntarily agreed to waive
management fees and/or reimburse expenses such that "Total Annual Operating
Expenses" will not exceed 0.90% for Class A shares, 1.65% for Class B shares,
1.65% for Class C shares and 1.15% for Class N shares, respectively. The
voluntary waiver described above may be amended or withdrawn at any time. For
the year ended April 30, 2004, management fees in the amount of $38,041 were
voluntarily waived by the Manager.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended April 30, 2004, the Fund paid $24,144
to OFS for services to the Fund.
OFS has voluntarily agreed to limit transfer and shareholder servicing
agent fees for all classes to 0.35% of average annual net assets per class. This
undertaking may be amended or withdrawn at any time.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12B-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate of up to 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor currently uses all of those fees to
pay dealers, brokers, banks and other financial institutions quarterly for
providing personal services and maintenance of accounts of their customers that
hold Class A shares. Any unreimbursed expenses the Distributor incurs with
respect to Class A shares in any fiscal year cannot be recovered in subsequent
years. Fees incurred by the Fund under the Plan are detailed in the Statement of
Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class N
shares to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% per year on
Class B shares and on Class C shares and 0.25% per year on Class N shares. The
Distributor also receives a service fee of up to 0.25% per year under each plan.
If either the Class B, Class C or Class N plan is terminated by the Fund or by
the shareholders of a class, the Board of Trustees and its independent trustees
must determine whether the Distributor shall be entitled to payment from the
Fund of all or a portion of the service fee and/or asset-based sales charge in
respect to shares sold
39 | OPPENHEIMER TOTAL RETURN BOND FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
prior to the effective date of such termination. The Distributor's aggregate
uncompensated expenses under the plan at April 30, 2004 for Class B, Class C and
Class N shares were $96,691, $41,757 and $16,201, respectively. Fees incurred by
the Fund under the plans are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption proceeds
prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the table below for the period indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- -------------------------------------------------------------------------------------------------------------------------
April 30, 2004 $35,933 $493 $6,156 $928 $927
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts to settle specific purchases or sales of securities
denominated in a foreign currency and for protection from adverse exchange rate
fluctuation. Risks to the Fund include the potential inability of the
counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using prevailing foreign currency exchange rates.
Unrealized appreciation and depreciation on foreign currency contracts are
reported in the Statement of Assets and Liabilities as a receivable or payable
and in the Statement of Operations with the change in unrealized appreciation or
depreciation.
The Fund may realize a gain or loss upon the closing or settlement of the
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.
As of April 30, 2004, the Fund had no outstanding foreign currency
contracts.
40 | OPPENHEIMER TOTAL RETURN BOND FUND
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a negotiated price on a stipulated future
date. Futures contracts are traded on a commodity exchange. The Fund may buy and
sell futures contracts that relate to broadly based securities indices
(financial futures) or debt securities (interest rate futures) in order to gain
exposure to or protection from changes in market value of stocks and bonds or
interest rates. The Fund may also buy or write put or call options on these
futures contracts.
The Fund generally sells futures contracts as a hedge against increases in
interest rates and decreases in market value of portfolio securities. The Fund
may also purchase futures contracts to gain exposure to market changes as it may
be more efficient or cost effective than actually buying 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 has expired.
Cash held by the broker to cover initial margin requirements on open
futures contracts is noted in the Statement of Assets and Liabilities.
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 and/or payable for the
daily mark to market for variation margin. Realized gains and losses are
reported in the Statement of Operations as the closing and expiration of futures
contracts. The net change in unrealized appreciation and depreciation is
reported on the Statement of Operations.
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 April 30, 2004, the Fund had outstanding futures contracts as follows:
UNREALIZED
EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS APRIL 30, 2004 (DEPRECIATION)
- -------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
U.S. Long Bonds 6/21/04 4 $ 428,375 $ (8,953)
U.S. Treasury Nts., 10 yr. 6/21/04 33 3,646,500 (115,540)
---------
(124,493)
---------
CONTRACTS TO SELL
U.S. Treasury Nts., 2 yr. 6/30/04 27 5,738,766 39,704
U.S. Treasury Nts., 5 yr. 6/21/04 26 2,858,375 49,660
---------
89,364
---------
$(35,129)
=========
41 | OPPENHEIMER TOTAL RETURN BOND FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. TOTAL RETURN SWAP CONTRACTS
The Fund may enter into a total return swap transaction to maintain a total
return on a particular investment, or portion of its portfolio, or for other
non-speculative purposes. Because the principal amount is not exchanged, it
represents neither an asset nor a liability to either counterparty, and is
referred to as notional. The Fund records an increase or decrease to unrealized
gain (loss), in the amount due to or owed by the Fund at termination or
settlement. Total return swaps are subject to risks (if the counterparty fails
to meet its obligations).
As of April 30, 2004, the Fund had entered into the following total return swap
agreements:
PAID BY RECEIVED BY
NOTIONAL THE FUND AT THE FUND AT TERMINATION UNREALIZED
SWAP COUNTERPARTY AMOUNT APRIL 30, 2004 APRIL 30, 2004 DATE DEPRECIATION
- ----------------------------------------------------------------------------------------------------------------
One-Month Value of
LIBOR total return of
less 50 Lehman Brothers
Deutsche Bank AG $726,263 basis points CMBS Index 6/30/04 $24,851
Index abbreviations are noted below:
CMBS Commercial Mortgage Backed Securities Markets
- --------------------------------------------------------------------------------
8. ILLIQUID SECURITIES
As of April 30, 2004, investments in securities included issues that are
illiquid. 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 15% of its net assets (determined at the
time of purchase and reviewed periodically) in illiquid securities. The
aggregate value of illiquid securities subject to this limitation as of April
30, 2004 was $112,152, which represents 0.27% of the Fund's net assets.
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9. BORROWING AND LENDING ARRANGEMENTS
The Fund entered into an "interfund borrowing and lending arrangement" with
other funds in the Oppenheimer funds complex, to allow funds to borrow for
liquidity purposes. The arrangement was initiated pursuant to exemptive relief
granted by the Securities and Exchange Commission (the SEC) to allow these
affiliated funds to lend money to, and borrow money from, each other, in an
attempt to reduce borrowing costs below those of bank loan facilities. The SEC's
order requires the Fund's Board of Trustees to adopt operating policies and
procedures to administer interfund borrowing and lending. Under the arrangement
the Fund may lend money to other Oppenheimer funds and may borrow from other
Oppenheimer funds at a rate set by the Fund's Board of Trustees, based upon a
recommendation by the Manager. The Fund's borrowings, if any, are subject to
asset coverage requirements under the Investment Company Act and the provisions
of the SEC order and other applicable regulations. If the Fund borrows money,
there is a risk that the loan could be called on one day's notice, in which case
the Fund might
42 | OPPENHEIMER TOTAL RETURN BOND FUND
have to borrow from a bank at higher rates if a loan were not available from
another Oppenheimer fund. If the Fund lends money to another fund, it will be
subject to the risk that the other fund might not repay the loan in a timely
manner, or at all.
The Fund had no interfund borrowings or loans outstanding during the year
ended or at April 30, 2004.
43 | OPPENHEIMER TOTAL RETURN BOND FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF OPPENHEIMER TOTAL RETURN BOND FUND
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Total Return Bond Fund (the "Fund"), including the statement of
investments, as of April 30, 2004, and the related statement of operations for
the year then ended and the statements of changes in net assets and the
financial highlights for the year then ended and for the period from February
21, 2003 (commencement of operations) to April 30, 2003. 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 the standards of the Public
Company Accounting Oversight Board (United States). 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 as of April 30, 2004, by correspondence with
the custodian and others. 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, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Total Return Bond Fund at April 30, 2004, the results of its
operations for the year then ended and the changes in its net assets and the
financial highlights for the year then ended and for the period from February
21, 2003 to April 30, 2003 in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
New York, New York
June 4, 2004
44 | OPPENHEIMER TOTAL RETURN BOND FUND
FEDERAL INCOME TAX INFORMATION Unaudited
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In early 2005, if applicable, shareholders of record will receive information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2004. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Dividends and distributions of $0.0891, $0.0819, $0.0819 and $0.0862 per
share were paid to Class A, Class B, Class C and Class N shareholders,
respectively, on December 30, 2003, of which $0.0355 was designated as a
"capital gain distribution" for federal income tax purposes. Whether received in
stock or in cash, the capital gain distribution should be treated by
shareholders as a gain from the sale of the capital assets held for more than
one year (long-term capital gains).
None of the dividends paid by the Fund during the year ended April 30,
2004 are eligible for the corporate dividend-received deduction.
Dividends, if any, paid by the Fund during the fiscal year ended April 30,
2004 which are not designated as capital gain distribution, may be eligible for
lower individual income tax rates to the extent that the Fund has received
qualified dividend income as stipulated by recent tax legislation. In early
2005, shareholders of record will receive information regarding the percentage
of distributions that are eligible for lower individual income tax rates. The
amount will be the maximum amount allowed.
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.
45 | OPPENHEIMER TOTAL RETURN BOND FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES Unaudited
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The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.225.5677, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund will be
required to file new Form N-PX, with its complete proxy voting record for the 12
months ended June 30th, no later than August 31st of each year. The first such
filing is due no later than August 31, 2004, for the twelve months ended June
30, 2004. Once filed, the Fund's Form N-PX filing will be available (i) without
charge, upon request, by calling the Fund toll-free at 1.800.225.5677, and (ii)
on the SEC's website at www.sec.gov.
46 | OPPENHEIMER TOTAL RETURN BOND FUND
TRUSTEES AND OFFICERS Unaudited
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NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS;
FUND, LENGTH OF SERVICE, AGE OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD BY TRUSTEE;
NUMBER OF PORTFOLIOS IN FUND COMPLEX CURRENTLY
OVERSEEN BY TRUSTEE
INDEPENDENT THE ADDRESS OF EACH TRUSTEE AND INTERESTED
TRUSTEES TRUSTEE IN THE CHARTS BELOW IS 6803 S. TUCSON
WAY, CENTENNIAL, CO 80112-3924. EACH TRUSTEE
SERVES FOR AN INDEFINITE TERM, UNTIL HIS OR HER
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
RONALD J. ABDOW, Chairman (since 1959) of Abdow Corporation
Trustee (since 2003) (operator of restaurants); Trustee of the
Age: 72 following real estate businesses (owners and
operators of restaurants): G&R Realty Co. (since
1978), G&R Trust Co. (since 1973), Abdow
Partnership (since 1975), Auburn Associates
(since 1983); Hazard Associates (since 1985);
Trustee of MML Series Investment Fund (since
1993) and of MassMutual Institutional Funds
(MMIF) (since 1994) (open-end investment
companies); Trustee (since 1987) of Bay State
Health System (health services); Chairman (since
1996) of Western Mass Development Corp.
(non-profit land development); Chairman (since
1991) of American International College
(non-profit college). Oversees 10 portfolios in
the OppenheimerFunds complex.
JOSEPH M. WIKLER, Self-employed as an investment consultant; a
Trustee (since 2003) director (since 1996) of Lakes Environmental
Age: 63 Association, and Medintec (since 1992) and Cathco
(since 1995) (medical device companies); a member
of the investment committee of the Associated
Jewish Charities of Baltimore (since 1994);
formerly a director of Fortis/Hartford mutual
funds (1994 - December 2001). Oversees 10
portfolios in the OppenheimerFunds complex.
PETER I. WOLD, President of Wold Properties, Inc. (an oil and
Trustee (since 2003) gas exploration and production company); Vice
Age: 56 President, Secretary and Treasurer of Wold Trona
Company, Inc. (soda ash processing and
production); Vice President of Wold Talc Company,
Inc. (talc mining); Managing Member,
Hole-in-the-Wall Ranch (cattle ranching);
formerly Director and Chairman of the Board,
Denver Branch of the Federal Reserve Bank of
Kansas City (1993 - 1999) and Director of
PacifiCorp. (1995 - 1999), an electric utility.
Oversees 10 portfolios in the OppenheimerFunds
complex.
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INTERESTED TRUSTEE
EUSTIS WALCOTT, Principal with Ardsley Associates (since 2000)
Trustee (since 2003) (consulting firm); Director (since October 2000)
Age: 66 of Cornerstone Real Estate Advisors (real estate
equity investment management services) and MML
Investors Services (individual retirement,
insurance, investment, and life event planning
products and services company) (both affiliates
of the Manager); Trustee of OFI Trust Company
(since 2001) (also an affiliate of the Manager);
formerly Trustee of the American International
College (1995 - December 2003); Senior Vice
President, MassMutual Financial Group (May 1990 -
July 2000). Oversees 10 portfolios in the
Oppenheimer Funds complex.
47 | OPPENHEIMER TOTAL RETURN BOND FUND
TRUSTEES AND OFFICERS Unaudited / Continued
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INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IN THE CHART BELOW IS
AND OFFICER TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET,
NEW YORK, NY 10281-1008. MR. MURPHY SERVES FOR AN
INDEFINITE TERM, UNTIL HIS RESIGNATION, DEATH OR
REMOVAL.
JOHN V. MURPHY, Chairman, Chief Executive Officer and director
President, Trustee and (since June 2001) and President (since September
Chairman of the Board, 2000) of the Manager; President and a director or
Trustee (since 2003) trustee of other Oppenheimer funds; President and
Age: 54 a director (since July 2001) of Oppenheimer
Acquisition Corp. (the Manager's parent holding
company) and of Oppenheimer Partnership Holdings,
Inc. (a holding company subsidiary of the
Manager); a director (since November 2001) of
OppenheimerFunds Distributor, Inc. (a subsidiary
of the Manager); Chairman and a director (since
July 2001) of Shareholder Services, Inc. and of
Shareholder Financial Services, Inc. (transfer
agent subsidiaries of the Manager); President and
a director (since July 2001) of OppenheimerFunds
Legacy Program (a charitable trust program
established by the Manager); a director of the
following investment advisory subsidiaries of the
Manager: OFI Institutional Asset Management,
Inc., Centennial Asset Management Corporation,
Trinity Investment Management Corporation and
Tremont Capital Management, Inc. (since November
2001), HarbourView Asset Management Corporation
and OFI Private Investments, Inc. (since July
2001); President (since November 1, 2001) and a
director (since July 2001) of Oppenheimer Real
Asset Management, Inc.; Executive Vice President
(since February 1997) of Massachusetts Mutual
Life Insurance Company (the Manager's parent
company); a director (since June 1995) of DLB
Acquisition Corporation (a holding company that
owns the shares of David L. Babson & Company,
Inc.); a member of the Investment Company
Institute's Board of Governors (elected to serve
from October 3, 2003 through September 30, 2006).
Formerly, Chief Operating Officer (September
2000-June 2001) of the Manager; President and
trustee (November 1999-November 2001) of MML
Series Investment Fund and MassMutual
Institutional Funds (open-end investment
companies); a director (September 1999-August
2000) of C.M. Life Insurance Company; President,
Chief Executive Officer and director (September
1999-August 2000) of MML Bay State Life Insurance
Company; a director (June 1989-June 1998) of
Emerald Isle Bancorp and Hibernia Savings Bank (a
wholly-owned subsidiary of Emerald Isle Bancorp).
Oversees 73 portfolios as Trustee/ Director and
10 portfolios as Officer in the OppenheimerFunds
complex.
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OFFICERS THE ADDRESS OF THE OFFICERS IN THE CHART BELOW IS
AS FOLLOWS: FOR MESSRS. MANIOUDAKIS AND ZACK, TWO
WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW
YORK, NY 10281-1008, FOR MR. WIXTED, 6803 S.
TUCSON WAY, CENTENNIAL, CO 80112-3924. EACH
OFFICER SERVES FOR AN ANNUAL TERM OR UNTIL HIS OR
HER EARLIER RESIGNATION, DEATH OR REMOVAL.
ANGELO MANIOUDAKIS, Senior Vice President of the Manager (since April
Vice President (since 2003) 2002), of HarbourView Asset Management
Age: 37 Corporation (since April, 2002 and of OFI
Institutional Asset Management, Inc. (since June
2002); an officer of 14 portfolios in the
OppenheimerFunds complex. Formerly Executive
Director and portfolio manager for Miller,
Anderson & Sherrerd, a division of Morgan Stanley
Investment Management (August 1993-April 2002).
48 | OPPENHEIMER TOTAL RETURN BOND FUND
BRIAN W. WIXTED, Senior Vice President and Treasurer (since March
Treasurer, Principal Financial 1999) of the Manager; Treasurer of HarbourView
and Accounting Officer Asset Management Corporation, Shareholder
(since 2003) Financial Services, Inc., Shareholder Services,
Age: 44 Inc., Oppenheimer Real Asset Management
Corporation, and Oppenheimer Partnership
Holdings, Inc. (since March 1999), of OFI
Private Investments, Inc. (since March 2000), of
OppenheimerFunds International Ltd. and
OppenheimerFunds plc (since May 2000), of OFI
Institutional Asset Management, Inc. (since
November 2000), and of OppenheimerFunds Legacy
Program (a Colorado non-profit corporation)
(since June 2003); Treasurer and Chief Financial
Officer (since May 2000) of OFI Trust Company (a
trust company subsidiary of the Manager);
Assistant Treasurer (since March 1999) of
Oppenheimer Acquisition Corp. Formerly Assistant
Treasurer of Centennial Asset Management
Corporation (March 1999-October 2003) and
OppenheimerFunds Legacy Program (April 2000-June
2003); Principal and Chief Operating Officer
(March 1995-March 1999) at Bankers Trust
Company-Mutual Fund Services Division. An
officer of 83 portfolios in the OppenheimerFunds
complex.
ROBERT G. ZACK, Executive Vice President (since January 2004)
Secretary (since 2003) and General Counsel (since February 2002) of the
Age: 55 Manager; General Counsel and a director (since
November 2001) of the Distributor; General
Counsel (since November 2001) of Centennial
Asset Management Corporation; Senior Vice
President and General Counsel (since November
2001) of HarbourView Asset Management
Corporation; Secretary and General Counsel
(since November 2001) of Oppenheimer Acquisition
Corp.; Assistant Secretary and a director (since
October 1997) of OppenheimerFunds International
Ltd. and OppenheimerFunds plc; Vice President
and a director (since November 2001) of
Oppenheimer Partnership Holdings, Inc.; a
director (since November 2001) of Oppenheimer
Real Asset Management, Inc.; Senior Vice
President, General Counsel and a director (since
November 2001) of Shareholder Financial
Services, Inc., Shareholder Services, Inc., OFI
Private Investments, Inc. and OFI Trust Company;
Vice President (since November 2001) of
OppenheimerFunds Legacy Program; Senior Vice
President and General Counsel (since November
2001) of OFI Institutional Asset Management,
Inc.; a director (since June 2003) of
OppenheimerFunds (Asia) Limited. Formerly Senior
Vice President (May 1985-December 2003), Acting
General Counsel (November 2001-February 2002)
and Associate General Counsel (May 1981-October
2001) of the Manager; Assistant Secretary of
Shareholder Services, Inc. (May 1985-November
2001), Shareholder Financial Services, Inc.
(November 1989-November 2001); and
OppenheimerFunds International Ltd. (October
1997-November 2001). An officer of 83 portfolios
in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND IS AVAILABLE WITHOUT CHARGE UPON REQUEST.
49 | OPPENHEIMER TOTAL RETURN BOND FUND
Item 2. Code of Ethics
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer, principal
accounting officer or controller or persons performing similar functions.
Item 3. Audit Committee Financial Expert
The Board of Trustees of the registrant has determined that Joseph M.
Wikler, the Chairman of the Board's Audit Committee, possesses the technical
attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as
an "audit committee financial expert," and has designated Mr. Wikler as the
Audit Committee's financial expert. Mr. Wikler is an "independent" Trustee
pursuant to paragraph (a)(2) of Item 3 to Form N-CSR.
Item 4. Principal Accountant Fees and Services
(a) Audit Fees
The principal accountant for the audit of the registrant's annual
financial statements was engaged to provide $18,250 in fiscal 2004
and $17,500 in fiscal 2003.
(b) Audit-Related Fees
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees to the registrant during
the last two fiscal years.
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees to the registrant during
the last two fiscal years to the registrant's investment adviser
or any entity controlling, controlled by, or under common control
with the adviser that provides ongoing services to the registrant.
Such fees would include, among others: due diligence related to
mergers and acquisitions, accounting consultations and audits in
connection with acquisitions, internal control reviews and
consultation concerning financial accounting and reporting
standards.
(c) Tax Fees
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees to the registrant during
the last two fiscal years.
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees during the last two
fiscal years to the registrant's investment adviser or any entity
controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant.
Such fees would include, among others: tax compliance, tax
planning and tax advice. Tax compliance generally involves
preparation of original and amended tax returns, claims for a
refund and tax payment-planning services. Tax planning and tax
advice includes assistance with tax audits and appeals, tax advice
related to mergers and acquisitions and requests for rulings or
technical advice from taxing authorities.
(d) All Other Fees
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees to the registrant during
the last two fiscal years.
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees to the registrant during
the last two fiscal years to the registrant's investment adviser
or any entity controlling, controlled by, or under common control
with the adviser that provides ongoing services to the registrant.
Such fees would include services provided to the registrant's
Board of Trustees with respect to analysis of the registrant's
expenses and consultations with management with respect to its due
diligence review process surrounding investments.
(e) (1) During its regularly scheduled periodic meetings, the
registrant's audit committee will pre-approve all audit,
audit-related, tax and other services to be provided by the
principal accountants of the registrant.
The audit committee has delegated pre-approval authority to its
Chairman for any subsequent new engagements that arise between
regularly scheduled meeting dates provided that any fees such
pre-approved are presented to the audit committee at its next
regularly scheduled meeting.
Pre-approval of non-audit services is waived provided that: 1) the
aggregate amount of all such services provided constitutes no more
than five percent of the total amount of fees paid by the
registrant to it principal accountant during the fiscal year in
which services are provided 2) such services were not recognized
by the registrant at the time of engagement as non-audit services
and 3) such services are promptly brought to the attention of the
audit committee of the registrant and approved prior to the
completion of the audit.
(2) 100%
(f) Not applicable as less than 50%.
(g) The principal accountant for the audit of the registrant's annual
financial statements billed no such fees to the registrant during
the last two fiscal years to the registrant and the registrant's
investment adviser or any entity controlling, controlled by, or
under common control with the adviser that provides ongoing
services to the registrant related to non-audit fees. Those
billings did not include any prohibited non-audit services as
defined by the Securities Exchange Act of 1934.
(h) The registrant's audit committee of the board of trustees has
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser, and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with
maintaining the principal account's independence. No such services
were rendered.
Item 5. Not applicable
Item 6. Schedule of Investments
Not applicable
Item 7. Not applicable
Item 8. Not applicable
Item 9. Submission of Matters to a Vote of Security Holders
The Board is responsible for approving nominees for election as
trustees. To assist in this task, the Board has designated the Audit Committee
as the nominating committee for the Board. It reviews and recommends nominees to
the Board. The Committee is comprised entirely of disinterested trustees as
defined in Section 2(a)(19) of the Investment Company Act of 1940.
The Audit Committee charter describes the responsibilities of the
Committee in nominating candidates for election as independent Trustees of the
Registrant. The Registrant's Board has adopted a written charter for the
Committee. A current copy of the Audit Committee charter is available to
shareholders on the OppenheimerFunds website at www.oppenheimerfunds.com.
Under the current policy, if the Board determines that a vacancy exists
or is likely to exist on the Board, the Audit Committee of the Board will
consider candidates for Board membership including recommended by Registrant
shareholders. The Audit Committee will consider nominees recommended by
independent Board members or recommended by any other Board members including
Board members affiliated with the Registrant's investment advisors. The
Committee may, upon Board approval, retain an executive search firm to assist in
screening potential candidates. Upon Board approval, the Audit Committee may
also use the services of legal, financial, or other external counsel that it
deems necessary or desirable in the screening process. Shareholders wishing to
submit a nominee for election to the Board may do so by mailing their submission
to the offices of OppenheimerFunds, Inc., 6803 South Tucson Way, Centennial, CO
80112, to the attention of the Board of Trustees of the named Registrant, c/o
the Secretary of the Registrant.
The Committee's process for identifying and evaluating nominees for
trustees includes a number of factors. In screening candidates for board
membership, whether the candidate is suggested by Board members, shareholders or
others, the Committee considers the candidate's professional experience,
soundness of judgment, integrity, ability to make independent, analytical
inquiries, collegiality, willingness and ability to devote the time required to
perform Board activities adequately, ability to represent the interests of all
shareholders of the Registrant, and diversity relative to the board's
composition. Candidates are expected to provide a mix of attributes, experience,
perspective and skills necessary to effectively advance the interests of
shareholders.
Item 10. Controls and Procedures
(a) Based on their evaluation of registrant's disclosure controls and
procedures (as defined in rule 30a-2(c) under the Investment
Company Act of 1940 (17 CFR 270.30a-2(c)) as of April 30, 2004,
registrant's principal executive officer and principal financial
officer found registrant's disclosure controls and procedures to
provide reasonable assurances that information required to be
disclosed by registrant in the reports that it files under the
Securities Exchange Act of 1934 (a) is accumulated and
communicated to registrant's management, including its principal
executive officer and principal financial officer, to allow timely
decisions regarding required disclosure, and (b) is recorded,
processed, summarized and reported, within the time periods
specified in the rules and forms adopted by the U.S. Securities
and Exchange Commission.
(b) There have been no significant changes in registrant's internal
controls over financial reporting that occurred during the
registrant's last fiscal half-year that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
Item 11. Exhibits.
(a) Exhibit attached hereto. (Attach code of ethics as exhibit)
(b) Exhibits attached hereto. (Attach certifications as exhibits)