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 811-3420
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OPPENHEIMER INTEGRITY FUNDS
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(Exact name of registrant as specified in charter)
6803 SOUTH TUCSON WAY, CENTENNIAL, COLORADO 80112-3924
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(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: DECEMBER 31
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Date of reporting period: DECEMBER 31, 2006
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ITEM 1. REPORTS TO STOCKHOLDERS.
TOP HOLDINGS AND ALLOCATIONS
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CORPORATE BONDS & NOTES--TOP TEN INDUSTRIES
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Oil & Gas 3.8%
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Media 3.2
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Hotels, Restaurants & Leisure 2.2
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Commercial Banks 2.1
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Household Durables 2.0
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Multi-Utilities & Unregulated Power 2.0
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Insurance 1.9
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Automobiles 1.8
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Food & Staples Retailing 1.7
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Real Estate 1.5
Portfolio holdings and allocations are subject to change. Percentages are as of
December 31, 2006, and are based on net assets.
CREDIT ALLOCATION
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Treasury 0.7%
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Agency 48.4
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AAA 14.6
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AA 1.4
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A 3.9
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BBB 16.6
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BB 5.0
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B 0.7
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Not Rated 8.7
Portfolio holdings and allocations are subject to change. Percentages are as of
December 31, 2006, and are based on the total market value of investments.
Average credit quality and ratings include securities rated by a national rating
organization. As of that date, no securities held by the Fund were rated lower
than B.
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10 | OPPENHEIMER CORE BOND FUND
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 DECEMBER 31, 2006, FOLLOWED
BY A GRAPHICAL COMPARISON OF THE FUND'S PERFORMANCE TO AN APPROPRIATE
BROAD-BASED MARKET INDEX.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. For the 12-month period ended
December 31, 2006, Oppenheimer Core Bond Fund posted a positive, competitive
total return that outpaced both its primary and secondary benchmarks, and placed
the Fund in the top fifteen percent of its Lipper peer group of similarly
managed funds. We attribute these favorable results to multiple factors, with
the most important being our positioning within the corporate bond sector.
Additionally our active management of the portfolio's interest-rate exposure
added value as did our overweight allocation to "spread," or non-Treasury
securities such as mortgage-backed securities ("MBS") and commercial
mortgage-backed securities ("CMBS").
The most significant contributor to performance throughout the Fund's
fiscal year under review was our active management of the portfolio's allocation
to corporate bonds, or the credit sector. We began the year modestly overweight
credit, and after two very strong months of outperformance by the sector, we
moved to a meaningful underweight by reducing our exposure to longer-maturity
(30-year) bonds. This substantially added to returns, not only since we reaped
sizable gains in trimming our position, but also since March and April proved to
be very difficult months for the credit market, particularly long-maturity
credits. As such, we effectively missed a good portion of the losses the sector
suffered during that brief period.
In May, conditions began to show signs of improvement, and we took what we
saw as an ideal opportunity to restore our position in credit at attractive
valuations. We held a generally neutral exposure to credit for the remainder of
the year. Within that exposure, we focused on bonds rated BBB (lower quality),
with maturities of 5-years and under, where we perceived favorable yield at
relatively less risk. At the same time, our decision to heavily overweight our
exposure to financial-services credit, specifically longer-maturity,
banking-related bonds, pushed Fund returns higher, as this was the
best-performing sector within the corporate bond market this year.
Also within our credit allocation, our decision to significantly increase
our high-yield bond exposure solidly added to both absolute and relative returns
for the period. First, high-yield bonds were the best-performing segment of the
fixed-income markets this year, buoyed by investors' growing appetite for risk,
as well as low default rates and a still-solid economic backdrop. Second, our
specific areas of focus within the high-yield universe also benefited returns.
By focusing on high-yield bonds of lower credit quality and short maturities, we
worked to minimize volatility in the portfolio while capturing
11 | OPPENHEIMER CORE BOND FUND
FUND PERFORMANCE DISCUSSION
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an attractive yield. At the same time, our decision to overweight domestic
auto-related high-yield credits, namely Ford Motor Credit Co. and General Motors
Acceptance Corp., substantially added to our returns, as these names delivered
significant outperformance within a sector that generally outperformed the
market.
A significant contributor to performance throughout the Fund's fiscal year
under review was our active management of the Fund's duration, or interest-rate
sensitivity. We began the fiscal year with less interest-rate exposure than the
market, based on our belief at that time that the Federal Reserve (the "Fed")
was not finished raising short-term rates and that the U.S. economy was
healthier than some market participants believed. When rates increased rather
markedly over the first half of the year, this stance helped Fund performance
tremendously, particularly vis-a-vis our benchmarks.
As we entered the second half of the period, we saw yields reaching levels
that we deemed more consistent with economic fundamentals. As such, we began
trending our short duration position a bit closer to a neutral stance. In
August, when the market began to react to various data hinting at economic
softening, yields fell rather quickly. We again viewed this as more pessimistic
than warranted given the state of the economy, and as such, we reverted back to
a short-duration position on interest rates for the remainder of the year. For
the period, the adjustments we made to our interest-rate sensitivity generally
aided the Fund's total return. We believe we have positioned the portfolio well
for the conditions we anticipate moving forward.
Our mortgage-backed securities ("MBS") exposure throughout the year also
served us well, boosting Fund performance in a number of ways. First, MBS in
general enjoyed a very strong year, outperforming like duration Treasuries by a
substantial margin, and as such, our decision to opportunistically overweight
the sector throughout the year added to Fund returns. MBS benefited over the
course of the year, as did most other spread sectors, from tightening spreads
versus Treasuries. The muted interest rate movements over the past also reduced
the costs associated with managing the interest-rate exposure of MBS, so
investors were able to realize much of the spread advantage MBS offer versus
Treasuries. In addition, this sector also derived support from the market's
lower expectations for future interest-rate volatility. When investors'
expectations regarding future rate volatility decrease, the MBS market typically
benefits, since investors then anticipate lower costs associated with managing
the interest-rate exposure of MBS.
In addition, the MBS market behaved similarly to the corporate market this
year, in that longer maturity MBS (30-year maturity)--which are seen as holding
more spread and volatility risk--outperformed shorter-maturity MBS. Therefore,
our decision to maintain an overweight allocation over the past year to 30-year
maturity MBS definitively added to
12 | OPPENHEIMER CORE BOND FUND
our returns. Finally, our underweighted allocation to Ginnie Mae's (GNMA), which
performed very poorly relative to other areas of the MBS market, helped us.
Despite the positive results we derived from the bulk of our MBS
allocation, the one detractor to Fund performance this year came from our
emphasis on higher-coupon MBS. While some of these securities performed
reasonably well for us, lower-coupon MBS, which held more risk, enjoyed greater
return relative to equal duration Treasuries than did higher coupon issues, so
our overweight to the high coupon sector of the MBS market had a slight negative
impact on Fund returns.
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 December 31, 2006. In the case of Class A, Class B and Class C
shares, performance is measured over a ten-fiscal-year period. In the case of
Class N shares, performance is measured from inception of the Class on March 1,
2001. In the case of Class Y shares, performance is measured from inception of
the Class on April 27, 1998. 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 its primary
benchmark, the Citigroup Broad Investment Grade Index, a market-capitalization
weighted index that includes fixed-rate Treasury, government-sponsored,
corporate and mortgage securities. The Fund's performance is also compared to
the performance of its secondary benchmark, the Lehman Brothers Aggregate Bond
Index, an unmanaged index of U.S. corporate and government bonds. 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.
13 | OPPENHEIMER CORE BOND FUND
FUND PERFORMANCE DISCUSSION
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CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Core Bond Fund (Class A)
Citigroup Broad Investment Grade Index
Lehman Brothers Credit Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Core Citigroup Broad Lehman Brothers
Bond Fund Investment Lehman Brothers Aggregate Bond
Date (Class A) Grade Index Credit Index Index
12/31/1996 9,525 10,000 10,000 10,000
03/31/1997 9,511 9,948 9,899 9,944
06/30/1997 9,877 10,307 10,307 10,309
09/30/1997 10,230 10,650 10,711 10,652
12/31/1997 10,490 10,964 11,023 10,965
03/31/1998 10,669 11,140 11,192 11,136
06/30/1998 10,890 11,398 11,480 11,396
09/30/1998 11,074 11,871 11,897 11,878
12/31/1998 11,078 11,919 11,968 11,918
03/31/1999 11,028 11,864 11,883 11,589
06/30/1999 10,886 11,754 11,697 11,755
09/30/1999 10,846 11,839 11,730 11,835
12/31/1999 10,896 11,820 11,734 11,820
03/31/2000 10,994 12,079 11,902 12,081
06/30/2000 11,087 12,284 12,049 12,291
09/30/2000 11,299 12,658 12,418 12,662
12/31/2000 11,527 13,190 12,836 13,194
03/31/2001 11,984 13,597 13,385 13,595
06/30/2001 12,106 13,667 13,527 13,671
09/30/2001 12,547 14,311 14,046 14,302
12/31/2001 12,340 14,314 14,171 14,308
03/31/2002 12,289 14,323 14,134 14,322
06/30/2002 12,640 14,828 14,543 14,851
09/30/2002 13,268 15,510 15,195 15,531
12/31/2002 13,581 15,758 15,663 15,776
03/31/2003 13,814 15,979 16,039 15,995
06/30/2003 14,218 16,389 16,808 16,395
09/30/2003 14,278 16,361 16,784 16,372
12/31/2003 14,378 16,420 16,867 16,423
03/31/2004 14,758 16,861 17,420 16,860
06/30/2004 14,414 16,450 16,823 16,448
09/30/2004 14,902 16,986 17,530 16,974
12/31/2004 15,082 17,155 17,752 17,136
03/31/2005 15,026 17,068 17,564 17,053
06/30/2005 15,405 17,602 18,192 17,567
09/30/2005 15,356 17,483 18,009 17,448
12/31/2005 15,437 17,596 18,099 17,552
03/31/2006 15,372 17,479 17,888 17,438
06/30/2006 15,349 17,459 17,818 17,425
09/30/2006 15,937 18,131 18,621 18,089
12/31/2006 16,184 18,358 18,869 18,313
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE FUND AT
12/31/06
1-Year -0.14% 5-Year 4.55% 10-Year 4.93%
14 | OPPENHEIMER CORE BOND FUND
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Core Bond Fund (Class B)
Citigroup Broad Investment Grade Index
Lehman Brothers Credit Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Core Citigroup Broad Lehman Brothers
Bond Fund Investment Lehman Brothers Aggregate Bond
Date (Class B) Grade Index Credit Index Index
12/31/1996 10,000 10,000 10,000 10,000
03/31/1997 9,976 9,948 9,899 9,944
06/30/1997 10,341 10,307 10,307 10,309
09/30/1997 10,690 10,650 10,711 10,652
12/31/1997 10,941 10,964 11,023 10,965
03/31/1998 11,107 11,140 11,192 11,136
06/30/1998 11,315 11,398 11,480 11,396
09/30/1998 11,484 11,871 11,897 11,878
12/31/1998 11,467 11,919 11,968 11,918
03/31/1999 11,393 11,864 11,883 11,589
06/30/1999 11,215 11,754 11,697 11,755
09/30/1999 11,164 11,839 11,730 11,835
12/31/1999 11,182 11,820 11,734 11,820
03/31/2000 11,273 12,079 11,902 12,081
06/30/2000 11,347 12,284 12,049 12,291
09/30/2000 11,542 12,658 12,418 12,662
12/31/2000 11,753 13,190 12,836 13,194
03/31/2001 12,184 13,597 13,385 13,595
06/30/2001 12,298 13,667 13,527 13,671
09/30/2001 12,709 14,311 14,046 14,302
12/31/2001 12,475 14,314 14,171 14,308
03/31/2002 12,400 14,323 14,134 14,322
06/30/2002 12,744 14,828 14,543 14,851
09/30/2002 13,355 15,510 15,195 15,531
12/31/2002 13,651 15,758 15,663 15,776
03/31/2003 13,885 15,979 16,039 15,995
06/30/2003 14,291 16,389 16,808 16,395
09/30/2003 14,352 16,361 16,784 16,372
12/31/2003 14,452 16,420 16,867 16,423
03/31/2004 14,834 16,861 17,420 16,860
06/30/2004 14,488 16,450 16,823 16,448
09/30/2004 14,978 16,986 17,530 16,974
12/31/2004 15,160 17,155 17,752 17,136
03/31/2005 15,103 17,068 17,564 17,053
06/30/2005 15,485 17,602 18,192 17,567
09/30/2005 15,435 17,483 18,009 17,448
12/31/2005 15,517 17,596 18,099 17,552
03/31/2006 15,451 17,479 17,888 17,438
06/30/2006 15,428 17,459 17,818 17,425
09/30/2006 16,019 18,131 18,621 18,089
12/31/2006 16,267 18,358 18,869 18,313
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE FUND AT
12/31/06
1-Year -0.83% 5-Year 4.47% 10-Year 4.99%
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 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. BECAUSE CLASS B SHARES CONVERT TO
CLASS A SHARES 72 MONTHS AFTER PURCHASE, 10-YEAR RETURNS FOR CLASS B SHARES
REFLECT CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 19 FOR
FURTHER INFORMATION.
15 | OPPENHEIMER CORE BOND FUND
FUND PERFORMANCE DISCUSSION
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CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Core Bond Fund (Class C)
Citigroup Broad Investment Grade Index
Lehman Brothers Credit Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Core Citigroup Broad Lehman Brothers
Bond Fund Investment Lehman Brothers Aggregate Bond
Date (Class C) Grade Index Credit Index Index
12/31/1996 10,000 10,000 10,000 10,000
03/31/1997 9,976 9,948 9,899 9,944
06/30/1997 10,340 10,307 10,307 10,309
09/30/1997 10,689 10,650 10,711 10,652
12/31/1997 10,939 10,964 11,023 10,965
03/31/1998 11,105 11,140 11,192 11,136
06/30/1998 11,313 11,398 11,480 11,396
09/30/1998 11,482 11,871 11,897 11,878
12/31/1998 11,465 11,919 11,968 11,918
03/31/1999 11,392 11,864 11,883 11,589
06/30/1999 11,214 11,754 11,697 11,755
09/30/1999 11,163 11,839 11,730 11,835
12/31/1999 11,182 11,820 11,734 11,820
03/31/2000 11,273 12,079 11,902 12,081
06/30/2000 11,335 12,284 12,049 12,291
09/30/2000 11,541 12,658 12,418 12,662
12/31/2000 11,753 13,190 12,836 13,194
03/31/2001 12,184 13,597 13,385 13,595
06/30/2001 12,297 13,667 13,527 13,671
09/30/2001 12,709 14,311 14,046 14,302
12/31/2001 12,475 14,314 14,171 14,308
03/31/2002 12,401 14,323 14,134 14,322
06/30/2002 12,745 14,828 14,543 14,851
09/30/2002 13,354 15,510 15,195 15,531
12/31/2002 13,630 15,758 15,663 15,776
03/31/2003 13,853 15,979 16,039 15,995
06/30/2003 14,218 16,389 16,808 16,395
09/30/2003 14,264 16,361 16,784 16,372
12/31/2003 14,337 16,420 16,867 16,423
03/31/2004 14,687 16,861 17,420 16,860
06/30/2004 14,319 16,450 16,823 16,448
09/30/2004 14,775 16,986 17,530 16,974
12/31/2004 14,926 17,155 17,752 17,136
03/31/2005 14,843 17,068 17,564 17,053
06/30/2005 15,190 17,602 18,192 17,567
09/30/2005 15,097 17,483 18,009 17,448
12/31/2005 15,149 17,596 18,099 17,552
03/31/2006 15,072 17,479 17,888 17,438
06/30/2006 15,006 17,459 17,818 17,425
09/30/2006 15,567 18,131 18,621 18,089
12/31/2006 15,780 18,358 18,869 18,313
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE FUND AT
12/31/06
1-Year 3.16% 5-Year 4.81% 10-Year 4.67%
16 | OPPENHEIMER CORE BOND FUND
CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Core Bond Fund (Class N)
Citigroup Broad Investment Grade Index
Lehman Brothers Credit Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Core Citigroup Broad Lehman Brothers
Bond Fund Investment Lehman Brothers Aggregate Bond
Date (Class N) Grade Index Credit Index Index
03/01/2001 10,000 10,000 10,000 10,000
03/31/2001 10,025 10,052 10,062 10,050
06/30/2001 10,136 10,104 10,169 10,107
09/30/2001 10,496 10,580 10,559 10,573
12/31/2001 10,318 10,582 10,653 10,578
03/31/2002 10,268 10,589 10,625 10,588
06/30/2002 10,567 10,962 10,932 10,979
09/30/2002 11,088 11,467 11,423 11,482
12/31/2002 11,321 11,650 11,775 11,663
03/31/2003 11,519 11,814 12,057 11,825
06/30/2003 11,833 12,116 12,635 12,121
09/30/2003 11,883 12,096 12,617 12,103
12/31/2003 11,944 12,140 12,680 12,141
03/31/2004 12,261 12,466 13,095 12,464
06/30/2004 11,968 12,162 12,647 12,159
09/30/2004 12,365 12,558 13,178 12,548
12/31/2004 12,507 12,683 13,345 12,668
03/31/2005 12,453 12,619 13,204 12,607
06/30/2005 12,759 13,013 13,675 12,986
09/30/2005 12,698 12,925 13,538 12,899
12/31/2005 12,757 13,009 13,606 12,976
03/31/2006 12,708 12,922 13,447 12,892
06/30/2006 12,668 12,908 13,395 12,882
09/30/2006 13,159 13,404 13,998 13,372
12/31/2006 13,354 13,572 14,185 13,538
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE FUND AT
12/31/06
1-Year 3.68% 5-Year 5.30% Since Inception (3/1/01) 5.08%
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 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. BECAUSE CLASS B SHARES CONVERT TO
CLASS A SHARES 72 MONTHS AFTER PURCHASE, 10-YEAR RETURNS FOR CLASS B SHARES
REFLECT CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 19 FOR
FURTHER INFORMATION.
17 | OPPENHEIMER CORE BOND FUND
FUND PERFORMANCE DISCUSSION
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CLASS Y SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Core Bond Fund (Class Y)
Citigroup Broad Investment Grade Index
Lehman Brothers Credit Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Core Citigroup Broad Lehman Brothers
Bond Fund Investment Lehman Brothers Aggregate Bond
Date (Class Y) Grade Index Credit Index Index
04/27/1998 10,000 10,000 10,000 10,000
06/30/1998 10,254 10,179 10,193 10,180
09/30/1998 10,436 10,601 10,563 10,611
12/31/1998 10,440 10,644 10,627 10,647
03/31/1999 10,405 10,595 10,551 10,594
06/30/1999 10,272 10,497 10,386 10,501
09/30/1999 10,250 10,573 10,416 10,572
12/31/1999 10,297 10,556 10,419 10,559
03/31/2000 10,380 10,787 10,568 10,792
06/30/2000 10,471 10,970 10,698 10,980
09/30/2000 10,667 11,304 11,026 11,311
12/31/2000 11,031 11,779 11,397 11,787
03/31/2001 11,464 12,143 11,884 12,145
06/30/2001 11,594 12,205 12,011 12,213
09/30/2001 12,027 12,780 12,471 12,776
12/31/2001 11,836 12,783 12,583 12,782
03/31/2002 11,797 12,791 12,550 12,794
06/30/2002 12,163 13,242 12,913 13,267
09/30/2002 12,784 13,851 13,492 13,874
12/31/2002 13,088 14,072 13,907 14,093
03/31/2003 13,340 14,270 14,241 14,289
06/30/2003 13,732 14,636 14,924 14,646
09/30/2003 13,820 14,611 14,902 14,625
12/31/2003 13,920 14,664 14,976 14,671
03/31/2004 14,316 15,058 15,467 15,061
06/30/2004 13,992 14,690 14,937 14,693
09/30/2004 14,477 15,169 15,565 15,163
12/31/2004 14,657 15,320 15,762 15,308
03/31/2005 14,611 15,243 15,596 15,234
06/30/2005 14,989 15,719 16,152 15,693
09/30/2005 14,937 15,613 15,990 15,587
12/31/2005 15,024 15,714 16,070 15,680
03/31/2006 14,985 15,609 15,883 15,578
06/30/2006 14,959 15,592 15,821 15,566
09/30/2006 15,563 16,192 16,534 16,159
12/31/2006 15,818 16,394 16,754 16,359
AVERAGE ANNUAL TOTAL RETURNS OF CLASS Y SHARES OF THE FUND AT 12/31/06
1-Year 5.29% 5-Year 5.97% Since Inception (4/27/98) 5.43%
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 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. BECAUSE CLASS B SHARES CONVERT TO
CLASS A SHARES 72 MONTHS AFTER PURCHASE, 10-YEAR RETURNS FOR CLASS B SHARES
REFLECT CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 19 FOR
FURTHER INFORMATION.
18 | OPPENHEIMER CORE BOND FUND
NOTES
- --------------------------------------------------------------------------------
Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. 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.
The Fund's investment strategy and focus can change over time. The mention of
specific fund holdings does not constitute a recommendation by OppenheimerFunds,
Inc.
CLASS A shares of the Fund were first publicly offered on 4/15/88. 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 5/3/93. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 2% (5-year). Because Class B shares convert to
Class A shares 72 months after purchase, the 10-year returns for Class B reflect
Class A performance for the period after conversion. 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 7/11/95. 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 3/1/01. 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.
19 | OPPENHEIMER CORE BOND FUND
NOTES
- --------------------------------------------------------------------------------
CLASS Y shares of the Fund were first publicly offered on 4/27/98. Class Y
shares are offered only to certain institutional investors under special
agreements with the Distributor.
An explanation of the calculation of performance is in the Fund's Statement of
Additional Information.
20 | OPPENHEIMER CORE BOND FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include sales charges (loads) on purchase payments,
contingent deferred sales charges on redemptions; and redemption fees, if any;
and (2) ongoing costs, including management fees; distribution and service fees;
and other Fund expenses. These examples are intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended December 31, 2006.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio for each class of shares, and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front-end
or contingent deferred sales charges (loads), or a $12.00 fee imposed annually
on accounts valued at less than $500.00 (subject to exceptions described in
21 | OPPENHEIMER CORE BOND FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
the Statement of Additional Information). Therefore, the "hypothetical" lines of
the table are useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(7/1/06) (12/31/06) DECEMBER 31, 2006
- --------------------------------------------------------------------------------
Class A Actual $1,000.00 $1,054.40 $4.62
- --------------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,020.72 4.54
- --------------------------------------------------------------------------------
Class B Actual 1,000.00 1,051.60 8.57
- --------------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,016.89 8.42
- --------------------------------------------------------------------------------
Class C Actual 1,000.00 1,051.50 8.57
- --------------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,016.89 8.42
- --------------------------------------------------------------------------------
Class N Actual 1,000.00 1,054.20 5.97
- --------------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,019.41 5.87
- --------------------------------------------------------------------------------
Class Y Actual 1,000.00 1,057.40 2.70
- --------------------------------------------------------------------------------
Class Y Hypothetical 1,000.00 1,022.58 2.65
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios,
excluding affiliated fund indirect expenses, based on the 6-month period ended
December 31, 2006 are as follows:
CLASS EXPENSE RATIOS
- ------------------------------------
Class A 0.89%
- ------------------------------------
Class B 1.65
- ------------------------------------
Class C 1.65
- ------------------------------------
Class N 1.15
- ------------------------------------
Class Y 0.52
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Fund's Manager and Transfer Agent that can be terminated at any time,
without advance notice. The "Financial Highlights" tables in the Fund's
financial statements, included in this report, also show the gross expense
ratios, without such waivers or reimbursements.
- --------------------------------------------------------------------------------
22 | OPPENHEIMER CORE BOND FUND
STATEMENTS OF INVESTMENTS December 31, 2006
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--7.7%
- -----------------------------------------------------------------------------------------------------
Ace Securities Corp. Home Equity Loan Trust, Asset-Backed Pass-Through
Certificates, Series 2005-HE7, Cl. A2B, 5.53%, 11/25/35 1 $2,030,000 $2,031,989
- -----------------------------------------------------------------------------------------------------
Aesop Funding II LLC, Automobile Asset-Backed Certificates,
Series 2005-1A, Cl. A2, 5.41%, 4/20/08 1 960,000 960,962
- -----------------------------------------------------------------------------------------------------
Ameriquest Mortgage Securities, Inc., Home Equity Mtg. Obligations,
Series 2006-R2, Cl. A2A, 5.41%, 3/25/36 1 145,028 145,133
- -----------------------------------------------------------------------------------------------------
Argent Securities Trust 2004-W8, Asset-Backed Pass-Through Certificates,
Series 2004-W8, Cl. A2, 5.83%, 5/25/34 1 8,320,000 8,349,685
- -----------------------------------------------------------------------------------------------------
Argent Securities Trust 2006-W5, Asset-Backed Pass-Through Certificates,
Series 2006-W5, Cl. A2B, 5.45%, 5/26/36 1 3,380,000 3,382,579
- -----------------------------------------------------------------------------------------------------
Capital Auto Receivables Asset Trust 2004-2, Automobile Asset-Backed
Securities, Series 2004-2, Cl. A3, 3.58%, 1/15/09 3,070,000 3,036,810
- -----------------------------------------------------------------------------------------------------
Centex Home Equity Loan Trust 2005-A, Asset-Backed Certificates,
Series 2005-A, Cl. AF3, 4.14%, 3/25/28 3,637,326 3,613,910
- -----------------------------------------------------------------------------------------------------
Centex Home Equity Loan Trust 2005-D, Asset-Backed Certificates:
Series 2005-D, Cl. AF1, 5.04%, 10/25/35 861,191 858,232
Series 2005-D, Cl. AV2, 5.62%, 10/25/35 1 3,640,000 3,643,661
- -----------------------------------------------------------------------------------------------------
Centex Home Equity Loan Trust 2006-A, Asset-Backed Certificates,
Series 2006-A, Cl. AV2, 5.45%, 5/16/36 1 4,220,000 4,223,262
- -----------------------------------------------------------------------------------------------------
Chase Funding Trust 2003-2, Mtg. Loan Asset-Backed Certificates,
Series 2003-2, Cl. 2A2, 5.63%, 2/25/33 1 2,190,314 2,193,622
- -----------------------------------------------------------------------------------------------------
Citibank Credit Card Issuance Trust, Credit Card Receivable Nts.,
Series 2003-C4, Cl. C4, 5%, 6/10/15 460,000 447,628
- -----------------------------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust 2005-WF2, Asset-Backed Pass-Through
Certificates, Series 2005-WF2, Cl. AF2, 4.922%, 8/25/35 1 2,326,310 2,309,798
- -----------------------------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust 2006-WFH3, Asset-Backed Pass-Through
Certificates, Series 2006-WFH3, Cl. A2, 5.45%, 10/31/36 1 2,300,000 2,300,000
- -----------------------------------------------------------------------------------------------------
Consumer Credit Reference Index Securities Program, Credit Card
Asset-Backed Certificates, Series 2002-B, Cl. FX, 10.421%, 3/22/07 2 4,360,000 4,392,955
- -----------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2002-4, Asset-Backed Certificates,
Series 2002-4, Cl. A1, 5.72%, 2/25/33 1 48,808 48,869
- -----------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-10, Asset-Backed Certificates,
Series 2005-10, Cl. AF1, 5.51%, 2/25/36 1 450,488 450,833
- -----------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-16, Asset-Backed Certificates,
Series 2005-16, Cl. 2AF2, 5.382%, 5/25/36 1 1,450,000 1,445,196
- -----------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-17, Asset-Backed Certificates:
Series 2005-17, Cl. 1AF1, 5.55%, 5/25/36 1 1,649,438 1,651,304
Series 2005-17, Cl. 1AF2, 5.363%, 5/25/36 1 970,000 966,530
- -----------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2006-25, Asset-Backed Certificates,
Series 2006-25, Cl. 2A2, 5.44%, 12/25/29 1 3,020,000 3,022,114
- -----------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust 2005-FF10, Mtg. Pass-Through
Certificates, Series 2005-FF10, Cl. A3, 5.56%, 11/25/35 1 5,840,000 5,845,787
- -----------------------------------------------------------------------------------------------------
23 | OPPENHEIMER CORE BOND FUND
STATEMENT OF INVESTMENTS Continued
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- -----------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust 2006-FF10, Mtg. Pass-Through
Certificates, Series 2006-FF10, Cl. A3, 5.41%, 7/25/36 1 $3,550,000 $3,552,269
- -----------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust 2006-FF5, Mtg. Pass-Through
Certificates, Series 2006-FF5, Cl. 2A1, 5.40%, 5/15/36 1 1,799,137 1,800,389
- -----------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust 2006-FF9, Mtg. Pass-Through
Certificates, Series 2006-FF9, Cl. 2A2, 5.43%, 7/7/36 1 1,820,000 1,821,164
- -----------------------------------------------------------------------------------------------------
Ford Credit Auto Owner Trust, Automobile Loan Pass-Through
Certificates, Series 2005-A, Cl. A3, 3.48%, 11/17/08 2,093,397 2,081,667
- -----------------------------------------------------------------------------------------------------
Household Home Equity Loan Trust, Home Equity Loan Pass-Through
Certificates:
Series 2005-3, Cl. A1, 5.61%, 1/20/35 1 1,888,073 1,891,133
Series 2006-4, Cl. A2V, 5.46%, 3/20/36 1,3 1,120,000 1,120,000
- -----------------------------------------------------------------------------------------------------
Lehman XS Trust, Mtg. Pass-Through Certificates:
Series 2005-10, Cl. 2A3B, 5.55%, 1/25/36 2,094,081 2,077,879
Series 2005-2, Cl. 2A1B, 5.18%, 8/25/35 1 1,967,592 1,963,285
Series 2005-4, Cl. 2A1B, 5.17%, 10/25/35 1,743,756 1,736,469
- -----------------------------------------------------------------------------------------------------
Litigation Settlement Monetized Fee Trust, Asset-Backed Certificates,
Series 2001-1A, Cl. A1, 8.33%, 4/25/31 3 1,542,982 1,575,092
- -----------------------------------------------------------------------------------------------------
MBNA Credit Card Master Note Trust, Credit Card Receivables,
Series 2003-C7, Cl. C7, 6.70%, 3/15/16 1 4,380,000 4,648,580
- -----------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc., Home Equity Asset-Backed
Securities, Series 2005-WMC2, Cl. A2B, 5.53%, 4/25/36 1 1,238,921 1,239,845
- -----------------------------------------------------------------------------------------------------
Morgan Stanley ABS Capital I, Mtg. Pass-Through Certificates,
Series 2005-WMC6, Cl. A2B, 5.61%, 7/25/35 1 2,050,000 2,053,944
- -----------------------------------------------------------------------------------------------------
NC Finance Trust, CMO Pass-Through Certificates, Series 1999-I, Cl. ECFD,
1.762%, 1/25/29 3 1,750,658 367,638
- -----------------------------------------------------------------------------------------------------
Option One Mortgage Loan Trust, Asset-Backed Certificates,
Series 2006-2, Cl. 2A2, 5.45%, 7/1/36 1 5,940,000 5,944,632
- -----------------------------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through Trust 2004-5, Mtg. Pass-Through
Certificates, Series 2004-5, Cl. AF2, 3.735%, 11/10/34 1 57,046 56,877
- -----------------------------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through Trust 2005-1, Mtg. Pass-Through
Certificates, Series 2005-1, Cl. AF2, 3.914%, 5/25/35 1 192,193 191,537
- -----------------------------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through Trust 2005-2, Mtg. Pass-Through
Certificates, Series 2005-2, Cl. AF2, 4.415%, 4/25/35 1 1,110,000 1,099,549
- -----------------------------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through Trust 2005-6, Mtg. Pass-Through
Certificates, Series 2005-6, Cl. A3, 5.68%, 1/25/36 1 1,520,000 1,515,877
- -----------------------------------------------------------------------------------------------------
RAMP Series 2004-RS7 Trust, Mtg. Asset-Backed Pass-Through Certificates,
Series 2004-RS7, Cl. AI32, 4.45%, 7/25/28 1,735,112 1,723,014
- -----------------------------------------------------------------------------------------------------
RAMP Series 2006-RS4 Trust, Mtg. Asset-Backed Pass-Through Certificates,
Series 2006-RS4, Cl. A1, 5.43%, 7/25/36 1 1,883,433 1,884,765
- -----------------------------------------------------------------------------------------------------
Structured Asset Investment Loan Trust, Mtg. Pass-Through Certificates,
Series 2006-2, Cl. A1, 5.41%, 4/25/36 1 4,841,987 4,845,333
- -----------------------------------------------------------------------------------------------------
24 | OPPENHEIMER CORE BOND FUND
STATEMENT OF INVESTMENTS Continued
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- ---------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Mtg. Pass-Through Certificates:
Series 2002-AL1, Cl. B2, 3.45%, 2/25/32 $ 2,527,668 $ 2,228,915
Series 2003-25XS, Cl. A4, 4.51%, 8/25/33 110,448 109,759
Series 2005-4XS, Cl. 3A1, 5.18%, 3/26/35 2,133,608 2,128,412
- ---------------------------------------------------------------------------------------------------------
Tobacco Settlement Authority, Asset-Backed Securities, Series 2001-A,
6.79%, 6/1/10 1,160,000 1,186,216
- ---------------------------------------------------------------------------------------------------------
Wells Fargo Home Equity Asset-Backed Securities 2006-2 Trust, Home
Equity Asset-Backed Certificates, Series 2006-2, Cl. A2, 5.59%, 7/25/36 1 3,530,000 3,532,255
------------
Total Asset-Backed Securities (Cost $110,914,129) 109,697,354
- ---------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--64.0%
- ---------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY--56.7%
- ---------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED--56.6%
Fannie Mae Whole Loan, CMO Pass-Through Certificates, Trust 2004-W9,
Cl. 2A2, 7%, 2/25/44 1,885,974 1,944,615
- ---------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
4.50%, 5/1/19 26,415,438 25,515,022
5%, 6/1/33-8/1/33 12,986,031 12,556,487
5%, 1/1/37 4 1,107,000 1,068,255
6%, 5/1/18-10/1/29 6,742,339 6,835,122
6.50%, 4/1/18-4/1/34 9,449,773 9,683,111
7%, 7/1/21-3/1/35 16,345,730 16,814,028
8%, 4/1/16 676,874 716,144
9%, 3/1/17-5/1/25 207,643 221,822
12.50%, 4/1/14 1,247 1,389
13.50%, 11/1/10 2,215 2,439
- ---------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., CMO Gtd. Multiclass Mtg.
Participation Certificates:
Series 2046, Cl. G, 6.50%, 4/15/28 372,090 380,475
Series 2410, Cl. PF, 6.33%, 2/15/32 1 5,912,807 6,057,485
Series 2423, Cl. MC, 7%, 3/15/32 4,192,496 4,327,783
Series 2453, Cl. BD, 6%, 5/15/17 1,599,518 1,621,996
Series 3138, Cl. PA, 5.50%, 2/15/27 17,140,910 17,191,399
- ---------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., CMO Gtd. Real Estate Mtg.
Investment Conduit Multiclass Pass-Through Certificates:
Series 1590, Cl. IA, 6.425%, 10/15/23 1 5,777,395 5,909,196
Series 2006-11, Cl. PS, 5.06%, 3/25/36 1 2,566,416 2,548,879
Series 2034, Cl. Z, 6.50%, 2/15/28 48,493 49,480
Series 2043, Cl. ZP, 6.50%, 4/15/28 4,137,339 4,229,282
Series 2053, Cl. Z, 6.50%, 4/15/28 51,931 53,026
Series 2055, Cl. ZM, 6.50%, 5/15/28 62,115 63,094
Series 2063, Cl. PG, 6.50%, 6/15/28 3,460,650 3,525,572
Series 2075, Cl. D, 6.50%, 8/15/28 648,507 662,109
Series 2080, Cl. Z, 6.50%, 8/15/28 1,787,691 1,816,579
Series 2195, Cl. LH, 6.50%, 10/15/29 2,918,422 2,977,700
Series 2326, Cl. ZP, 6.50%, 6/15/31 1,051,075 1,074,478
25 | OPPENHEIMER CORE BOND FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal Home Loan Mortgage Corp., CMO Gtd. Real Estate Mtg.
Investment Conduit Multiclass Pass-Through Certificates: Continued
Series 2387, Cl. PD, 6%, 4/15/30 $ 22,281 $ 22,298
Series 2427, Cl. ZM, 6.50%, 3/15/32 5,534,387 5,669,288
Series 2461, Cl. PZ, 6.50%, 6/15/32 4,453,907 4,640,677
Series 2500, Cl. FD, 5.85%, 3/15/32 1 439,835 444,308
Series 2526, Cl. FE, 5.75%, 6/15/29 1 652,540 659,741
Series 2551, Cl. FD, 5.75%, 1/15/33 1 509,289 514,192
Series 2583, Cl. KA, 5.50%, 3/15/22 614,984 614,317
Series 3025, Cl. SJ, 5.133%, 8/15/35 1 1,267,329 1,274,113
Series 3153, Cl. FJ, 5.73%, 5/15/36 1 2,227,040 2,236,430
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., CMO Pass-Through Participation
Certificates, Series 151, Cl. F, 9%, 5/15/21 39,317 39,232
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Interest-Only Stripped
Mtg.-Backed Security:
Series 176, Cl. IO, 12.08%, 6/1/26 5 831,479 177,524
Series 183, Cl. IO, 8.691%, 4/1/27 5 1,247,941 275,443
Series 184, Cl. IO, 14.305%, 12/1/26 5 1,360,598 288,907
Series 192, Cl. IO, 11.932%, 2/1/28 5 333,138 73,750
Series 200, Cl. IO, 10.682%, 1/1/29 5 397,029 84,427
Series 2003-118, Cl. S, 7.994%, 12/25/33 5 7,706,146 952,776
Series 2003-26, Cl. IO, 7.812%, 4/25/33 5 4,085,017 903,525
Series 2005-87, Cl. SG, 9.386%, 10/25/35 5 17,322,305 948,232
Series 206, Cl. IO, (9.408)%, 12/1/29 5 445,211 101,994
Series 2130, Cl. SC, (4.245)%, 3/15/29 5 898,191 63,696
Series 2134, Cl. SB, (0.357)%, 3/15/29 5 936,077 64,577
Series 2422, Cl. SJ, 15.124%, 1/15/32 5 4,230,117 357,864
Series 2796, Cl. SD, (0.672)%, 7/15/26 5 1,420,856 102,947
Series 2920, Cl. S,(4.213)%, 1/15/35 5 5,855,235 272,874
Series 3000, Cl. SE, (4.70)%, 7/15/25 5 8,527,683 300,087
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Principal-Only Stripped Mtg.-Backed
Security, Series 176, Cl. PO, 4.705%, 6/1/26 6 355,363 289,872
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
4.50%, 5/1/18-9/1/18 30,120,168 29,137,110
5%, 12/1/17-11/1/33 134,646,398 131,382,743
5%, 1/1/22-1/1/37 4 46,528,000 45,383,443
5.50%, 3/1/33-1/1/34 41,020,876 40,615,595
5.50%, 1/1/22-1/1/374 42,548,000 42,248,510
6%, 8/1/29-11/1/33 47,078,888 47,554,597
6%, 1/1/22-3/1/33 4 59,777,027 60,540,864
6.50%, 6/1/17-11/1/31 35,159,457 36,076,348
6.50%, 1/1/37 4 23,867,000 24,321,953
7%, 1/1/09-3/1/36 19,218,320 19,821,631
7.50%, 2/1/08-8/1/33 14,419,471 15,060,739
8%, 8/1/17 4,120 4,166
8.50%, 7/1/32 72,838 78,434
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Grantor Trust, CMO, Trust 2002-T1,
Cl. A2, 7%, 11/25/31 2,064,249 2,123,981
26 | OPPENHEIMER CORE BOND FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Trust 1998-61, Cl. PL, 6%, 11/25/28 $ 2,530,888 $ 2,563,393
Trust 1992-34, Cl. G, 8%, 3/25/22 28,056 28,402
Trust 1993-104, Cl. ZB, 6.50%, 7/25/23 1,242,226 1,258,764
Trust 1993-215, Cl. ZQ, 6.50%, 11/25/23 4,748,491 4,857,078
Trust 1993-87, Cl. Z, 6.50%, 6/25/23 503,303 517,281
Trust 1996-35, Cl. Z, 7%, 7/25/26 180,851 184,818
Trust 1998-58, Cl. PC, 6.50%, 10/25/28 1,566,117 1,609,325
Trust 1999-60, Cl. PG, 7.50%, 12/25/29 12,759,208 13,406,693
Trust 2001-50, Cl. NE, 6%, 8/25/30 12,279 12,275
Trust 2001-51, Cl. OD, 6.50%, 10/25/31 3,108,698 3,177,080
Trust 2001-70, Cl. LR, 6%, 9/25/30 396,898 396,979
Trust 2001-72, Cl. NH, 6%, 4/25/30 82,246 82,399
Trust 2001-74, Cl. PD, 6%, 5/25/30 54,718 54,591
Trust 2001-82, Cl. ZA, 6.50%, 1/25/32 2,198,190 2,261,291
Trust 2002-56, Cl. FN, 6.35%, 7/25/32 1 2,319,301 2,380,307
Trust 2002-77, Cl. WF, 5.75%, 12/18/32 1 746,842 752,512
Trust 2002-9, Cl. PC, 6%, 3/25/17 9,779,968 9,913,003
Trust 2003-17, Cl. EQ, 5.50%, 3/25/23 6,305,000 6,160,398
Trust 2003-21, Cl. FK, 5.75%, 3/25/33 1 43,432 43,787
Trust 2003-23, Cl. EQ, 5.50%, 4/25/23 8,316,000 8,135,827
Trust 2003-28, Cl. KG, 5.50%, 4/25/23 1,492,000 1,469,478
Trust 2003-84, Cl. PW, 3%, 6/25/22 4,330,176 4,256,277
Trust 2004-101, Cl. BG, 5%, 1/25/20 2,603,000 2,538,996
Trust 2005-100, Cl. BQ, 5.50%, 11/25/25 2,450,000 2,360,329
Trust 2005-104, Cl. MC, 5.50%, 12/25/25 11,700,000 11,390,950
Trust 2005-109, Cl. AH, 5.50%, 12/25/25 10,000,000 9,696,246
Trust 2005-31, Cl. PB, 5.50%, 4/25/35 2,480,000 2,433,711
Trust 2005-71, Cl. DB, 4.50%, 8/25/25 1,260,000 1,163,334
Trust 2006-44, Cl. OA, 5.50%, 12/25/26 9,220,000 9,243,198
Trust 2006-46, Cl. SW, 4.583%, 6/25/36 1 2,785,189 2,709,899
Trust 2006-50, Cl. KS, 4.583%, 6/25/36 1 4,176,270 4,037,653
Trust 2006-50, Cl. SA, 4.583%, 6/25/36 1 3,134,819 3,032,265
Trust 2006-50, Cl. SK, 4.583%, 6/25/36 1 3,009,382 2,908,367
Trust 2006-57, Cl. PA, 5.50%, 8/25/27 11,426,914 11,442,546
Trust 2006-64, Cl. MD, 5.50%, 7/25/36 2,091,828 2,039,502
- ---------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed
Security:
Trust 2001-15, Cl. SA, 3.236%, 3/17/31 5 1,724,658 225,461
Trust 2001-65, Cl. S, 7.063%, 11/25/31 5 3,923,379 376,680
Trust 2001-81, Cl. S, (0.012)%, 1/25/32 5 704,096 66,119
Trust 2002-38, Cl. IO, (4.264)%, 4/25/32 5 475,877 26,067
Trust 2002-41, Cl. S, 10.258%, 7/25/32 5 4,572,391 393,328
Trust 2002-47, Cl. NS, (1.229)%, 4/25/32 5 1,708,757 161,678
Trust 2002-51, Cl. S, (1.111)%, 8/25/32 5 1,569,016 148,341
Trust 2002-52, Cl. SD, (2.616)%, 9/25/32 5 1,850,997 150,569
Trust 2002-60, Cl. SY, 12.498%, 4/25/32 5 1,031,636 37,810
27 | OPPENHEIMER CORE BOND FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed
Security: Continued
Trust 2002-75, Cl. SA, 7.402%, 11/25/32 5 $ 3,397,927 $ 333,471
Trust 2002-77, Cl. IS, 0.605%, 12/18/32 5 810,752 68,890
Trust 2002-77, Cl. SH, 0.162%, 12/18/32 5 892,050 82,308
Trust 2002-84, Cl. SA, 7.821%, 12/25/32 5 235,265 24,203
Trust 2002-89, Cl. S, 10.624%, 1/25/33 5 7,221,431 596,102
Trust 2002-9, Cl. MS, 0.014%, 3/25/32 5 56,304 5,425
Trust 2003-33, Cl. SP, 9.233%, 5/25/33 5 5,349,073 669,983
Trust 2003-4, Cl. S, 6.818%, 2/25/33 5 2,078,906 218,333
Trust 2004-54, Cl. DS, (6.544)%, 11/25/30 5 360,487 21,594
Trust 2005-19, Cl. SA, (3.128)%, 3/25/35 5 20,181,379 1,030,851
Trust 2005-40, Cl. SA, (3.186)%, 5/25/35 5 3,724,636 182,292
Trust 2005-6, Cl. SE, (3.602)%, 2/25/35 5 4,209,154 214,493
Trust 2005-71, Cl. SA, 3.36%, 8/25/25 5 5,376,703 312,784
Trust 2005-83, Cl. SL, 7.334%, 10/25/35 5 14,084,940 752,263
Trust 2006-119, Cl. MS, 8.866%, 12/25/36 5 9,448,472 520,018
Trust 2006-33, Cl. SP, 11.645%, 5/25/36 5 15,241,953 1,330,147
Trust 2006-34, Cl. SK, 11.144%, 5/25/36 5 21,320,567 1,894,196
Trust 222, Cl. 2, 12.42%, 6/1/23 5 2,725,912 578,786
Trust 240, Cl. 2, 14.828%, 9/1/23 5 3,291,748 738,498
Trust 247, Cl. 2, 12.811%, 10/1/23 5 233,785 50,610
Trust 252, Cl. 2, 8.818%, 11/1/23 5 2,402,538 553,279
Trust 254, Cl. 2, 3.621%, 1/1/24 5 4,153,292 979,363
Trust 2682, Cl. TQ, 13.248%, 10/15/33 5 6,465,214 356,345
Trust 273, Cl. 2, 12.009%, 8/1/26 5 612,431 130,526
Trust 2981, Cl. BS, 13.29%, 5/15/35 5 12,336,577 580,203
Trust 301, Cl. 2, 3.881%, 4/1/29 5 1,550,079 330,910
Trust 303, Cl. IO, (5.604)%, 11/1/29 5 195,767 46,569
Trust 319, Cl. 2, 9.972%, 2/1/32 5 645,548 148,507
Trust 321, Cl. 2, 7.648%, 4/1/32 5 3,949,398 908,109
Trust 322, Cl. 2, 12.549%, 4/1/32 5 4,925,469 1,101,025
Trust 324, Cl. 2, 4.63%, 7/1/32 5 3,142,450 699,193
Trust 329, Cl. 2, 8.357%, 1/1/33 5 3,251,252 754,935
Trust 331, Cl. 9, 3.77%, 2/1/33 5 7,345,836 1,791,328
Trust 334, Cl. 17, 16.937%, 2/1/33 5 318,440 73,747
Trust 340, Cl. 2, 7.032%, 9/1/33 5 4,232,787 1,020,826
Trust 342, Cl. 2, 9.01%, 9/1/33 5 3,094,017 703,063
Trust 344, Cl. 2, 5.66%, 12/1/33 5 23,967,044 5,434,955
Trust 346, Cl. 2, 11.437%, 12/1/33 5 10,063,913 2,325,400
Trust 362, Cl. 12, 5.435%, 8/1/35 5 10,735,444 2,266,478
Trust 362, Cl. 13, 5.442%, 8/1/35 5 5,957,189 1,260,584
- ---------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Principal-Only Stripped Mtg.-Backed
Security:
Trust 1993-184, Cl. M, 5.673%, 9/25/23 6 801,170 651,303
Trust 340, Cl. 1, 5.532%, 9/1/33 6 4,232,787 3,093,344
------------
808,510,418
28 | OPPENHEIMER CORE BOND FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------
GNMA/GUARANTEED--0.1%
Government National Mortgage Assn.:
5.75%, 7/20/25-7/20/27 1 $ 28,089 $ 28,447
7%, 7/15/09 9,838 9,985
8.50%, 8/15/17-12/15/17 278,435 296,920
9%, 2/15/09-6/15/09 10,613 10,958
10%, 11/15/09 15,988 16,722
10.50%, 12/15/17-5/15/21 28,441 31,765
11%, 10/20/19 51,813 57,022
12%, 5/15/14 317 359
- --------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., Interest-Only Stripped
Mtg.-Backed Security:
Series 2001-21, Cl. SB, (5.021)%, 1/16/27 5 1,752,117 118,221
Series 2002-15, Cl. SM, (8.249)%, 2/16/32 5 1,725,274 113,347
Series 2002-41, Cl. GS, 1.983%, 6/16/32 5 1,378,052 204,952
Series 2002-76, Cl. SY, (4.813)%, 12/16/26 5 851,092 59,497
Series 2004-11, Cl. SM, (7.87)%, 1/17/30 5 298,316 21,090
Series 2006-47, Cl. SA, 14.403%, 8/16/36 5 21,328,846 1,103,348
------------
2,072,633
- --------------------------------------------------------------------------------------------------------
NON-AGENCY--7.3%
- --------------------------------------------------------------------------------------------------------
COMMERCIAL--6.0%
Asset Securitization Corp., Commercial Interest-Only Stripped
Mtg.-Backed Security, Series 1997-D4, Cl. PS1, 1.889%, 4/14/29 5 28,135,292 737,904
- --------------------------------------------------------------------------------------------------------
Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates,
Series 1996-MD6, Cl. A3, 7.267%, 11/13/29 1 800,000 812,140
- --------------------------------------------------------------------------------------------------------
Banc of America Commercial Mortgage, Inc., Commercial Mtg.
Pass-Through Certificates:
Series 2005-3, Cl. A2, 4.501%, 7/10/43 3,580,000 3,498,860
Series 2006-5, Cl. A2, 5.348%, 10/10/11 6,320,000 6,333,578
- --------------------------------------------------------------------------------------------------------
Banc of America Funding Corp., CMO Pass-Through Certificates,
Series 2004-2, Cl. 2A1, 6.50%, 7/20/32 2,063,882 2,091,981
- --------------------------------------------------------------------------------------------------------
Banc of America Mortgage Securities, Inc., CMO Pass-Through Certificates:
Series 2004-8, Cl. 5A1, 6.50%, 5/25/32 1,862,838 1,879,721
Series 2005-E, Cl. 2A2, 4.975%, 6/25/35 1 207,312 206,964
- --------------------------------------------------------------------------------------------------------
Bear Stearns Commercial Mortgage Securities, Inc., Commercial Mtg.
Obligations, Series 2003-T10, Cl. A1, 4%, 3/13/40 208,400 201,889
- --------------------------------------------------------------------------------------------------------
Capital Lease Funding Securitization LP, Interest-Only Corporate-Backed
Pass-Through Certificates, Series 1997-CTL1, 6.676%, 6/22/24 5 7,713,678 305,467
- --------------------------------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust 2006-WF1, Asset-Backed Pass-Through
Certificates, Series 2006-WF1, Cl. A2B, 5.536%, 3/1/36 1,150,000 1,146,533
- --------------------------------------------------------------------------------------------------------
Deutsche Alt-A Securities Mortgage Loan Trust, Mtg. Pass-Through
Certificates:
Series 2006-AB2, Cl. A7, 5.961%, 6/25/36 5,664,885 5,654,573
Series 2006-AB3, Cl. A7, 6.36%, 4/25/08 1,759,286 1,759,781
29 | OPPENHEIMER CORE BOND FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------
COMMERCIAL Continued
GE Capital Commercial Mortgage Corp., Commercial Mtg. Obligations:
Series 2003-C1, Cl. A2, 4.093%, 1/10/38 $ 215,000 $ 209,855
Series 2004-C3, Cl. A2, 4.433%, 7/10/39 1,850,000 1,816,597
Series 2005-C3, Cl. A2, 4.853%, 7/10/45 2,250,000 2,224,846
- -----------------------------------------------------------------------------------------------------------
GMAC Commercial Mortgage Securities, Inc., Commercial Mtg
Pass-Through Certificates, Series 1997-C1, Cl. A3, 6.869%, 7/15/29 560,307 562,456
- -----------------------------------------------------------------------------------------------------------
Greenwich Capital Commercial Funding Corp., Commercial Mtg.
Pass-Through Certificates:
Series 2005-GG3, Cl. A2, 4.305%, 8/10/42 2,000,000 1,948,263
Series 2005-GG5, Cl. A2, 5.117%, 4/10/37 6,378,000 6,359,307
- -----------------------------------------------------------------------------------------------------------
JP Morgan Commercial Mortgage Finance Corp., Commercial Mtg.
Obligations, Series 2000-C9, Cl. A2, 7.77%, 10/15/32 4,659,495 4,914,069
- -----------------------------------------------------------------------------------------------------------
JPMorgan Chase Commercial Mortgage Securities Corp., Commercial
Mtg. Pass-Through Certificates:
Series 2005-LDP2, Cl. A2, 4.575%, 7/15/42 860,000 842,566
Series 2005-LDP4, Cl. A2, 4.79%, 10/15/42 3,566,000 3,514,136
- -----------------------------------------------------------------------------------------------------------
LB-UBS Commercial Mortgage Trust, Commercial Mtg. Pass-Through
Certificates, Series 2005-C5, Cl. A2, 4.885%, 9/15/30 2,700,000 2,675,663
- -----------------------------------------------------------------------------------------------------------
Lehman Brothers Commercial Conduit Mortgage Trust, Interest-Only
Stripped Mtg.-Backed Security, Series 1998-C1, Cl. IO, 8.983%, 2/18/30 5 10,218,546 191,704
- -----------------------------------------------------------------------------------------------------------
Lehman Structured Securities Corp., CMO, Series 2002-GE1, Cl. A,
2.514%, 7/26/24 3 202,901 126,813
- -----------------------------------------------------------------------------------------------------------
Mastr Alternative Loan Trust, CMO Pass-Through Certificates:
Series 2004-6, Cl. 10A1, 6%, 7/25/34 2,621,812 2,610,275
Series 2004-9, Cl. A3, 4.70%, 8/25/34 1 1,935,033 1,919,693
- -----------------------------------------------------------------------------------------------------------
Prudential Mortgage Capital Co. II LLC, Commercial Mtg. Pass-Through
Certificates, Series PRU-HTG 2000-C1, Cl. A2, 7.306%, 10/6/15 182,000 196,039
- -----------------------------------------------------------------------------------------------------------
RALI Series 2003-QS1 Trust, Mtg. Asset-Backed Pass-Through Certificates,
Series 2003-QS1, Cl. A2, 5.75%, 1/25/33 1,713,126 1,705,583
- -----------------------------------------------------------------------------------------------------------
RALI Series 2006-QS13 Trust, Mtg. Asset-Backed Pass-Through Certificates,
Series 2006-QS13, Cl. 1A8, 6%, 9/25/36 7,232,304 7,225,866
- -----------------------------------------------------------------------------------------------------------
RALI Series 2006-QS5 Trust, Mtg. Asset-Backed Pass-Through Certificates,
Series 2006-QS5, Cl. 2A2, 6%, 4/25/08 6,791,499 6,779,314
- -----------------------------------------------------------------------------------------------------------
Residential Asset Securitization Trust 2006-A9CB, CMO Pass-Through
Certificates, Series 2006-A9CB, Cl. A5, 6%, 9/25/36 7,519,371 7,507,710
- -----------------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VII, Inc., Interest-Only Commercial
Mtg. Pass-Through Certificates, Series 1999-C1, Cl. X, (5.055)%, 5/18/32 5 193,685,578 482,200
- -----------------------------------------------------------------------------------------------------------
Wachovia Bank Commercial Mortgage Trust 2005-C17, Commercial Mtg.
Obligations, Series 2005-C17, Cl. A2, 4.782%, 3/15/42 3,830,000 3,779,901
- -----------------------------------------------------------------------------------------------------------
Wachovia Bank Commercial Mortgage Trust 2006-C29, Commercial
Asset-Backed Securities, Series 2006-C29, Cl. A2, 5.272%, 11/15/48 2,146,000 2,144,262
30 | OPPENHEIMER CORE BOND FUND
- ----------------------------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------
COMMERCIAL Continued
WAMU Mortgage Pass-Through Certificates Series 2005-AR5 Trust,
Series 2005-AR5, Cl. A1, 4.673%, 5/25/35 1 $ 1,307,060 $ 1,304,341
------------
85,670,850
- ----------------------------------------------------------------------------------------------------
OTHER--0.4%
Ford Credit Auto Owner Trust, Automobile Loan Pass-Through
Certificates, Series 2005-C, Cl. A2, 4.24%, 3/15/08 760,829 760,579
- ----------------------------------------------------------------------------------------------------
JP Morgan Mortgage Trust, CMO Pass-Through Certificates,
Series 2005-S2, Cl. 3A1, 6.712%, 2/25/32 1 2,575,615 2,600,750
- ----------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VI, Inc., Interest-Only Stripped
Mtg.-Backed Security, Series 1987-3, Cl. B, 17.199%, 10/23/17 5 12,869 2,412
- ----------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VI, Inc., Principal-Only Stripped
Mtg.-Backed Security, Series 1987-3, Cl. A, 1.536%, 10/23/17 6 18,593 16,802
- ----------------------------------------------------------------------------------------------------
WAMU Mortgage Pass-Through Certificates Series 2005-AR8 Trust,
Series 2005-AR8, Cl. 2AB1, 5.60%, 7/25/45 1 1,626,947 1,631,164
------------
5,011,707
- ----------------------------------------------------------------------------------------------------
RESIDENTIAL--0.9%
Countrywide Alternative Loan Trust, CMO:
Series 2005-J1, Cl. 3A1, 6.50%, 8/25/32 8,516,501 8,609,655
Series 2005-J3, Cl. 3A1, 6.50%, 9/25/34 4,328,281 4,402,107
------------
13,011,762
------------
Total Mortgage-Backed Obligations (Cost $916,915,455) 914,277,370
- ----------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--3.5%
- ----------------------------------------------------------------------------------------------------
Fannie Mae Unsec. Nts., 3.579%, 1/31/07 7 9,150,000 9,111,177
- ----------------------------------------------------------------------------------------------------
Federal Home Loan Bank Unsec. Bonds, 3.50%, 11/15/07 565,000 556,842
- ----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. Unsec. Nts.:
4%, 8/17/07 8 1,025,000 1,017,301
4.125%, 7/12/10 5,987,000 5,839,079
5%, 9/16/08 8 1,495,000 1,494,185
5.25%, 7/18/11 8 2,800,000 2,836,350
6.625%, 9/15/09 8 3,435,000 3,579,754
- ----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Unsec. Nts.:
4%, 2/28/07 1,275,000 1,272,682
5%, 10/15/11 8 5,800,000 5,818,972
6%, 5/15/11 8,9 6,400,000 6,670,272
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
4.50%, 2/15/36 8 2,919,000 2,776,702
8.875%, 8/15/17 8 3,464,000 4,634,995
STRIPS, 3.862%, 2/15/13 7,8 1,520,000 1,147,156
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Nts., 4.875%, 10/31/08 8 3,030,000 3,032,369
------------
Total U.S. Government Obligations (Cost $50,378,270) 49,787,836
31 | OPPENHEIMER CORE BOND FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--31.4%
- ---------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--10.6%
- ---------------------------------------------------------------------------------------------------
AUTOMOBILES--1.8%
DaimlerChrysler North America Holding Corp., 7.30% Nts., 1/15/12 $ 5,125,000 $ 5,446,040
- ---------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 9.75% Sr. Unsec. Nts., 9/15/10 2 11,505,000 12,248,603
- ---------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 8% Bonds, 11/1/31 8 4,210,000 4,847,398
- ---------------------------------------------------------------------------------------------------
Hyundai Motor Manufacturing Alabama LLC, 5.30% Sr. Unsec. Nts.,
12/19/08 2 3,070,000 3,050,613
------------
25,592,654
- ---------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--2.2%
Caesars Entertainment, Inc., 7.50% Sr. Unsec. Nts., 9/1/09 7,245,000 7,522,469
- ---------------------------------------------------------------------------------------------------
Hilton Hotels Corp., 8.25% Sr. Unsec. Nts., 2/15/11 8 4,735,000 5,101,963
- ---------------------------------------------------------------------------------------------------
Hyatt Equities LLC, 6.875% Nts., 6/15/07 2 5,630,000 5,654,012
- ---------------------------------------------------------------------------------------------------
MGM Mirage, Inc., 6% Sr. Sec. Nts., 10/1/09 7,150,000 7,167,875
- ---------------------------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd., 7% Sr. Unsec. Unsub. Nts., 10/15/07 1,525,000 1,546,461
- ---------------------------------------------------------------------------------------------------
Yum! Brands, Inc., 7.70% Sr. Nts., 7/1/12 8 3,523,000 3,855,592
------------
30,848,372
- ---------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES--2.0%
Beazer Homes USA, Inc., 6.875% Sr. Unsec. Nts., 7/15/15 8 2,870,000 2,826,950
- ---------------------------------------------------------------------------------------------------
D.R. Horton, Inc.:
5.375% Sr. Unsec. Nts., 6/15/12 3,730,000 3,611,845
6.125% Nts., 1/15/14 2,640,000 2,625,010
- ---------------------------------------------------------------------------------------------------
K. Hovnanian Enterprises, Inc., 6.50% Sr. Nts., 1/15/14 8 4,885,000 4,762,875
- ---------------------------------------------------------------------------------------------------
KB Home, 5.75% Sr. Unsec. Unsub. Nts., 2/1/14 3,605,000 3,335,526
- ---------------------------------------------------------------------------------------------------
Lennar Corp., 7.625% Sr. Unsec. Nts., 3/1/09 8 5,805,000 6,046,401
- ---------------------------------------------------------------------------------------------------
Pulte Homes, Inc., 4.875% Nts., 7/15/09 5,888,000 5,801,370
------------
29,009,977
- ---------------------------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.1%
Eastman Kodak Co., 3.625% Nts., Series A, 5/15/08 738,000 715,132
- ---------------------------------------------------------------------------------------------------
MEDIA--3.2%
British Sky Broadcasting Group plc, 8.20% Sr. Unsec. Nts., 7/15/09 3,891,000 4,145,503
- ---------------------------------------------------------------------------------------------------
Chancellor Media CCU, 8% Sr. Unsec. Nts., 11/1/08 5,130,000 5,335,703
- ---------------------------------------------------------------------------------------------------
Clear Channel Communications, Inc., 6.25% Nts., 3/15/11 8 4,150,000 4,036,688
- ---------------------------------------------------------------------------------------------------
Comcast Corp., 6.45% Unsec. Nts., 3/15/37 8 7,770,000 7,799,977
- ---------------------------------------------------------------------------------------------------
EchoStar DBS Corp., 5.75% Sr. Unsec. Nts., 10/1/08 5,725,000 5,717,844
- ---------------------------------------------------------------------------------------------------
Liberty Media Corp., 7.875% Sr. Nts., 7/15/09 8 2,015,000 2,111,365
- ---------------------------------------------------------------------------------------------------
Reed Elsevier Capital, Inc., 4.625% Nts., 6/15/12 2,610,000 2,495,792
32 | OPPENHEIMER CORE BOND FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------
MEDIA Continued
Time Warner Entertainment Co. LP, 8.375% Sr. Nts., 7/15/33 $ 4,980,000 $ 6,036,666
- ---------------------------------------------------------------------------------------------------
Tribune Co., 5.50% Nts., Series E, 10/6/08 3,182,000 3,150,991
- ---------------------------------------------------------------------------------------------------
Univision Communications, Inc.:
3.50% Sr. Unsec. Nts., 10/15/07 3,865,000 3,782,420
3.875% Sr. Unsec. Nts., 10/15/08 1,795,000 1,712,739
------------
46,325,688
- ---------------------------------------------------------------------------------------------------
MULTILINE RETAIL--0.6%
Federated Department Stores, Inc., 6.625% Sr. Unsec. Nts., 9/1/08 3,165,000 3,217,723
- ---------------------------------------------------------------------------------------------------
J.C. Penney Co., Inc., 9% Nts., 8/1/12 1,780,000 2,037,598
- ---------------------------------------------------------------------------------------------------
May Department Stores Co., 7.90% Unsec. Debs., 10/15/07 2,515,000 2,553,054
------------
7,808,375
- ---------------------------------------------------------------------------------------------------
SPECIALTY RETAIL--0.7%
Gap, Inc. (The):
6.90% Nts., 9/15/07 4,230,000 4,260,003
9.445% Unsub. Nts., 12/15/08 1 530,000 566,053
- ---------------------------------------------------------------------------------------------------
Limited Brands, Inc., 6.125% Sr. Unsec. Nts., 12/1/12 8 5,720,000 5,789,715
------------
10,615,771
- ---------------------------------------------------------------------------------------------------
CONSUMER STAPLES--2.6%
- ---------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--1.7%
Albertson's, Inc., 8% Sr. Unsec. Debs., 5/1/31 8 4,960,000 5,056,021
- ---------------------------------------------------------------------------------------------------
Delhaize America, Inc., 9% Unsub. Debs., 4/15/31 3,765,000 4,489,028
- ---------------------------------------------------------------------------------------------------
Kroger Co. (The), 5.50% Unsec. Unsub. Nts., 2/1/13 8 5,745,000 5,690,210
- ---------------------------------------------------------------------------------------------------
Real Time Data Co., 11% Disc. Nts., 5/31/09 3,10,11 476,601 --
- ---------------------------------------------------------------------------------------------------
Safeway, Inc., 6.50% Sr. Unsec. Nts., 3/1/11 8 9,304,000 9,634,283
------------
24,869,542
- ---------------------------------------------------------------------------------------------------
FOOD PRODUCTS--0.6%
Bunge Ltd. Finance Corp., 4.375% Unsec. Nts., 12/15/08 2,070,000 2,027,304
- ---------------------------------------------------------------------------------------------------
Earthgrains Co. (The), 6.50% Nts., 4/15/09 2,275,000 2,314,942
- ---------------------------------------------------------------------------------------------------
Heinz (H.J.) Co., 6.428% Bonds, 12/1/08 2 970,000 987,743
- ---------------------------------------------------------------------------------------------------
Sara Lee Corp., 2.75% Unsec. Nts., 6/15/08 2,695,000 2,590,421
------------
7,920,410
- ---------------------------------------------------------------------------------------------------
TOBACCO--0.3%
R.J. Reynolds Tobacco Holdings, Inc., 6.50% Unsec. Nts., 6/1/07 195,000 196,237
- ---------------------------------------------------------------------------------------------------
Reynolds American, Inc., 6.50% Sr. Sec. Nts., 6/1/07 3,743,000 3,766,742
------------
3,962,979
33 | OPPENHEIMER CORE BOND FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------
ENERGY--3.8%
- ----------------------------------------------------------------------------------------------------------------
OIL & GAS--3.8%
El Paso Corp.:
6.50% Sr. Unsec. Nts., 6/1/08 8 $ 1,170,000 $ 1,186,088
7.625% Sr. Unsec. Nts., 9/1/08 4,415,000 4,569,525
- ----------------------------------------------------------------------------------------------------------------
Enbridge Energy Partners LP, 5.95% Sr. Unsec. Nts., Series B, 6/1/33 1,710,000 1,583,811
- ----------------------------------------------------------------------------------------------------------------
Energy Transfer Partners LP:
5.65% Sr. Unsec. Unsub. Nts., 8/1/12 1,240,000 1,236,240
6.625% Sr. Nts., 10/15/36 2,745,000 2,835,758
- ----------------------------------------------------------------------------------------------------------------
Enterprise Products Operating LP, 7.50% Sr. Unsec. Unsub. Nts., 2/1/11 6,050,000 6,457,619
- ----------------------------------------------------------------------------------------------------------------
Kaneb Pipe Line Operating Partnership LP:
5.875% Sr. Unsec. Nts., 6/1/13 1,245,000 1,250,293
7.75% Sr. Unsec. Nts., 2/15/12 620,000 676,433
- ----------------------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners LP, 7.30% Sr. Unsec. Nts., 8/15/33 5,450,000 5,928,412
- ----------------------------------------------------------------------------------------------------------------
ONEOK Partners LP, 7.10% Sr. Unsec. Nts., 3/15/11 950,000 999,649
- ----------------------------------------------------------------------------------------------------------------
Pemex Project Funding Master Trust, 7.875% Unsec. Unsub. Nts., 2/1/09 6,520,000 6,849,260
- ----------------------------------------------------------------------------------------------------------------
Petroleum Export Ltd. Cayman SPV, 4.623% Sr. Nts., Cl. A1, 6/15/10 2 4,816,000 4,742,570
- ----------------------------------------------------------------------------------------------------------------
PF Export Receivables Master Trust, 3.748% Sr. Nts., Series B, 6/1/13 2 1,342,989 1,259,555
- ----------------------------------------------------------------------------------------------------------------
TEPPCO Partners LP:
6.125% Nts., 2/1/13 3,060,000 3,064,134
7.625% Sr. Unsec. Nts., 2/15/12 1,010,000 1,087,130
- ----------------------------------------------------------------------------------------------------------------
Valero Logistics Operations LP, 6.05% Nts., 3/15/13 4,723,000 4,763,901
- ----------------------------------------------------------------------------------------------------------------
Williams Cos., Inc. Credit Linked Certificate Trust (The), 6.75% Nts., 4/15/09 3 5,975,000 6,109,438
------------
54,599,816
- ----------------------------------------------------------------------------------------------------------------
FINANCIALS--7.4%
- ----------------------------------------------------------------------------------------------------------------
CAPITAL MARKETS--0.9%
Goldman Sachs Capital, Inc. (The), 6.345% Sub. Bonds, 2/15/34 6,505,000 6,606,049
- ----------------------------------------------------------------------------------------------------------------
Morgan Stanley, 4.75% Sub. Nts., 4/1/14 6,330,000 6,061,399
------------
12,667,448
- ----------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS--2.1%
Barclays Bank plc, 6.278% Perpetual Bonds 12 6,720,000 6,612,950
- ----------------------------------------------------------------------------------------------------------------
HBOS plc, 6.413% Sub. Perpetual Bonds, Series A 2,12 6,800,000 6,776,350
- ----------------------------------------------------------------------------------------------------------------
HSBC Finance Capital Trust IX, 5.911% Nts., 11/30/35 1 9,800,000 9,865,366
- ----------------------------------------------------------------------------------------------------------------
Popular North America, Inc., 4.70% Nts., 6/30/09 6,799,000 6,659,437
------------
29,914,103
- ----------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--1.0%
CIT Group, Inc., 5.40% Sr. Nts., 3/7/13 6,055,000 6,017,102
- ----------------------------------------------------------------------------------------------------------------
Citigroup, Inc., 6.125% Sub. Nts., 8/25/36 2,590,000 2,706,361
- ----------------------------------------------------------------------------------------------------------------
JPMorgan Chase & Co., 5.15% Sub. Nts., 10/1/15 8 6,010,000 5,907,932
------------
14,631,395
34 | OPPENHEIMER CORE BOND FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------
INSURANCE--1.9%
Marsh & McLennan Cos., Inc.:
5.875% Sr. Unsec. Bonds, 8/1/33 $ 3,967,000 $ 3,624,727
7.125% Sr. Unsec. Nts., 6/15/09 3,370,000 3,484,401
- -----------------------------------------------------------------------------------------------------
MBIA, Inc., 5.70% Sr. Unsec. Unsub. Nts., 12/1/34 6,755,000 6,451,619
- -----------------------------------------------------------------------------------------------------
Prudential Holdings LLC, 8.695% Bonds, Series C, 12/18/23 2 4,675,000 5,730,101
- -----------------------------------------------------------------------------------------------------
Prudential Insurance Co. of America, 8.30% Nts., 7/1/25 5,635,000 7,093,000
------------
26,383,848
- -----------------------------------------------------------------------------------------------------
REAL ESTATE--1.5%
EOP Operating LP, 8.10% Unsec. Nts., 8/1/10 8,030,000 8,854,866
- -----------------------------------------------------------------------------------------------------
iStar Financial, Inc., 5.15% Sr. Unsec. Nts., 3/1/12 6,920,000 6,737,450
- -----------------------------------------------------------------------------------------------------
Vornado Realty LP, 5.625% Sr. Unsec. Unsub. Nts., 6/15/07 6,365,000 6,361,474
------------
21,953,790
- -----------------------------------------------------------------------------------------------------
HEALTH CARE--0.4%
- -----------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--0.4%
HCA, Inc., 8.75% Sr. Nts., 9/1/10 6,050,000 6,322,250
- -----------------------------------------------------------------------------------------------------
INDUSTRIALS--0.4%
- -----------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.4%
BAE Systems Holdings, Inc., 5.20% Nts., 8/15/15 2 6,640,000 6,335,636
- -----------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.0%
Waste Management, Inc., 7.125% Sr. Unsec. Nts., 10/1/07 5,000 5,047
- -----------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--0.5%
- -----------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--0.0%
Loral Skynet Corp., 14% Sr. Sec. Nts., 11/21/15 3,11 34,000 39,185
- -----------------------------------------------------------------------------------------------------
Orion Network Systems, Inc., 12.50% Sr. Unsub. Disc. Nts., 1/15/07 10 200,000 2
------------
39,187
- -----------------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--0.0%
NCR Corp., 7.125% Sr. Unsec. Unsub. Nts., 6/15/09 645,000 661,864
- -----------------------------------------------------------------------------------------------------
OFFICE ELECTRONICS--0.5%
Xerox Corp., 9.75% Sr. Unsec. Nts., 1/15/09 6,285,000 6,819,225
- -----------------------------------------------------------------------------------------------------
MATERIALS--0.4%
- -----------------------------------------------------------------------------------------------------
CHEMICALS--0.0%
Morton International, Inc., 9.25% Credit Sensitive Nts., 6/1/20 85,000 111,263
- -----------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.4%
MeadWestvaco Corp., 6.85% Unsec. Unsub. Nts., 4/1/12 8 5,550,000 5,822,294
- -----------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--1.4%
- -----------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.4%
Qwest Corp., 5.625% Unsec. Nts., 11/15/08 729,000 733,556
- -----------------------------------------------------------------------------------------------------
Telecom Italia Capital SpA:
4% Sr. Unsec. Nts., 11/15/08 3,080,000 3,000,792
4% Unsec. Unsub. Nts., 1/15/10 3,450,000 3,296,682
35 | OPPENHEIMER CORE BOND FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES Continued
Telefonos de Mexico SA de CV, 4.50% Nts., 11/19/08 $ 6,346,000 $ 6,263,267
- ----------------------------------------------------------------------------------------------------
Telus Corp., 8% Nts., 6/1/11 6,070,000 6,643,961
------------
19,938,258
- ----------------------------------------------------------------------------------------------------
UTILITIES--3.9%
- ----------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--1.4%
FirstEnergy Corp., 7.375% Sr. Unsub. Nts., Series C, 11/15/31 2,362,000 2,698,108
- ----------------------------------------------------------------------------------------------------
Mission Energy Holding Co., 13.50% Sr. Sec. Nts., 7/15/08 5,435,000 6,019,263
- ----------------------------------------------------------------------------------------------------
Monongahela Power Co., 7.36% Unsec. Nts., Series A, 1/15/10 4,312,000 4,520,343
- ----------------------------------------------------------------------------------------------------
Westar Energy, Inc., 7.125% Sr. Unsec. Nts., 8/1/09 5,640,000 5,857,777
------------
19,095,491
- ----------------------------------------------------------------------------------------------------
ENERGY TRADERS--0.3%
IPALCO Enterprises, Inc., 8.375% Sr. Sec. Nts., 11/14/08 1 1,535,000 1,600,238
- ----------------------------------------------------------------------------------------------------
TXU Energy Co., 6.125% Nts., 3/15/08 3,015,000 3,034,851
------------
4,635,089
- ----------------------------------------------------------------------------------------------------
GAS UTILITIES--0.2%
ONEOK Partners LP, 6.65% Nts., 10/1/36 8 3,250,000 3,335,092
- ----------------------------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--2.0%
CenterPoint Energy, Inc., 7.25% Sr. Nts., Series B, 9/1/10 9,602,000 10,125,002
- ----------------------------------------------------------------------------------------------------
Duke Energy Field Services Corp., 6.875% Sr. Unsec. Nts., 2/1/11 4,877,000 5,104,146
- ----------------------------------------------------------------------------------------------------
NiSource Finance Corp., 7.875% Sr. Unsec. Nts., 11/15/10 8 8,510,000 9,188,775
- ----------------------------------------------------------------------------------------------------
PSEG Funding Trust I, 5.381% Nts., 11/16/07 4,170,000 4,162,128
------------
28,580,051
------------
Total Corporate Bonds and Notes (Cost $444,671,912) 449,520,047
SHARES
- ----------------------------------------------------------------------------------------------------
PREFERRED STOCKS--0.0%
Loral Skynet Corp., 12% Cum., Series A, Non-Vtg. 3,11 (Cost $57,372) 304 62,928
- ----------------------------------------------------------------------------------------------------
COMMON STOCKS--0.0%
Chesapeake Energy Corp. 181 5,258
- ----------------------------------------------------------------------------------------------------
Loral Space & Communications Ltd. 13 2,155 87,752
------------
Total Common Stocks (Cost $64,591) 93,010
UNITS
- ----------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- ----------------------------------------------------------------------------------------------------
Concentric Network Corp. Wts., Exp. 12/15/07 3,13 50 --
- ----------------------------------------------------------------------------------------------------
HF Holdings, Inc. Wts., Exp. 9/27/09 3,13 1,063 --
36 | OPPENHEIMER CORE BOND FUND
VALUE
UNITS SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES Continued
- ------------------------------------------------------------------------------------------------------------------
Long Distance International, Inc. Wts., Exp. 4/13/08 3,13 150 $ --
- ------------------------------------------------------------------------------------------------------------------
Pathmark Stores, Inc. Wts., Exp. 9/19/10 13 2,028 507
----------------
Total Rights, Warrants and Certificates (Cost $21,515) 507
SHARES
- ------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND--4.7%
- ------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E, 5.25% 14,15
(Cost $67,486,873) 67,486,873 67,486,873
- ------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (excluding Investments Purchased with
Cash Collateral from Securities Loaned) (Cost $1,590,510,117) 1,590,925,925
PRINCIPAL
AMOUNT
- ------------------------------------------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED--4.3% 16
- ------------------------------------------------------------------------------------------------------------------
ASSET-BACKED FLOATING NOTES--0.4%
Trust Money Market Securities, Series A-2, 5.43%, 1/16/07 $ 2,000,000 2,000,000
- ------------------------------------------------------------------------------------------------------------------
Whitehawk CDO Funding Corp., 5.41%, 3/15/07 3,000,000 3,000,000
----------------
5,000,000
- ------------------------------------------------------------------------------------------------------------------
FUNDING AGREEMENT/GUARANTEED INVESTMENT CONTRACT--0.2%
Protective Life Insurance Co., 5.5%, 1/29/07 2,000,000 2,000,000
- ------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--3.4%
Undivided interest of 1.19% in joint repurchase agreement (Principal
Amount/Value $4,100,000,000, with a maturity value of $4,102,437,222)
with Nomura Securities, 5.35%, dated 12/29/06, to be repurchased at
$48,984,626 on 1/2/07, collateralized by U.S. Agency Mortgages,
0.00%-22.12%, 3/15/14-5/1/46, with a value of $4,182,000,000 48,955,525 48,955,525
- ------------------------------------------------------------------------------------------------------------------
MEDIUM-TERM FLOATING NOTE--0.2%
Five Finance, Inc., 5.38%, 1/2/07 2,999,639 2,999,639
- ------------------------------------------------------------------------------------------------------------------
YANKEE CERTIFICATE OF DEPOSIT FLOATING NOTE--0.1%
Natexis Banques Populaires NY, 5.34%, 1/2/07 2,000,000 2,000,000
----------------
Total Investments Purchased with Cash Collateral from Securities Loaned
(Cost $60,955,164) 60,955,164
TOTAL INVESTMENTS, AT VALUE (COST $1,651,465,281) 115.6% 1,651,881,089
- ------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (15.6) (222,655,595)
-------------------------------
NET ASSETS 100.0% $ 1,429,225,494
===============================
37 | OPPENHEIMER CORE BOND FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Represents the current interest rate for a variable or increasing rate
security.
2. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $51,178,138 or 3.58% of the Fund's net
assets as of December 31, 2006.
3. Illiquid security. The aggregate value of illiquid securities as of December
31, 2006 was $9,401,094, which represents 0.66% of the Fund's net assets. See
Note 7 of accompanying Notes.
4. When-issued security or forward commitment to be delivered and settled after
December 31, 2006. See Note 1 of accompanying Notes.
5. 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 $40,985,410 or 2.87% of the Fund's net assets
as of December 31, 2006.
6. 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.
These securities amount to $4,051,321 or 0.28% of the Fund's net assets as of
December 31, 2006.
7. Zero coupon bond reflects effective yield on the date of purchase.
8. Partial or fully-loaned security. See Note 8 of accompanying Notes.
9. All or a portion of the security is held in collateralized accounts to cover
initial margin requirements on open futures contracts. The aggregate market
value of such securities is $4,205,398. See Note 5 of accompanying Notes.
10. Issuer is in default. Non-income producing security. See Note 1 of
accompanying Notes.
11. Interest or dividend is paid-in-kind, when applicable.
12. This bond has no contractual maturity date, is not redeemable and
contractually pays an indefinite stream of interest. Rate reported represents
the current interest rate for this variable rate security.
13. Non-income producing security.
14. Rate shown is the 7-day yield as of December 31, 2006.
15. Represents ownership of an affiliated fund, at or during the period ended
December 31, 2006. Transactions during the period in which the issuer was an
affiliate are as follows:
SHARES GROSS GROSS SHARES
DECEMBER 31, 2005 ADDITIONS REDUCTIONS DECEMBER 31, 2006
- -----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional
Money Market Fund, Cl. E, 5.25%* -- 207,893,923 140,407,050 67,486,873
VALUE DIVIDEND
SEE NOTE 1 INCOME
- -----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E, 5.25%* $ 67,486,873 $ 529,137
* The money market fund and the Fund are affiliated by having the same
investment advisor.
16. The security/securities have been segregated to satisfy the forward
commitment to return the cash collateral received in securities lending
transactions upon the borrower's return of the securities loaned. See Note 8 of
accompanying Notes.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
38 | OPPENHEIMER CORE BOND FUND
STATEMENT OF ASSETS AND LIABILITIES December 31, 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $1,583,978,408) $ 1,584,394,216
Affiliated companies (cost $67,486,873) 67,486,873
----------------
1,651,881,089
- --------------------------------------------------------------------------------------------------
Cash 1,155,660
- --------------------------------------------------------------------------------------------------
Unrealized appreciation on swap contracts 1,392,576
- --------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold on a when-issued basis or forward commitment 24,059,134
Interest 13,411,480
Shares of beneficial interest sold 3,441,923
Futures margins 11,740
Other 28,196
----------------
Total assets 1,695,381,798
- --------------------------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 60,955,164
- --------------------------------------------------------------------------------------------------
Unrealized depreciation on swap contracts 1,164,703
- --------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $198,622,970 purchased on a when-issued basis
or forward commitment) 200,658,353
Shares of beneficial interest redeemed 2,436,303
Distribution and service plan fees 582,079
Transfer and shareholder servicing agent fees 206,981
Shareholder communications 93,017
Trustees' compensation 18,500
Dividends 63
Other 41,141
----------------
Total liabilities 266,156,304
- --------------------------------------------------------------------------------------------------
NET ASSETS $ 1,429,225,494
================
- --------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- --------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 139,765
- --------------------------------------------------------------------------------------------------
Additional paid-in capital 1,441,111,833
- --------------------------------------------------------------------------------------------------
Accumulated net investment loss (365,803)
- --------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (11,531,752)
- --------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments (128,549)
- --------------------------------------------------------------------------------------------------
NET ASSETS $ 1,429,225,494
================
39 | OPPENHEIMER CORE BOND FUND
STATEMENT OF ASSETS AND LIABILITIES Continued
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- ----------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$670,012,280 and 65,496,665 shares of beneficial interest outstanding) $10.23
Maximum offering price per share (net asset value plus sales charge of 4.75% of offering price) $10.74
- ----------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $116,230,222 and
11,365,935 shares of beneficial interest outstanding) $10.23
- ----------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $149,440,095 and
14,598,997 shares of beneficial interest outstanding) $10.24
- ----------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $58,231,615 and
5,694,452 shares of beneficial interest outstanding) $10.23
- ----------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net assets of
$435,311,282 and 42,609,260 shares of beneficial interest outstanding) $10.22
- ----------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
40 | OPPENHEIMER CORE BOND FUND
STATEMENT OF OPERATIONS For the Year Ended December 31, 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Interest $ 63,141,334
- --------------------------------------------------------------------------------
Fee income 1,160,583
- --------------------------------------------------------------------------------
Dividends:
Unaffiliated companies 4,443
Affiliated companies 529,137
- --------------------------------------------------------------------------------
Portfolio lending fees 122,608
- --------------------------------------------------------------------------------
Other income 30,020
-------------
Total investment income 64,988,125
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees 5,649,818
- --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 1,357,304
Class B 1,181,684
Class C 1,264,509
Class N 233,059
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 1,139,894
Class B 372,293
Class C 302,806
Class N 160,102
Class Y 195,589
- --------------------------------------------------------------------------------
Shareholder communications:
Class A 131,276
Class B 54,442
Class C 34,734
Class N 5,656
- --------------------------------------------------------------------------------
Trustees' compensation 19,636
- --------------------------------------------------------------------------------
Administration service fees 1,500
- --------------------------------------------------------------------------------
Custodian fees and expenses 521
- --------------------------------------------------------------------------------
Other 66,373
-------------
Total expenses 12,171,196
Less reduction to custodian expenses (521)
Less waivers and reimbursements of expenses (806,351)
-------------
Net expenses 11,364,324
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 53,623,801
41 | OPPENHEIMER CORE BOND FUND
STATEMENT OF OPERATIONS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments $ (5,165,111)
Closing and expiration of futures contracts 3,329,652
Foreign currency transactions 27,167
Swap contracts 772,956
-------------
Net realized loss (1,035,336)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments 7,767,924
Futures contracts (1,903,422)
Swap contracts 183,892
-------------
Net change in unrealized depreciation 6,048,394
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 58,636,859
=============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
42 | OPPENHEIMER CORE BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 2006 2005
- -------------------------------------------------------------------------------------------------
OPERATIONS
- -------------------------------------------------------------------------------------------------
Net investment income $ 53,623,801 $ 30,338,495
- -------------------------------------------------------------------------------------------------
Net realized loss (1,035,336) (3,146,837)
- -------------------------------------------------------------------------------------------------
Net change in unrealized depreciation 6,048,394 (11,650,764)
- -------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 58,636,859 15,540,894
----------------------------------
- -------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (27,534,042) (18,178,321)
Class B (4,835,065) (4,744,426)
Class C (5,213,068) (3,359,283)
Class N (2,161,598) (1,226,750)
Class Y (16,289,181) (4,277,387)
----------------------------------
(56,032,954) (31,786,167)
- -------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A 180,785,033 153,603,323
Class B (8,537,515) (20,719,422)
Class C 40,154,490 26,483,304
Class N 22,271,562 10,895,909
Class Y 261,623,548 135,190,630
----------------------------------
496,297,118 305,453,744
- -------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------
Total increase 498,901,023 289,208,471
- -------------------------------------------------------------------------------------------------
Beginning of period 930,324,471 641,116,000
----------------------------------
End of period (including accumulated net investment loss of
$365,803 and $86,008, respectively) $ 1,429,225,494 $ 930,324,471
==================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
43 | OPPENHEIMER CORE BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED DECEMBER 31, 2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.24 $ 10.44 $ 10.38 $ 10.14 $ 9.74
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .47 1 .42 1 .38 1 .35 .54
Net realized and unrealized gain (loss) .01 (.18) .12 .24 .40
--------------------------------------------------------------------------
Total from investment operations .48 .24 .50 .59 .94
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.49) (.44) (.44) (.35) (.54)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.23 $ 10.24 $ 10.44 $ 10.38 $ 10.14
==========================================================================
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 4.84% 2.35% 4.90% 5.87% 10.06%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $670,012 $488,889 $344,205 $382,966 $356,480
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $566,159 $423,182 $353,046 $382,420 $316,279
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 4.66% 4.12% 3.63% 3.39% 5.47%
Total expenses 0.96% 4 1.06% 1.10% 1.10% 1.10%
Expenses after payments and waivers and
reduction to custodian expenses 0.90% 0.90% 0.93% 1.10% 1.10%
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 107% 5 98% 5 94% 5 111% 151%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment 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 less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
4. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 0.96%
5. The portfolio turnover rate excludes purchases and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- ------------------------------------------------------------------------------
Year Ended December 31, 2006 $2,924,444,249 $2,991,206,014
Year Ended December 31, 2005 3,609,072,810 3,584,424,906
Year Ended December 31, 2004 3,447,306,025 3,473,854,068
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
44 | OPPENHEIMER CORE BOND FUND
CLASS B YEAR ENDED DECEMBER 31, 2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.23 $ 10.44 $ 10.37 $ 10.13 $ 9.73
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .40 1 .35 1 .30 1 .27 .47
Net realized and unrealized gain (loss) .01 (.20) .13 .24 .40
--------------------------------------------------------------------------
Total from investment operations .41 .15 .43 .51 .87
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.41) (.36) (.36) (.27) (.47)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.23 $ 10.23 $ 10.44 $ 10.37 $ 10.13
==========================================================================
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 4.17% 1.50% 4.21% 5.05% 9.26%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $116,230 $125,069 $148,445 $197,774 $217,789
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $118,240 $135,296 $167,685 $216,853 $187,343
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 3.92% 3.37% 2.86% 2.61% 4.68%
Total expenses 1.86% 4 1.91% 1.91% 1.87% 1.85%
Expenses after payments and waivers and
reduction to custodian expenses 1.65% 1.65% 1.69% 1.87% 1.85%
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 107% 5 98% 5 94% 5 111% 151%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment 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 less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
4. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 1.86%
5. The portfolio turnover rate excludes purchases and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- --------------------------------------------------------------------------------
Year Ended December 31, 2006 $2,924,444,249 $2,991,206,014
Year Ended December 31, 2005 3,609,072,810 3,584,424,906
Year Ended December 31, 2004 3,447,306,025 3,473,854,068
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
45 | OPPENHEIMER CORE BOND FUND
FINANCIAL HIGHLIGHTS Continued
CLASS C YEAR ENDED DECEMBER 31, 2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
Net asset value, beginning of period $ 10.24 $ 10.45 $ 10.39 $ 10.14 $ 9.74
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .40 1 .35 1 .30 1 .27 .47
Net realized and unrealized gain (loss) .01 (.20) .12 .25 .40
--------------------------------------------------------------------------
Total from investment operations .41 .15 .42 .52 .87
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.41) (.36) (.36) (.27) (.47)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.24 $ 10.24 $ 10.45 $ 10.39 $ 10.14
==========================================================================
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 4.16% 1.49% 4.12% 5.18% 9.26%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $149,440 $109,207 $ 84,696 $ 90,583 $ 90,800
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $126,593 $ 94,742 $ 86,020 $ 96,361 $ 75,531
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 3.92% 3.37% 2.87% 2.64% 4.61%
Total expenses 1.76% 4 1.86% 1.87% 1.84% 1.83%
Expenses after payments and waivers and
reduction to custodian expenses 1.65% 1.65% 1.68% 1.84% 1.83%
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 107% 5 98% 5 94% 5 111% 151%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment 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 less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
4. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 1.76%
5. The portfolio turnover rate excludes purchases and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- --------------------------------------------------------------------------------
Year Ended December 31, 2006 $2,924,444,249 $2,991,206,014
Year Ended December 31, 2005 3,609,072,810 3,584,424,906
Year Ended December 31, 2004 3,447,306,025 3,473,854,068
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
46 | OPPENHEIMER CORE BOND FUND
CLASS N YEAR ENDED DECEMBER 31, 2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.23 $ 10.44 $ 10.37 $ 10.13 $ 9.73
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .45 1 .40 1 .35 1 .31 .51
Net realized and unrealized gain (loss) .01 (.19) .13 .24 .40
--------------------------------------------------------------------------
Total from investment operations .46 .21 .48 .55 .91
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.46) (.42) (.41) (.31) (.51)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.23 $ 10.23 $ 10.44 $ 10.37 $ 10.13
==========================================================================
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 4.68% 1.99% 4.71% 5.51% 9.73%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 58,232 $ 35,836 $ 25,580 $ 17,732 $ 11,302
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 46,672 $ 30,274 $ 21,411 $ 15,338 $ 7,071
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 4.42% 3.87% 3.38% 3.03% 4.76%
Total expenses 1.35% 4 1.47% 1.51% 1.50% 1.44%
Expenses after payments and waivers and
reduction to custodian expenses 1.15% 1.15% 1.20% 1.44% 1.44%
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 107% 5 98% 5 94% 5 111% 151%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment 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 less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
4. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 1.35%
5. The portfolio turnover rate excludes purchases and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- ------------------------------------------------------------------------------
Year Ended December 31, 2006 $2,924,444,249 $2,991,206,014
Year Ended December 31, 2005 3,609,072,810 3,584,424,906
Year Ended December 31, 2004 3,447,306,025 3,473,854,068
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
47 | OPPENHEIMER CORE BOND FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS Y YEAR ENDED DECEMBER 31, 2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.22 $ 10.43 $ 10.36 $ 10.12 $ 9.72
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .51 1 .45 1 .41 1 .39 .59
Net realized and unrealized gain (loss) .01 (.19) .13 .24 .40
--------------------------------------------------------------------------
Total from investment operations .52 .26 .54 .63 .99
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.52) (.47) (.47) (.39) (.59)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.22 $ 10.22 $ 10.43 $ 10.36 $ 10.12
==========================================================================
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 5.29% 2.50% 5.30% 6.35% 10.58%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $435,311 $171,323 $ 38,190 $ 43,215 $ 24,358
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $309,558 $ 91,172 $ 45,333 $ 38,398 $ 10,243
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 5.03% 4.39% 3.92% 3.80% 5.53%
Total expenses 0.55% 4 0.76% 0.64% 0.63% 0.63%
Expenses after payments and waivers and
reduction to custodian expenses 0.55% 0.65% 0.64% 0.63% 0.63%
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 107% 5 98% 5 94% 5 111% 151%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment 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 less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
4. Expenses including indirect expenses from affiliated fund were as follows:
Year Ended December 31, 2006 0.55%
5. The portfolio turnover rate excludes purchases and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- -------------------------------------------------------------------------------
Year Ended December 31, 2006 $2,924,444,249 $2,991,206,014
Year Ended December 31, 2005 3,609,072,810 3,584,424,906
Year Ended December 31, 2004 3,447,306,025 3,473,854,068
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
48 | OPPENHEIMER CORE BOND FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Core Bond Fund (the Fund), is a separate fund of Oppenheimer
Integrity Funds, an open-end management investment company registered under the
Investment Company Act of 1940, as amended. The Fund's investment objective is
to seek total return by investing mainly in debt instruments. The Fund's
investment advisor is OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B, Class C, Class N and Class Y shares.
Class A shares are sold at their offering price, which is normally net asset
value plus a front-end sales charge. 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. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC, however, the institutional investor
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 due to each class having its own expenses,
such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. 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 may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic 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(R) 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 traded on
foreign exchanges are valued based on the last sale price on the principal
exchange on which the security is traded, as identified by the portfolio pricing
service, prior to the time when the Fund's assets are valued. In the absence of
a sale, the security is valued at the official closing price on the principal
exchange. Corporate, government and municipal debt instruments having a
remaining maturity in excess of sixty days and all mortgage-backed securities
will be valued at the mean between the "bid" and "asked" prices. Futures
contracts traded on a commodities or futures exchange will be valued at the
final settlement price or official closing price on the principal exchange as
reported by such principal exchange at its trading session
49 | OPPENHEIMER CORE BOND FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
ending at, or most recently prior to, the time when the Fund's assets are
valued. Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded. Securities (including restricted
securities) for which market quotations are not readily available are valued at
their fair value. Foreign and domestic 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 exchanges will be fair valued. Fair value is determined in good faith
using consistently applied procedures under the supervision of the Board of
Trustees. Investments in open-end registered investment companies (including
affiliated funds) are valued at that fund's net asset value. Short-term "money
market type" debt securities with remaining maturities of sixty days or less are
valued at amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED BASIS OR FORWARD COMMITMENT. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis or
forward commitment take place generally at least 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 internally designated assets with a market value equal to or greater
than the amount of its purchase commitments. The purchase of securities on a
when-issued basis or forward commitment 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 or forward commitment prior to settlement of
the original purchase. As of December 31, 2006, the Fund had purchased
$198,622,970 of securities issued on a when-issued basis or forward commitment
and sold $24,059,134 of securities issued on a when-issued basis or forward
commitment.
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.
50 | OPPENHEIMER CORE BOND FUND
- --------------------------------------------------------------------------------
SECURITY CREDIT RISK. The Fund invests in high-yield securities, which may be
subject to a greater degree of credit risk, market fluctuations and loss of
income and principal, and may be more sensitive to economic conditions than
lower-yielding, higher-rated fixed-income securities. The Fund may acquire
securities in default, and is not obligated to dispose of securities whose
issuers subsequently default. As of December 31, 2006, securities with an
aggregate market value of $2, representing less than 0.01% of the Fund's net
assets, were in default.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars 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. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.
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.
- --------------------------------------------------------------------------------
AFFILIATED FUNDS. The Fund is permitted to invest daily available cash balances
in affiliated money market funds. Each day, the Fund invests the available cash
in Class E shares of Oppenheimer Institutional Money Market Fund ("IMMF") which
seeks current income and stability of principal. IMMF is a registered open-end
management investment company, regulated as a money market fund under the
Investment Company Act of 1940, as amended. The Manager is also the investment
advisor of IMMF. The Fund's investment in IMMF is included in the Statement of
Investments. As a shareholder, the Fund is subject to its proportional share of
IMMF's Class E expenses, including its management fee. The Manager will waive
fees and/or reimburse Fund expenses in an amount equal to the indirect
management fees incurred through the Fund's investment in IMMF.
- --------------------------------------------------------------------------------
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
51 | OPPENHEIMER CORE BOND FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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.
- --------------------------------------------------------------------------------
INVESTMENTS WITH OFF BALANCE SHEET RISK. The Fund enters into financial
instrument transactions (such as swaps, futures, options and other derivatives)
that may have off-balance sheet market risk. Off-balance sheet market risk
exists when the maximum potential loss on a particular financial instrument is
greater than the value of such financial instrument, as reflected in the Fund's
Statement of Assets and Liabilities.
- --------------------------------------------------------------------------------
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.
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
APPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2,3 TAX PURPOSES
--------------------------------------------------------------------------
$17,684 $ -- $12,437,027 $751,154
1. As of December 31, 2006, the Fund had $12,437,027 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of December 31, 2006,
details of the capital loss carryforwards were as follows:
EXPIRING
-------------------------------------
2010 $ 2,007,359
2013 5,244,089
2014 5,185,579
-----------
Total $12,437,027
===========
2. During the fiscal year ended December 31, 2006, the Fund did not utilize any
capital loss carryforward.
3. During the fiscal year ended December 31, 2005, the Fund did not utilize any
capital loss carryforward.
52 | OPPENHEIMER CORE BOND FUND
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 December 31, 2006. Net assets of
the Fund were unaffected by the reclassifications.
REDUCTION TO INCREASE TO
ACCUMULATED ACCUMULATED
REDUCTION TO NET INVESTMENT NET REALIZED LOSS
PAID-IN CAPITAL LOSS ON INVESTMENTS
-----------------------------------------------------------------------
$92,946 $2,129,358 $2,036,412
The tax character of distributions paid during the years ended December 31, 2006
and December 31, 2005 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2006 DECEMBER 31, 2005
-------------------------------------------------------------------------
Distributions paid from:
Ordinary income $56,032,954 $31,786,167
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 December 31, 2006 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 $ 1,651,997,170
Federal tax cost of other investments (152,113,580)
----------------
Total federal tax cost $ 1,499,883,590
================
Gross unrealized appreciation $ 14,760,236
Gross unrealized depreciation (14,009,082)
----------------
Net unrealized appreciation $ 751,154
================
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a compensation
deferral plan for independent trustees that enables trustees to elect to defer
receipt of all or a portion of the annual compensation they are entitled to
receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of
53 | OPPENHEIMER CORE BOND FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
Assets and Liabilities. Deferral of trustees' fees under the plan will not
affect the net assets of the Fund, and will not materially affect the Fund's
assets, liabilities or net investment income per share. Amounts will be deferred
until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
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.
54 | OPPENHEIMER CORE BOND FUND
- --------------------------------------------------------------------------------
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 DECEMBER 31, 2006 YEAR ENDED DECEMBER 31, 2005
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
CLASS A
Sold 24,694,647 $ 251,126,785 22,484,859 $ 233,172,087
Dividends and/or
distributions reinvested 2,187,400 22,195,864 1,468,476 15,183,663
Acquisition-Note 11 4,211,155 42,659,003 -- --
Redeemed (13,362,338) (135,196,619) (9,157,866) (94,752,427)
-------------------------------------------------------------------
Net increase 17,730,864 $ 180,785,033 14,795,469 $ 153,603,323
===================================================================
- ------------------------------------------------------------------------------------------------
CLASS B
Sold 2,765,817 $ 28,133,557 2,411,315 $ 24,979,660
Dividends and/or
distributions reinvested 404,022 4,097,199 379,150 3,922,040
Acquisition-Note 11 481,162 4,874,168 -- --
Redeemed (4,509,251) (45,642,439) (4,791,597) (49,621,122)
-------------------------------------------------------------------
Net decrease (858,250) $ (8,537,515) (2,001,132) $ (20,719,422)
===================================================================
- ------------------------------------------------------------------------------------------------
CLASS C
Sold 5,956,040 $ 60,599,966 4,590,226 $ 47,533,624
Dividends and/or
distributions reinvested 429,623 4,363,414 273,806 2,832,425
Acquisition-Note 11 862,709 8,747,866 -- --
Redeemed (3,312,539) (33,556,756) (2,308,506) (23,882,745)
-------------------------------------------------------------------
Net increase 3,935,833 $ 40,154,490 2,555,526 $ 26,483,304
===================================================================
- ------------------------------------------------------------------------------------------------
CLASS N
Sold 3,137,184 $ 31,843,965 2,021,843 $ 20,942,281
Dividends and/or
distributions reinvested 171,486 1,739,889 103,371 1,068,388
Acquisition-Note 11 315,811 3,199,167 -- --
Redeemed (1,432,560) (14,511,459) (1,073,761) (11,114,760)
-------------------------------------------------------------------
Net increase 2,191,921 $ 22,271,562 1,051,453 $ 10,895,909
===================================================================
- ------------------------------------------------------------------------------------------------
CLASS Y
Sold 28,523,591 $ 288,469,512 13,663,394 $ 141,043,009
Dividends and/or
distributions reinvested 1,606,546 16,289,132 415,195 4,276,823
Redeemed (4,282,356) (43,135,096) (980,307) (10,129,202)
-------------------------------------------------------------------
Net increase 25,847,781 $ 261,623,548 13,098,282 $ 135,190,630
===================================================================
55 | OPPENHEIMER CORE BOND FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and money market funds, for the year ended December
31, 2006, were as follows:
PURCHASES SALES
- -------------------------------------------------------------------------------------------
Investment securities $1,296,083,586 $ 839,471,548
U.S. government and government agency obligations 198,081,292 232,712,822
To Be Announced (TBA) mortgage-related securities 2,924,444,249 2,991,206,014
- --------------------------------------------------------------------------------
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 average net assets as shown in the following table:
FEE SCHEDULE EFFECTIVE MARCH 27, 2006 FEE SCHEDULE JAN. 1, 2006 TO MARCH 26, 2006
- ------------------------------------- -------------------------------------------
Up to $1 billion 0.50% Up to $200 million 0.60%
Over $1 billion 0.35 Next $200 million 0.57
Next $200 million 0.54
Next $200 million 0.51
Next $200 million 0.45
Over $1 billion 0.35
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
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 December 31, 2006, the Fund paid
$2,139,878 to OFS for services to the Fund.
Additionally, Class Y shares are subject to minimum fees of $10,000 per
annum for assets of $10 million or more. The Class Y shares are subject to the
minimum fees in the event that the per account fee does not equal or exceed the
applicable minimum fees. OFS may voluntarily waive the minimum fees.
- --------------------------------------------------------------------------------
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
periodically 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 periodically 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
periods. Fees incurred by the Fund under the plan are detailed in the Statement
of Operations.
56 | OPPENHEIMER CORE BOND FUND
- --------------------------------------------------------------------------------
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% on Class B and
Class C shares and 0.25% 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
prior to the effective date of such termination. The Distributor determines its
uncompensated expenses under the plan at calendar quarter ends. The
Distributor's aggregate uncompensated expenses under the plan at December 31,
2006 for Class B, Class C and Class N shares were $2,540,981, $2,472,256 and
$889,782, 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 following table 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
- -----------------------------------------------------------------------------------------------------------------
December 31, 2006 $578,248 $7,802 $332,533 $16,575 $5,807
- -----------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. Effective March 1, 2004, the Manager has
voluntarily undertaken to limit the "Total Expenses" for all classes of shares
so that total expenses as percentages of average daily net assets, will not
exceed the following annual rates: 0.90% for the Class A shares; 1.65% for the
Class B and Class C shares, respectively; 1.15% for the Class N shares and 0.65%
for the Class Y shares. During the year ended December 31, 2006, the Manager
reimbursed the Fund $321,367, $244,417, $137,135, $86,001 and $1,917 for Class
A, Class B, Class C, Class N and Class Y, respectively. The Manager may
terminate this voluntary expense limitation arrangement at any time without
notice to shareholders.
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.
During the year ended December 31, 2006, OFS waived $5,431 for Class N shares.
This undertaking may be amended or withdrawn at any time.
57 | OPPENHEIMER CORE BOND FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
The Manager will waive fees and/or reimburse Fund expenses in an amount
equal to the indirect management fees incurred through the Fund's investment in
IMMF. During the year ended December 31, 2006, the Manager waived $10,083 for
IMMF management fees.
- --------------------------------------------------------------------------------
5. 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 at the closing and expiration of futures
contracts. The net change in unrealized appreciation and depreciation is
reported in 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.
58 | OPPENHEIMER CORE BOND FUND
As of December 31, 2006, the Fund had outstanding futures contracts as follows:
UNREALIZED
EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS DECEMBER 31, 2006 (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
U.S. Long Bonds 3/21/07 1,397 $155,678,188 $(2,237,942)
U.S. Treasury Nts., 10 yr 3/21/07 113 12,143,969 (172,685)
------------
(2,410,627)
------------
CONTRACTS TO SELL
Euro-Bundesobligation, 10 yr. 3/8/07 179 27,416,501 678,823
U.S. Treasury Nts., 2 yr 3/30/07 1,118 228,106,938 605,262
U.S. Treasury Nts., 5 yr 3/30/07 607 63,772,938 371,287
------------
1,655,372
------------
$ (755,255)
============
- --------------------------------------------------------------------------------
6. CREDIT DEFAULT SWAP CONTRACTS
Credit default swaps are designed to transfer the credit exposure of fixed
income products between counterparties. The Fund may enter into credit default
swaps, both directly ("unfunded swaps") and indirectly in the form of a swap
embedded within a structured note ("funded swaps"), to protect against the risk
that a security will default. Unfunded and funded credit default swaps may be on
a single security, or a basket of securities. The Fund may take a short position
(purchaser of credit protection) or a long position (seller of credit
protection) in the credit default swap. Risks of credit default swaps include,
but are not limited to, the cost of paying for credit protection if there are no
credit events, pricing transparency when assessing the cost of a credit default
swap, counterparty risk, and the need to fund the delivery obligation (either
cash or defaulted bonds depending on whether the Fund is long or short the swap,
respectively).
The Fund would take a short position in a credit default swap (the
"unfunded swap") against a long portfolio position to decrease exposure to
specific high yield issuers. As a purchaser of credit protection under a swap
contract, the Fund pays a periodic interest fee on the notional amount to the
counterparty. This interest fee is accrued daily as a component of unrealized
appreciation (depreciation) and is recorded as realized loss upon payment. Upon
occurrence of a specific credit event with respect to the underlying referenced
debt obligation, the Fund is obligated to deliver that security to the
counter-party in exchange for receipt of the notional amount from the
counterparty. The
59 | OPPENHEIMER CORE BOND FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. CREDIT DEFAULT SWAP CONTRACTS Continued
difference between the value of the security delivered and the notional amount
received is recorded as realized gain and is included on the Statement of
Operations. Credit default swaps are marked to market daily using different
sources, including quotations from counterparties, pricing services, brokers or
market makers. The unrealized appreciation (depreciation) related to the change
in the valuation of the notional amount of the swap is combined with the amount
due to (owed by) the Fund at termination or settlement and disclosed separately
on the Statement of Assets and Liabilities. The net change in this amount is
included on the Statement of Operations.
Information regarding such credit default swaps as of December 31, 2006 is as
follows:
NOTIONAL ANNUAL
AMOUNT INTEREST
RECEIVED BY THE RATE
REFERENCED DEBT FUND UPON PAID BY TERMINATION UNREALIZED
COUNTERPARTY OBLIGATION CREDIT EVENT THE FUND DATES DEPRECIATION
- --------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
J.C. Penney Co., Inc. $2,065,000 0.580% 3/20/12 $ 3,481
Weyerhaeuser Co. 5,950,000 0.580 9/20/11 38,876
- --------------------------------------------------------------------------------------------------------------------
Morgan Stanley
Capital Services, Inc.:
Arrow Electronics, Inc. 5,950,000 0.790 9/20/11 106,516
Arrow Electronics, Inc. 2,950,000 0.770 9/20/11 50,303
Belo Corp. 3,100,000 0.650 6/20/11 21,278
Belo Corp. 1,730,000 0.670 6/20/11 13,272
Belo Corp. 3,440,000 0.675 6/20/11 27,085
Ford Motor Co. 3,065,000 5.300 12/20/08 170,541
Ford Motor Co. 6,445,000 5.400 12/20/08 370,761
General Motors Corp. 3,250,000 4.000 12/20/08 133,981
General Motors Corp. 3,440,000 3.950 12/20/08 138,552
International Paper Co. 6,600,000 0.409 12/20/11 20,984
-------------
1,095,630
=============
The Fund would take a long position in the credit default swap note (the "funded
swap") to increase the exposure to specific high yield corporate issuers. As a
seller of credit protection under a swap contract, the Fund receives a periodic
interest fee on the notional amount from the counterparty. This interest fee is
accrued daily as a component of unrealized appreciation (depreciation) and is
recorded as realized gain upon receipt. Upon occurrence of a specific credit
event with respect to the underlying referenced debt obligation, the Fund
receives that security from the counterparty in exchange for payment of the
notional amount to the counterparty. The difference between the value of the
security received and the notional amount paid is recorded as realized loss and
is included on the Statement of Operations. Credit default swaps are marked to
market daily using different sources, including quotations from counterparties,
pricing services,
60 | OPPENHEIMER CORE BOND FUND
brokers or market makers. The unrealized appreciation (depreciation) related to
the change in the valuation of the notional amount of the swap is combined with
the amount due to (owed by) the Fund at termination or settlement and disclosed
separately on the Statement of Assets and Liabilities. The net change in this
amount is included on the Statement of Operations.
Information regarding such credit default swaps as of December 31, 2006 is as
follows:
NOTIONAL ANNUAL
AMOUNT INTEREST
PAID BY THE RATE UNREALIZED
REFERENCED DEBT FUND UPON RECEIVED BY TERMINATION APPRECIATION
COUNTERPARTY OBLIGATION CREDIT EVENT THE FUND DATES (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
Abitibi-Consolidated Co.
of Canada $ 4,860,000 1.52% 9/20/07 $ 20,044
Allied Waste North America, Inc. 1,830,000 2.00 9/20/09 49,761
Allied Waste North America, Inc. 3,020,000 2.00 9/20/09 82,119
Bombardier, Inc. 1,550,000 0.90 9/20/07 5,705
Eastman Kodak Co. 4,550,000 1.00 12/20/08 25,665
General Motors Acceptance Corp. 2,480,000 2.30 6/20/07 24,306
- -----------------------------------------------------------------------------------------------------------------
Morgan Stanley
Capital Services, Inc.:
ArvinMeritor, Inc. 1,720,000 1.05 9/20/07 5,159
ArvinMeritor, Inc. 1,410,000 1.10 9/20/07 4,767
ArvinMeritor, Inc. 185,000 1.20 9/20/07 767
Bombardier, Inc. 1,720,000 1.00 9/20/07 9,143
Bombardier, Inc. 1,715,000 1.05 9/20/07 9,773
CDX.NA.IG HVOL7 17,000,000 0.75 12/20/11 (28,810)
Ford Motor Co. 3,065,000 7.05 12/20/16 178,637
Ford Motor Co. 6,445,000 7.15 12/20/16 409,692
General Motors Corp. 3,250,000 5.80 12/20/16 256,186
General Motors Corp. 3,440,000 5.75 12/20/16 261,180
General Motors Acceptance Corp. 3,380,000 3.15 6/20/07 46,345
Hyundai Motor
Manufacturing Alabama LLC 2,500,000 0.40 6/20/07 3,327
J.C. Penney Co., Inc. 5,950,000 0.61 6/20/13 (40,263)
--------------
$ 1,323,503
==============
7. ILLIQUID SECURITIES
As of December 31, 2006, 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 will not invest more than 15% of its net assets (determined at the time of
purchase and reviewed periodically) in illiquid securities. Securities that are
illiquid are marked with the applicable footnote on the Statement of
Investments.
61 | OPPENHEIMER CORE BOND FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of
securities, letters of credit or cash, against the loaned securities and
maintains collateral in an amount not less than 100% of the market value of the
loaned securities during the period of the loan. The market value of the loaned
securities is determined at the close of business each day. If the Fund is
undercollateralized at the close of business due to an increase in market value
of securities on loan, additional collateral is requested from the borrowing
counterparty and is delivered to the Fund on the next business day. Cash
collateral may be invested in approved investments and the Fund bears the risk
of any loss in value of these investments. The Fund retains a portion of the
interest earned from the collateral. If the borrower defaults on its obligation
to return the securities loaned because of insolvency or other reasons, the Fund
could experience delays and cost in recovering the securities loaned or in
gaining access to the collateral. The Fund continues to receive the economic
benefit of interest or dividends paid on the securities loaned in the form of a
substitute payment received from the borrower. As of December 31, 2006, the Fund
had on loan securities valued at $60,969,735, which are included in the
Statement of Assets and Liabilities as "Investments, at value" and, when
applicable, as "Receivable for Investments sold." Cash collateral of $60,955,164
was received for the loans, all of which was subsequently invested in approved
instruments. In addition, collateral of $1,200,515 was also received in the form
of securities.
- --------------------------------------------------------------------------------
9. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Fund's tax returns to determine whether it
is "more-likely-than-not" that tax positions taken in the Fund's tax return will
be ultimately sustained. A tax liability and expense must be recorded in respect
of any tax position that, in Management's judgment, will not be fully realized.
FIN 48 is effective for fiscal years beginning after December 15, 2006. As of
December 31, 2006, the Manager has evaluated the implications of FIN 48 and does
not currently anticipate a material impact to the Fund's financial statements.
The Manager will continue to monitor the Fund's tax positions prospectively for
potential future impacts.
In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 157, FAIR VALUE MEASUREMENTS. This standard establishes a
single authoritative definition of fair value, sets out a framework for
measuring fair value and expands disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. As of December 31, 2006, the Manager does not believe the
adoption of SFAS No. 157 will
62 | OPPENHEIMER CORE BOND FUND
materially impact the financial statement amounts; however, additional
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the measurements on changes in net assets for the
period.
- --------------------------------------------------------------------------------
10. LITIGATION
A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds including the Fund) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.
- --------------------------------------------------------------------------------
11. ACQUISITION OF OPPENHEIMER TOTAL RETURN BOND FUND
On March 23, 2006, the Fund acquired all of the net assets of Oppenheimer Total
Return Bond Fund, pursuant to an Agreement and Plan of Reorganization approved
by the Oppenheimer Total Return Bond Fund shareholders on March 15, 2006. The
Fund issued (at an exchange ratio of 0.964160 for Class A, 0.964242 for Class B,
0.962906 for Class C and 0.964275 for Class N of the Fund to one share of
Oppenheimer Total Return Bond Fund), 4,211,155; 481,162; 862,709 and 315,811
shares of beneficial interest for Class A, Class B, Class C and Class N,
respectively, valued at $42,659,003, $4,874,168, $8,747,866 and $3,199,167 in
exchange for the net assets, resulting in combined Class A net assets of
$549,554,571, Class B net assets of $124,605,847, Class C net assets of
$122,287,022 and Class N net assets of $43,300,947 on March 23, 2006. The net
assets acquired included net unrealized depreciation of $949,524 and an unused
capital loss carryforward of $759,669, potential utilization subject to tax
limitations. The exchange qualified as a tax-free reorganization for federal
income tax purposes.
63 | OPPENHEIMER CORE BOND FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
OPPENHEIMER CORE BOND FUND:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Core Bond Fund (the "Fund"), a series of Oppenheimer Integrity
Funds, including the statement of investments, as of December 31, 2006, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
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.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits included consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2006, by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. 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 the
Fund as of December 31, 2006, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 8, 2007
64 | OPPENHEIMER CORE BOND FUND
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2007, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2006. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Dividends, if any, paid by the Fund during the fiscal year ended December
31, 2006 which are not designated as capital gain distributions should be
multiplied by 0.01% to arrive at the amount eligible for the corporate
dividend-received deduction.
A portion, if any, of the dividends paid by the Fund during the fiscal
year ended December 31, 2006 which are not designated as capital gain
distributions are eligible for lower individual income tax rates to the extent
that the Fund has received qualified dividend income as stipulated by recent tax
legislation. $4,450 of the Fund's fiscal year taxable income may be eligible for
the lower individual income tax rates. In early 2007, shareholders of record
received information regarding the percentage of distributions that are eligible
for lower individual income tax rates.
Recent tax legislation allows a regulated investment company to designate
distributions not designated as capital gain distributions, as either interest
related dividends or short-term capital gain dividends, both of which are exempt
from the U.S. withholding tax applicable to non U.S. taxpayers. For the fiscal
year ended December 31, 2006, $53,413,431 or 95.33% of the ordinary
distributions paid by the Fund qualifies as an interest related dividend.
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.
65 | OPPENHEIMER CORE BOND FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
1.800.525.7048, (ii) on the Fund's web-site at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file 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 Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
66 | OPPENHEIMER CORE BOND FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services, (v) whether economies of scale
are realized as the Fund grows and whether fee levels reflect these economies of
scale for Fund investors and (vi) other benefits to the Manager from its
relationship with the Fund. Outlined below is a summary of the principal
information considered by the Board as well as the Board's conclusions.
The Board was aware that there are alternatives to retaining the Manager.
NATURE, QUALITY AND EXTENT OF SERVICES. The Board considered information
about the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel who provide such services. The Manager's
duties include providing the Fund with the services of the portfolio manager and
the Manager's investment team, who provide research, analysis and other advisory
services in regard to the Fund's investments; securities trading services;
oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel who are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
67 | OPPENHEIMER CORE BOND FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over forty years of experience
as an investment adviser and that its assets under management rank it among the
top mutual fund managers in the United States. The Board evaluated the Manager's
administrative, accounting, legal and compliance services, and information the
Board has received regarding the experience and professional qualifications of
the Manager's key personnel and the size and functions of its staff providing
investment management services to the Fund. In its evaluation of the quality of
the portfolio management services provided, the Board considered the experience
of Angelo Manioudakis and the Manager's Core Fixed Income investment team and
analysts. Mr. Manioudakis has been a portfolio manager of the Fund since April
2002. The Board members also considered the totality of their experiences with
the Manager as directors or trustees of the Fund and other funds advised by the
Manager. In light of the foregoing, the Board concluded that the Fund benefits
from the services provided under the Agreement as a result of the Manager's
experience, reputation, personnel, operations, and resources.
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the investment performance of the Fund and the
Manager at each Board meeting, including comparative performance information.
The Board also reviewed information, prepared by the Manager and by the
independent consultant, comparing the Fund's historical performance to relevant
market indices and to the performance of other intermediate investment-grade
debt funds (including both funds advised by the Manager and funds advised by
other investment advisers). The Board noted that the Fund's one-year, three-year
and five-year performance were better than its peer group median and its
ten-year performance was equal to its peer group median.
COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board
considered information regarding the Manager's costs in serving as the Fund's
investment adviser, including the costs associated with the personnel and
systems necessary to manage the Fund, and information regarding the Manager's
profitability from its relationship with the Fund. The Board reviewed the fees
paid to the Manager and the other expenses borne by the Fund. The Board also
evaluated the comparability of the fees charged and the services provided to the
Fund to the fees and services for other clients or accounts advised by the
Manager. The independent consultant provided comparative data in regard to the
fees and expenses of the Fund, other intermediate investment-grade debt funds
and other funds with comparable asset levels and distribution features. The
Board noted that the Manager has voluntarily undertaken to limit the "Total
Annual Operating Expenses" for all classes of shares so that
68 | OPPENHEIMER CORE BOND FUND
"Total Annual Operating Expenses," as percentages of average daily net assets,
will not exceed the following annual rates: 0.90% for the Class A shares; 1.65%
for the Class B and Class C shares, respectively; 1.15% for the Class N shares
and 0.65% for the Class Y shares. After all waivers, the actual "Other Expenses"
and "Total Annual Operating Expenses" for each class as a percentage of average
daily net assets were 0.10% and 0.90% for Class A shares, 0.10% and 1.65% for
Class B shares, 0.10% and 1.65% for Class C shares, 0.10% and 1.15% for the
Class N shares, and 0.10% and 0.65% for Class Y. The Board noted that the Fund's
contractual and actual management fees are lower than its peer group median.
ECONOMIES OF SCALE. The Board reviewed whether the Manager may realize
economies of scale in managing and supporting the Fund, whether those economies
of scale benefit the Fund's shareholders and the current level of Fund assets in
relation to the Fund's management fee breakpoints, which are intended to share
with shareholders economies of scale that may exist as the Fund grows.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates. The Board also considered that the Manager must be able to pay and
retain experienced professional personnel at competitive rates to provide
services to the Fund and that maintaining the financial viability of the Manager
is important in order for the Manager to continue to provide significant
services to the Fund and its shareholders.
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and to the independent Trustees. Fund counsel and the independent
Trustees' counsel are both independent of the Manager within the meaning and
intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
decided to continue the Agreement for another year. In arriving at this
decision, the Board did not single out any factor or factors as being more
important than others, but considered all of the factors together. The Board
judged the terms and conditions of the Agreement, including the management fee,
in light of all of the surrounding circumstances.
69 | OPPENHEIMER CORE BOND FUND
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS
FUND, LENGTH OF SERVICE, AGE HELD; NUMBER OF PORTFOLIOS IN THE FUND COMPLEX CURRENTLY OVERSEEN
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL,
TRUSTEES COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
WILLIAM L. ARMSTRONG, President, Colorado Christian University (since 2006); Chairman of the following
Chairman of the Board private mortgage banking companies: Cherry Creek Mortgage Company (since
of Trustees (since 2003), 1991), Centennial State Mortgage Company (since 1994), and The El Paso
Trustee (since 1999) Mortgage Company (since 1993); Chairman of the following private companies:
Age: 69 Ambassador Media Corporation (since 1984) and Broadway Ventures (since 1984);
Director of the following: Helmerich & Payne, Inc. (oil and gas drilling/production
company) (since 1992), Campus Crusade for Christ (since 1991) and The Lynde
and Harry Bradley Foundation, Inc. (non-profit organization) (since 2002); former
Chairman of the following: Transland Financial Services, Inc. (private mortgage
banking company) (1997-2003), Great Frontier Insurance (insurance agency) (1995-
2000), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-2000) and
Frontier Title (title insurance agency) (1995-2000); former Director of the
following: UNUMProvident (insurance company) (1991-2004), Storage Technology
Corporation (computer equipment company) (1991-2003) and International
Family Entertainment (television channel) (1992-1997); U.S. Senator (January 1979-
January 1991). Oversees 37 portfolios in the OppenheimerFunds complex.
ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Inc. (General Partner of private
Trustee (since 1993) equity funds) (until February 2001); Chairman, President and Chief Executive
Age: 75 Officer of A.G. Edwards Capital, Inc. (until March 2000); Director of A.G. Edwards
& Sons, Inc. (brokerage company) (until 2000) and A.G. Edwards Trust Company
(investment adviser) (until 2000); Vice Chairman and Director of A.G. Edwards,
Inc. (until March 1999); Vice Chairman of A.G. Edwards & Sons, Inc. (until March
1999); Chairman of A.G. Edwards Trust Company (until March 1999) and A.G.E.
Asset Management (investment adviser) (until March 1999). Oversees 37
portfolios in the OppenheimerFunds complex.
GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Corporation
Trustee (since 2001) (December 1991-April 1999); President, Treasurer and Director of Centennial
Age: 70 Capital Corporation (June 1989-April 1999); Chief Executive Officer and Director
of MultiSource Services, Inc. (March 1996-April 1999); Mr. Bowen held several
positions with the Manager and with subsidiary or affiliated companies of the
Manager (September 1987-April 1999). Oversees 37 portfolios in the
OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical
Trustee (since 2001) site) (since June 2000); Director of Genetic ID, Inc. (biotech company) (March
Age: 68 2001-May 2002); Partner at PricewaterhouseCoopers LLP (accounting firm)
(July 1974-June 1999); Chairman of Price Waterhouse LLP Global Investment
Management Industry Services Group (accounting firm) (July 1994-June 1998).
Oversees 37 portfolios in the OppenheimerFunds complex.
70 | OPPENHEIMER CORE BOND FUND
JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of
Trustee (since 1990) Northwestern Energy Corp. (public utility corporation) (since November 2004);
Age: 65 Director of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky
Mountain Elk Foundation (non-profit organization) (February 1998-February
2003 and since February 2005); Chairman and Director (until October 1996) and
President and Chief Executive Officer (until October 1995) of the Manager;
President, Chief Executive Officer and Director of the following: Oppenheimer
Acquisition Corp. ("OAC") (parent holding company of the Manager), Shareholders
Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees
37 portfolios in the OppenheimerFunds complex.
SAM FREEDMAN, Director of Colorado UpLIFT (charitable organization) (since September 1984).
Trustee (since 1996) Mr. Freedman held several positions with the Manager and with subsidiary or
Age: 66 affiliated companies of the Manager (until October 1994). Oversees 37
portfolios in the OppenheimerFunds complex.
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational
Trustee (since 2002) organization) (since February 2000); Board Member of Middlebury College (educational
Age: 60 organization) (since December 2005); Director of The California Endowment
(philanthropic organization) (since April 2002); Director (February 2002-2005)
and Chairman of Trustees (since 2006) of the Community Hospital of Monterey
Peninsula; Director (October 1991-2005) and Vice Chairman (since 2006) of
American Funds' Emerging Markets Growth Fund, Inc. (mutual fund); President
of ARCO Investment Management Company (February 1991-April 2000);
Member of the investment committees of The Rockefeller Foundation (since
2001) and The University of Michigan (since 2000); Advisor at Credit Suisse First
Boston's Sprout venture capital unit (venture capital fund) (1994-January 2005);
Trustee of MassMutual Institutional Funds (investment company) (1996-June
2004); Trustee of MML Series Investment Fund (investment company) (April
1989-June 2004); Member of the investment committee of Hartford Hospital
(2000-2003); and Advisor to Unilever (Holland) pension fund (2000-2003).
Oversees 37 portfolios in the OppenheimerFunds complex.
ROBERT J. MALONE, Director of Jones International University (educational organization) (since
Trustee (since 2002) August 2005); Chairman, Chief Executive Officer and Director of Steele Street
Age: 62 State Bank (commercial banking) (since August 2003); Director of Colorado
UpLIFT (charitable organization) (since 1986); Trustee of the Gallagher Family
Foundation (non-profit organization) (since 2000); Former Chairman of U.S.
Bank-Colorado (subsidiary of U.S. Bancorp and formerly Colorado National
Bank) (July 1996-April 1999); Director of Commercial Assets, Inc. (real estate
investment trust) (1993-2000); Director of Jones Knowledge, Inc. (2001-July
2004); and Director of U.S. Exploration, Inc. (oil and gas exploration) (1997-
February 2004). Oversees 37 portfolios in the OppenheimerFunds complex.
F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds)
Trustee (since 2001) (investment company) (since 1996) and MML Series Investment Fund (invest-
Age: 64 ment company) (since 1996); Trustee (since 1987) and Chairman (1994-2005) of
the Investment Committee of the Worcester Polytech Institute (private
university); President and Treasurer of the SIS Funds (private charitable fund) (since
January 1999); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank)
(commercial bank) (January 1999-July 1999); and Executive Vice President of Peoples
Heritage Financial Group, Inc. (commercial bank) (January 1999-July 1999).
Oversees 39 portfolios in the OppenheimerFunds complex.
71 | OPPENHEIMER CORE BOND FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR,
AND OFFICER NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM,
OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN ANNUAL
TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED
TRUSTEE DUE TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President
Trustee, President and (since September 2000) of the Manager; President and director or trustee of other
Principal Executive Officer Oppenheimer funds; President and Director of OAC and of Oppenheimer
(since 2001) Partnership Holdings, Inc. (holding company subsidiary of the Manager) (since
Age: 57 July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the
Manager) (since November 2001); Chairman and Director of Shareholder Services,
Inc. and of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the
Manager) (since July 2001); President and Director of OppenheimerFunds Legacy
Program (charitable trust program established by the Manager) (since July 2001);
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 2001)
and Director (since July 2001) of Oppenheimer Real Asset Management, Inc.;
Executive Vice President of Massachusetts Mutual Life Insurance Company (OAC's
parent company) (since February 1997); Director of DLB Acquisition Corporation
(holding company parent of Babson Capital Management LLC) (since June 1995);
Member of the Investment Company Institute's Board of Governors (since
October 3, 2003); Chief Operating Officer of the Manager (September 2000-June
2001); President and Trustee of MML Series Investment Fund and MassMutual
Select Funds (open-end investment companies) (November 1999-November
2001); Director of C.M. Life Insurance Company (September 1999-August 2000);
President, Chief Executive Officer and Director of MML Bay State Life Insurance
Company (September 1999-August 2000); Director of Emerald Isle Bancorp and
Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp) (June
1989-June 1998). Oversees 96 portfolios in the OppenheimerFunds complex.
- ----------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. ZACK,
THE FUND GILLESPIE AND MS. BLOOMBERG, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW
YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY, WIXTED, PETERSEN, SZILAGYI AND MS.
IVES, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924; FOR MESSRS. MANIOUDAKIS,
BOMFIM, CAAN, GORD AND SWANEY, 470 ATLANTIC AVENUE, 11TH FLOOR, BOSTON, MA 02210.
EACH OFFICER SERVES FOR AN ANNUAL TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT,
DEATH OR REMOVAL.
ANGELO G. MANIOUDAKIS, Senior Vice President of the Manager (since April 2002) of HarbourView Asset
Vice President and Management Corporation (since April 2002) and of OFI Institutional Asset
Portfolio Manager Management, Inc. (since June 2002); Executive Director and portfolio manager
(since 2002) for Miller, Anderson & Sherrerd, a division of Morgan Stanley Investment
Age: 40 Management (August 1993-April 2002). An officer of 17 portfolios in the
OppenheimerFunds complex.
ANTULIO N. BOMFIM, Vice President of the Manager (since October 2003); Senior Economist at the
Vice President and Board of Governors of the Federal Reserve System (June 1992-October 2003).
Portfolio Manager A portfolio manager of 15 portfolios in the OppenheimerFunds complex.
(since 2006)
Age: 40
72 | OPPENHEIMER CORE BOND FUND
GEOFFREY CAAN, Vice President and Portfolio Manager of the Manager (since August 2003); Vice
Vice President and President of ABN AMRO NA, Inc. (June 2002-August 2003); Vice President of
Portfolio Manager Zurich Scudder Investments (January 1999-June 2002). A portfolio manager of
(since 2006) 15 portfolios in the OppenheimerFunds complex.
Age: 37
BENJAMIN J. GORD, Vice President of the Manager (since April 2002), of HarbourView Asset
Vice President and Management Corporation (since April 2002) and of OFI Institutional Asset
Portfolio Manager Management, Inc. (as of June 2002); Executive Director and senior fixed income
(since 2006) analyst at Miller Anderson & Sherrerd, a division of Morgan Stanley Investment
Age: 44 Management (April 1992-March 2002). A portfolio manager of 15 portfolios in
the OppenheimerFunds complex.
THOMAS SWANEY, Vice President of the Manager (since April 2006); senior analyst, high grade
Vice President and investment team (June 2002-March 2006); senior fixed income analyst at Miller
Portfolio Manager Anderson & Sherrerd, a division of Morgan Stanley Investment Management
(since 2006) (May 1998-May 2002). A portfolio manager of 15 portfolios in the
Age: 34 OppenheimerFunds complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since
Vice President and March 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial
Chief Compliance Officer Asset Management Corporation and Shareholder Services, Inc. (since June 1983);
(since 2004) Vice President and Director of Internal Audit of the Manager (1997-February
Age: 56 2004). An officer of 96 portfolios in the OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer
Treasurer and Principal of the following: HarbourView Asset Management Corporation, Shareholder
Financial & Accounting Financial Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset
Officer (since 1999) Management Corporation, and Oppenheimer Partnership Holdings, Inc. (since
Age: 47 March 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds
International Ltd. and OppenheimerFunds plc (since May 2000), OFI Institutional
Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy
Program (since June 2003); Treasurer and Chief Financial Officer of OFI Trust
Company (trust company subsidiary of the Manager) (since May 2000); Assistant
Treasurer of the following: OAC (since March 1999), Centennial Asset Management
Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program
(April 2000-June 2003); Principal and Chief Operating Officer of Bankers Trust
Company-Mutual Fund Services Division (March 1995-March 1999). An officer
of 96 portfolios in the OppenheimerFunds complex.
BRIAN S. PETERSEN, Assistant Vice President of the Manager (since August 2002); Manager/Financial
Assistant Treasurer Product Accounting of the Manager (November 1998-July 2002). An officer of
(since 2004) 96 portfolios in the OppenheimerFunds complex.
Age: 36
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Financial
Assistant Treasurer Reporting and Compliance of First Data Corporation (April 2003-July 2004);
(since 2005) Manager of Compliance of Berger Financial Group LLC (May 2001-March 2003);
Age: 36 Director of Mutual Fund Operations at American Data Services, Inc. (September
2000-May 2001). An officer of 96 portfolios in the OppenheimerFunds complex.
73 | OPPENHEIMER CORE BOND FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March
Vice President and Secretary 2002) of the Manager; General Counsel and Director of the Distributor (since
(since 2001) December 2001); General Counsel of Centennial Asset Management Corporation
Age: 58 (since December 2001); Senior Vice President and General Counsel of Harbour-
View Asset Management Corporation (since December 2001); Secretary and
General Counsel of OAC (since November 2001); Assistant Secretary (since
September 1997) and Director (since November 2001) of OppenheimerFunds
International Ltd. and OppenheimerFunds plc; Vice President and Director of
Oppenheimer Partnership Holdings, Inc. (since December 2002); Director of
Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice
President, General Counsel and Director of Shareholder Financial Services, Inc. and
Shareholder Services, Inc. (since December 2001); Senior Vice President, General
Counsel and Director of OFI Private Investments, Inc. and OFI Trust Company
(since November 2001); Vice President of OppenheimerFunds Legacy Program
(since June 2003); Senior Vice President and General Counsel of OFI Institutional
Asset Management, Inc. (since November 2001); Director of OppenheimerFunds
(Asia) Limited (since December 2003); 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
the following: Shareholder Services, Inc. (May 1985-November 2001), Shareholder
Financial Services, Inc. (November 1989-November 2001), and OppenheimerFunds
International Ltd. (September 1997-November 2001). An officer of 96 portfolios in
the OppenheimerFunds complex.
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First
Assistant Secretary Vice President (April 2001-April 2004), Associate General Counsel (December
(since 2004) 2000-April 2004), Corporate Vice President (May 1999-April 2001) and Assistant
Age: 39 General Counsel (May 1999-December 2000) of UBS Financial Services Inc.
(formerly, PaineWebber Incorporated). An officer of 96 portfolios in the
OppenheimerFunds complex.
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since
Assistant Secretary October 2003) of the Manager; Vice President (since 1999) and Assistant Secretary
(since 2001) (since October 2003) of the Distributor; Assistant Secretary of Centennial Asset
Age: 41 Management Corporation (since October 2003); Vice President and Assistant
Secretary of Shareholder Services, Inc. (since 1999); Assistant Secretary of
OppenheimerFunds Legacy Program and Shareholder Financial Services, Inc. (since
December 2001); Assistant Counsel of the Manager (August 1994-October 2003).
An officer of 96 portfolios in the OppenheimerFunds complex.
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since
Assistant Secretary September 2004); First Vice President (2000-September 2004), Director (2000-
(since 2004) September 2004) and Vice President (1998-2000) of Merrill Lynch Investment
Age: 43 Management. An officer of 96 portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON
REQUEST, BY CALLING 1.800.525.7048.
74 | OPPENHEIMER CORE 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 Edward L. Cameron,
the Chairman of the Board's Audit Committee, and George C. Bowen, a member of
the Board's Audit Committee, are audit committee financial experts and that
Messrs. Cameron and Bowen are "independent" for purposes of this Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The principal accountant for the audit of the registrant's annual financial
statements billed $18,000 in fiscal 2006 and $17,750 in fiscal 2005.
(b) Audit-Related Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees during the last two fiscal years.
The principal accountant for the audit of the registrant's annual financial
statements billed $40,000 in fiscal 2006 and no such fees in fiscal 2005 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 services include: Review of management's assessment of the financial
statements disclosure impacts of an IRS private letter ruling.
(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 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.
(d) All Other Fees
The principal accountant for the audit of the registrant's annual financial
statements billed $967 in fiscal 2006 and $2,448 in fiscal 2005.
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.
Services include: Compliance review.
(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.
Under applicable laws, pre-approval of non-audit services maybe 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 $40,967 in fiscal 2006 and $2,448 in fiscal
2005 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) No such services were rendered.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
THE FUND'S GOVERNANCE COMMITTEE PROVISIONS WITH RESPECT TO NOMINATIONS OF
DIRECTORS/TRUSTEES TO THE RESPECTIVE BOARDS
1. The Fund's Governance Committee (the "Committee") will evaluate potential
Board candidates to assess their qualifications. The Committee shall have
the authority, upon approval of the Board, to retain an executive search
firm to assist in this effort. The Committee may consider recommendations
by business and personal contacts of current Board members and by
executive search firms which the Committee may engage from time to time
and may also consider shareholder recommendations. The Committee may
consider the advice and recommendation of the Funds' investment manager
and its affiliates in making the selection.
2. The Committee shall screen candidates for Board membership. The Committee
has not established specific qualifications that it believes must be met
by a trustee nominee. In evaluating trustee nominees, the Committee
considers, among other things, an individual's background, skills, and
experience; whether the individual is an "interested person" as defined in
the Investment Company Act of 1940; and whether the individual would be
deemed an "audit committee financial expert" within the meaning of
applicable SEC rules. The Committee also considers whether the
individual's background, skills, and experience will complement the
background, skills, and experience of other nominees and will contribute
to the Board. There are no differences in the manner in which the
Committee evaluates nominees for trustees based on whether the nominee is
recommended by a shareholder.
3. The Committee may consider nominations from shareholders for the Board at
such times as the Committee meets to consider new nominees for the Board.
The Committee shall have the sole discretion to determine the candidates
to present to the Board and, in such cases where required, to
shareholders. Recommendations for trustee nominees should, at a minimum,
be accompanied by the following:
o the name, address, and business, educational, and/or other pertinent
background of the person being recommended;
o a statement concerning whether the person is an "interested person"
as defined in the Investment Company Act of 1940;
o any other information that the Funds would be required to include in
a proxy statement concerning the person if he or she was nominated;
and
o the name and address of the person submitting the recommendation
and, if that person is a shareholder, the period for which that
person held Fund shares.
The recommendation also can include any additional information which the
person submitting it believes would assist the Committee in evaluating the
recommendation.
4. Shareholders should note that a person who owns securities issued by
Massachusetts Mutual Life Insurance Company (the parent company of the
Funds' investment adviser) would be deemed an "interested person" under
the Investment Company Act of 1940. In addition, certain other
relationships with Massachusetts Mutual Life Insurance Company or its
subsidiaries, with registered broker-dealers, or with the Funds' outside
legal counsel may cause a person to be deemed an "interested person."
5. Before the Committee decides to nominate an individual as a trustee,
Committee members and other directors customarily interview the individual
in person. In addition, the individual customarily is asked to complete a
detailed questionnaire which is designed to elicit information which must
be disclosed under SEC and stock exchange rules and to determine whether
the individual is subject to any statutory disqualification from serving
as a trustee of a registered investment company.
ITEM 11. CONTROLS AND PROCEDURES.
Based on their evaluation of the registrant's disclosure controls and procedures
(as defined in rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR
270.30a-3(c)) as of December 31, 2006, the registrant's principal executive
officer and principal financial officer found the registrant's disclosure
controls and procedures to provide reasonable assurances that information
required to be disclosed by the 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.
There have been no changes in the registrant's internal controls over financial
reporting that occurred during the registrant's second fiscal quarter of the
period covered by this
report that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) (1) Exhibit attached hereto.
(2) Exhibits attached hereto.
(3) Not applicable.
(b) Exhibit attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Oppenheimer Integrity Funds
By: /s/ John V. Murphy
---------------------------
John V. Murphy
Principal Executive Officer
Date: February 8, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ John V. Murphy
---------------------------
John V. Murphy
Principal Executive Officer
Date: February 8, 2007
By: /s/ Brian W. Wixted
---------------------------
Brian W. Wixted
Principal Financial Officer
Date: February 8, 2007