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 811-4576
Oppenheimer Convertible Securities Fund
(Exact name of registrant as specified in charter)
6803 South Tucson Way, Centennial, Colorado 80112-3924
(Address of principal executive offices) (Zip code)
Robert G. Zack, Esq.
OppenheimerFunds, Inc.
Two World Financial Center, New York, New York 10281-1008
(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 768-3200
Date of fiscal year end: December 31
Date of reporting period: January 1, 2004 - December 31, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
TOP HOLDINGS AND ALLOCATIONS
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TOP TEN CONVERTIBLE CORPORATE BOND AND NOTE SECTORS
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Information Technology 18.2%
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Consumer Discretionary 16.9
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Health Care 9.7
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Industrials 5.4
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Energy 4.9
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Utilities 2.8
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Financials 2.5
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Materials 2.1
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Telecommunication Services 1.1
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Consumer Staples 0.6
Portfolio holdings and allocations are subject to change. Percentages are as of
December 31, 2004, and are based on net assets.
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PORTFOLIO ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Convertible Corporate Bonds and Notes 64.2%
Stocks 32.2
Bonds and Notes 2.7
Cash Equivalents 0.9
Portfolio holdings and allocations are subject to change. Percentages are as of
December 31, 2004, and are based on total investments.
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8 | OPPENHEIMER CONVERTIBLE SECURITIES 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, 2004, FOLLOWED
BY A GRAPHICAL COMPARISON OF THE FUND'S PERFORMANCE TO AN APPROPRIATE
BROAD-BASED MARKET INDICES.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. For the fiscal year ended December
31, 2004, Oppenheimer Convertible Securities Fund performed competitively versus
its secondary benchmark, the Goldman Sachs Convertible Bond 100 Index, largely
due to a few key factors. First, the Fund's overall exposure to the energy
sector added to returns, as this segment of the market continued to enjoy strong
performance due to a prolonged rally in the price of crude oil. As such, most
sub-segments of the energy sector, including exploration and production, as well
as oil services, all continued to post strong performance this year.
Second, our overall exposure to leisure-related convertibles, such as
select convertibles issued by hotels, cruise lines and gaming-related companies,
also performed well for the Fund and added to our relative returns. These
convertibles enjoyed a boost from strong performance in their underlying stocks,
as consumer demand for leisure-related goods and services remained robust this
year.
Finally, select names within the Fund's portfolio also performed extremely
well, thereby adding to the Fund's overall returns. In particular, our largest
single holding, Tyco International Ltd., was a strong performer for us this year
and substantially supported Fund returns. After a few difficult years, the
manufacturing conglomerate underwent a substantial reorganization that included
a new management team and a restructuring of the company into five core business
segments. As a result, Tyco has enjoyed continually improving fundamentals and
strong performance from several of its now more focused individual business
lines, particularly electronics and medical services. Its new management team
has placed greater emphasis on its core, strongest businesses, a move that
helped push the company's valuation up in the eyes of investors. As the company
continues to pay down its debt and maintains a renewed focus on profitable
businesses, the outlook for this name appears quite favorable. However, while we
still view this holding favorably, we are not convinced it represents the same
opportunities it did a year ago. As such, we will monitor our exposure to this
name.
On the negative side, a few factors detracted from absolute performance.
Our exposure to the advertising industry proved to be a detractor to returns, as
this industry continued to struggle this year due to a persistently weak
advertising environment. Despite this, we did enjoy solid performance from a
handful of select media holdings, such as The Walt Disney Company, which
performed well for the portfolio. As the company's fourth quarter 2004 earnings
beat estimates, and with revenue up roughly 8% from
9 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
FUND PERFORMANCE DISCUSSION
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2003, Disney enjoyed good performance in 2004, driven by strong brands and
continued strength from its theme park and its cable networks such as ESPN, also
fared particularly well throughout the year.
While our exposure to technology delivered strong performance this period,
one of the sub-segments within that sector--semi-conductors--detracted from
performance. This segment of the technology sector has been "beaten down" for
quite some time. Since expectations are currently low for this segment of the
market, an opportunity for improved performance in 2005 could be at hand,
leading us to explore the possibility that current valuations could offer
tremendous value. As such, we will continue to investigate opportunities to add
to our semi-conductor holdings at what we believe to be good value.
Finally, we believe the low volatility of the equity market played a
central role in suppressing convertibles' returns this period and, consequently,
in slightly dampening Fund returns. Equity market performance for the year was
generally positive, especially on an absolute basis, but low volatility held
back convertible returns relative to their underlying stocks. Additionally,
yields declined this year for new convertible issuance, further exacerbating the
situation and making yield more difficult to come by as a source of potential
returns. As such, the upside potential of convertibles was somewhat muted in
2004. However, from a longer-term, historical perspective, we view the Fund's
fiscal year as a reasonable year for convertible securities returns overall, and
are confident that our individual security selection and emphasis on broad
diversification helped support returns despite these somewhat challenging
conditions.
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, 2004. In the case of Class A and Class B shares,
performance is measured from inception of the Class on May 1, 1995. In the case
of Class C shares, performance is measured from inception of the Class on March
11, 1996. In the case of Class M shares, performance is measured over a 10-year
period. In the case of Class N shares, performance is measured from inception of
the Class on March 1, 2001. The Fund's performance reflects the deduction of the
maximum initial sales charge on Class A and Class M 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.
10 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
The Fund's performance is compared to the performance of the Lehman
Brothers Aggregate Bond Index, Goldman Sachs Convertible Bond 100 Index, and the
S&P 500 Index. The Lehman Brothers Aggregate Bond Index is a broad-based,
unmanaged index of U.S. corporate bond issues, U.S. government securities and
mortgage-backed securities, widely recognized as a measure of the performance of
the domestic debt securities market. The Goldman Sachs Convertible Bond 100
Index is an unmanaged index of convertible securities. The S&P 500 Index is a
broad-based index of equity securities widely regarded as a general measurement
of the performance of the U.S. equity securities market. 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 indices.
11 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
FUND PERFORMANCE DISCUSSION
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CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Convertible Securities Fund (Class A)
Lehman Brothers Aggregate Bond Index
Goldman Sachs Convertible Bond 100 Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer
Convertible
Securities Lehman Brothers Goldman Sachs Convertible S&P 500
Fund (Class A) Aggregate Bond Index Bond 100 Index Index
05/01/1995 9,425 10,000 10,000 10,000
06/30/1995 9,970 10,463 10,631 10,640
09/30/1995 10,798 10,669 11,224 11,485
12/31/1995 10,890 11,123 11,480 12,176
03/31/1996 11,120 10,926 12,174 12,829
06/30/1996 11,349 10,988 12,423 13,404
09/30/1996 11,592 11,191 12,796 13,819
12/31/1996 11,992 11,527 13,054 14,970
03/31/1997 12,224 11,463 13,231 15,372
06/30/1997 13,203 11,884 14,461 18,053
09/30/1997 14,233 12,278 15,967 19,405
12/31/1997 14,243 12,640 15,599 19,962
03/31/1998 15,438 12,836 16,949 22,745
06/30/1998 15,035 13,136 16,769 23,500
09/30/1998 13,444 13,692 14,778 21,168
12/31/1998 14,824 13,738 16,805 25,671
03/31/1999 15,065 13,670 17,097 26,950
06/30/1999 16,044 13,550 18,517 28,846
09/30/1999 15,677 13,642 17,936 27,049
12/31/1999 18,290 13,625 20,261 31,071
03/31/2000 19,336 13,926 21,507 31,783
06/30/2000 18,941 14,168 21,836 30,938
09/30/2000 19,153 14,595 22,821 30,639
12/31/2000 17,410 15,209 20,742 28,243
03/31/2001 16,781 15,671 19,696 24,897
06/30/2001 17,371 15,759 19,593 26,353
09/30/2001 15,754 16,486 17,801 22,486
12/31/2001 16,836 16,493 19,057 24,889
03/31/2002 16,970 16,509 18,687 24,957
06/30/2002 15,970 17,118 17,254 21,616
09/30/2002 14,608 17,903 15,688 17,884
12/31/2002 15,727 18,185 17,290 19,390
03/31/2003 16,143 18,438 17,599 18,780
06/30/2003 17,581 18,899 19,223 21,669
09/30/2003 18,049 18,871 19,849 22,242
12/31/2003 19,336 18,931 21,316 24,949
03/31/2004 19,910 19,434 22,019 25,371
06/30/2004 19,692 18,959 22,047 25,808
09/30/2004 19,470 19,565 21,814 25,325
12/31/2004 20,833 19,752 23,010 27,662
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE FUND AT
12/31/04
1-Year 1.55% 5-Year 1.43% Since Inception (5/1/95) 7.89%
12 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Convertible Securities Fund (Class B)
Lehman Brothers Aggregate Bond Index
Goldman Sachs Convertible Bond 100 Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer
Convertible
Securities Lehman Brothers Goldman Sachs Convertible S&P 500
Fund (Class B) Aggregate Bond Index Bond 100 Index Index
05/01/1995 10,000 10,000 10,000 10,000
06/30/1995 10,566 10,463 10,631 10,640
09/30/1995 11,421 10,669 11,224 11,485
12/31/1995 11,509 11,123 11,480 12,176
03/31/1996 11,730 10,926 12,174 12,829
06/30/1996 11,948 10,988 12,423 13,404
09/30/1996 12,180 11,191 12,796 13,819
12/31/1996 12,577 11,527 13,054 14,970
03/31/1997 12,797 11,463 13,231 15,372
06/30/1997 13,796 11,884 14,461 18,053
09/30/1997 14,844 12,278 15,967 19,405
12/31/1997 14,832 12,640 15,599 19,962
03/31/1998 16,045 12,836 16,949 22,745
06/30/1998 15,587 13,136 16,769 23,500
09/30/1998 13,912 13,692 14,778 21,168
12/31/1998 15,322 13,738 16,805 25,671
03/31/1999 15,542 13,670 17,097 26,950
06/30/1999 16,509 13,550 18,517 28,846
09/30/1999 16,112 13,642 17,936 27,049
12/31/1999 18,747 13,625 20,261 31,071
03/31/2000 19,781 13,926 21,507 31,783
06/30/2000 19,343 14,168 21,836 30,938
09/30/2000 19,529 14,595 22,821 30,639
12/31/2000 17,708 15,209 20,742 28,243
03/31/2001 17,033 15,671 19,696 24,897
06/30/2001 17,618 15,759 19,593 26,353
09/30/2001 15,979 16,486 17,801 22,486
12/31/2001 17,076 16,493 19,057 24,889
03/31/2002 17,212 16,509 18,687 24,957
06/30/2002 16,198 17,118 17,254 21,616
09/30/2002 14,816 17,903 15,688 17,884
12/31/2002 15,951 18,185 17,290 19,390
03/31/2003 16,373 18,438 17,599 18,780
06/30/2003 17,832 18,899 19,223 21,669
09/30/2003 18,307 18,871 19,849 22,242
12/31/2003 19,612 18,931 21,316 24,949
03/31/2004 20,194 19,434 22,019 25,371
06/30/2004 19,973 18,959 22,047 25,808
09/30/2004 19,748 19,565 21,814 25,325
12/31/2004 21,131 19,752 23,010 27,662
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE FUND AT
12/31/04
1-Year 1.92% 5-Year 1.53% Since Inception (5/1/95) 8.05%
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 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); FOR CLASS C AND
N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD; AND FOR
CLASS M SHARES, A SALES CHARGE OF 3.25%. BECAUSE CLASS B SHARES CONVERT TO CLASS
A SHARES 72 MONTHS AFTER PURCHASE, SINCE INCEPTION RETURNS FOR CLASS B SHARES
USES CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 17 FOR
FURTHER INFORMATION.
13 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
FUND PERFORMANCE DISCUSSION
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CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Convertible Securities Fund (Class C)
Lehman Brothers Aggregate Bond Index
Goldman Sachs Convertible Bond 100 Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer
Convertible
Securities Lehman Brothers Goldman Sachs Convertible S&P 500
Fund (Class C) Aggregate Bond Index Bond 100 Index Index
03/11/1996 10,000 10,000 10,000 10,000
03/31/1996 10,048 9,930 10,138 10,096
06/30/1996 10,235 9,987 10,344 10,549
09/30/1996 10,426 10,172 10,656 10,875
12/31/1996 10,774 10,477 10,871 11,781
03/31/1997 10,955 10,418 11,017 12,097
06/30/1997 11,811 10,801 12,041 14,207
09/30/1997 12,711 11,160 13,296 15,271
12/31/1997 12,701 11,488 12,989 15,710
03/31/1998 13,742 11,667 14,114 17,899
06/30/1998 13,349 11,939 13,964 18,494
09/30/1998 11,921 12,444 12,306 16,658
12/31/1998 13,122 12,486 13,993 20,202
03/31/1999 13,311 12,424 14,237 21,209
06/30/1999 14,140 12,315 15,420 22,701
09/30/1999 13,812 12,399 14,936 21,287
12/31/1999 16,062 12,384 16,871 24,452
03/31/2000 16,950 12,657 17,909 25,012
06/30/2000 16,573 12,877 18,183 24,347
09/30/2000 16,722 13,265 19,003 24,111
12/31/2000 15,169 13,823 17,272 22,226
03/31/2001 14,591 14,243 16,401 19,593
06/30/2001 15,076 14,323 16,315 20,739
09/30/2001 13,644 14,984 14,823 17,696
12/31/2001 14,566 14,991 15,869 19,587
03/31/2002 14,643 15,005 15,561 19,641
06/30/2002 13,753 15,559 14,367 17,011
09/30/2002 12,567 16,272 13,064 14,074
12/31/2002 13,489 16,528 14,398 15,259
03/31/2003 13,822 16,758 14,655 14,779
06/30/2003 15,038 17,177 16,007 17,053
09/30/2003 15,396 17,152 16,528 17,504
12/31/2003 16,476 17,206 17,750 19,634
03/31/2004 16,920 17,664 18,335 19,966
06/30/2004 16,704 17,232 18,359 20,310
09/30/2004 16,497 17,783 18,165 19,930
12/31/2004 17,611 17,953 19,160 21,769
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE FUND AT
12/31/04
1-Year 5.89% 5-Year 1.86% Since Inception (3/11/96) 6.64%
14 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
CLASS M SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Convertible Securities Fund (Class M)
Lehman Brothers Aggregate Bond Index
Goldman Sachs Convertible Bond 100 Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer
Convertible
Securities Lehman Brothers Goldman Sachs Convertible S&P 500
Fund (Class M) Aggregate Bond Index Bond 100 Index Index
12/31/1994 9,675 10,000 10,000 10,000
03/31/1995 10,336 10,504 10,845 10,973
06/30/1995 11,174 11,144 11,807 12,019
09/30/1995 12,089 11,363 12,466 12,973
12/31/1995 12,191 11,847 12,750 13,753
03/31/1996 12,433 11,637 13,521 14,491
06/30/1996 12,673 11,704 13,797 15,141
09/30/1996 12,928 11,920 14,212 15,609
12/31/1996 13,358 12,278 14,499 16,909
03/31/1997 13,601 12,209 14,694 17,363
06/30/1997 14,663 12,657 16,061 20,392
09/30/1997 15,790 13,078 17,734 21,919
12/31/1997 15,788 13,463 17,325 22,548
03/31/1998 17,093 13,672 18,824 25,691
06/30/1998 16,625 13,992 18,624 26,544
09/30/1998 14,847 14,583 16,413 23,910
12/31/1998 16,353 14,632 18,664 28,997
03/31/1999 16,603 14,560 18,989 30,441
06/30/1999 17,649 14,432 20,566 32,583
09/30/1999 17,234 14,530 19,921 30,554
12/31/1999 20,072 14,512 22,502 35,096
03/31/2000 21,195 14,832 23,887 35,900
06/30/2000 20,737 15,091 24,252 34,946
09/30/2000 20,940 15,546 25,345 34,608
12/31/2000 19,008 16,199 23,037 31,902
03/31/2001 18,296 16,691 21,876 28,122
06/30/2001 18,917 16,785 21,760 29,767
09/30/2001 17,133 17,559 19,771 25,399
12/31/2001 18,302 17,567 21,166 28,113
03/31/2002 18,412 17,584 20,755 28,191
06/30/2002 17,304 18,233 19,163 24,416
09/30/2002 15,823 19,069 17,424 20,200
12/31/2002 16,992 19,369 19,203 21,902
03/31/2003 17,432 19,638 19,546 21,212
06/30/2003 18,983 20,130 21,350 24,476
09/30/2003 19,449 20,100 22,044 25,124
12/31/2003 20,832 20,164 23,674 28,181
03/31/2004 21,426 20,700 24,455 28,658
06/30/2004 21,194 20,194 24,487 29,151
09/30/2004 20,973 20,839 24,228 28,606
12/31/2004 22,433 21,038 25,556 31,245
AVERAGE ANNUAL TOTAL RETURNS OF CLASS M SHARES WITH SALES CHARGE OF THE FUND AT
12/31/04
1-Year 4.19% 5-Year 1.58% 10-Year 8.41%
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 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); FOR CLASS C AND
N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD; AND FOR
CLASS M SHARES, A SALES CHARGE OF 3.25%. BECAUSE CLASS B SHARES CONVERT TO CLASS
A SHARES 72 MONTHS AFTER PURCHASE, SINCE INCEPTION RETURNS FOR CLASS B SHARES
USES CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 17 FOR
FURTHER INFORMATION.
15 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
FUND PERFORMANCE DISCUSSION
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CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Convertible Securities Fund (Class N)
Lehman Brothers Aggregate Bond Index
Goldman Sachs Convertible Bond 100 Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer
Convertible
Securities Lehman Brothers Goldman Sachs Convertible S&P 500
Fund (Class N) Aggregate Bond Index Bond 100 Index Index
03/01/2001 10,000 10,000 10,000 10,000
03/31/2001 9,690 10,050 9,518 9,367
06/30/2001 10,020 10,107 9,468 9,915
09/30/2001 9,073 10,573 8,602 8,460
12/31/2001 9,698 10,578 9,209 9,364
03/31/2002 9,770 10,588 9,030 9,390
06/30/2002 9,188 10,979 8,338 8,132
09/30/2002 8,398 11,482 7,581 6,728
12/31/2002 9,027 11,663 8,355 7,295
03/31/2003 9,257 11,825 8,505 7,065
06/30/2003 10,072 12,121 9,289 8,153
09/30/2003 10,328 12,103 9,591 8,368
12/31/2003 11,054 12,141 10,300 9,387
03/31/2004 11,371 12,464 10,640 9,545
06/30/2004 11,233 12,159 10,654 9,710
09/30/2004 11,094 12,548 10,541 9,528
12/31/2004 11,861 12,668 11,119 10,407
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE FUND AT
12/31/04
1-Year 6.31% 5-Year N/A Since Inception (3/1/01) 4.55%
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 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); FOR CLASS C AND
N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD; AND FOR
CLASS M SHARES, A SALES CHARGE OF 3.25%. BECAUSE CLASS B SHARES CONVERT TO CLASS
A SHARES 72 MONTHS AFTER PURCHASE, SINCE INCEPTION RETURNS FOR CLASS B SHARES
USES CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 17 FOR
FURTHER INFORMATION.
16 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
NOTES
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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 5/1/95. The Fund's
maximum sales charge for Class A shares was lower prior to 3/11/96, so actual
performance may have been higher. Class A returns include the current maximum
initial sales charge of 5.75%.
CLASS B shares of the Fund were first publicly offered on 5/1/95. 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 "since inception" return for Class B uses 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 3/11/96. 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 M shares of the Fund were first publicly offered on 6/3/86. Class M
returns include the current maximum initial sales charge of 3.25%. Prior to
March 11, 1996, Class M shares were designated as Class A shares. While Class M
shares are
17 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
NOTES
- --------------------------------------------------------------------------------
subject to an annual 0.50% asset-based sales charge, the Board has set that
charge at zero effective February 11, 2004.
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.
An explanation of the calculation of performance is in the Fund's Statement of
Additional Information.
18 | OPPENHEIMER CONVERTIBLE SECURITIES 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, 2004.
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
19 | OPPENHEIMER CONVERTIBLE SECURITIES 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
(07/01/04) (12/31/04) DECEMBER 31,2004
- ------------------------------------------------------------------------
Class A Actual $ 1,000.00 $ 1,058.00 $ 4.93
- ------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,020.36 4.84
- ------------------------------------------------------------------------
Class B Actual 1,000.00 1,053.90 9.23
- ------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,016.19 9.06
- ------------------------------------------------------------------------
Class C Actual 1,000.00 1,054.30 8.92
- ------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,016.49 8.76
- ------------------------------------------------------------------------
Class M Actual 1,000.00 1,058.50 4.77
- ------------------------------------------------------------------------
Class M Hypothetical 1,000.00 1,020.51 4.68
- ------------------------------------------------------------------------
Class N Actual 1,000.00 1,055.90 7.31
- ------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,018.05 7.18
Hypothetical assumes 5% 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 184/366
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended December 31, 2004 are as follows:
CLASS EXPENSE RATIOS
- ---------------------------
Class A 0.95%
- ---------------------------
Class B 1.78
- ---------------------------
Class C 1.72
- ---------------------------
Class M 0.92
- ---------------------------
Class N 1.41
- --------------------------------------------------------------------------------
20 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMENT OF INVESTMENTS December 31, 2004
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS AND NOTES--64.2%
- ------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--16.9%
- ------------------------------------------------------------------------------------------------
AUTO COMPONENTS--0.6%
Goodyear Tire & Rubber Co. (The), 4% Cv. Sr. Nts., 6/15/34 1 $ 2,500,000 $ 3,612,500
- ------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--4.4%
Carnival Corp., 2% Cv. Sr. Unsec. Unsub. Debs., 4/15/21 5,000,000 7,568,750
- ------------------------------------------------------------------------------------------------
Hilton Hotels Corp., 3.375% Cv. Sr. Unsec. Unsub. Nts., 4/15/23 1 3,000,000 3,603,750
- ------------------------------------------------------------------------------------------------
International Game Technology, 1.30% Cv. Sr. Unsec. Unsub.
Debs., 1/29/33 2 6,000,000 4,612,500
- ------------------------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd., 38.15% Cv. Sr. Unsec. Unsub.
Liquid Yield Option Nts., 2/2/21 2 5,000,000 3,218,750
- ------------------------------------------------------------------------------------------------
Scientific Games Corp., 0.75% Cv. Sr. Sub. Nts., 12/1/24 1 3,500,000 3,661,875
- ------------------------------------------------------------------------------------------------
Shuffle Master, Inc.:
1.25% Cv. Sr. Unsec. Nts., 4/15/24 1 2,000,000 2,505,000
1.25% Cv. Sr. Unsec. Nts., 4/15/24 500,000 626,250
-------------
25,796,875
- ------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES--1.0%
Beazer Homes USA, Inc., 4.625% Cv. Sr. Nts., 6/15/24 1 4,500,000 5,613,750
- ------------------------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--1.2%
Eastman Kodak Co., 3.375% Cv. Sr. Nts., 10/15/33 1 3,000,000 3,768,750
- ------------------------------------------------------------------------------------------------
Hasbro, Inc., 2.75% Cv. Sr. Unsec. Debs., 12/1/21 3,000,000 3,247,500
-------------
7,016,250
- ------------------------------------------------------------------------------------------------
MEDIA--6.2%
Charter Communications, Inc., 5.875% Cv. Sr. Nts., 11/16/09 1 2,000,000 2,262,500
- ------------------------------------------------------------------------------------------------
Citadel Broadcasting Corp.:
1.875% Cv. Sub. Nts., 2/15/11 1 4,000,000 3,635,000
1.875% Cv. Sub. Nts., 2/15/11 1,000,000 908,750
- ------------------------------------------------------------------------------------------------
Interpublic Group of Cos., Inc. (The):
4.50% Cv. Sr. Unsec. Nts., 3/15/23 1 3,000,000 3,945,000
4.50% Cv. Sr. Unsec. Nts., 3/15/23 1,500,000 1,972,500
- ------------------------------------------------------------------------------------------------
Liberty Media Corp.:
0.75% Exchangeable Sr. Unsec. Debs., 3/30/23 (exchangeable
for Time Warner, Inc. common stock) 1 8,000,000 9,670,000
3.25% Exchangeable Sr. Unsec. Debs., 3/15/31 (exchangeable for
Viacom, Inc. Cl. B common stock or cash based on the value thereof) 6,000,000 5,917,500
- ------------------------------------------------------------------------------------------------
Walt Disney Co. (The), 2.125% Cv. Sr. Unsec. Nts., 4/15/23 7,500,000 8,381,250
-------------
36,692,500
21 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------
SPECIALTY RETAIL--2.6%
Gap, Inc. (The), 5.75% Cv. Sr. Unsec. Nts., 3/15/09 1 $ 3,000,000 $ 3,993,750
- ------------------------------------------------------------------------------------------------
Lowe's Cos., Inc., 0.861% Cv. Sr. Nts., 10/19/21 3 5,500,000 5,816,250
- ------------------------------------------------------------------------------------------------
TJX Cos., Inc. (The):
1.22% Cv. Unsec. Sub. Liquid Yield Option Nts., 2/13/21 2 2,000,000 1,765,000
1.66% Cv. Unsec. Sub. Liquid Yield Option Nts., 2/13/21 1,2 4,000,000 3,530,000
-------------
15,105,000
- ------------------------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--0.9%
Reebok International Ltd., 2% Cv. Sr. Unsec. Nts., Series B, 5/1/24 5,000,000 5,462,500
- ------------------------------------------------------------------------------------------------
CONSUMER STAPLES--0.6%
- ------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--0.6%
Costco Cos., Inc., 50.55% Cv. Sub. Nts., 8/19/17 2 3,000,000 3,307,500
- ------------------------------------------------------------------------------------------------
ENERGY--4.9%
- ------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--3.3%
Halliburton Co.:
3.125% Cv. Sr. Nts., 7/15/23 1 5,000,000 6,175,000
3.125% Cv. Sr. Nts., 7/15/23 1,000,000 1,235,000
- ------------------------------------------------------------------------------------------------
Pride International, Inc., 3.25% Cv. Sr. Nts., 5/1/33 1 5,000,000 5,443,750
- ------------------------------------------------------------------------------------------------
Schlumberger Ltd., 1.50% Cv. Sr. Unsec. Debs., Series A, 6/1/23 6,000,000 6,600,000
-------------
19,453,750
- ------------------------------------------------------------------------------------------------
OIL & GAS--1.6%
El Paso Corp., 6.34% Cv. Debs., 2/28/21 2 10,000,000 5,312,500
- ------------------------------------------------------------------------------------------------
Kerr-McGee Corp., 5.25% Cv. Jr. Unsec. Sub. Debs., 2/15/10 4,000,000 4,255,000
-------------
9,567,500
- ------------------------------------------------------------------------------------------------
FINANCIALS--2.5%
- ------------------------------------------------------------------------------------------------
CONSUMER FINANCE--1.5%
American Express Co.:
1.85% Cv. Sr. Nts., 12/1/33 1,3 6,000,000 6,547,500
1.85% Cv. Sr. Nts., 12/1/33 3 2,000,000 2,182,500
-------------
8,730,000
- ------------------------------------------------------------------------------------------------
REAL ESTATE--1.0%
Host Marriott LP, 3.25% Cv. Sr. Debs., 4/15/24 1 5,000,000 5,775,000
- ------------------------------------------------------------------------------------------------
HEALTH CARE--9.7%
- ------------------------------------------------------------------------------------------------
BIOTECHNOLOGY--3.6%
Amylin Pharmaceuticals, Inc., 2.50% Cv. Sr. Unsec. Nts., 4/15/11 1 3,500,000 3,622,500
- ------------------------------------------------------------------------------------------------
Celgene Corp., 1.75% Cv. Sr. Nts., 6/1/08 1 2,000,000 2,587,500
- ------------------------------------------------------------------------------------------------
Genzyme Corp., 1.25% Cv. Sr. Nts., 12/1/23 1 6,000,000 6,390,000
- ------------------------------------------------------------------------------------------------
ImClone Systems, Inc., 1.375% Cv. Sr. Nts., 5/15/24 1 3,500,000 3,246,250
22 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------
BIOTECHNOLOGY Continued
Invitrogen Corp., 1.50% Cv. Sr. Unsec. Nts., 2/15/24 $ 6,000,000 $ 5,655,000
-------------
21,501,250
- ------------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--1.7%
Cytyc Corp., 2.25% Cv. Sr. Nts., 3/15/24 1 2,000,000 2,425,000
- ------------------------------------------------------------------------------------------------
Fisher Scientific International, Inc., 3.25% Cv. Sr. Sub. Nts.,
3/1/24 6,500,000 7,320,625
-------------
9,745,625
- ------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--2.1%
Health Management Associates, Inc., 1.50% Cv. Sr. Sub. Nts., 8/1/23 5,500,000 5,788,750
- ------------------------------------------------------------------------------------------------
Lincare Holdings, Inc., 3% Cv. Sr. Nts., 6/15/33 4,000,000 4,295,000
- ------------------------------------------------------------------------------------------------
Quest Diagnostics, Inc., 1.75% Cv. Sr. Unsec. Debs., 11/30/21 2,000,000 2,192,500
-------------
12,276,250
- ------------------------------------------------------------------------------------------------
PHARMACEUTICALS--2.3%
DOV Pharmaceutical, Inc., 2.50% Cv. Unsec. Sub. Debs., 1/15/25 1 1,500,000 1,593,750
- ------------------------------------------------------------------------------------------------
Teva Pharmaceutical Finance II BV, 0.50% Cv. Sr. Sec. Debs.,
Series A, 2/1/24 6,000,000 6,142,500
- ------------------------------------------------------------------------------------------------
Watson Pharmaceuticals, Inc.:
1.75% Cv. Sr. Unsec. Debs., 3/15/23 1 4,000,000 4,140,000
1.75% Cv. Sr. Unsec. Debs., 3/15/23 1,500,000 1,552,500
-------------
13,428,750
- ------------------------------------------------------------------------------------------------
INDUSTRIALS--5.4%
- ------------------------------------------------------------------------------------------------
AIRLINES--1.0%
Continental Airlines, Inc., 4.50% Cv. Sr. Unsec. Unsub. Nts., 2/1/07 3,000,000 2,527,500
- ------------------------------------------------------------------------------------------------
Northwest Airlines Corp., 7.625% Cv. Sr. Nts., 11/15/23 3 4,000,000 3,215,000
-------------
5,742,500
- ------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--2.7%
Tyco International Group SA, 2.75% Cv. Sr. Unsec. Unsub. Debs.,
Series A, 1/15/18 10,000,000 15,900,000
- ------------------------------------------------------------------------------------------------
MACHINERY--1.7%
Danaher Corp., 2.46% Cv. Sr. Unsec. Unsub. Liquid Yield Option Nts.,
1/22/21 2 5,000,000 4,268,750
- ------------------------------------------------------------------------------------------------
Navistar Financial Corp., 4.75% Cv. Unsec. Sub. Nts., 4/1/09 4,000,000 4,175,000
- ------------------------------------------------------------------------------------------------
SystemOne Technologies, Inc.:
2.888% Cv. Sub. Nts., 12/31/05 4 3,344,633 936,497
8.25% Cv. Sub. Nts., 12/31/05 4 2,962,671 829,548
-------------
10,209,795
- ------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--18.2%
- ------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--4.3%
Andrew Corp., 3.25% Cv. Sub. Nts., 8/15/13 3,500,000 4,545,625
23 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT Continued
Comverse Technology, Inc., 0% Cv. Sr. Unsec. Zero Yield Puttable
Securities, 5/15/23 2 $ 3,500,000 $ 5,162,500
- ------------------------------------------------------------------------------------------------
Corning, Inc., 3.50% Cv. Sr. Unsec. Debs., 11/1/08 2,000,000 2,437,500
- ------------------------------------------------------------------------------------------------
JDS Uniphase Corp., 0% Cv. Sr. Nts., 11/15/10 2 3,500,000 3,408,125
- ------------------------------------------------------------------------------------------------
Nortel Networks Corp., 4.25% Cv. Sr. Unsec. Nts., 9/1/08 7,500,000 7,331,250
- ------------------------------------------------------------------------------------------------
Tekelec, Inc., 2.25% Cv. Sr. Sub. Nts., 6/15/08 2,000,000 2,565,000
-------------
25,450,000
- ------------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--2.6%
Agilent Technologies, Inc., 3% Cv. Sr. Unsec. Debs., 12/1/21 3 6,000,000 6,082,500
- ------------------------------------------------------------------------------------------------
Flextronics International Ltd., 1% Cv. Unsec. Sub. Nts., 1%, 8/1/10 4,000,000 4,610,000
- ------------------------------------------------------------------------------------------------
Vishay Intertechnology, Inc.:
3.625% Cv. Sub. Nts., 8/1/23 1 3,000,000 3,378,750
3.625% Cv. Sub. Nts., 8/1/23 1,000,000 1,126,250
-------------
15,197,500
- ------------------------------------------------------------------------------------------------
IT SERVICES--3.4%
BearingPoint, Inc., 2.50% Cv. Sub. Nts., 12/15/24 1 4,000,000 4,225,000
- ------------------------------------------------------------------------------------------------
CSG Systems International, Inc., 2.50% Cv. Nts., 6/15/24 1 3,500,000 3,578,750
- ------------------------------------------------------------------------------------------------
DST Systems, Inc., 3.625% Cv. Sr. Unsec. Debs., Series B, 8/15/23 6,000,000 7,507,500
- ------------------------------------------------------------------------------------------------
Electronic Data Systems Corp.:
3.875% Cv. Sr. Nts., 7/15/23 1 4,000,000 4,245,000
3.875% Cv. Sr. Unsec. Nts., 7/15/23 500,000 530,625
-------------
20,086,875
- ------------------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--4.0%
Advanced Micro Devices, Inc., 4.75% Cv. Sr. Unsec. Debs., 2/1/22 3 5,000,000 5,768,750
- ------------------------------------------------------------------------------------------------
Agere Systems, Inc., 6.50% Cv. Unsec. Unsub. Nts., 12/15/09
(cv. into Agere Systems, Inc., Cl. A common stock) 5,000,000 5,312,500
- ------------------------------------------------------------------------------------------------
Cypress Semiconductor Corp., 1.25% Cv. Unsec. Sub. Nts., 6/15/08 5,000,000 5,306,250
- ------------------------------------------------------------------------------------------------
LSI Logic Corp., 4% Cv. Sub. Nts., 5/15/10 5,000,000 4,718,750
- ------------------------------------------------------------------------------------------------
Skyworks Solutions, Inc., 4.75% Cv. Unsec. Sub. Nts., 11/15/07 2,000,000 2,455,000
-------------
23,561,250
- ------------------------------------------------------------------------------------------------
SOFTWARE--3.9%
Computer Associates International, Inc., 5% Cv. Sr. Unsec. Nts.,
3/15/07 6,500,000 8,425,625
- ------------------------------------------------------------------------------------------------
Mentor Graphics Corp., 6.875% Cv. Unsec. Sub. Nts., 6/15/07 3,500,000 3,696,875
- ------------------------------------------------------------------------------------------------
Novell, Inc., 0.50% Cv. Sr. Unsec. Debs., 7/15/24 1 7,500,000 7,171,875
- ------------------------------------------------------------------------------------------------
Red Hat, Inc., 0.50% Cv. Sr. Unsec. Debs., 1/15/24 1 4,000,000 3,690,000
-------------
22,984,375
24 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------
MATERIALS--2.1%
- ------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING--1.0%
Sealed Air Corp., 3% Cv. Nts., 6/30/33 1 $ 5,500,000 $ 5,692,500
- ------------------------------------------------------------------------------------------------
METALS & MINING--1.1%
Inco Ltd., 1% Cv. Unsec. Unsub. Debs., 3/14/23 3,000,000 3,937,500
- ------------------------------------------------------------------------------------------------
Quanex Corp., 2.50% Cv. Sr. Unsec. Nts., 5/15/34 1 2,000,000 2,677,500
-------------
6,615,000
- ------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--1.1%
- ------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.1%
American Tower Corp., 3% Cv. Sr. Nts., 8/15/12 3,000,000 3,401,250
- ------------------------------------------------------------------------------------------------
Level 3 Communications, Inc., 6% Cv. Nts., 9/15/09 5,000,000 3,131,250
-------------
6,532,500
- ------------------------------------------------------------------------------------------------
UTILITIES--2.8%
- ------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--2.8%
Calpine Corp., 4.75% Cv. Sr. Unsec. Nts., 11/15/23 1 7,000,000 6,125,000
- ------------------------------------------------------------------------------------------------
CenterPoint Energy, Inc., 3.75% Cv. Sr. Nts., 5/15/23 1 4,000,000 4,595,000
- ------------------------------------------------------------------------------------------------
Duke Energy Corp., 1.75% Cv. Sr. Bonds, 5/15/23 5,000,000 5,637,500
-------------
16,357,500
-------------
Total Convertible Corporate Bonds and Notes (Cost $350,196,019) 377,414,795
SHARES
- ------------------------------------------------------------------------------------------------
PREFERRED STOCKS--30.3%
- ------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--3.7%
- ------------------------------------------------------------------------------------------------
AUTOMOBILES--3.1%
Ford Motor Co. Capital Trust II, 6.50% Cum. Cv. Trust Preferred
Securities, Non-Vtg. 175,000 9,238,250
- ------------------------------------------------------------------------------------------------
General Motors Corp., 5.25% Cv. Sr. Unsec. Debs., Series B 400,000 9,228,000
-------------
18,466,250
- ------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES--0.6%
Newell Financial Trust I, 5.25% Cum. Cv. Quarterly Income Preferred
Securities, Non-Vtg. 70,000 3,298,750
- ------------------------------------------------------------------------------------------------
CONSUMER STAPLES--0.9%
- ------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--0.9%
Albertson's, Inc., 7.25% Cv. Units (each unit has a stated
amount of $25, and will consist of a purchase contract issued by
Albertson's, initially a 1/40, or 2.50%, ownership interest in
one of their sr. nts. with a principal amount of $1,000) 5 210,000 5,334,000
- ------------------------------------------------------------------------------------------------
ENERGY--1.2%
- ------------------------------------------------------------------------------------------------
OIL & GAS--1.2%
Chesapeake Energy Corp., 4.125% Cum. Cv., Non-Vtg. 1 4,000 4,655,000
25 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------
OIL & GAS Continued
Williams Cos., Inc. (The), 5.50% Cv. Jr. Unsec. Debs. 1 30,000 $ 2,520,000
-------------
7,175,000
- ------------------------------------------------------------------------------------------------
FINANCIALS--9.5%
- ------------------------------------------------------------------------------------------------
COMMERCIAL BANKS--1.8%
Marshall & Ilsley Corp., 6.50% Cv. 160,000 4,545,600
- ------------------------------------------------------------------------------------------------
Washington Mutual Capital Trust 2001:
5.375% Cum. Cv. Units (each unit consists of one preferred stock
and one warrant to purchase shares of Washington Mutual, Inc.),
Non-Vtg. 1,5 75,000 4,229,700
5.375% Cum. Cv. Units (each unit consists of one preferred stock
and one warrant to purchase shares of Washington Mutual, Inc.),
Non-Vtg. 5 30,000 1,691,880
-------------
10,467,180
- ------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--0.7%
Capital One Financial Corp., 6.25% Cv. Upper DECS (each upper DECS
has a stated amount of $50 and consists of a forward purchase
contract to purchase Capital One Financial Corp. common stock and
$50 principal amount of Capital One Financial Corp., 6.25% sr.
nts., 5/17/07) 5 75,000 4,233,000
- ------------------------------------------------------------------------------------------------
INSURANCE--4.9%
Chubb Corp. (The), 7% Cv. Equity Units, Series A (each unit
consists of one warrant to purchase Chubb Corp. (The) common stock
and $25 principal amount of Chubb Corp. (The), 4% sr. nts.,
11/16/07) 5 170,000 5,030,300
- ------------------------------------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The), 7% Cv. Equity Units
(each unit has a stated amount of $50 and consists of a purchase
contract to purchase Hartford Financial Services Group, Inc. (The)
common stock and a normal unit which consists of $1,000 principal
amount of Hartford Financial Services Group, Inc. (The), 2.56% sr.
nts., 8/16/08) 5 100,000 6,575,000
- ------------------------------------------------------------------------------------------------
PMI Group, Inc. (The), 5.875% Cv. Hybrid Income Term Security Units
(each unit has a stated value of $25 and consists of a purchase
contract to purchase PMI Group, Inc. (The) common stock and a
corporate unit which consists of PMI Group, Inc. (The) 3% sr. nts.,
11/15/08) 5 180,000 4,747,500
- ------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., 4.50% Cv. Jr. Unsec. Sub. Nts. 200,000 4,606,000
- ------------------------------------------------------------------------------------------------
UnumProvident Corp., 8.25% Cv 100,000 3,607,000
- ------------------------------------------------------------------------------------------------
XL Capital Ltd., 6.50% Cv 170,000 4,326,500
-------------
28,892,300
- ------------------------------------------------------------------------------------------------
REAL ESTATE--1.2%
Simon Property Group Inc., 6% Cv., Non-Vtg 120,000 7,106,400
- ------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--0.9%
Sovereign Capital Trust VI, 4.375% Cv. 100,000 4,900,000
26 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------
HEALTH CARE--3.2%
- ------------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--1.2%
Baxter International, Inc., 7% Cv. Equity Units (each equity
unit has a stated value of $50 and consists of a purchase
contract to purchase Baxter International, Inc. common stock and
$50 principal amount of Baxter International, Inc., 3.60% sr.
nts., 2/16/08), Non-Vtg. 5 120,000 $ 6,775,200
- ------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--0.7%
Omnicare, Inc., 4% Cv. 80,000 4,412,800
- ------------------------------------------------------------------------------------------------
PHARMACEUTICALS--1.3%
Schering-Plough Corp. 6% Cv. 140,000 7,854,000
- ------------------------------------------------------------------------------------------------
INDUSTRIALS--1.3%
- ------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.7%
Northrop Grumman Corp., 7% Cum. Cv. Series B 30,000 3,967,500
- ------------------------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--0.6%
United Rentals Trust I, 6.50% Cv. Quarterly Income Preferred
Securities 85,000 3,686,875
- ------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--3.1%
- ------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--1.7%
Lucent Technologies Capital Trust I, 7.75% Cum. Cv., Non-Vtg. 8,500 10,111,260
- ------------------------------------------------------------------------------------------------
OFFICE ELECTRONICS--1.4%
Xerox Corp., 6.25% Cv. 55,000 8,129,550
- ------------------------------------------------------------------------------------------------
MATERIALS--1.6%
- ------------------------------------------------------------------------------------------------
METALS & MINING--0.8%
Freeport-McMoRan Copper & Gold, Inc., 5.50% Cv. 1 5,000 4,900,000
- ------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.8%
International Paper Capital Trust, 5.25% Cum. Cv. (cv. into
International Paper Co. common stock), Non-Vtg. 6 90,000 4,556,250
- ------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--1.6%
- ------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.6%
Alltel Corp., 7.75% Cv. Equity Units (each unit consists of
corporate units, each with a stated value of $50 and includes a
purchase contract to purchase Alltel Corp. common stock and $50
principal amount of Alltel Corp., 6.25% sr. nts., 5/17/07),
Non-Vtg. 5 120,000 6,346,800
- ------------------------------------------------------------------------------------------------
CenturyTel, Inc., 6.875% Cv. Equity Units (each unit consists of
units referred to as corporate units, each with a stated amount
of $25 and includes a purchase contract to purchase CenteryTel,
Inc. common stock and $25 principal amount of CenturyTel, Inc.,
6.02% sr. nts., series j, due 2007), Non-Vtg. 5 113,900 3,032,588
-------------
9,379,388
- ------------------------------------------------------------------------------------------------
UTILITIES--4.2%
- ------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--2.4%
Calpine Capital Trust III, 5% Cum. Cv. Remarketable Term
Income
Deferrable Equity Securities, Non-Vtg. 70,000 3,403,750
27 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES Continued
Cinergy Corp., 9.50% Cv. Flexible Equity Linked Exchangeable
Preferred Redeemable Increased Dividend Equity Securities (each
feline prides consists of units referred to as income prides,
each with a stated amount of $50 and includes a purchase contract
for Cinergy Corp. common stock, and a 6.90% preferred trust
security, due 2007, issued by Cinergy Corp. Funding Trust I) 5 50,000 $ 3,170,000
- ------------------------------------------------------------------------------------------------
FPL Group, Inc., 8.50% Cv. Equity Units (each unit consists of
corporate units, each with a stated amount of $50 and includes a
purchase contract to purchase FPL Group, Inc. common stock and
$50 principal amount of FPL Group Capital, Inc., 4.75% debs.,
series a, 2/16/07) 5 120,000 7,381,200
-------------
13,954,950
- ------------------------------------------------------------------------------------------------
GAS UTILITIES--0.5%
Sempra Energy, 8.50% Cv. Equity Units (each equity unit consists
of income equity units, each has a stated value of $25 and
consists of a purchase contract to purchase Sempra Energy common
stock and $25 principal amount of Sempra Energy, 5.60% sr. nts.,
5/17/07) 5 100,000 3,112,000
- ------------------------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--1.3%
AES Trust III, 6.75% Cv. 90,000 4,441,500
- ------------------------------------------------------------------------------------------------
Williams Cos., Inc. (The), 5.50% Cv. Jr. Unsec. Sub. Debs. 40,000 3,360,000
-------------
7,801,500
-------------
Total Preferred Stocks (Cost $158,535,076) 178,514,153
- ------------------------------------------------------------------------------------------------
COMMON STOCKS--1.8%
- ------------------------------------------------------------------------------------------------
Comcast Corp., Cl. A Special, Non-Vtg. 7 165,800 5,444,872
- ------------------------------------------------------------------------------------------------
Johnson & Johnson 50,000 3,171,000
- ------------------------------------------------------------------------------------------------
Motorola, Inc. 100,000 1,720,000
- ------------------------------------------------------------------------------------------------
SystemOne Technologies, Inc. 7 197,142 29,571
-------------
Total Common Stocks (Cost $8,825,135) 10,365,443
UNITS
- ------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- ------------------------------------------------------------------------------------------------
Portion of Danskin, Inc., Promissory Nt. to be used to purchase
53,309 shares of restricted common stock in rights offering 4,6,7
(Cost $15,993) -- 15,993
PRINCIPAL
AMOUNT
- ------------------------------------------------------------------------------------------------
STRUCTURED NOTES--2.7%
- ------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., Cv. Premium Income Equity Linked
Nts., 6.25%, 10/15/07 (linked to General Mills, Inc.) $ 200,000 5,384,000
- ------------------------------------------------------------------------------------------------
Morgan Stanley, Cv. Premium Equity Participating Security, 2.50%,
10/2/06 (exchangeable for General Electric Co. common stock) 298,463 10,683,483
-------------
Total Structured Notes (Cost $15,030,751) 16,067,483
28 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--0.9%
- ------------------------------------------------------------------------------------------------
Undivided interest of 0.49% in joint repurchase agreement
(Principal Amount/Value $1,103,300,000, with a maturity value of
$1,103,498,594) with UBS Warburg LLC, 2.16%, dated 12/31/04, to
be repurchased at $5,410,974 on 1/3/05, collateralized by
Federal National Mortgage Assn., 5%, 3/1/34, with a value of
$1,127,561,486 (Cost $5,410,000) $ 5,410,000 $ 5,410,000
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $538,012,974) 99.9% 587,787,867
- ------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.1 508,506
-----------------------------
NET ASSETS 100.0% $ 588,296,373
=============================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. 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 $159,432,200 or 27.10% of the Fund's net
assets as of December 31, 2004.
2. Zero coupon bond reflects effective yield on the date of purchase.
3. Represents the current interest rate for a variable or increasing rate
security.
4. Illiquid or restricted security. The aggregate value of illiquid or
restricted securities as of December 31, 2004 was $1,782,038, which represents
0.30% of the Fund's net assets, of which $15,993 is considered restricted. See
Note 5 of Notes to Financial Statements.
5. Units may be comprised of several components, such as debt and equity and/or
warrants to purchase equity at some point in the future. For units, which
represent debt securities, principal amount disclosed represents total
underlying principal.
6. Received as the result of issuer reorganization.
7. Non-income producing security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES December 31, 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investments, at value (cost $538,012,974)--see accompanying
statement of investments $ 587,787,867
- --------------------------------------------------------------------------------
Cash 1,075,569
- --------------------------------------------------------------------------------
Receivables and other assets:
Interest and dividends 2,539,233
Investments sold 613,134
Other 26,306
-------------
Total assets 592,042,109
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 3,070,293
Distribution and service plan fees 358,002
Trustees' compensation 130,037
Transfer and shareholder servicing agent fees 77,155
Shareholder communications 67,372
Other 42,877
--------------
Total liabilities 3,745,736
- --------------------------------------------------------------------------------
NET ASSETS $ 588,296,373
==============
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- --------------------------------------------------------------------------------
Paid-in capital $ 653,147,053
- --------------------------------------------------------------------------------
Accumulated net investment loss (4,639,826)
- --------------------------------------------------------------------------------
Accumulated net realized loss on investments (109,985,747)
- --------------------------------------------------------------------------------
Net unrealized appreciation on investments 49,774,893
--------------
NET ASSETS $ 588,296,373
==============
30 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- --------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net $13.63
assets of $319,477,580 and 23,443,391 shares of beneficial
interest outstanding) Maximum offering price per share (net
asset value plus sales charge of 5.75% of offering price) $14.46
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per share
(based on net assets of $84,815,864 and 6,214,381 shares of
beneficial interest outstanding) $13.65
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per share
(based on net assets of $80,994,661 and 5,946,692 shares of
beneficial interest outstanding) $13.62
- --------------------------------------------------------------------------------
Class M Shares:
Net asset value, redemption price per share (based on net assets
of $100,877,243 and 7,406,974 shares of beneficial interest
outstanding) $13.62
Maximum offering price per share (net asset value plus sales
charge of 3.25% of offering price) $14.08
- --------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per share
(based on net assets of $2,131,025 and 156,376 shares of
beneficial interest outstanding) $13.63
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMENT OF OPERATIONS For the Year Ended December 31, 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $ 12,931,206
- --------------------------------------------------------------------------------
Interest 12,794,857
--------------
Total investment income 25,726,063
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees 2,940,552
- --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 771,143
Class B 1,027,329
Class C 824,144
Class M 307,581
Class N 8,890
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 447,784
Class B 172,382
Class C 116,957
Class M 115,040
Class N 5,083
- --------------------------------------------------------------------------------
Shareholder communications:
Class A 55,235
Class B 37,538
Class C 15,923
Class M 13,540
Class N 749
- --------------------------------------------------------------------------------
Accounting service fees 187,502
- --------------------------------------------------------------------------------
Trustees' compensation 51,119
- --------------------------------------------------------------------------------
Custodian fees and expenses 18,943
- --------------------------------------------------------------------------------
Other 133,074
--------------
Total expenses 7,250,508
Less reduction to custodian expenses (5,955)
Less payments and waivers of expenses (38)
--------------
Net expenses 7,244,515
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 18,481,548
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
- --------------------------------------------------------------------------------
Net realized gain on:
Investments 29,042,625
Net increase from payment by affiliate 3,750
--------------
Net realized gain 29,046,375
- --------------------------------------------------------------------------------
Net change in unrealized appreciation on investments (4,905,531)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 42,622,392
==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2004 2003
- -------------------------------------------------------------------------------------------------
OPERATIONS
- -------------------------------------------------------------------------------------------------
Net investment income $ 18,481,548 $ 23,819,107
- -------------------------------------------------------------------------------------------------
Net realized gain 29,046,375 29,278,307
- -------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (4,905,531) 64,594,391
-------------------------------
Net increase in net assets resulting from operations 42,622,392 117,691,805
- -------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (15,613,529) (11,367,661)
Class B (3,901,818) (5,345,568)
Class C (3,350,297) (2,624,294)
Class M (5,064,498) (4,627,938)
Class N (83,852) (28,916)
- -------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A 1,054,354 66,001,751
Class B (50,450,935) (43,825,244)
Class C (3,149,841) 9,713,833
Class M (16,303,106) (11,782,752)
Class N 631,345 938,567
- -------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------
Total increase (decrease) (53,609,785) 114,743,583
- -------------------------------------------------------------------------------------------------
Beginning of period 641,906,158 527,162,575
-------------------------------
End of period (including accumulated net investment
loss of $4,639,826 and $970,782, respectively) $ 588,296,373 $ 641,906,158
===============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED DECEMBER 31, 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.27 $ 11.29 $ 12.76 $ 13.85 $ 16.36
Income (loss) from investment operations:
Net investment income .43 1 .56 .57 .48 .72
Net realized and unrealized gain (loss) .58 1.98 (1.41) (.94) (1.45)
-----------------------------------------------------------------------
Total from investment operations 1.01 2.54 (.84) (.46) (.73)
- -------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.65) (.56) (.63) (.63) (.72)
Distributions from net realized gain -- -- -- -- (1.06)
-----------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.65) (.56) (.63) (.63) (1.78)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.63 $ 13.27 $ 11.29 $ 12.76 $ 13.85
=======================================================================
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 7.74% 22.95% (6.59)% (3.30)% (4.81)%
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 319,478 $ 310,641 $ 202,968 $ 187,458 $ 210,903
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 321,729 $ 252,347 $ 190,677 $ 197,514 $ 225,938
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 3.24% 4.48% 4.77% 3.58% 4.42%
Total expenses 0.94% 4 0.94% 4,5 0.99% 4 0.95% 4 0.90% 4
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 54% 61% 52% 69% 127%
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. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
34 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
CLASS B YEAR ENDED DECEMBER 31, 2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.29 $ 11.30 $ 12.79 $ 13.87 $ 16.38
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .33 1 .43 .43 .38 .59
Net realized and unrealized gain (loss) .58 2.02 (1.38) (.93) (1.45)
----------------------------------------------------------------------
Total from investment operations .91 2.45 (.95) (.55) (.86)
- ------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.55) (.46) (.54) (.53) (.59)
Distributions from net realized gain -- -- -- -- (1.06)
----------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.55) (.46) (.54) (.53) (1.65)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.65 $ 13.29 $ 11.30 $ 12.79 $ 13.87
======================================================================
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 6.92% 22.07% (7.44)% (3.97)% (5.55)%
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 84,816 $ 133,058 $ 154,350 $ 286,829 $ 373,860
- ------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 102,670 $ 139,757 $ 213,259 $ 330,806 $ 418,592
- ------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 2.47% 3.79% 3.95% 2.75% 3.62%
Total expenses 1.75% 4 1.74% 4,5 1.77% 4 1.71% 4 1.70% 4
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 54% 61% 52% 69% 127%
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. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
35 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS C YEAR ENDED DECEMBER 31, 2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.27 $ 11.28 $ 12.76 $ 13.84 $ 16.35
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .33 1 .46 .46 .38 .59
Net realized and unrealized gain (loss) .57 1.99 (1.40) (.93) (1.45)
----------------------------------------------------------------------
Total from investment operations .90 2.45 (.94) (.55) (.86)
- ------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.55) (.46) (.54) (.53) (.59)
Distributions from net realized gain -- -- -- -- (1.06)
----------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.55) (.46) (.54) (.53) (1.65)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.62 $ 13.27 $ 11.28 $ 12.76 $ 13.84
======================================================================
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 6.89% 22.14% (7.39)% (3.98)% (5.56)%
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 80,995 $ 82,149 $ 61,031 $ 76,846 $ 91,567
- ------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 82,470 $ 69,787 $ 66,391 $ 85,774 $ 96,574
- ------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 2.48% 3.73% 3.97% 2.80% 3.62%
Total expenses 1.70% 4 1.70% 4,5 1.76% 4 1.71% 4 1.70% 4
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 54% 61% 52% 69% 127%
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. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
36 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
CLASS M YEAR ENDED DECEMBER 31, 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.27 $ 11.28 $ 12.76 $ 13.84 $ 16.35
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .43 1 .50 .49 .41 .64
Net realized and unrealized gain (loss) .57 2.00 (1.40) (.93) (1.45)
-------------------------------------------------------------------------
Total from investment operations 1.00 2.50 (.91) (.52) (.81)
- ---------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.65) (.51) (.57) (.56) (.64)
Distributions from net realized gain -- -- -- -- (1.06)
-------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.65) (.51) (.57) (.56) (1.70)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.62 $ 13.27 $ 11.28 $ 12.76 $ 13.84
=========================================================================
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 7.69% 22.59% (7.16)% (3.72)% (5.30)%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 100,877 $ 114,600 $ 108,426 $ 144,612 $ 181,521
- ---------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 106,194 $ 110,337 $ 122,897 $ 160,919 $ 213,617
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 3.24% 4.16% 4.24% 3.04% 3.90%
Total expenses 0.95% 4,5 1.32% 4,5 1.51% 4 1.45% 4 1.42% 4
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 54% 61% 52% 69% 127%
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. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
37 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS N YEAR ENDED DECEMBER 31, 2004 2003 2002 2001 1
- -------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.27 $ 11.29 $ 12.76 $ 13.68
- -------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .37 2 .49 .55 .42
Net realized and unrealized gain (loss) .58 2.00 (1.43) (.84)
-----------------------------------------------------
Total from investment operations .95 2.49 (.88) (.42)
- -------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.59) (.51) (.59) (.50)
Distributions from net realized gain -- -- -- --
-----------------------------------------------------
Total dividends and/or distributions
to shareholders (.59) (.51) (.59) (.50)
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.63 $ 13.27 $ 11.29 $ 12.76
=====================================================
- -------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 7.31% 22.45% (6.92)% (3.02)%
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 2,131 $ 1,458 $ 388 $ 36
- -------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 1,781 $ 743 $ 205 $ 10
- -------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.79% 3.87% 4.38% 5.45%
Total expenses 1.37% 1.37% 1.43% 1.22%
Expenses after payments and waivers and
reduction to custodian expenses N/A 5 1.35% 1.38% N/A 5
- -------------------------------------------------------------------------------------------------------
Portfolio turnover rate 54% 61% 52% 69%
1. For the period from March 1, 2001 (inception of offering) to December 31,
2001.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. 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.
4. Annualized for periods of less than one full year.
5. Reduction to custodian expenses less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
38 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Convertible Securities Fund (the Fund), a portfolio of the Bond Fund
Series, is registered under the Investment Company Act of 1940, as amended, as
an open end management investment company. The Fund's investment objective is to
seek a high level of total return on its assets through a combination of current
income and capital appreciation. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B, Class C, Class M and Class N shares.
Class A shares are sold at their offering price, which is normally net asset
value plus a front-end sales charge. 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 M shares are sold with a reduced front-end
sales charge. Class N shares are sold only through retirement plans. Retirement
plans that offer Class N shares may impose charges on those accounts. All
classes of shares have identical rights and voting privileges with respect to
the Fund in general and exclusive voting rights on matters that affect that
class alone. Earnings, net assets and net asset value per share may differ 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, M and N have separate distribution and/or service
plans. Class B shares will automatically convert to Class A shares six years
after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities listed
or traded on National Stock Exchanges or other domestic or foreign exchanges are
valued based on the last sale price of the security traded on that exchange
prior to the time when the Fund's assets are valued. Securities traded on NASDAQ
are valued based on the closing price provided by NASDAQ prior to the time when
the Fund's assets are valued. In the absence of a sale, the security is valued
at the last sale price on the prior trading day, if it is within the spread of
the closing bid and asked prices, and if not, at the closing bid price.
Corporate, government and municipal debt instruments having a remaining maturity
in excess of 60 days and all mortgage-backed securities will be valued at the
mean between the "bid" and "asked" prices. Securities may be valued primarily
using dealer-supplied valuations or a portfolio pricing service authorized by
the Board of Trustees. Securities (including restricted securities) for which
market quotations are not readily available are valued at their fair value.
Foreign 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. Short-term "money
market type" debt securities with remaining maturities of sixty days or less are
valued at amortized cost (which approximates market value).
39 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
STRUCTURED NOTES. The Fund invests in structured notes whose market values,
interest rates and/or redemption prices are linked to the performance of
underlying foreign currencies, interest rate spreads, stock market indices,
prices of individual securities, commodities or other financial instruments or
the occurrence of other specific events. The structured notes are often
leveraged, increasing the volatility of each note's market value relative to the
change in the underlying linked financial element or event. Fluctuations in
value of these securities are recorded as unrealized gains and losses in the
accompanying financial statements. The Fund records a realized gain or loss when
a structured note is sold or matures. As of December 31, 2004, the market value
of these securities comprised 2.7% of the Fund's net assets and resulted in
unrealized cumulative gains of $1,036,732.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal. In the event of default by the other party to the agreement,
retention of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
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.
40 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
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
------------------------------------------------------------------------
$52,124 $-- $109,300,089 $44,520,263
1. As of December 31, 2004, the Fund had $109,300,089 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, 2004,
details of the capital loss carryforwards were as follows.
EXPIRING
----------------------
2009 $ 18,833,093
2010 90,466,996
------------
Total $109,300,089
============
2.During the fiscal year ended December 31, 2004, the Fund utilized $22,626,011
of capital loss carryforward to offset capital gains realized in that fiscal
year.
3. During the fiscal year ended December 31, 2003, the Fund utilized $24,570,184
of capital loss carryforward to offset capital gains realized in that fiscal
year.
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, 2004. Net assets of
the Fund were unaffected by the reclassifications.
INCREASE TO
REDUCTION TO ACCUMULATED NET
ACCUMULATED NET REALIZED LOSS
INVESTMENT LOSS ON INVESTMENTS
-----------------------------------
$5,863,402 $5,863,402
The tax character of distributions paid during the years ended December 31, 2004
and December 31, 2003 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
-------------------------------------------------------------------
Distributions paid from:
Ordinary income $28,013,994 $23,994,377
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, 2004 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.
41 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
Federal tax cost of securities $543,267,604
=============
Gross unrealized appreciation $ 52,694,676
Gross unrealized depreciation (8,174,413)
-------------
Net unrealized appreciation $ 44,520,263
=============
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for the
Fund's independent trustees. Benefits are based on years of service and fees
paid to each trustee during the years of service. During the year ended December
31, 2004, the Fund's projected benefit obligations were increased by $13,596 and
payments of $2,372 were made to retired trustees, resulting in an accumulated
liability of $116,064 as of December 31, 2004.
The Board of Trustees has adopted a deferred compensation 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 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
and paid quarterly. 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 at a rate equal to the Federal
Funds Rate plus 0.50%. The Reduction to
42 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST The Fund has authorized an unlimited number of
no par value shares of beneficial interest of each class. Transactions in shares
of beneficial interest were as follows:
YEAR ENDED DECEMBER 31, 2004 YEAR ENDED DECEMBER 31, 2003
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------
CLASS A
Sold 6,358,012 $ 84,644,732 10,293,699 $ 125,272,357
Dividends and/or
distributions reinvested 900,277 12,114,223 717,012 8,840,852
Redeemed (7,215,971) (95,704,601) (5,594,158) (68,111,458)
------------------------------------------------------------
Net increase 42,318 $ 1,054,354 5,416,553 $ 66,001,751
============================================================
- ---------------------------------------------------------------------------------------
CLASS B
Sold 1,168,753 $ 15,636,529 2,802,713 $ 34,182,973
Dividends and/or
distributions reinvested 193,385 2,607,930 300,964 3,678,039
Redeemed (5,155,900) (68,695,394) (6,750,493) (81,686,256)
------------------------------------------------------------
Net decrease (3,793,762) $ (50,450,935) (3,646,816) $ (43,825,244)
============================================================
- ---------------------------------------------------------------------------------------
CLASS C
Sold 1,078,891 $ 14,393,979 1,914,058 $ 23,378,006
Dividends and/or
distributions reinvested 162,119 2,182,505 144,706 1,777,170
Redeemed (1,486,132) (19,726,325) (1,277,679) (15,441,343)
------------------------------------------------------------
Net increase (decrease) (245,122) $ (3,149,841) 781,085 $ 9,713,833
============================================================
- ---------------------------------------------------------------------------------------
CLASS M
Sold 140,463 $ 1,876,605 223,208 $ 2,730,862
Dividends and/or
distributions reinvested 265,627 3,571,401 264,332 3,234,301
Redeemed (1,637,323) (21,751,112) (1,462,362) (17,747,915)
------------------------------------------------------------
Net decrease (1,231,233) $ (16,303,106) (974,822) $ (11,782,752)
============================================================
43 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST Continued
YEAR ENDED DECEMBER 31, 2004 YEAR ENDED DECEMBER 31, 2003
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------
CLASS N
Sold 102,523 $ 1,367,550 89,088 $ 1,101,574
Dividends and/or
distributions reinvested 5,527 74,505 2,161 27,095
Redeemed (61,549) (810,710) (15,713) (190,102)
--------------------------------------------------------------
Net increase 46,501 $ 631,345 75,536 $ 938,567
==============================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than U.S. government obligations and short-term obligations, for the year ended
December 31, 2004, were $311,733,023 and $328,138,505, respectively. There were
no purchases and sales of $25,103,516 of U.S. government and government agency
obligations for the year ended December 31, 2004.
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of 0.625% of the first $50 million of average annual net assets of
the Fund, 0.50% of the next $250 million and 0.4375% of average annual net
assets over $300 million.
- --------------------------------------------------------------------------------
ACCOUNTING FEES. Accounting fees paid to the Manager were in accordance with the
accounting services agreement with the Fund which provides for an annual fee of
$12,000 for the first $30 million of average daily net assets and $9,000 for
each additional $30 million of average daily net assets. During the year ended
December 31, 2004, the Fund paid $187,502 to the Manager for accounting and
pricing services.
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICES. 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, 2004, the Fund paid
$861,707 to OFS for services to the Fund.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate of up to 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor
44 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
currently uses all of those fees to pay dealers, brokers, banks and other
financial institutions quarterly for providing personal services and maintenance
of accounts of their customers that hold Class A shares. Any unreimbursed
expenses the Distributor incurs with respect to Class A shares in any fiscal
year cannot be recovered in subsequent years. Fees incurred by the Fund under
the Plan are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C, CLASS M AND CLASS N SHARES.
The Fund has adopted Distribution and Service Plans for Class B, Class C, Class
M and Class N shares to compensate the Distributor for its services in
connection with the distribution of those shares and servicing accounts. Under
the plans, the Fund pays the Distributor an annual asset-based sales charge of
0.75% per year on Class B and Class C shares and 0.25% per year on Class N
shares. While the Class M plan permits an annual asset-based sales charge
payment of 0.50%, the Board has set that payment at zero effective February 11,
2004. The Distributor also receives a service fee of up to 0.25% per year under
each plan. If either the Class B, Class C, Class M 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's aggregate uncompensated expenses under the plan
at December 31, 2004 for Class B, Class C and Class N shares were $2,725,440,
$2,181,422 and $27,851, respectively. Fees incurred by the Fund under the plans
are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption proceeds
prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the table below for the period indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CLASS M CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- -----------------------------------------------------------------------------------------------------------------
December 31, 2004 $131,622 $6,967 $2,108 $242,429 $14,123 $2,508
- --------------------------------------------------------------------------------
PAYMENTS AND WAIVERS OF EXPENSES. Following a review of its use of brokerage
commissions for sales that is permitted under its investment advisory agreement,
the Fund's Manager terminated that practice in July 2003. Subsequently, the
Manager paid the Fund $3,750, an amount equivalent to certain of such
commissions incurred in prior years.
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, 2004, OFS waived $38 for Class M shares. This
undertaking may be amended or withdrawn at any time.
45 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. ILLIQUID OR RESTRICTED SECURITIES
As of December 31, 2004, investments in securities included issues that are
illiquid or restricted. Restricted securities are purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. A security may also 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 or restricted securities. Certain restricted securities, eligible for
resale to qualified institutional investors, are not subject to that limitation.
Information concerning restricted securities is as follows:
UNREALIZED
ACQUISITION VALUATION AS OF APPRECIATION
SECURITY DATE COST DECEMBER 31, 2004 (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------
Portion of Danskin, Inc. Promissory Nt.
to be used to purchase 53,309 shares of
restricted common stock in rights offering 8/14/95 $15,993 $15,993 $--
- --------------------------------------------------------------------------------
6. LITIGATION
A consolidated amended complaint has been filed as putative derivative and class
actions against the Manager, OFS and the Distributor (collectively, the
"Oppenheimer defendants"), as well as 51 of the Oppenheimer funds (as "Nominal
Defendants") including the Fund, 31 present and former Directors or Trustees and
9 present and former officers of the funds. This complaint, filed in the U.S.
District Court for the Southern District of New York on January 10, 2005,
consolidates into a single action and amends six individual previously-filed
putative derivative and class action complaints. Like those prior complaints,
the complaint alleges that the Manager charged excessive fees for distribution
and other costs, improperly used assets of the funds in the form of directed
brokerage commissions and 12b-1 fees to pay brokers to promote sales of the
funds, and failed to properly disclose the use of assets of the funds to make
those payments in violation of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940. Also, like those prior complaints, the
complaint further alleges that by permitting and/or participating in those
actions, the Directors/Trustees and the Officers breached their fiduciary duties
to shareholders of the funds under the Investment Company Act of 1940 and at
common law. The complaint seeks unspecified compensatory and punitive damages,
rescission of the funds' investment advisory agreements, an accounting of all
fees paid, and an award of attorneys' fees and litigation expenses.
46 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
The Oppenheimer defendants believe that the allegations contained in the
Complaints are without merit and that they, the funds named as Nominal
Defendants, and the Directors/Trustees of those funds have meritorious defenses
against the claims asserted. The Oppenheimer defendants intend to defend these
lawsuits vigorously and to contest any claimed liability, and they have retained
legal counsel to defend such suits. The Oppenheimer defendants believe that it
is premature to render any opinion as to the likelihood of an outcome
unfavorable to them and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.
47 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER BOND FUND SERIES:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Convertible Securities Fund (a portfolio of the Bond Fund Series),
including the statement of investments, as of December 31, 2004, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year 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.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 2004, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Convertible Securities Fund as of December 31, 2004, the results of
its operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with U.S.
generally accepted accounting principles.
KPMG LLP
Denver, Colorado
February 8, 2005
48 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2005, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2004. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Dividends, if any, paid by the Fund during the fiscal year ended December
31, 2004 which are not designated as capital gain distributions should be
multiplied by 3.77% 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, 2004 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. $992,784 of the Fund's fiscal year taxable income may be eligible
for the lower individual income tax rates. In early 2005, shareholders of record
will receive information regarding the percentage of distributions that are
eligible for lower individual income tax rates.
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.
49 | OPPENHEIMER CONVERTIBLE SECURITIES 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 website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file new Form N-PX, with its complete proxy voting record for the 12 months
ended June 30th, no later than August 31st of each year. The Fund's Form N-PX
filing is available (i) without charge, upon request, by calling the Fund
toll-free at 1.800.525.7048, and (ii) 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.
50 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS BY
HELD FUND, LENGTH SERVICE, TRUSTEE; NUMBER OF PORTFOLIOS IN FUND COMPLEX CURRENTLY OVERSEEN BY TRUSTEE
AGE
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, CO
TRUSTEES 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, UNTIL HIS RESIGNATION,
RETIREMENT, DEATH OR REMOVAL.
THOMAS W. COURTNEY, Principal of Courtney Associates, Inc. (venture capital firm); former General Partner
Chairman of the Board of of Trivest Venture Fund (private venture capital fund); former President of Investment
Trustees, Trustee (since Counseling Federated Investors, Inc.; Trustee of the following open-end investment
1995) companies: Cash Assets Trust, PIMCO ADVISORS VIT, Tax Free Trust of Arizona and 4
Age: 71 funds for the Hawaiian Tax Free Trust. Oversees 10 portfolios in the OppenheimerFunds
complex.
JOHN CANNON, Director, Neuberger Berman Income Managers Trust, Neuberger & Berman Income Funds and
Trustee (since 1992) Neuberger Berman Trust, (1995-present); Neuberger Berman Equity Funds (November
Age: 75 2000-present); Trustee, Neuberger Berman Mutual Funds (October 1994-present); formerly
Chairman and Treasurer, CDC Associates, a registered investment adviser (December
1993-February 1996); Independent Consultant; Chief Investment Officer, CDC Associates
(1996-June 2000); Consultant and director, CDC Associates (December 1993-February
1999). Oversees 3 portfolios in the OppenheimerFunds complex.
PAUL Y. CLINTON, Principal of Clinton Management Associates, a financial and venture capital
Trustee (since 1995) consulting firm; Trustee of the following open-end investment companies: Trustee of
Age: 73 Capital Cash Management Trust, Prime Cash Fund, PIMCO ADVISORS VIT and Narragansett
Insured Tax-Free Income Fund. Formerly a director of OCC Cash Reserves, Inc. (open-end
investment company) (1989-December 2002). Oversees 10 portfolios in the
OppenheimerFunds complex.
ROBERT G. GALLI, A trustee or director of other Oppenheimer funds. Oversees 35 portfolios in the
Trustee (since 1998) OppenheimerFunds complex.
Age: 71
LACY B. HERRMANN, Chairman and Chief Executive Officer of Aquila Management Corporation, the sponsoring
Trustee (since 1995) organization and manager, administrator and/or sub-adviser to the following open-end
Age: 75 investment companies, and Chairman of the Board of Trustees and President of each:
Churchill Cash Reserves Trust, Aquila-Cascadia Equity Fund, Cash Assets Trust, Prime
Cash Fund, Narragansett Insured Tax-Free Income Fund, Tax-Free Fund For Utah,
Churchill Tax-Free Fund of Kentucky, Tax-Free Fund of Colorado, Tax-Free Trust of
Oregon, Tax-Free Trust of Arizona, and Aquila Rocky Mountain Equity Fund and PIMCO
ADVISORS VIT; Vice President, Director, Secretary, and formerly Treasurer of Aquila
Distributors, Inc., distributor of the above funds; President and Chairman of the
Board of Trustees of Capital Cash Management Trust ("CCMT"), and an Officer and
Trustee/Director of its predecessors; President and Director of STCM Management
Company, Inc., sponsor and adviser to CCMT; Chairman, President and a Director of
InCap Management Corporation, formerly sub-adviser and administrator of Prime Cash
Fund and Short Term Asset Reserves; Trustee Emeritus of Brown University. Formerly
Chairman of the Board of Trustees and President of Hawaiian Tax-Free Trust. Oversees
10 portfolios in the OppenheimerFunds complex.
51 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
BRIAN WRUBLE, General Partner (since September 1995) of Odyssey Partners, L.P. (hedge funds in
Trustee (since 2001) distribution since 1/1/97); Director (since September 2004) of Special Value
Age: 61 Opportunities Fund, LLC; Investment Advisory Board (since October 2004) of Zurich
Financial Services; Board of Governing Trustees (since August 1990) of The Jackson
Laboratory (genetics laboratory, non profit); Trustee (since May 1992) of Institute
for Advanced Study (educational institute); Formerly Special Limited Partner
(1999-2004) and Managing Principal (through December 1998) of Odyssey Investment
Partners, LLC (private equity investment); Trustee (2000-2002) of Research Foundation
of AIMR (investment research, non-profit); Governor, Jerome Levy Economics Institute
of Bard College (economics research) (August 1990-September 2001); Director of Ray &
Berendtson, Inc. (executive search firm) (May 2000-April 2002). Oversees 10 portfolios
in the OppenheimerFunds complex.
- ---------------------------------------------------------------------------------------------------------------------
OFFICERS THE ADDRESS OF THE OFFICERS IN THE CHART BELOW IS AS FOLLOWS: FOR MESSRS. EVERETT,
MURPHY, AND ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW
YORK, NY 10281-1008, AND FOR MR. WIXTED AND MR.VANDEHEY, 6803 S. TUCSON WAY,
CENTENNIAL, CO 80112-3924. EACH OFFICER SERVES FOR AN ANNUAL TERM OR UNTIL HIS
RESIGNATION, DEATH OR REMOVAL.
JOHN V. MURPHY, Chairman, Chief Executive Officer and director (since June 2001) and President (since
President (since 2001) September 2000) of the Manager; President and a director or trustee of other
Age: 55 Oppenheimer funds; President and a director (since July 2001) of Oppenheimer
Acquisition Corp. (the Manager's parent holding company) and of Oppenheimer
Partnership Holdings, Inc. (a holding company subsidiary of the Manager); a director
(since November 2001) of OppenheimerFunds Distributor, Inc. (a subsidiary of the
Manager); Chairman and a director (since July 2001) of Shareholder Services, Inc. and
of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager);
President and a director (since July 2001) of OppenheimerFunds Legacy Program (a
charitable trust program established by the Manager); a director of the following
investment advisory subsidiaries of the Manager: OFI Institutional Asset Management,
Inc., Centennial Asset Management Corporation, Trinity Investment Management
Corporation and Tremont Capital Management, Inc. (since November 2001), HarbourView
Asset Management Corporation and OFI Private Investments, Inc. (since July 2001);
President (since November 1, 2001) and a director (since July 2001) of Oppenheimer
Real Asset Management, Inc.; Executive Vice President (since February 1997) of
Massachusetts Mutual Life Insurance Company (the Manager's parent company); a director
(since June 1995) of DLB Acquisition Corporation (a holding company that owns the
shares of Babson Capital Management LLC); a member of the Investment Company
Institute's Board of Governors (elected to serve from October 3, 2003 through
September 30, 2006). Formerly, Chief Operating Officer (September 2000-June 2001) of
the Manager; President and trustee (November 1999-November 2001) of MML Series
Investment Fund and MassMutual Institutional Funds (open-end investment companies); a
director (September 1999-August 2000) of C.M. Life Insurance Company; President, Chief
Executive Officer and director (September 1999-August 2000) of MML Bay State Life
Insurance Company; a director (June 1989-June 1998) of Emerald Isle Bancorp and
Hibernia Savings Bank (a wholly-owned subsidiary of Emerald Isle Bancorp). Oversees 62
portfolios as Trustee/Director and 21 additional portfolios as Officer in the
OppenheimerFunds complex.
52 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
- ---------------------------------------------------------------------------------------------------------------------
EDWARD EVERETT, Vice President of the Manager since January 2000; an officer of 1 portfolio in the
Vice President (since 2000) OppenheimerFunds complex; formerly Assistant Vice President of the Manager and of the
and Portfolio Manager Fund (January 1996 - January 2000).
(since 1993)
Age: 38
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since February
Secretary (since 2001) 2002) of the Manager; General Counsel and a director (since November 2001) of the
Age: 56 Distributor; General Counsel (since November 2001) of Centennial Asset Management
Corporation; Senior Vice President and General Counsel (since November 2001) of
HarbourView Asset Management Corporation; Secretary and General Counsel (since
November 2001) of Oppenheimer Acquisition Corp.; Assistant Secretary and a director
(since October 1997) of OppenheimerFunds International Ltd. and OppenheimerFunds plc;
Vice President and a director (since November 2001) of Oppenheimer Partnership
Holdings, Inc.; a director (since November 2001) of Oppenheimer Real Asset Management,
Inc.; Senior Vice President, General Counsel and a director (since November 2001) of
Shareholder Financial Services, Inc., Shareholder Services, Inc., OFI Private
Investments, Inc. and OFI Trust Company; Vice President (since November 2001) of
OppenheimerFunds Legacy Program; Senior Vice President and General Counsel (since
November 2001) of OFI Institutional Asset Management, Inc.; a director (since June
2003) of OppenheimerFunds (Asia) Limited. Formerly Senior Vice President (May
1985-December 2003), Acting General Counsel (November 2001-February 2002) and
Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary
of Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial
Services, Inc. (November 1989-November 2001); and OppenheimerFunds International Ltd.
(October 1997-November 2001). An officer of 83 portfolios in the OppenheimerFunds
complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer (since March 2004) of the Manager;
Vice President and Vice President (since June 1983) of OppenheimerFunds Distributor, Inc., Centennial
Chief Compliance Officer Asset Management Corporation and Shareholder Services, Inc. Formerly (until February
(since 2004) 2004) Vice President and Director of Internal Audit of the Manager. An officer of 83
Age: 54 portfolios in the Oppenheimer funds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer (since March 1999) of the Manager; Treasurer of
Treasurer (since 1999) HarbourView Asset Management Corporation, Shareholder Financial Services, Inc.,
Age: 45 Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and
Oppenheimer Partnership Holdings, Inc. (since March 1999), of OFI Private Investments,
Inc. (since March 2000), of OppenheimerFunds International Ltd. and OppenheimerFunds
plc (since May 2000), of OFI Institutional Asset Management, Inc. (since November
2000), and of OppenheimerFunds Legacy Program (a Colorado non-profit corporation)
(since June 2003); Treasurer and Chief Financial Officer (since May 2000) of OFI Trust
Company (a trust company subsidiary of the Manager); Assistant Treasurer (since March
1999) of Oppenheimer Acquisition Corp. Formerly Assistant Treasurer of Centennial
Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy
Program (April 2000-June 2003); Principal and Chief Operating Officer (March
1995-March 1999) at Bankers Trust Company-Mutual Fund Services Division. An officer of
83 portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND IS AVAILABLE WITHOUT CHARGE UPON REQUEST, BY
CALLING 1.800.525.7048.
53 | OPPENHEIMER CONVERTIBLE SECURITIES 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 the registrant
does not have an audit committee financial expert serving on its Audit
Committee. In this regard, no member of the Audit Committee was identified as
having all of the technical attributes identified in Instruction 2(b) to Item 3
of Form N-CSR to qualify as an "audit committee financial expert," whether
through the type of specialized education or experience described in that
Instruction. The Board has concluded that while the members of the Audit
Committee collectively have the necessary attributes and experience required to
serve effectively as an Audit Committee, no single member possesses all of the
required technical attributes through the particular methods of education or
experience set forth in the Instructions to be designated as an audit committee
financial expert.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(a) Audit Fees
The principal accountant for the audit of the registrant's annual
financial statements billed $20,000 in fiscal 2004 and $20,000 in
fiscal 2003.
(b) Audit-Related Fees
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees to the registrant during
the last two fiscal years.
The principal accountant for the audit of the registrant's annual
financial statements billed $39,500 in fiscal 2004 and no such fees
in fiscal 2003 to the registrant's investment adviser or any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant.
Such fees include: internal control reviews.
(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 $6,000 in fiscal 2004 and $5,000 in
fiscal 2003 to the registrant's investment adviser or any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant.
Such fees include: tax compliance, tax planning and tax advice. Tax
compliance generally involves preparation of original and amended
tax returns,
claims for a refund and tax payment-planning services.
Tax planning and tax advice includes assistance with tax audits and
appeals, tax advice related to mergers and acquisitions and requests
for rulings or technical advice from taxing authorities.
(d) All Other Fees
The principal accountant for the audit of the registrant's annual
financial statements billed $74 in fiscal 2004 and $90 in fiscal
2003.
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees during the last two fiscal
years to the registrant's investment adviser or any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant.
Such fees would include services provided to the registrant's Board
of Trustees with respect to the annual renewal of the registrant's
investment advisory agreement.
(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 $45,574 in fiscal 2004 and $5,090 in
fiscal 2003 to the registrant and the registrant's investment
adviser or any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the
registrant related to non-audit fees. Those billings did not include
any prohibited non-audit services as defined by the Securities
Exchange Act of 1934.
(h) The registrant's audit committee of the board of trustees has
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser, and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is
compatible with maintaining the principal account's independence. No
such services were rendered.
ITEM 5. NOT APPLICABLE
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable
ITEM 7. NOT APPLICABLE
ITEM 8. NOT APPLICABLE
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Board is responsible for approving nominees for election as trustees.
To assist in this task, the Board has designated the Audit Committee as the
nominating committee for the Board. It reviews and recommends nominees to the
Board. The Committee is comprised entirely of disinterested trustees as defined
in Section 2(a)(19) of the Investment Company Act of 1940.
The Audit Committee charter describes the responsibilities of the
Committee in nominating candidates for election as independent Trustees of the
Registrant. The Registrant's Board has adopted a written charter for the
Committee. A current copy of the Audit Committee charter is available to
shareholders on the OppenheimerFunds website at WWW.OPPENHEIMERFUNDS.COM.
Under the current policy, if the Board determines that a vacancy exists or
is likely to exist on the Board, the Audit Committee of the Board will consider
candidates for Board membership including recommended by Registrant
shareholders. The Audit Committee will consider nominees recommended by
independent Board members or recommended by any other Board members including
Board members affiliated with the Registrant's investment advisors. The
Committee may, upon Board approval, retain an executive search firm to assist in
screening potential candidates. Upon Board approval, the Audit Committee may
also use the services of legal, financial, or other external counsel that it
deems necessary or desirable in the screening process. Shareholders wishing to
submit a nominee for election to the Board may do so by mailing their submission
to the offices of OppenheimerFunds, Inc., 6803 South Tucson Way, Centennial, CO
80112, to the attention of the Board of Trustees of the named Registrant, c/o
the Secretary of the Registrant.
The Committee's process for identifying and evaluating nominees for
trustees includes a number of factors. In screening candidates for board
membership, whether the candidate is suggested by Board members, shareholders or
others, the Committee considers the candidate's professional experience,
soundness of judgment, integrity, ability to make independent, analytical
inquiries, collegiality, willingness and ability to devote the time required to
perform Board activities adequately, ability to represent the interests of all
shareholders of the Registrant, and diversity relative to the board's
composition. Candidates are expected to provide a mix of attributes, experience,
perspective and skills necessary to effectively advance the interests of
shareholders.
ITEM 10. CONTROLS AND PROCEDURES
(a) Based on their evaluation of registrant's disclosure controls and
procedures (as defined in rule 30a-3(c) under the Investment Company
Act of 1940 (17 CFR 270.30a-3(c)) as of December 31, 2004,
registrant's principal executive officer and principal financial
officer found registrant's disclosure controls and procedures to
provide reasonable assurances that information required to be
disclosed by registrant in the reports that it files under the
Securities Exchange Act of 1934 (a) is accumulated and communicated
to registrant's management, including its principal executive
officer and principal financial officer, to allow timely decisions
regarding required disclosure, and (b) is recorded, processed,
summarized and reported, within the time periods specified in the
rules and forms adopted by the U.S. Securities and Exchange
Commission.
(b) There have been no changes in registrant's internal controls over
financial reporting that occurred during the registrant's last
fiscal quarter that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over
financial reporting.
ITEM 11. EXHIBITS.
(A) EXHIBIT ATTACHED HERETO. (ATTACH CODE OF ETHICS AS EXHIBIT)(NOT
APPLICABLE TO SEMIANNUAL REPORTS)
(B) EXHIBITS ATTACHED HERETO. (ATTACH CERTIFICATIONS AS EXHIBITS)