UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-4576
Bond Fund Series
----------------
(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: June 30, 2005
-------------
ITEM 1. REPORTS TO STOCKHOLDERS.
TOP HOLDINGS AND ALLOCATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOP TEN CONVERTIBLE CORPORATE BONDS AND NOTES SECTORS
- --------------------------------------------------------------------------------
Information Technology 14.3%
- --------------------------------------------------------------------------------
Consumer Discretionary 14.1
- --------------------------------------------------------------------------------
Health Care 10.1
- --------------------------------------------------------------------------------
Industrials 7.4
- --------------------------------------------------------------------------------
Financials 3.2
- --------------------------------------------------------------------------------
Energy 3.0
- --------------------------------------------------------------------------------
Utilities 2.9
- --------------------------------------------------------------------------------
Telecommunication Services 2.6
- --------------------------------------------------------------------------------
Materials 0.8
- --------------------------------------------------------------------------------
Consumer Staples 0.6
Portfolio holdings and strategies are subject to change. Percentages are as of
June 30, 2005 and are based on net assets.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Convertible Corporate Bonds and Notes 61.3%
Stocks 35.7
Bonds and Notes 2.9
Cash Equivalents 0.1
Portfolio holdings and strategies are subject to change. Percentages are as of
June 30, 2005 and are based on total market value of investments.
- --------------------------------------------------------------------------------
8 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
NOTES
- --------------------------------------------------------------------------------
TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND
CAPITAL GAINS DISTRIBUTIONS IN A HYPOTHETICAL INVESTMENT FOR THE PERIODS SHOWN.
CUMULATIVE TOTAL RETURNS ARE NOT ANNUALIZED. THE FUND'S TOTAL RETURNS SHOWN DO
NOT REFLECT THE DEDUCTION OF INCOME TAXES ON AN INDIVIDUAL'S INVESTMENT. TAXES
MAY REDUCE YOUR ACTUAL INVESTMENT RETURNS ON INCOME OR GAINS PAID BY THE FUND OR
ANY GAINS YOU MAY REALIZE IF YOU SELL YOUR SHARES. INVESTORS SHOULD CONSIDER THE
FUND'S INVESTMENT OBJECTIVES, RISKS, AND OTHER CHARGES AND EXPENSES CAREFULLY
BEFORE INVESTING. THE FUND'S PROSPECTUS CONTAINS THIS AND OTHER INFORMATION
ABOUT THE FUND, AND MAY BE OBTAINED BY ASKING YOUR FINANCIAL ADVISOR, CALLING US
AT 1.800.525.7048 OR VISITING OUR WEBSITE AT WWW.OPPEN-HEIMERFUNDS.COM. READ THE
PROSPECTUS CAREFULLY BEFORE INVESTING.
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 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.
9 | 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 June 30, 2005.
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
10 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
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
(1/1/05) (6/30/05) JUNE 30, 2005
- --------------------------------------------------------------------------------
Class A Actual $ 1,000.00 $ 958.10 $ 4.57
- --------------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,020.13 4.72
- --------------------------------------------------------------------------------
Class B Actual 1,000.00 954.30 8.52
- --------------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,016.12 8.79
- --------------------------------------------------------------------------------
Class C Actual 1,000.00 954.40 8.32
- --------------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,016.31 8.58
- --------------------------------------------------------------------------------
Class M Actual 1,000.00 958.40 4.23
- --------------------------------------------------------------------------------
Class M Hypothetical 1,000.00 1,020.48 4.37
- --------------------------------------------------------------------------------
Class N Actual 1,000.00 956.00 6.77
- --------------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,017.90 6.98
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 181/365
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended June 30, 2005 are as follows:
CLASS EXPENSE RATIOS
- ---------------------------
Class A 0.94%
- ---------------------------
Class B 1.75
- ---------------------------
Class C 1.71
- ---------------------------
Class M 0.87
- ---------------------------
Class N 1.39
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Fund's Transfer Agent that can be terminated at any time, without advance
notice. The "Financial Highlights" tables in the Fund's financial statements,
included in this report, also show the gross expense ratios, without such
waivers or reimbursements.
- --------------------------------------------------------------------------------
11 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMET OF INVESTMENTS June 30, 2005 / Unaudited
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS AND NOTES--59.0%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--14.1%
- --------------------------------------------------------------------------------
AUTO COMPONENTS--0.5%
Goodyear Tire & Rubber Co. (The), 4% Cv.
Sr. Nts., 6/15/34 1 $ 2,000,000 $ 2,792,500
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--4.6%
Carnival Corp., 2% Cv. Sr. Unsec. Unsub.
Debs., 4/15/21 6,500,000 9,221,875
- --------------------------------------------------------------------------------
Hilton Hotels Corp., 3.375% Cv. Sr. Unsec.
Unsub. Nts., 4/15/23 4,000,000 4,835,000
- --------------------------------------------------------------------------------
Scientific Games Corp., 0.75% Cv. Sr. Sub.
Nts., 12/1/24 1 6,000,000 6,510,000
- --------------------------------------------------------------------------------
Shuffle Master, Inc., 1.25% Cv. Sr. Unsec.
Nts., 4/15/24 1 2,000,000 2,267,500
----------------
22,834,375
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.9%
Eastman Kodak Co.:
3.375% Cv. Sr. Nts., 10/15/33 1 3,000,000 3,232,500
3.375% Cv. Sr. Unsec. Unsub. Nts., 10/15/33 1,000,000 1,077,500
----------------
4,310,000
- --------------------------------------------------------------------------------
MEDIA--5.6%
Charter Communications, Inc., 5.875% Cv.
Sr. Nts., 11/16/09 1 2,000,000 1,292,500
- --------------------------------------------------------------------------------
Interpublic Group of Cos., Inc. (The),
4.50% Cv. Sr. Unsec. Nts., 3/15/23 3,000,000 3,581,250
- --------------------------------------------------------------------------------
Liberty Media Corp., 0.75% Exchangeable Sr.
Unsec. Debs., 3/30/23 (exchangeable for Time
Warner, Inc., common stock) 1 8,000,000 8,480,000
- --------------------------------------------------------------------------------
Liberty Media Corp., 3.25% Exchangeable Sr.
Unsec. Debs., 3/15/31 (exchangeable for Viacom,
Inc., Cl. B common stock or cash based
on the value thereof) 5,000,000 3,850,000
- --------------------------------------------------------------------------------
Walt Disney Co. (The), 2.125% Cv. Sr.
Unsec. Nts., 4/15/23 7,500,000 7,734,375
- --------------------------------------------------------------------------------
XM Satellite Radio, Inc., 1.75% Cv. Sr.
Nts., 12/1/09 1 3,000,000 2,805,000
----------------
27,743,125
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--1.5%
Lowe's Cos., Inc., 0.861% Cv. Sr. Nts.,
10/19/21 2 7,000,000 7,262,500
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--1.0%
Reebok International Ltd., 2% Cv. Sr.
Unsec. Nts., Series B, 5/1/24 5,000,000 5,262,500
- --------------------------------------------------------------------------------
CONSUMER STAPLES--0.6%
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--0.6%
Costco Cos., Inc., 2.50% Cv. Sub. Nts.,
8/19/17 3 3,000,000 3,071,250
- --------------------------------------------------------------------------------
ENERGY--3.0%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--3.0%
Halliburton Co., 3.125% Cv. Sr. Nts.,
7/15/23 1 5,000,000 6,937,500
- --------------------------------------------------------------------------------
Schlumberger Ltd., 1.50% Cv. Sr. Unsec.
Debs., Series A, 6/1/23 7,000,000 8,067,500
----------------
15,005,000
12 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
FINANCIALS--3.2%
- --------------------------------------------------------------------------------
CONSUMER FINANCE--1.3%
American Express Co., 1.85% Cv. Sr. Nts.,
12/1/33 1,2 $ 6,000,000 $ 6,105,000
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--0.8%
BlackRock, Inc., 2.625% Cv. Sr. Nts.,
2/15/35 1 4,000,000 4,055,000
- --------------------------------------------------------------------------------
REAL ESTATE--1.1%
Host Marriott LP, 3.25% Cv. Sr. Debs.,
4/15/24 1 5,000,000 5,568,750
- --------------------------------------------------------------------------------
HEALTH CARE--10.1%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--3.6%
Amylin Pharmaceuticals, Inc., 2.50% Cv. Sr.
Unsec. Nts., 4/15/11 1 3,500,000 3,180,625
- --------------------------------------------------------------------------------
Celgene Corp., 1.75% Cv. Sr. Nts., 6/1/08 1 1,000,000 1,763,750
- --------------------------------------------------------------------------------
Genzyme Corp., 1.25% Cv. Sr. Nts., 12/1/23 1 6,000,000 6,255,000
- --------------------------------------------------------------------------------
Invitrogen Corp., 1.50% Cv. Sr. Unsec.
Nts., 2/15/24 7,000,000 6,772,500
----------------
17,971,875
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--1.7%
Cytyc Corp.:
2.25% Cv. Sr. Nts., 3/15/24 1 2,000,000 1,965,000
2.25% Cv. Sr. Nts., 3/15/24 1,500,000 1,473,750
- --------------------------------------------------------------------------------
Fisher Scientific International, Inc.,
3.25% Cv. Sr. Sub. Nts., 3/1/24 5,000,000 5,200,000
----------------
8,638,750
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--2.6%
Health Management Associates, Inc., 1.50%
Cv. Sr. Sub. Nts., 8/1/23 6,500,000 7,052,500
- --------------------------------------------------------------------------------
Lincare Holdings, Inc., 3% Cv. Sr. Nts.,
6/15/33 5,500,000 5,561,875
----------------
12,614,375
- --------------------------------------------------------------------------------
PHARMACEUTICALS--2.2%
Teva Pharmaceutical Finance LLC, 0.25% Cv.
Sr. Sec. Debs., Series B, 2/1/24 6,000,000 5,977,500
- --------------------------------------------------------------------------------
Watson Pharmaceuticals, Inc., 1.75% Cv. Sr.
Unsec. Debs., 3/15/23 5,500,000 5,128,750
----------------
11,106,250
- --------------------------------------------------------------------------------
INDUSTRIALS--7.4%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--2.4%
Alliant Techsystems, Inc., 2.75% Cv. Sr.
Sub. Nts., 2/15/24 4,500,000 4,719,375
- --------------------------------------------------------------------------------
Lockheed Martin Corp., 3.018% Cv. Sr. Nts.,
8/15/33 2 7,000,000 7,485,870
----------------
12,205,245
- --------------------------------------------------------------------------------
AIRLINES--0.8%
Continental Airlines, Inc., 4.50% Cv. Sr.
Unsec. Unsub. Nts., 2/1/07 3,000,000 2,595,000
- --------------------------------------------------------------------------------
Northwest Airlines Corp., 7.625% Cv. Sr.
Nts., 11/15/23 2 3,000,000 1,188,750
----------------
3,783,750
13 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--2.3%
Tyco International Group SA, 2.75% Cv. Sr.
Unsec. Unsub. Debs.,
Series A, 1/15/18 $ 9,000,000 $ 11,655,000
- --------------------------------------------------------------------------------
MACHINERY--1.9%
Danaher Corp., 2.46% Cv. Sr. Unsec. Unsub.
Liquid Yield Option Nts., 1/22/21 3 5,000,000 3,925,000
- --------------------------------------------------------------------------------
Navistar Financial Corp., 4.75% Cv. Unsec.
Sub. Nts., 4/1/09 4,000,000 3,950,000
- --------------------------------------------------------------------------------
SystemOne Technologies, Inc.:
2.888% Cv. Sub. Nts., 12/31/05 4 3,482,599 766,172
8.25% Cv. Sub. Nts., 12/31/05 4 2,962,671 651,788
----------------
9,292,960
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--14.3%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--4.2%
Andrew Corp., 3.25% Cv. Sub. Nts., 8/15/13 4,000,000 4,530,000
- --------------------------------------------------------------------------------
Comverse Technology, Inc., 0% Cv. Sr.
Unsec. Zero Yield Puttable
Securities, 5/15/23 3 4,000,000 5,525,000
- --------------------------------------------------------------------------------
Nortel Networks Corp., 4.25% Cv. Sr. Unsec.
Nts., 9/1/08 7,500,000 7,031,250
- --------------------------------------------------------------------------------
Tekelec, Inc., 2.25% Cv. Sr. Sub. Nts.,
6/15/08 2,000,000 2,082,500
- --------------------------------------------------------------------------------
UTStarcom, Inc., 0.875% Cv. Sr. Unsec. Sub.
Nts., 3/1/08 2,000,000 1,415,000
----------------
20,583,750
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.8%
Agilent Technologies, Inc., 3% Cv. Sr.
Unsec. Debs., 12/1/21 2 4,000,000 3,965,000
- --------------------------------------------------------------------------------
IT SERVICES--3.6%
Amdocs Ltd., 0.50% Cv. Nts., 3/15/24 4,000,000 3,665,000
- --------------------------------------------------------------------------------
BearingPoint, Inc., 2.75% Cv. Sub. Nts.,
12/15/24 1,2 4,500,000 3,993,750
- --------------------------------------------------------------------------------
CSG Systems International, Inc.:
2.50% Cv. Nts., 6/15/24 1 3,500,000 3,241,875
2.50% Cv. Sr. Nts., 6/15/24 500,000 463,125
- --------------------------------------------------------------------------------
DST Systems, Inc., 3.625% Cv. Sr. Unsec.
Debs., Series B, 8/15/23 6,000,000 6,577,500
----------------
17,941,250
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT--2.7%
Agere Systems, Inc., 6.50% Cv. Unsec.
Unsub. Nts., 12/15/09 (cv. into Agere Systems,
Inc., Cl. A common stock) 6,000,000 6,075,000
- --------------------------------------------------------------------------------
Cypress Semiconductor Corp., 1.25% Cv.
Unsec. Sub. Nts., 6/15/08 3,000,000 3,187,500
- --------------------------------------------------------------------------------
Skyworks Solutions, Inc., 4.75% Cv. Unsec.
Sub. Nts., 11/15/07 4,000,000 4,080,000
----------------
13,342,500
- --------------------------------------------------------------------------------
SOFTWARE--3.0%
Mentor Graphics Corp., 6.875% Cv. Unsec.
Sub. Nts., 6/15/07 4 4,000,000 3,980,000
- --------------------------------------------------------------------------------
Mercury Interactive Corp., 0% Cv. Sr.
Unsec. Sub. Nts., 5/1/08 3 5,000,000 4,668,750
- --------------------------------------------------------------------------------
Novell, Inc., 0.50% Cv. Sr. Unsec. Debs.,
7/15/24 1 7,500,000 6,403,125
----------------
15,051,875
14 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
MATERIALS--0.8%
- --------------------------------------------------------------------------------
METALS & MINING--0.8%
Inco Ltd., 1% Cv. Unsec. Unsub. Debs.,
3/14/23 $ 3,000,000 $ 3,787,500
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--2.6%
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.4%
American Tower Corp., 3% Cv. Sr. Nts.,
8/15/12 5,500,000 6,606,875
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--1.2%
NII Holdings, Inc., 2.875% Cv. Sr. Nts.,
2/1/34 4,500,000 6,041,250
- --------------------------------------------------------------------------------
UTILITIES--2.9%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--2.9%
Calpine Corp., 4.75% Cv. Sr. Unsec. Nts.,
11/15/23 1 4,000,000 2,880,000
- --------------------------------------------------------------------------------
CenterPoint Energy, Inc., 3.75% Cv. Sr.
Unsec. Nts., 5/15/23 5,000,000 6,018,750
- --------------------------------------------------------------------------------
CMS Energy Corp., 2.875% Cv. Sr. Nts.,
12/1/24 4,500,000 5,467,500
----------------
14,366,250
----------------
Total Convertible Corporate Bonds and
Notes (Cost $292,619,327) 292,964,455
SHARES
- --------------------------------------------------------------------------------
PREFERRED STOCKS--30.5%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--2.8%
- --------------------------------------------------------------------------------
AUTOMOBILES--2.8%
Ford Motor Co. Capital Trust II, 6.50%
Cum. Cv. Trust Preferred Securities,
Non-Vtg. 100,000 4,033,000
- --------------------------------------------------------------------------------
General Motors Corp., 4.50% Cv. Sr. Debs.,
Series A 400,000 9,728,000
----------------
13,761,000
- --------------------------------------------------------------------------------
ENERGY--2.5%
- --------------------------------------------------------------------------------
OIL & GAS--2.5%
Amerada Hess Corp. 7% Cv., Non-Vtg. 100,000 9,163,000
- --------------------------------------------------------------------------------
Chesapeake Energy Corp., 5% Cum. Cv.,
Non-Vtg. 1 30,000 3,431,250
----------------
12,594,250
- --------------------------------------------------------------------------------
FINANCIALS--12.1%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--1.1%
Lehman Brothers Holdings, Inc., 6.25% Cv.
Premium Income Equity Linked Nts., 10/15/07
(linked to General Mills, Inc. common stock) 220,000 5,544,000
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--2.2%
Marshall & Ilsley Corp., 6.50% Cv. 200,000 5,510,000
- --------------------------------------------------------------------------------
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 3,975,000
Non-Vtg. 5 30,000 1,590,000
----------------
11,075,000
15 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--1.1%
State Street Corp., 6.75% Cv. Nts. 25,000 $ 5,425,000
- --------------------------------------------------------------------------------
INSURANCE--5.6%
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) 5 130,000 4,124,900
- --------------------------------------------------------------------------------
Genworth Financial, Inc., 6% Cv. 210,000 7,213,500
- --------------------------------------------------------------------------------
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 6,920,000
- --------------------------------------------------------------------------------
MetLife, Inc., 6.375% Cv. Equity Units,
Series B, (each equity unit consists
of a fractional interest in trust preferred
securities as well as a stock
purchase contract to purchase Met Life,
Inc., Series A and Series B) 5,6 170,000 4,457,400
- --------------------------------------------------------------------------------
XL Capital Ltd., 6.50% Cv. 220,000 5,269,000
----------------
27,984,800
- --------------------------------------------------------------------------------
REAL ESTATE--1.6%
Simon Property Group Inc., 6% Cv., Non-Vtg. 130,000 8,060,000
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--0.5%
Sovereign Capital Trust VI, 4.375% Cv. 50,000 2,212,500
- --------------------------------------------------------------------------------
HEALTH CARE--3.4%
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--1.5%
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. 5 130,000 7,187,700
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--0.9%
Omnicare Capital Trust II, Inc., 4% Cv.,
Series B 80,000 4,640,000
- --------------------------------------------------------------------------------
PHARMACEUTICALS--1.0%
Schering-Plough Corp. 6% Cv. 100,000 5,098,000
- --------------------------------------------------------------------------------
INDUSTRIALS--1.5%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.8%
Northrop Grumman Corp., 7% Cum. Cv., Series B 30,000 3,750,000
- --------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--0.7%
United Rentals Trust I, 6.50% Cv. Quarterly
Income Preferred Securities 85,000 3,570,000
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--2.8%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--1.6%
Lucent Technologies Capital Trust I, 7.75%
Cum. Cv., Non-Vtg. 8,000 7,786,000
- --------------------------------------------------------------------------------
OFFICE ELECTRONICS--1.2%
Xerox Corp., 6.25% Cv. 50,000 5,953,000
16 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
MATERIALS--1.1%
- --------------------------------------------------------------------------------
METALS & MINING--1.1%
Freeport-McMoRan Copper & Gold, Inc., 5.50%
Cv. 6,000 $ 5,555,250
- --------------------------------------------------------------------------------
UTILITIES--4.3%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--1.6%
FPL Group, Inc., 8% 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., 5% debs., series b, 2/16/08) 5 120,000 7,753,200
- --------------------------------------------------------------------------------
GAS UTILITIES--0.8%
El Paso Corp., 4.99% Cv. 1 3,000 3,198,000
- --------------------------------------------------------------------------------
Williams Cos., Inc. (The), 5.50% Cv. Jr.
Unsec. Debs. 1 10,000 912,500
----------------
4,110,500
- --------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--1.9%
AES Trust III, 6.75% Cv. 100,000 4,830,000
- --------------------------------------------------------------------------------
Williams Cos., Inc. (The), 5.50% Cv. Jr.
Unsec. Sub. Debs. 50,000 4,562,500
----------------
9,392,500
----------------
Total Preferred Stocks (Cost $142,081,818) 151,452,700
- --------------------------------------------------------------------------------
COMMON STOCKS--4.0%
- --------------------------------------------------------------------------------
Alltel Corp. 70,000 4,359,600
- --------------------------------------------------------------------------------
Altria Group, Inc. 75,000 4,849,500
- --------------------------------------------------------------------------------
Computer Associates International, Inc. -- 7
- --------------------------------------------------------------------------------
Johnson & Johnson 70,000 4,550,000
- --------------------------------------------------------------------------------
Legg Mason, Inc. 25,000 2,602,750
- --------------------------------------------------------------------------------
Masco Corp. 100,000 3,176,000
- --------------------------------------------------------------------------------
SystemOne Technologies, Inc. 6 197,142 5,914
----------------
Total Common Stocks (Cost $18,115,315) 19,543,771
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
17 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
STRUCTURED NOTES--2.8%
- --------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., Capped Appreciation
Linked Nts., Series BIIB, 7.25%, 3/14/06
(linked to the performance of Biogen Idec,
Inc.) $ 4,000,000 $ 3,710,000
- --------------------------------------------------------------------------------
Morgan Stanley, Cv. Premium Equity
Participating Security, 2.50%, 10/2/06
(exchangeable for General Electric Co.
common stock) 4 298,463 10,062,680
----------------
Total Structured Notes (Cost $14,000,003) 13,772,680
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--0.1%
- --------------------------------------------------------------------------------
Undivided interest of 0.05% in joint
repurchase agreement (Principal Amount/
Value $1,064,446,000, with a maturity value of
$1,064,540,617) with UBS Warburg LLC, 3.20%,
dated 6/30/05, to be repurchased at $496,044
on 7/1/05, collateralized by Federal Home
Loan Mortgage Corp., 5.50%, 2/1/35, with a
value of $1,087,273,837 (Cost $496,000) 496,000 496,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST
$467,328,456) 96.4% 478,245,599
- --------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 3.6 17,993,837
-------------------------------
NET ASSETS 100.0% $ 496,239,436
===============================
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 $91,246,125 or 18.39% of the Fund's net
assets as of June 30, 2005.
2. Represents the current interest rate for a variable or increasing rate
security.
3. Zero coupon bond reflects effective yield on the date of purchase.
4. Illiquid or restricted security. The aggregate value of illiquid or
restricted securities as of June 30, 2005 was $15,476,633, which represents
3.12% 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. Non-income producing security.
7. Received as the result of issuer reorganization.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES Unaudited
- --------------------------------------------------------------------------------
June 30, 2005
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investments, at value (cost $467,328,456)--see
accompanying statement of investments $ 478,245,599
- --------------------------------------------------------------------------------
Cash 3,240,630
- --------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 15,627,231
Interest and dividends 1,946,366
Shares of beneficial interest sold 377,036
Other 54,168
----------------
Total assets 499,491,030
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 1,418,964
Dividends 741,086
Investments purchased 520,194
Distribution and service plan fees 306,611
Trustees' compensation 120,464
Transfer and shareholder servicing agent fees 66,355
Shareholder communications 58,410
Other 19,510
----------------
Total liabilities 3,251,594
================
- --------------------------------------------------------------------------------
NET ASSETS $ 496,239,436
================
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- --------------------------------------------------------------------------------
Paid-in capital $ 593,252,913
- --------------------------------------------------------------------------------
Accumulated net investment loss (4,639,827)
- --------------------------------------------------------------------------------
Accumulated net realized loss on investments (103,290,793)
- --------------------------------------------------------------------------------
Net unrealized appreciation on investments 10,917,143
----------------
NET ASSETS $ 496,239,436
================
19 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- --------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net
assets of $274,176,600 and 21,286,162 shares of beneficial
interest outstanding) $ 12.88
Maximum offering price per share (net asset value plus sales
charge of 5.75% of offering price) $ 13.67
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $67,114,656 and 5,202,700
shares of beneficial interest outstanding) $ 12.90
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $67,504,426 and 5,243,713
shares of beneficial interest outstanding) $ 12.87
- --------------------------------------------------------------------------------
Class M Shares:
Net asset value and redemption price per share (based on net
assets of $85,000,008 and 6,603,187 shares of beneficial
interest outstanding) $ 12.87
Maximum offering price per share (net asset value plus sales
charge of 3.25% of offering price) $ 13.30
- --------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $2,443,746 and 189,732 shares
of beneficial interest outstanding) $ 12.88
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMENT OF OPERATIONS Unaudited
- --------------------------------------------------------------------------------
For the Six Months Ended June 30, 2005
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $ 4,917,130
- --------------------------------------------------------------------------------
Interest 4,897,038
-----------------
Total investment income 9,814,168
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees 1,276,745
- --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 344,419
Class B 365,310
Class C 364,070
Class M 96,250
Class N 5,680
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 205,360
Class B 67,345
Class C 56,323
Class M 50,585
Class N 3,857
- --------------------------------------------------------------------------------
Shareholder communications:
Class A 22,181
Class B 9,976
Class C 6,080
Class M 4,879
Class N 319
- --------------------------------------------------------------------------------
Accounting service fees 80,534
- --------------------------------------------------------------------------------
Custodian fees and expenses 6,550
- --------------------------------------------------------------------------------
Trustees' compensation 3,808
- --------------------------------------------------------------------------------
Other 51,530
-----------------
Total expenses 3,021,801
Less reduction to custodian expenses (5,988)
Less waivers and reimbursements of expenses (163)
-----------------
Net expenses 3,015,650
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 6,798,518
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
- --------------------------------------------------------------------------------
Net realized gain on investments 6,694,954
- --------------------------------------------------------------------------------
Net change in unrealized appreciation on investments (38,857,750)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (25,364,278)
=================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 2005 DECEMBER 31,
(UNAUDITED) 2004
- --------------------------------------------------------------------------------
OPERATIONS
- --------------------------------------------------------------------------------
Net investment income $ 6,798,518 $ 18,481,548
- --------------------------------------------------------------------------------
Net realized gain 6,694,954 29,046,375
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (38,857,750) (4,905,531)
-------------------------------
Net increase (decrease) in net assets
resulting from operations (25,364,278) 42,622,392
- --------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Dividends from net investment income:
Class A (4,018,544) (15,613,529)
Class B (723,592) (3,901,818)
Class C (736,316) (3,350,297)
Class M (1,293,609) (5,064,498)
Class N (26,458) (83,852)
- --------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from beneficial interest
transactions:
Class A (27,828,087) 1,054,354
Class B (13,154,168) (50,450,935)
Class C (8,997,628) (3,149,841)
Class M (10,356,039) (16,303,106)
Class N 441,782 631,345
- --------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------
Total decrease (92,056,937) (53,609,785)
- --------------------------------------------------------------------------------
Beginning of period 588,296,373 641,906,158
-------------------------------
End of period (including accumulated net
investment loss of $4,639,827 and $4,639,826,
respectively) $ 496,239,436 $ 588,296,373
===============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
JUNE 30,2005 DEC. 31,
CLASS A (UNAUDITED) 2004 2003 2002 2001 2000
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.63 $ 13.27 $ 11.29 $ 12.76 $ 13.85 $ 16.36
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .18 1 .43 1 .56 .57 .48 .72
Net realized and unrealized gain (loss) (.75) .58 1.98 (1.41) (.94) (1.45)
-----------------------------------------------------------------------------------------
Total from investment operations (.57) 1.01 2.54 (.84) (.46) (.73)
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income (.18) (.65) (.56) (.63) (.63) (.72)
Distributions from net realized gain -- -- -- -- -- (1.06)
-----------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.18) (.65) (.56) (.63) (.63) (1.78)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.88 $ 13.63 $ 13.27 $ 11.29 $ 12.76 $ 13.85
=========================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 (4.19)% 7.74% 22.95% (6.59)% (3.30)% (4.81)%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $ 274,177 $ 319,478 $ 310,641 $ 202,968 $ 187,458 $ 210,903
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 290,216 $ 321,729 $ 252,347 $ 190,677 $ 197,514 $ 225,938
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 2.79% 3.24% 4.48% 4.77% 3.58% 4.42%
Total expenses 0.94% 4 0.94% 4 0.94% 4,5 0.99% 4 0.95% 4 0.90% 4
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 28% 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.
23 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
JUNE 30,2005 DEC. 31,
CLASS B (UNAUDITED) 2004 2003 2002 2001 2000
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.65 $ 13.29 $ 11.30 $ 12.79 $ 13.87 $ 16.38
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .13 1 .33 1 .43 .43 .38 .59
Net realized and unrealized gain (loss) (.75) .58 2.02 (1.38) (.93) (1.45)
-----------------------------------------------------------------------------------------
Total from investment operations (.62) .91 2.45 (.95) (.55) (.86)
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income (.13) (.55) (.46) (.54) (.53) (.59)
Distributions from net realized gain -- -- -- -- -- (1.06)
-----------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.13) (.55) (.46) (.54) (.53) (1.65)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.90 $ 13.65 $ 13.29 $ 11.30 $ 12.79 $ 13.87
=========================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 (4.57)% 6.92% 22.07% (7.44)% (3.97)% (5.55)%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $ 67,115 $ 84,816 $ 133,058 $ 154,350 $ 286,829 $ 373,860
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 73,628 $ 102,670 $ 139,757 $ 213,259 $ 330,806 $ 418,592
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.98% 2.47% 3.79% 3.95% 2.75% 3.62%
Total expenses 1.75% 4 1.75% 4 1.74% 4,5 1.77% 4 1.71% 4 1.70% 4
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 28% 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.
24 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
SIX MONTHS YEAR
ENDED ENDED
JUNE 30,2005 DEC. 31,
CLASS C (UNAUDITED) 2004 2003 2002 2001 2000
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.62 $ 13.27 $ 11.28 $ 12.76 $ 13.84 $ 16.35
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .13 1 .33 1 .46 .46 .38 .59
Net realized and unrealized gain (loss) (.75) .57 1.99 (1.40) (.93) (1.45)
-----------------------------------------------------------------------------------------
Total from investment operations (.62) .90 2.45 (.94) (.55) (.86)
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income (.13) (.55) (.46) (.54) (.53) (.59)
Distributions from net realized gain -- -- -- -- -- (1.06)
-----------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.13) (.55) (.46) (.54) (.53) (1.65)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.87 $ 13.62 $ 13.27 $ 11.28 $ 12.76 $ 13.84
=========================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 (4.56)% 6.89% 22.14% (7.39)% (3.98)% (5.56)%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $ 67,503 $ 80,995 $ 82,149 $ 61,031 $ 76,846 $ 91,567
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 73,393 $ 82,470 $ 69,787 $ 66,391 $ 85,774 $ 96,574
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 2.02% 2.48% 3.73% 3.97% 2.80% 3.62%
Total expenses 1.71% 4 1.70% 4 1.70% 4,5 1.76% 4 1.71% 4 1.70% 4
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 28% 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.
25 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
JUNE 30,2005 DEC. 31,
CLASS M (UNAUDITED) 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.62 $ 13.27 $ 11.28 $ 12.76 $ 13.84 $ 16.35
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .18 1 .43 1 .50 .49 .41 .64
Net realized and unrealized gain (loss) (.75) .57 2.00 (1.40) (.93) (1.45)
------------------------------------------------------------------------------------------
Total from investment operations (.57) 1.00 2.50 (.91) (.52) (.81)
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income (.18) (.65) (.51) (.57) (.56) (.64)
Distributions from net realized gain -- -- -- -- -- (1.06)
-------------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.18) (.65) (.51) (.57) (.56) (1.70)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.87 $ 13.62 $ 13.27 $ 11.28 $ 12.76 $ 13.84
===========================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 (4.16)% 7.69% 22.59% (7.16)% (3.72)% (5.30)%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $ 85,000 $ 100,877 $ 114,600 $ 108,426 $ 144,612 $ 181,521
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 91,280 $ 106,194 $ 110,337 $ 122,897 $ 160,919 $ 213,617
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 2.86% 3.24% 4.16% 4.24% 3.04% 3.90%
Total expenses 0.87% 4 0.95% 4,5 1.32% 4,5 1.51% 4 1.45% 4 1.42% 4
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 28% 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.
26 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 2005 DEC. 31,
CLASS N (UNAUDITED) 2004 2003 2002 2001 1
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.63 $ 13.27 $ 11.29 $ 12.76 $ 13.68
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .15 2 .37 2 .49 .55 .42
Net realized and unrealized gain (loss) (.75) .58 2.00 (1.43) (.84)
----------------------------------------------------------------------------
Total from investment operations (.60) .95 2.49 (.88) (.42)
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.15) (.59) (.51) (.59) (.50)
Distributions from net realized gain -- -- -- -- --
----------------------------------------------------------------------------
Total dividends and/or distributions to
shareholders (.15) (.59) (.51) (.59) (.50)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.88 $ 13.63 $ 13.27 $ 11.29 $ 12.76
===========================================================================
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 (4.40)% 7.31% 22.45% (6.92)% (3.02)%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 2,444 $ 2,131 $ 1,458 $ 388 $ 36
- ---------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 2,294 $ 1,781 $ 743 $ 205 $ 10
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.33% 2.79% 3.87% 4.38% 5.45%
Total expenses 1.39% 1.37% 1.37% 1.43% 1.22%
Expenses after payments and waivers and
reduction to custodian expenses N/A 5,6 N/A 5 1.35% 1.38% N/A 5
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 28% 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%.
6. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 sixty days and all mortgage-backed securities will be valued at the
mean between the "bid" and "asked" prices. Futures contracts traded on a
commodities or futures exchange will be valued at the final settlement price or
official closing price on the principal exchange as reported by such principal
exchange at its trading session ending at, or most recently prior to, the time
when the Fund's assets are valued. 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
28 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
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).
- --------------------------------------------------------------------------------
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 Statement of Operations. The Fund records a realized gain or loss
when a structured note is sold or matures. As of June 30, 2005, the market value
of these securities comprised 2.8% of the Fund's net assets and resulted in
unrealized cumulative losses of $227,323.
- --------------------------------------------------------------------------------
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.
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.
As of June 30, 2005, the Fund had available for federal income tax
purposes an estimated capital loss carryforward of $102,605,135. This estimated
capital loss carryforward represents carryforward as of the end of the last
fiscal year, increased for losses deferred
29 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
under tax accounting rules to the current fiscal year and is increased or
decreased by capital losses or gains realized in the first six months of the
current fiscal year. During the six months ended June 30, 2005, it is estimated
that the Fund will utilize $6,694,954 of capital loss carryforward to offset
realized capital gains. During the year ended December 31, 2004, the Fund
utilized $22,626,011 of capital loss carryforward to offset capital gains
realized in that fiscal year.
As of December 31, 2004, the Fund had available for federal income tax purposes
unused capital loss carryforwards as follows:
EXPIRING
------------------------------
2009 $ 18,833,093
2010 90,466,996
--------------
Total $ 109,300,089
==============
- --------------------------------------------------------------------------------
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 six months ended
June 30, 2005, the Fund's projected benefit obligations were decreased by $6,308
and payments of $2,545 were made to retired trustees, resulting in an
accumulated liability of $107,211 as of June 30, 2005.
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.
30 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
- --------------------------------------------------------------------------------
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 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:
SIX MONTHS ENDED JUNE 30, 2005 YEAR ENDED DECEMBER 31, 2004
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------
CLASS A
Sold 1,470,771 $ 19,200,322 6,358,012 $ 84,644,732
Dividends and/or
distributions reinvested 238,733 3,081,500 900,277 12,114,223
Redeemed (3,866,733) (50,109,909) (7,215,971) (95,704,601)
---------------------------------------------------------------
Net increase (decrease) (2,157,229) $ (27,828,087) 42,318 $ 1,054,354
===============================================================
- ------------------------------------------------------------------------------------------
CLASS B
Sold 245,055 $ 3,181,222 1,168,753 $ 15,636,529
Dividends and/or
distributions reinvested 36,461 471,386 193,385 2,607,930
Redeemed (1,293,197) (16,806,776) (5,155,900) (68,695,394)
---------------------------------------------------------------
Net decrease (1,011,681) $ (13,154,168) (3,793,762) $ (50,450,935)
===============================================================
- ------------------------------------------------------------------------------------------
CLASS C
Sold 242,292 $ 3,142,995 1,078,891 $ 14,393,979
Dividends and/or
distributions reinvested 36,432 469,919 162,119 2,182,505
Redeemed (981,703) (12,610,542) (1,486,132) (19,726,325)
---------------------------------------------------------------
Net decrease (702,979) $ (8,997,628) (245,122) $ (3,149,841)
===============================================================
31 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST Continued
SIX MONTHS ENDED JUNE 30, 2005 YEAR ENDED DECEMBER 31, 2004
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------
CLASS M
Sold 33,955 $ 436,511 140,463 $ 1,876,605
Dividends and/or
distributions reinvested 70,381 907,718 265,627 3,571,401
Redeemed (908,123) (11,700,268) (1,637,323) (21,751,112)
-----------------------------------------------------------------
Net decrease (803,787) $(10,356,039) (1,231,233) $(16,303,106)
=================================================================
- -----------------------------------------------------------------------------------------------
CLASS N
Sold 54,194 $ 708,127 102,523 $ 1,367,550
Dividends and/or
distributions reinvested 1,796 23,187 5,527 74,505
Redeemed (22,634) (289,532) (61,549) (810,710)
-----------------------------------------------------------------
Net increase 33,356 $ 441,782 46,501 $ 631,345
=================================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the six months ended June 30, 2005, were
$140,323,705 and $225,955,930, respectively.
- --------------------------------------------------------------------------------
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 six months
ended June 30, 2005, the Fund paid $80,534 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 six months ended June 30, 2005, the Fund paid
$394,107 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.
32 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate of up to 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor currently uses all of those fees to
pay dealers, brokers, banks and other financial institutions quarterly for
providing personal services and maintenance of accounts of their customers that
hold Class A shares. Any unreimbursed expenses the Distributor incurs with
respect to Class A shares in any fiscal year cannot be recovered in subsequent
years. Fees incurred by the Fund under the Plan are detailed in the Statement of
Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C, 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% on Class B and Class C shares and 0.25% 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 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 June 30, 2005
for Class B, Class C and Class N shares were $2,577,840, $2,226,620 and $29,160,
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
SIX MONTHS RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- -------------------------------------------------------------------------------------------------------------
June 30, 2005 $ 32,356 $ 2,208 $ 966 $ 111,476 $ 14,148 $ 2,380
33 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
WAIVERS AND REIMBURSEMENTS OF EXPENSES. 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 six months ended June 30, 2005,
OFS waived $163 for Class N shares. This undertaking may be amended or withdrawn
at any time.
- --------------------------------------------------------------------------------
5. ILLIQUID OR RESTRICTED SECURITIES
As of June 30, 2005, 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 10% of
its net assets (determined at the time of purchase and reviewed periodically) in
illiquid or restricted securities. Certain restricted securities, eligible for
resale to qualified institutional investors, are not subject to that limitation.
Securities that are illiquid or restricted are marked with the applicable
footnote on the Statement of Investments. Information concerning restricted
securities is as follows:
UNREALIZED
ACQUISITION VALUATION AS OF APPRECIATION
SECURITY DATE COST JUNE 30, 2005 (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, as well as 51 of the
Oppenheimer funds (as "Nominal Defendants") including the Fund, 30 present and
former Directors or Trustees and 8 present and former officers of the funds.
This complaint, initially filed in the U.S. District Court for the Southern
District of New York on January 10, 2005 and amended on March 4, 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,
34 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
rescission of the funds' investment advisory agreements, an accounting of all
fees paid, and an award of attorneys' fees and litigation expenses.
The defendants believe that the allegations contained in the Complaints
are without merit and that they have meritorious defenses against the claims
asserted. The defendants intend to defend these lawsuits vigorously and to
contest any claimed liability. The 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.
35 | 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 Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
36 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
advisory agreement. The Investment Company Act of 1940, as amended, requires
that the Board request and evaluate, and that the Manager provide, such
information as may be reasonably necessary to evaluate the terms of the advisory
agreement. The Board employs an independent consultant to prepare a report that
provides information, including comparative information, that the Board requests
for this purpose. In addition, the Board receives information throughout the
year regarding Fund services, fees, expenses and performance.
NATURE AND EXTENT OF SERVICES. In considering the renewal of the Fund's
advisory agreement for the current year, the Board evaluated the nature and
extent of the services provided by the Manager and its affiliates. The Manager
provides the Fund with office space, facilities and equipment; administrative,
accounting, clerical, legal and compliance personnel; securities trading
services; oversight of third party service providers and the services of the
portfolio manager and the Manager's investment team, who provide research,
analysis and other advisory services in regard to the Fund's investments.
QUALITY OF SERVICES. The Board also considered the quality of the services
provided and the quality of the Manager's resources that are available to the
Fund. The Board noted that the Manager has had over forty years of experience as
an investment adviser and that its assets under management rank it among the top
mutual fund managers in the United States. The Board evaluated the Manager's
administrative, accounting, legal and compliance services and information the
Board received regarding the experience and professional qualifications of the
Manager's personnel and the size and functions of its staff. The Board members
also considered their experiences as directors or trustees of the Fund and other
funds advised by the Manager. The Board received and reviewed information
regarding the quality of services provided by affiliates of the Manager, which
it also reviews at other times during the year in connection with the renewal of
the Fund's service agreements. The Board considered that the relatively low
redemption rate for funds advised by the Manager provided an indication of
shareholder satisfaction with the overall level of services provided by the
Manager. The Board was aware that there are alternatives to retaining the
Manager.
PORTFOLIO MANAGEMENT SERVICES AND PERFORMANCE. In its evaluation of the
quality of the portfolio management services to be provided, the Board
considered the experience of Edward Everett and the Manager's Growth investment
team and analysts. Mr. Everett has had over 12 years of experience managing
equity investments. Mr. Everett has been a portfolio manager of the Fund since
1993. Mr. Everett has been a Vice President of the Manager and of the Fund since
January 2000.
37 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
The Board reviewed information, prepared by the Manager and by the
independent consultant, comparing the Fund's historical performance to relevant
market indices and to the performance of other convertible securities funds
(including both funds advised by the Manager and funds advised by other
investment advisers). The Board also receives and reviews comparative
performance information regarding the Fund and other funds at each Board
meeting. The Board considered that the Fund's five-year, three-year and one-year
performance were all below its peer group average.
MANAGEMENT FEES AND EXPENSES. The Board also reviewed information,
including comparative information, regarding the fees paid to the Manager and
its affiliates and the other expenses borne by the Fund. The independent
consultant provided comparative data in regard to the fees and expenses of the
Fund, other convertible securities funds and other funds with comparable assets
levels and distribution features. The Board considered that the Fund's
management fees and its total expenses are both lower than its peer group
average. In addition, the Board evaluated the comparability of the fees charged
and the services provided to the Fund to the fees charged and services provided
to other types of entities advised by the Manager.
PROFITABILITY OF THE MANAGER AND AFFILIATES. The Board also reviewed
information regarding the cost of services provided by the Manager and its
affiliates and the Manager's profitability. The Board considered that the
Manager must be able to pay and retain experienced professional personnel at
competitive rates to provide services to the Fund and that maintaining the
financial viability of the Manager is important in order for the Manager to
continue to provide significant services to the Fund and its shareholders. In
addition the Board considered information that was provided regarding the direct
and indirect benefits the Manager receives as a result of its relationship with
the Fund, including compensation paid to the Manager's affiliates and research
provided to the Manager in connection with permissible brokerage arrangements
(soft dollar arrangements).
ECONOMIES OF SCALE. The Board reviewed the extent to which the Manager may
realize economies of scale in managing and supporting the Fund and the current
level of Fund assets in relation to the Fund's breakpoint schedule for its
management fees. The Board considered that the Fund has recently experienced
modest asset growth and that, based on current asset levels, the Fund has passed
its last management fee breakpoint.
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and the independent Trustees. Fund counsel is independent of the
Manager within the meaning and intent of the Securities and Exchange Commission
Rules.
38 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
concluded that the nature, extent and quality of the services provided to the
Fund by the Manager are a benefit to the Fund and in the best interest of the
Fund's shareholders and that the amount and structure of the compensation
received by the Manager and its affiliates are reasonable in relation to the
services provided. Accordingly, the Board elected to continue the investment
advisory agreement for another year. In arriving at this decision, the Board did
not single out any factor or factors as being more important than others, but
considered all of the factors together. The Board judged the terms and
conditions of the advisory agreement, including the management fee, in light of
all of the surrounding circumstances.
39 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
ITEM 2. CODE OF ETHICS.
Not applicable to semiannual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to semiannual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to semiannual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
THE FUNDS' AUDIT COMMITTEE PROVISIONS WITH RESPECT TO NOMINATIONS OF
DIRECTORS/TRUSTEES TO THE RESPECTIVE BOARDS
1. The Funds' Audit Committee (the "Committee") will evaluate
potential Board candidates to assess their qualifications. The
Committee shall have the authority, upon approval of the Board, to
retain an executive search firm to assist in this effort. The
Committee may consider recommendations by business and personal
contacts of current Board members and by executive search firms
which the Committee may engage from time to time and may also
consider shareholder recommendations. The Committee may consider
the advice and recommendation of the Funds' investment manager and
its affiliates in making the selection.
2. The Committee shall screen candidates for Board membership. The
Committee has not established specific qualifications that it
believes must be met by a trustee nominee. In evaluating trustee
nominees, the
Committee considers, among other things, an individual's
background, skills, and experience; whether the individual is an
"interested person" as defined in the Investment Company Act of
1940; and whether the individual would be deemed an "audit
committee financial expert" within the meaning of applicable SEC
rules. The Committee also considers whether the individual's
background, skills, and experience will complement the background,
skills, and experience of other nominees and will contribute to the
Board. There are no differences in the manner in which the
Committee evaluates nominees for trustees based on whether the
nominee is recommended by a shareholder.
3. The Committee may consider nominations from shareholders for the
Board at such times as the Committee meets to consider new nominees
for the Board. The Committee shall have the sole discretion to
determine the candidates to present to the Board and, in such cases
where required, to shareholders. Recommendations for trustee
nominees should, at a minimum, be accompanied by the following:
o the name, address, and business, educational, and/or other
pertinent background of the person being recommended;
o a statement concerning whether the person is an "interested
person" as defined in the Investment Company Act of 1940;
o any other information that the Funds would be required to
include in a proxy statement concerning the person if he or
she was nominated; and
o the name and address of the person submitting the
recommendation and, if that person is a shareholder, the
period for which that person held Fund shares.
The recommendation also can include any additional information
which the person submitting it believes would assist the Committee
in evaluating the recommendation.
4. Shareholders should note that a person who owns securities issued
by Massachusetts Mutual Life Insurance Company (the parent company
of the Funds' investment adviser) would be deemed an "interested
person" under the Investment Company Act of 1940. In addition,
certain other relationships with Massachusetts Mutual Life
Insurance Company or its subsidiaries, with registered
broker-dealers, or with the Funds' outside legal counsel may cause
a person to be deemed an "interested person."
5. Before the Committee decides to nominate an individual as a
trustee, Committee members and other directors customarily
interview the individual in person. In addition, the individual
customarily is asked to
complete a detailed questionnaire which is designed to elicit
information which must be disclosed under SEC and stock exchange
rules and to determine whether the individual is subject to any
statutory disqualification from serving as a trustee of a
registered investment company.
ITEM 11. CONTROLS AND PROCEDURES.
Based on their evaluation of the registrant's disclosure controls and
procedures (as defined in rule 30a-3(c) under the Investment Company Act of
1940 (17 CFR 270.30a-3(c)) as of June 30, 2005 the registrant's principal
executive officer and principal financial officer found the registrant's
disclosure controls and procedures to provide reasonable assurances that
information required to be disclosed by the registrant in the reports that it
files under the Securities Exchange Act of 1934 (a) is accumulated and
communicated to registrant's management, including its principal executive
officer and principal financial officer, to allow timely decisions regarding
required disclosure, and (b) is recorded, processed, summarized and reported,
within the time periods specified in the rules and forms adopted by the U.S.
Securities and Exchange Commission.
There have been no changes in the registrant's internal controls over financial
reporting that occurred during the registrant's second fiscal quarter of the
period covered by this report that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a) (1) Not applicable to semiannual reports.
(2) Exhibits attached hereto.
(3) Not applicable.
(b) Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Bond Fund Series
By: /s/John V. Murphy
-----------------
John V. Murphy
Principal Executive Officer
Date: August 10, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/John V. Murphy
-----------------
John V. Murphy
Principal Executive Officer
Date: August 10, 2005
By: /s/Brian W. Wixted
-----------------
Brian W. Wixted
Principal Financial Officer
Date: August 10, 2005