UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-4576
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: DECEMBER 31, 2005
ITEM 1. REPORTS TO STOCKHOLDERS.
TOP HOLDINGS AND ALLOCATIONS
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TOP CONVERTIBLE CORPORATE BOND AND NOTES SECTORS
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Consumer Discretionary 12.9%
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Health Care 12.9
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Information Technology 12.3
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Industrials 6.8
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Financials 4.0
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Telecommunication Services 3.5
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Energy 3.0
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Utilities 2.5
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Materials 0.9
Portfolio holdings and strategies are subject to change. Percentages are as of
December 31, 2005 and are based on net assets.
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PORTFOLIO ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Convertible Corporate Bonds and Notes 59.3%
Common and Preferred Stocks 33.8
Structured Notes 4.3
Cash Equivalents 2.6
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Portfolio holdings and strategies are subject to change. Percentages are as of
December 31, 2005 and are based on the total market value of investments.
9 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
FUND PERFORMANCE DISCUSSION
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HOW HAS THE FUND PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS, INC., OF
THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR ENDED DECEMBER 31, 2005, FOLLOWED
BY A GRAPHICAL COMPARISON OF THE FUND'S PERFORMANCE TO APPROPRIATE BROAD-BASED
MARKET INDICES.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. For the fiscal year ended December
31, 2005, Oppenheimer Convertible Securities Fund Class A shares (without sales
charge) performed competitively versus its primary and secondary benchmarks, as
shown in the graphs that follow.
Our favorable performance was attributed to an array of factors. First,
our decision to overweight our exposure to the energy sector, which continued to
fare well thanks to prolonged strength in the price of crude oil and natural
gas, significantly added to returns for the fiscal year. Similarly, our decision
to substantially underweight our exposure to auto-related convertibles--which
generally suffered this period--helped performance. While these tactics proved
to benefit our returns throughout the entire review period, we enjoyed a
significant boost to returns from these decisions particularly in the second
half of the year.
Both absolute and relative performance was supported by our overweighted
exposure to financial-services related convertibles, while our individual
security selection within this industry sector further added to returns. The
fact that we emphasized outperforming sub-segments of this category, such as
insurance and investment-management companies, and sought to keep low our
exposure to banks and savings and loan institutions, which lagged in a rising
interest-rate environment, definitively added to the Fund's returns.
Our careful security selection and active management of the portfolio's
emphasis within the health care sector also positively impacted performance.
Although the health care sector as a whole did not deliver uniformly strong
performance, we enjoyed good success in terms of our individual security
selection within this category. Select holdings such as Teva Pharmaceutical
Industries, a generic pharmaceutical company, proved to deliver strong
performance for the Fund particularly in the second half of the year, and
thereby added to overall returns. Similarly, Omnicare, a large pharmacy-services
company, was a significant outperformer in the second half of the year and added
to performance.
The fact that we effectively worked to refocus and sharpen the portfolio's
overall quality profile over the course of the fiscal year positively
contributed to our generally favorable returns this period. For a select portion
of the portfolio, we had previously targeted underperforming companies that, in
our opinion, represented good relative value with solid performance potential.
This year, we refocused this portion of the portfolio on higher-quality
companies with more consistent track records regarding their stock
10 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
performance and earnings momentum, and are pleased to report that this
initiative positively impacted our returns for the year.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each class of shares of the
Fund held until December 31, 2005. In the case of Class A, Class B, and Class M
shares, performance is over a 10-year period. In the case of Class C shares,
performance is measured from inception of the Class on March 11, 1996. In the
case of Class N shares, performance is measured from inception of the Class on
March 1, 2001. The Fund's performance reflects the deduction of the maximum
initial sales charge on Class A and Class M shares, the applicable contingent
deferred sales charge on Class B, Class C and Class N shares, and reinvestments
of all dividends and capital gains distributions.
The Fund's performance is compared to the performance of the Lehman
Brothers Aggregate Bond Index, Goldman Sachs Convertible Bond 100 Index, and the
S&P 500 Index. The Lehman Brothers Aggregate Bond Index is a broad-based,
unmanaged index of U.S. corporate bond issues, U.S. government securities and
mortgage-backed securities, widely recognized as a measure of the performance of
the domestic debt securities market. The Goldman Sachs Convertible Bond 100
Index is an unmanaged index of convertible securities. The S&P 500 Index is a
broad-based index of equity securities widely regarded as a general measurement
of the performance of the U.S. equity securities market. Index performance
reflects the reinvestment of income but does not consider the effect of
transaction costs, and none of the data in the graphs shows the effect of taxes.
The Fund's performance reflects the effects of the Fund's business and operating
expenses. While index comparisons may be useful to provide a benchmark for the
Fund's performance, it must be noted that the Fund's investments are not limited
to the investments in the indices.
11 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
FUND PERFORMANCE DISCUSSION
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CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Convertible Securities Fund (Class A)
Lehman Brothers Aggregate Bond Index
Goldman Sachs Convertible Bond 100 Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Oppenheimer Convertible
Securities Fund S & P 500 Goldman Sachs Convertible Lehman Brothers
(Class A) Monthly Reinvested Bond 100 index Aggregate Bond Index
12/31/1995 9,425 10,000 10,000 10,000
03/31/1996 9,625 10,537 10,605 9,823
06/30/1996 9,823 11,009 10,821 9,879
09/30/1996 10,033 11,349 11,147 10,061
12/31/1996 10,379 12,295 11,372 10,363
03/31/1997 10,580 12,625 11,525 10,305
06/30/1997 11,427 14,827 12,597 10,684
09/30/1997 12,319 15,937 13,909 11,039
12/31/1997 12,327 16,395 13,588 11,364
03/31/1998 13,361 18,680 14,764 11,540
06/30/1998 13,013 19,300 14,607 11,810
09/30/1998 11,636 17,385 12,873 12,309
12/31/1998 12,830 21,084 14,638 12,351
03/31/1999 13,039 22,134 14,893 12,289
06/30/1999 13,886 23,691 16,130 12,181
09/30/1999 13,568 22,215 15,624 12,264
12/31/1999 15,829 25,518 17,649 12,249
03/31/2000 16,735 26,103 18,735 12,519
06/30/2000 16,394 25,409 19,021 12,737
09/30/2000 16,577 25,163 19,879 13,121
12/31/2000 15,068 23,196 18,068 13,673
03/31/2001 14,524 20,447 17,157 14,088
06/30/2001 15,034 21,643 17,067 14,168
09/30/2001 13,635 18,468 15,507 14,821
12/31/2001 14,571 20,441 16,601 14,828
03/31/2002 14,687 20,497 16,278 14,842
06/30/2002 13,822 17,753 15,030 15,390
09/30/2002 12,643 14,687 13,666 16,095
12/31/2002 13,611 15,925 15,061 16,348
03/31/2003 13,972 15,423 15,331 16,576
06/30/2003 15,217 17,796 16,745 16,991
09/30/2003 15,621 18,267 17,290 16,966
12/31/2003 16,735 20,490 18,568 17,019
03/31/2004 17,232 20,837 19,181 17,472
06/30/2004 17,043 21,195 19,205 17,045
09/30/2004 16,851 20,799 19,002 17,590
12/31/2004 18,037 22,718 20,044 17,758
03/31/2005 17,238 22,230 19,339 17,673
06/30/2005 17,281 22,535 19,684 18,204
09/30/2005 18,182 23,347 20,646 18,082
12/31/2005 18,300 23,833 20,760 18,189
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE FUND AT
12/31/05
1-Year -4.34% 5-Year 2.74% 10-Year 6.23%
12 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Convertible Securities Fund (Class B)
Lehman Brothers Aggregate Bond Index
Goldman Sachs Convertible Bond 100 Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Oppenheimer Convertible
Securities Fund S & P 500 Goldman Sachs Convertible Lehman Brothers
(Class B) Monthly Reinvested Bond 100 index Aggregate Bond Index
12/31/1995 10,000 10,000 10,000 10,000
03/31/1996 10,192 10,537 10,605 9,823
06/30/1996 10,381 11,009 10,821 9,879
09/30/1996 10,583 11,349 11,147 10,061
12/31/1996 10,928 12,295 11,372 10,363
03/31/1997 11,119 12,625 11,525 10,305
06/30/1997 11,987 14,827 12,597 10,684
09/30/1997 12,898 15,937 13,909 11,039
12/31/1997 12,887 16,395 13,588 11,364
03/31/1998 13,941 18,680 14,764 11,540
06/30/1998 13,543 19,300 14,607 11,810
09/30/1998 12,088 17,385 12,873 12,309
12/31/1998 13,313 21,084 14,638 12,351
03/31/1999 13,504 22,134 14,893 12,289
06/30/1999 14,344 23,691 16,130 12,181
09/30/1999 13,999 22,215 15,624 12,264
12/31/1999 16,289 25,518 17,649 12,249
03/31/2000 17,188 26,103 18,735 12,519
06/30/2000 16,807 25,409 19,021 12,737
09/30/2000 16,968 25,163 19,879 13,121
12/31/2000 15,386 23,196 18,068 13,673
03/31/2001 14,800 20,447 17,157 14,088
06/30/2001 15,291 21,643 17,067 14,168
09/30/2001 13,842 18,468 15,507 14,821
12/31/2001 14,773 20,441 16,601 14,828
03/31/2002 14,891 20,497 16,278 14,842
06/30/2002 14,014 17,753 15,030 15,390
09/30/2002 12,818 14,687 13,666 16,095
12/31/2002 13,800 15,925 15,061 16,348
03/31/2003 14,166 15,423 15,331 16,576
06/30/2003 15,428 17,796 16,745 16,991
09/30/2003 15,838 18,267 17,290 16,966
12/31/2003 16,968 20,490 18,568 17,019
03/31/2004 17,471 20,837 19,181 17,472
06/30/2004 17,280 21,195 19,205 17,045
09/30/2004 17,085 20,799 19,002 17,590
12/31/2004 18,287 22,718 20,044 17,758
03/31/2005 17,477 22,230 19,339 17,673
06/30/2005 17,521 22,535 19,684 18,204
09/30/2005 18,434 23,347 20,646 18,082
12/31/2005 18,556 23,833 20,760 18,189
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE FUND AT
12/31/05
1-Year -4.17% 5-Year 2.81% 10-Year 6.38%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); FOR CLASS C AND
N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD; AND FOR
CLASS M SHARES, A SALES CHARGE OF 3.25%. BECAUSE CLASS B SHARES CONVERT TO CLASS
A SHARES 72 MONTHS AFTER PURCHASE, SINCE INCEPTION RETURNS FOR CLASS B SHARES
USES CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 17 FOR
FURTHER INFORMATION.
13 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
FUND PERFORMANCE DISCUSSION
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CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Convertible Securities Fund (Class C)
Lehman Brothers Aggregate Bond Index
Goldman Sachs Convertible Bond 100 Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Oppenheimer Convertible
Securities Fund S & P 500 Goldman Sachs Convertible Lehman Brothers
(Class C) Monthly Reinvested Bond 100 index Aggregate Bond Index
03/11/1996 10,000 10,000 10,000 10,000
03/31/1996 10,048 10,096 10,138 9,930
06/30/1996 10,235 10,549 10,344 9,987
09/30/1996 10,426 10,875 10,656 10,172
12/31/1996 10,774 11,781 10,871 10,477
03/31/1997 10,955 12,097 11,017 10,418
06/30/1997 11,811 14,207 12,041 10,801
09/30/1997 12,711 15,271 13,296 11,160
12/31/1997 12,701 15,710 12,989 11,488
03/31/1998 13,742 17,899 14,114 11,667
06/30/1998 13,349 18,494 13,964 11,939
09/30/1998 11,921 16,658 12,306 12,444
12/31/1998 13,122 20,202 13,993 12,486
03/31/1999 13,311 21,209 14,237 12,424
06/30/1999 14,140 22,701 15,420 12,315
09/30/1999 13,812 21,287 14,936 12,399
12/31/1999 16,062 24,452 16,871 12,384
03/31/2000 16,950 25,012 17,909 12,657
06/30/2000 16,573 24,347 18,183 12,877
09/30/2000 16,722 24,111 19,003 13,265
12/31/2000 15,169 22,226 17,272 13,823
03/31/2001 14,591 19,593 16,401 14,243
06/30/2001 15,076 20,739 16,315 14,323
09/30/2001 13,644 17,696 14,823 14,984
12/31/2001 14,566 19,587 15,869 14,991
03/31/2002 14,643 19,641 15,561 15,005
06/30/2002 13,753 17,011 14,367 15,559
09/30/2002 12,567 14,074 13,064 16,272
12/31/2002 13,489 15,259 14,398 16,528
03/31/2003 13,822 14,779 14,655 16,758
06/30/2003 15,038 17,053 16,007 17,177
09/30/2003 15,396 17,504 16,528 17,152
12/31/2003 16,476 19,634 17,750 17,206
03/31/2004 16,920 19,966 18,335 17,664
06/30/2004 16,704 20,310 18,359 17,232
09/30/2004 16,497 19,930 18,165 17,783
12/31/2004 17,611 21,769 19,160 17,953
03/31/2005 16,798 21,301 18,487 17,867
06/30/2005 16,808 21,593 18,816 18,404
09/30/2005 17,651 22,371 19,737 18,280
12/31/2005 17,738 22,837 19,845 18,389
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE FUND AT
12/31/05
1-Year -0.25% 5-Year 3.18% Since Inception (3/11/96) 6.02%
14 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
CLASS M SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Convertible Securities Fund (Class M)
Lehman Brothers Aggregate Bond Index
Goldman Sachs Convertible Bond 100 Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Oppenheimer Convertible
Securities Fund S & P 500 Goldman Sachs Convertible Lehman Brothers
(Class M) Monthly Reinvested Bond 100 index Aggregate Bond Index
12/31/1995 9,675 10,000 10,000 10,000
03/31/1996 9,867 10,537 10,605 9,823
06/30/1996 10,058 11,009 10,821 9,879
09/30/1996 10,260 11,349 11,147 10,061
12/31/1996 10,602 12,295 11,372 10,363
03/31/1997 10,794 12,625 11,525 10,305
06/30/1997 11,637 14,827 12,597 10,684
09/30/1997 12,531 15,937 13,909 11,039
12/31/1997 12,530 16,395 13,588 11,364
03/31/1998 13,566 18,680 14,764 11,540
06/30/1998 13,195 19,300 14,607 11,810
09/30/1998 11,783 17,385 12,873 12,309
12/31/1998 12,979 21,084 14,638 12,351
03/31/1999 13,177 22,134 14,893 12,289
06/30/1999 14,007 23,691 16,130 12,181
09/30/1999 13,678 22,215 15,624 12,264
12/31/1999 15,930 25,518 17,649 12,249
03/31/2000 16,821 26,103 18,735 12,519
06/30/2000 16,458 25,409 19,021 12,737
09/30/2000 16,619 25,163 19,879 13,121
12/31/2000 15,086 23,196 18,068 13,673
03/31/2001 14,520 20,447 17,157 14,088
06/30/2001 15,013 21,643 17,067 14,168
09/30/2001 13,597 18,468 15,507 14,821
12/31/2001 14,525 20,441 16,601 14,828
03/31/2002 14,612 20,497 16,278 14,842
06/30/2002 13,733 17,753 15,030 15,390
09/30/2002 12,558 14,687 13,666 16,095
12/31/2002 13,486 15,925 15,061 16,348
03/31/2003 13,835 15,423 15,331 16,576
06/30/2003 15,066 17,796 16,745 16,991
09/30/2003 15,436 18,267 17,290 16,966
12/31/2003 16,533 20,490 18,568 17,019
03/31/2004 17,005 20,837 19,181 17,472
06/30/2004 16,821 21,195 19,205 17,045
09/30/2004 16,645 20,799 19,002 17,590
12/31/2004 17,804 22,718 20,044 17,758
03/31/2005 17,017 22,230 19,339 17,673
06/30/2005 17,063 22,535 19,684 18,204
09/30/2005 17,955 23,347 20,646 18,082
12/31/2005 18,080 23,833 20,760 18,189
AVERAGE ANNUAL TOTAL RETURNS OF CLASS M SHARES WITH SALES CHARGE OF THE FUND AT
12/31/05
1-Year -1.75% 5-Year 3.01% 10-Year 6.10%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); FOR CLASS C AND
N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD; AND FOR
CLASS M SHARES, A SALES CHARGE OF 3.25%. BECAUSE CLASS B SHARES CONVERT TO CLASS
A SHARES 72 MONTHS AFTER PURCHASE, SINCE INCEPTION RETURNS FOR CLASS B SHARES
USES CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 17 FOR
FURTHER INFORMATION.
15 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
FUND PERFORMANCE DISCUSSION
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CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Convertible Securities Fund (Class N)
Lehman Brothers Aggregate Bond Index
Goldman Sachs Convertible Bond 100 Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Oppenheimer Convertible
Securities Fund S & P 500 Goldman Sachs Convertible Lehman Brothers
(Class N) Monthly Reinvested Bond 100 index Aggregate Bond Index
03/01/2001 10,000 10,000 10,000 10,000
03/31/2001 9,690 9,367 9,518 10,050
06/30/2001 10,020 9,915 9,468 10,107
09/30/2001 9,073 8,460 8,602 10,573
12/31/2001 9,698 9,364 9,209 10,578
03/31/2002 9,770 9,390 9,030 10,588
06/30/2002 9,188 8,132 8,338 10,979
09/30/2002 8,398 6,728 7,581 11,482
12/31/2002 9,027 7,295 8,355 11,663
03/31/2003 9,257 7,065 8,505 11,825
06/30/2003 10,072 8,153 9,289 12,121
09/30/2003 10,328 8,368 9,591 12,103
12/31/2003 11,054 9,387 10,300 12,141
03/31/2004 11,371 9,545 10,640 12,464
06/30/2004 11,233 9,710 10,654 12,159
09/30/2004 11,094 9,528 10,541 12,548
12/31/2004 11,861 10,407 11,119 12,668
03/31/2005 11,323 10,184 10,728 12,607
06/30/2005 11,339 10,323 10,919 12,986
09/30/2005 11,916 10,695 11,453 12,899
12/31/2005 11,984 10,918 11,517 12,976
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE FUND AT
12/31/05
1-Year 0.07% 5-Year N/A Since Inception (3/1/01) 3.82%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); FOR CLASS C AND
N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD; AND FOR
CLASS M SHARES, A SALES CHARGE OF 3.25%. BECAUSE CLASS B SHARES CONVERT TO CLASS
A SHARES 72 MONTHS AFTER PURCHASE, SINCE INCEPTION RETURNS FOR CLASS B SHARES
USES CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 17 FOR
FURTHER INFORMATION.
16 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
NOTES
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Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. The Fund's total returns shown do
not reflect the deduction of income taxes on an individual's investment. Taxes
may reduce your actual investment returns on income or gains paid by the Fund or
any gains you may realize if you sell your shares.
INVESTORS SHOULD CONSIDER THE FUND'S INVESTMENT OBJECTIVES, RISKS, AND OTHER
CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE FUND'S PROSPECTUS CONTAINS
THIS AND OTHER INFORMATION ABOUT THE FUND, AND MAY BE OBTAINED BY ASKING YOUR
FINANCIAL ADVISOR, CALLING US AT 1.800.525.7048 OR VISITING OUR WEBSITE AT
WWW.OPPENHEIMERFUNDS.COM. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
The Fund's investment strategy and focus can change over time. The mention of
specific fund holdings does not constitute a recommendation by OppenheimerFunds,
Inc.
CLASS A shares of the Fund were first publicly offered on 5/1/95. The Fund's
maximum sales charge for Class A shares was lower prior to 3/11/96, so actual
performance may have been higher. Class A returns include the current maximum
initial sales charge of 5.75%.
CLASS B shares of the Fund were first publicly offered on 5/1/95. Class B
returns include the applicable contingent deferred sales charge of 5% (1-year)
and 2% (5-year). Because Class B shares convert to Class A shares 72 months
after purchase, the 10-year 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.
17 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
NOTES
- --------------------------------------------------------------------------------
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.
18 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include sales charges (loads) on purchase payments,
contingent deferred sales charges on redemptions; and redemption fees, if any;
and (2) ongoing costs, including management fees; distribution and service fees;
and other Fund expenses. These examples are intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended December 31, 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
19 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
the Statement of Additional Information). Therefore, the "hypothetical" lines of
the table are useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(7/1/05) (12/31/05) DECEMBER 31, 2005
- --------------------------------------------------------------------------------
Class A Actual $1,000.00 $1,059.40 $5.15
- --------------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,020.21 5.05
- --------------------------------------------------------------------------------
Class B Actual 1,000.00 1,055.00 9.52
- --------------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,015.98 9.34
- --------------------------------------------------------------------------------
Class C Actual 1,000.00 1,055.30 9.21
- --------------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,016.28 9.04
- --------------------------------------------------------------------------------
Class M Actual 1,000.00 1,059.60 4.89
- --------------------------------------------------------------------------------
Class M Hypothetical 1,000.00 1,020.47 4.80
- --------------------------------------------------------------------------------
Class N Actual 1,000.00 1,056.90 7.65
- --------------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,017.80 7.50
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended December 31, 2005 are as follows:
CLASS EXPENSE RATIOS
- -------------------------------
Class A 0.99%
- -------------------------------
Class B 1.83
- -------------------------------
Class C 1.77
- -------------------------------
Class M 0.94
- -------------------------------
Class N 1.47
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.
- --------------------------------------------------------------------------------
20 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMENT OF INVESTMENTS December 31, 2005
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS AND NOTES--58.8%
- ----------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--12.9%
- ----------------------------------------------------------------------------------------------------------------------
AUTO COMPONENTS--0.7%
Goodyear Tire & Rubber Co. (The), 4.50% Cv. Sr. Nts., 6/15/34 1 $ 2,000,000 $ 3,130,000
- ----------------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--6.0%
Caesars Entertainment, Inc., 4.15% Cv. Sr. Unsec. Nts., 4/15/24 2 3,000,000 3,837,930
- ----------------------------------------------------------------------------------------------------------------------
Carnival Corp., 2% Cv. Sr. Unsec. Unsub. Debs., 4/15/21 6,500,000 8,970,000
- ----------------------------------------------------------------------------------------------------------------------
Hilton Hotels Corp., 3.375% Cv. Sr. Unsec. Unsub. Nts., 4/15/23 5,000,000 5,906,250
- ----------------------------------------------------------------------------------------------------------------------
Scientific Games Corp., 0.75% Cv. Sr. Sub. Nts., 12/1/24 6,000,000 6,457,500
- ----------------------------------------------------------------------------------------------------------------------
Shuffle Master, Inc., 1.25% Cv. Sr. Unsec. Nts., 4/15/24 1 2,000,000 2,105,000
-------------
27,276,680
- ----------------------------------------------------------------------------------------------------------------------
MEDIA--4.1%
Charter Communications, Inc., 5.875% Cv. Sr. Nts., 11/16/09 1 2,000,000 1,497,500
- ----------------------------------------------------------------------------------------------------------------------
Liberty Media Corp., 0.75% Exchangeable Sr. Unsec. Debs., 3/30/23
(exchangeable for Time Warner, Inc., common stock) 1 7,000,000 7,525,000
- ----------------------------------------------------------------------------------------------------------------------
Walt Disney Co. (The), 2.125% Cv. Sr. Unsec. Nts., 4/15/23 6,000,000 6,030,000
- ----------------------------------------------------------------------------------------------------------------------
XM Satellite Radio Holdings, Inc., 1.75% Cv. Sr. Nts., 12/1/09 1 4,000,000 3,475,000
-------------
18,527,500
- ----------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL--2.1%
CSK Auto Corp., 3.375% Cv. Sr. Nts., 8/15/25 1 4,000,000 3,720,000
- ----------------------------------------------------------------------------------------------------------------------
Lowe's Cos., Inc., 0.861% Cv. Sr. Nts., 10/19/21 2 5,000,000 5,825,000
-------------
9,545,000
- ----------------------------------------------------------------------------------------------------------------------
ENERGY--3.0%
- ----------------------------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--3.0%
Halliburton Co., 3.125% Cv. Sr. Nts., 7/15/23 1 4,000,000 6,860,000
- ----------------------------------------------------------------------------------------------------------------------
Schlumberger Ltd., 1.50% Cv. Sr. Unsec. Debs., Series A, 6/1/23 5,000,000 6,900,000
-------------
13,760,000
- ----------------------------------------------------------------------------------------------------------------------
FINANCIALS--4.0%
- ----------------------------------------------------------------------------------------------------------------------
CAPITAL MARKETS--1.3%
BlackRock, Inc.:
2.625% Cv. Sr. Nts., 2/15/35 1,000,000 1,160,000
2.625% Cv. Sr. Nts., 2/15/35 1 4,000,000 4,640,000
-------------
5,800,000
- ----------------------------------------------------------------------------------------------------------------------
CONSUMER FINANCE--1.4%
American Express Co., 1.85% Cv. Sr. Nts., 12/1/33 1,2 6,000,000 6,397,500
- ----------------------------------------------------------------------------------------------------------------------
REAL ESTATE--1.3%
Host Marriott LP, 3.25% Cv. Sr. Debs., 4/15/24 1 5,000,000 5,856,250
21 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------------
HEALTH CARE--12.9%
- ----------------------------------------------------------------------------------------------------------------------
BIOTECHNOLOGY--3.4%
Amylin Pharmaceuticals, Inc., 2.50% Cv. Sr. Unsec. Nts., 4/15/11 1 $ 2,000,000 $ 2,570,000
- ----------------------------------------------------------------------------------------------------------------------
Genzyme Corp., 1.25% Cv. Sr. Nts., 12/1/23 1 6,000,000 6,802,500
- ----------------------------------------------------------------------------------------------------------------------
Invitrogen Corp., 1.50% Cv. Sr. Unsec. Nts., 2/15/24 7,000,000 5,950,000
-------------
15,322,500
- ----------------------------------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--2.1%
Cytyc Corp.:
2.25% Cv. Sr. Nts., 3/15/24 1 2,000,000 2,215,000
2.25% Cv. Sr. Nts., 3/15/24 2,000,000 2,215,000
- ----------------------------------------------------------------------------------------------------------------------
Fisher Scientific International, Inc., 3.25% Cv. Sr. Sub. Nts., 3/1/24 5,000,000 4,993,750
-------------
9,423,750
- ----------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--3.9%
Health Management Associates, Inc., 1.50% Cv. Sr. Sub. Nts., 8/1/23 6,500,000 6,540,625
- ----------------------------------------------------------------------------------------------------------------------
Lincare Holdings, Inc., 3% Cv. Sr. Nts., 6/15/33 6,000,000 6,037,500
- ----------------------------------------------------------------------------------------------------------------------
Omnicare, Inc., 3.25% Cv. Sr. Unsec. Debs., 12/15/35 5,000,000 4,987,500
-------------
17,565,625
- ----------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS--3.5%
Allergan, Inc., 0.02% Cv. Sr. Unsec. Nts., 11/6/22 3 5,000,000 6,187,500
- ----------------------------------------------------------------------------------------------------------------------
Teva Pharmaceutical Finance II LLC, 0.50% Cv. Sr. Sec. Debs., Series A, 2/1/24
(cv. into ADRs of Teva Pharmaceutical Industries Ltd.) 5,000,000 5,962,500
- ----------------------------------------------------------------------------------------------------------------------
Watson Pharmaceuticals, Inc., 1.75% Cv. Sr. Unsec. Debs., 3/15/23 4,000,000 3,830,000
-------------
15,980,000
- ----------------------------------------------------------------------------------------------------------------------
INDUSTRIALS--6.8%
- ----------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--3.1%
Alliant Techsystems, Inc., 2.75% Cv. Sr. Sub. Nts., 2/15/24 6,000,000 6,502,500
- ----------------------------------------------------------------------------------------------------------------------
Lockheed Martin Corp., 4.31% Cv. Sr. Nts., 8/15/33 2 7,000,000 7,499,660
-------------
14,002,160
- ----------------------------------------------------------------------------------------------------------------------
AIRLINES--0.6%
Continental Airlines, Inc., 4.50% Cv. Sr. Unsec. Unsub. Nts., 2/1/07 3,000,000 2,812,500
- ----------------------------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--2.0%
Tyco International Group SA, 2.75% Cv. Sr. Unsec. Unsub. Debs.,
Series A, 1/15/18 7,000,000 8,898,750
- ----------------------------------------------------------------------------------------------------------------------
MACHINERY--1.1%
Danaher Corp., 2.46% Cv. Sr. Unsec. Unsub. Liquid Yield Option Nts., 1/22/21 3 5,000,000 4,131,250
- ----------------------------------------------------------------------------------------------------------------------
SystemOne Technologies, Inc.:
2.888% Cv. Sub. Nts., 12/31/05 4 3,626,256 580,201
8.25% Cv. Sub. Nts., 1/3/07 4 2,962,671 474,027
-------------
5,185,478
22 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--12.3%
- ----------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--4.3%
Andrew Corp., 3.25% Cv. Sub. Nts., 8/15/13 $ 3,000,000 $ 3,022,500
- ----------------------------------------------------------------------------------------------------------------------
Comverse Technology, Inc., 0% Cv. Sr. Unsec. Zero Yield Puttable
Securities, 5/15/23 3 4,000,000 6,055,000
- ----------------------------------------------------------------------------------------------------------------------
Lucent Technologies, Inc., 2.75% Cv. Sr. Unsec. Debs., Series A, 6/15/23 2,000,000 2,005,000
- ----------------------------------------------------------------------------------------------------------------------
Nortel Networks Corp., 4.25% Cv. Sr. Unsec. Nts., 9/1/08 7,500,000 6,928,125
- ----------------------------------------------------------------------------------------------------------------------
UTStarcom, Inc., 0.875% Cv. Sr. Unsec. Sub. Nts., 3/1/08 2,000,000 1,632,500
-------------
19,643,125
- ----------------------------------------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--0.9%
Yahoo!, Inc., 0% Cv. Sr. Unsec. Nts., 4/1/08 3 2,000,000 3,842,500
- ----------------------------------------------------------------------------------------------------------------------
IT SERVICES--3.1%
Amdocs Ltd., 0.50% Cv. Nts., 3/15/24 4,000,000 3,605,000
- ----------------------------------------------------------------------------------------------------------------------
BearingPoint, Inc., 3% Cv. Sub. Nts., 12/15/24 1,2 3,000,000 2,801,250
- ----------------------------------------------------------------------------------------------------------------------
DST Systems, Inc., 3.625% Cv. Sr. Unsec. Debs., Series B, 8/15/23 6,000,000 7,792,500
-------------
14,198,750
- ----------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.1%
Agere Systems, Inc., 6.50% Cv. Unsec. Unsub. Nts., 12/15/09
(cv. into Agere Systems, Inc., Cl. A common stock) 5,000,000 4,943,750
- ----------------------------------------------------------------------------------------------------------------------
Cypress Semiconductor Corp., 1.25% Cv. Unsec. Sub. Nts., 6/15/08 2,000,000 2,275,000
- ----------------------------------------------------------------------------------------------------------------------
Intel Corp., 2.95% Cv. Unsec. Sub. Debs., 12/15/35 4 3,000,000 2,934,390
- ----------------------------------------------------------------------------------------------------------------------
Skyworks Solutions, Inc., 4.75% Cv. Unsec. Sub. Nts., 11/15/07 4,000,000 3,905,000
-------------
14,058,140
- ----------------------------------------------------------------------------------------------------------------------
SOFTWARE--0.9%
Mentor Graphics Corp., 6.875% Cv. Unsec. Sub. Nts., 6/15/07 4 4,000,000 3,995,000
- ----------------------------------------------------------------------------------------------------------------------
MATERIALS--0.9%
- ----------------------------------------------------------------------------------------------------------------------
METALS & MINING--0.9%
Inco Ltd., 1.094% Cv. Unsec. Unsub. Debs., 3/14/23 3,000,000 4,260,000
- ----------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--3.5%
- ----------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.6%
American Tower Corp., 3% Cv. Sr. Nts., 8/15/12 5,000,000 7,225,000
- ----------------------------------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--1.9%
NII Holdings, Inc., 2.75% Cv. Nts., 8/15/25 1 8,000,000 8,730,000
- ----------------------------------------------------------------------------------------------------------------------
UTILITIES--2.5%
- ----------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--1.2%
CMS Energy Corp., 2.875% Cv. Sr. Nts., 12/1/24 4,500,000 5,259,375
- ----------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--1.3%
CenterPoint Energy, Inc., 3.75% Cv. Sr. Unsec. Nts., Series B, 5/15/23 5,000,000 5,900,000
-------------
Total Convertible Corporate Bonds and Notes (Cost $255,902,112) 266,595,583
23 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--26.8%
- ----------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--2.0%
- ----------------------------------------------------------------------------------------------------------------------
AUTOMOBILES--2.0%
Ford Motor Co. Capital Trust II, 6.50% Cum. Cv. Trust Preferred
Securities, Non-Vtg 100,000 $ 2,760,000
- ----------------------------------------------------------------------------------------------------------------------
General Motors Corp., 4.50% Cv. Sr. Debs., Series A 300,000 6,258,000
-------------
9,018,000
- ----------------------------------------------------------------------------------------------------------------------
ENERGY--4.9%
- ----------------------------------------------------------------------------------------------------------------------
ENERGY TRADERS--1.4%
NRG Energy, Inc., 4% Cv., Non-Vtg 5,000 6,511,875
- ----------------------------------------------------------------------------------------------------------------------
OIL & GAS--3.5%
Amerada Hess Corp., 7% Cv., Non-Vtg 60,000 6,484,800
- ----------------------------------------------------------------------------------------------------------------------
Chesapeake Energy Corp., 4.50% Cum. Cv., Non-Vtg 50,000 4,825,500
- ----------------------------------------------------------------------------------------------------------------------
El Paso Corp., 4.99% Cv. 1 4,000 4,388,500
-------------
15,698,800
- ----------------------------------------------------------------------------------------------------------------------
FINANCIALS--11.3%
- ----------------------------------------------------------------------------------------------------------------------
CAPITAL MARKETS--1.3%
Lehman Brothers Holdings, Inc., 6.25% Cv. Premium Income Equity
Linked Nts., 10/15/07 (linked to General Mills, Inc. common stock) 220,000 5,775,000
- ----------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS--2.4%
Marshall & Ilsley Corp., 6.50% Cv 200,000 5,296,000
- ----------------------------------------------------------------------------------------------------------------------
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. 5 100,000 5,458,200
-------------
10,754,200
- ----------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--0.1%
State Street Corp., 4% Cv. 6 25,000 451,000
- ----------------------------------------------------------------------------------------------------------------------
INSURANCE--5.8%
Chubb Corp. (The), 7% Cv. Equity Units (each unit consists of one
purchase contract of Chubb Corp. (The) common stock and $25
principal amount of Chubb Corp. (The), 2.25% sr. nts., 8/16/08) 5 100,000 3,518,000
- ----------------------------------------------------------------------------------------------------------------------
Genworth Financial, Inc., 6% Cv 200,000 7,612,000
- ----------------------------------------------------------------------------------------------------------------------
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 7,713,000
- ----------------------------------------------------------------------------------------------------------------------
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 MetLife, Inc., series a and series b) 5 200,000 5,510,000
- ----------------------------------------------------------------------------------------------------------------------
XL Capital Ltd., 6.50% Cv 100,000 2,234,000
-------------
26,587,000
24 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
VALUE
SHARES SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------------
REAL ESTATE--1.7%
Simon Property Group, Inc., 6% Cv., Non-Vtg 120,000 $ 7,716,000
- ----------------------------------------------------------------------------------------------------------------------
HEALTH CARE--2.7%
- ----------------------------------------------------------------------------------------------------------------------
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 6,987,500
- ----------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS--1.2%
Schering-Plough Corp., 6% Cv 100,000 5,379,000
- ----------------------------------------------------------------------------------------------------------------------
INDUSTRIALS--1.7%
- ----------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.9%
Northrop Grumman Corp., 7% Cum. Cv., Series B 30,000 3,815,100
- ----------------------------------------------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--0.8%
United Rentals Trust I, 6.50% Cv. Quarterly Income Preferred Securities,
Non-Vtg 85,000 3,633,750
- ----------------------------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--2.1%
- ----------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--1.0%
Lucent Technologies Capital Trust I, 7.75% Cum. Cv., Non-Vtg 5,000 4,787,500
- ----------------------------------------------------------------------------------------------------------------------
OFFICE ELECTRONICS--1.1%
Xerox Corp., 6.25% Cv 40,000 4,896,000
- ----------------------------------------------------------------------------------------------------------------------
MATERIALS--1.3%
- ----------------------------------------------------------------------------------------------------------------------
METALS & MINING--1.3%
Freeport-McMoRan Copper & Gold, Inc., 5.50% Cv 5,000 5,871,250
- ----------------------------------------------------------------------------------------------------------------------
UTILITIES--0.8%
- ----------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.8%
AES Trust VII, 6% Cv., Non-Vtg 75,000 3,609,375
-------------
Total Preferred Stocks (Cost $111,899,210) 121,491,350
- ----------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--6.8%
- ----------------------------------------------------------------------------------------------------------------------
Alltel Corp. 80,000 5,048,000
- ----------------------------------------------------------------------------------------------------------------------
Altria Group, Inc. 50,000 3,736,000
- ----------------------------------------------------------------------------------------------------------------------
Costco Wholesale Corp. 68,127 3,370,243
- ----------------------------------------------------------------------------------------------------------------------
Johnson & Johnson 80,000 4,808,000
- ----------------------------------------------------------------------------------------------------------------------
Kinder Morgan, Inc. 60,000 5,517,000
- ----------------------------------------------------------------------------------------------------------------------
Legg Mason, Inc. 25,000 2,992,250
- ----------------------------------------------------------------------------------------------------------------------
SystemOne Technologies, Inc. 4,6 197,142 591
- ----------------------------------------------------------------------------------------------------------------------
Williams Cos., Inc. (The) 229,535 5,318,326
-------------
Total Common (Cost $24,865,621) 30,790,410
25 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES--4.3%
- ----------------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The), Cisco Systems, Inc. Cv. Linked Nts.,
4%, 12/30/05 $ 277,687 $ 4,767,886
- ----------------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., Cv. Linked Nts., Series BIIB, 7.25%,
3/14/06
(linked to the performance of Biogen Idec, Inc.) 4,000,000 4,540,600
- ----------------------------------------------------------------------------------------------------------------------
Morgan Stanley, Cv. Premium Equity Participating Security, 2.50%, 10/2/06
(exchangeable for General Electric Co. common stock) 4 298,463 10,179,081
-------------
Total Structured Notes (Cost $19,000,031) 19,487,567
- ----------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--2.6%
- ----------------------------------------------------------------------------------------------------------------------
Undivided interest of 0.97% in joint repurchase agreement (Principal Amount/
Value $1,203,488,000, with a maturity value of $1,204,036,256) with UBS Warburg
LLC, 4.10%, dated 12/30/05, to be repurchased at $11,624,293 on 1/3/06,
collateralized by Federal Home Loan Mortgage Corp., 5%--5.50%,
1/1/35--11/1/35, with a value of $565,118,538 and Federal
National Mortgage Assn., 5.50%--6%, 11/1/34--1/1/36,
with a value of $676,946,908 (Cost $11,619,000) 11,619,000 11,619,000
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $423,285,974) 99.3% 449,983,910
- ----------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.7 3,271,204
------------------------------
NET ASSETS 100.0% $453,255,114
==============================
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 $72,713,500 or 16.04% of the Fund's net
assets as of December 31, 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 security. The aggregate value of illiquid securities as of December
31, 2005 was $18,163,290, which represents 4.01% of the Fund's net assets. 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.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES December 31, 2005
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------
Investments, at value (cost $423,285,974)--see accompanying statement of investments $ 449,983,910
- -------------------------------------------------------------------------------------------------------
Cash 769,557
- -------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest and dividends 2,126,320
Investments sold 1,062,967
Shares of beneficial interest sold 1,010,956
Other 27,486
--------------
Total assets 454,981,196
- -------------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 1,139,394
Distribution and service plan fees 282,737
Shareholder communications 105,971
Trustees' compensation 100,980
Transfer and shareholder servicing agent fees 68,389
Other 28,611
--------------
Total liabilities 1,726,082
- -------------------------------------------------------------------------------------------------------
NET ASSETS $ 453,255,114
==============
- -------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -------------------------------------------------------------------------------------------------------
Paid-in capital $ 537,145,681
- -------------------------------------------------------------------------------------------------------
Accumulated net investment loss (4,601,685)
- -------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (105,986,818)
- -------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 26,697,936
--------------
NET ASSETS $ 453,255,114
==============
27 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES Continued
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- -----------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of $251,033,002 and
18,993,327 shares of beneficial interest outstanding) $13.22
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $14.03
- -----------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $58,482,872 and 4,417,994 shares of
beneficial interest outstanding) $13.24
- -----------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $62,231,424 and 4,710,931 shares of
beneficial interest outstanding) $13.21
- -----------------------------------------------------------------------------------------------------------
Class M Shares:
Net asset value and redemption price per share (based on net assets of $79,022,615 and
5,982,776 shares of beneficial interest outstanding) $13.21
Maximum offering price per share (net asset value plus sales charge of 3.25% of offering price) $13.65
- -----------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $2,485,201 and 188,016 shares of
beneficial interest outstanding) $13.22
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMENT OF OPERATIONS For the Year Ended December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $ 9,412,310
- --------------------------------------------------------------------------------
Interest 8,850,568
- --------------------------------------------------------------------------------
Other income 6,228
-------------
Total investment income 18,269,106
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees 2,455,646
- --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 659,287
Class B 681,156
Class C 692,778
Class M 195,860
Class N 11,877
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 418,087
Class B 134,491
Class C 113,669
Class M 101,281
Class N 8,437
- --------------------------------------------------------------------------------
Shareholder communications:
Class A 89,511
Class B 32,210
Class C 22,804
Class M 19,986
Class N 1,195
- --------------------------------------------------------------------------------
Accounting service fees 154,243
- --------------------------------------------------------------------------------
Custodian fees and expenses 10,267
- --------------------------------------------------------------------------------
Administration service fees 1,500
- --------------------------------------------------------------------------------
Other 118,451
-------------
Total expenses 5,922,736
Less reduction to custodian expenses (7,876)
Less waivers and reimbursements of expenses (385)
------------
Net expenses 5,914,475
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 12,354,631
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
- --------------------------------------------------------------------------------
Net realized gain on investments 12,688,258
- --------------------------------------------------------------------------------
Net change in unrealized appreciation on investments (23,076,957)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,965,932
=============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2005 2004
- -----------------------------------------------------------------------------------------------
OPERATIONS
- -----------------------------------------------------------------------------------------------
Net investment income $ 12,354,631 $ 18,481,548
- -----------------------------------------------------------------------------------------------
Net realized gain 12,688,258 29,046,375
- -----------------------------------------------------------------------------------------------
Net change in unrealized appreciation (23,076,957) (4,905,531)
--------------------------------
Net increase in net assets resulting from operations 1,965,932 42,622,392
- -----------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (12,158,423) (15,613,529)
Class B (2,373,869) (3,901,818)
Class C (2,499,131) (3,350,297)
Class M (3,875,859) (5,064,498)
Class N (98,537) (83,852)
- -----------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A (58,200,165) 1,054,354
Class B (23,575,464) (50,450,935)
Class C (16,051,502) (3,149,841)
Class M (18,593,755) (16,303,106)
Class N 419,514 631,345
- -----------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------
Total decrease (135,041,259) (53,609,785)
- -----------------------------------------------------------------------------------------------
Beginning of period 588,296,373 641,906,158
--------------------------------
End of period (including accumulated net investment loss of
$4,601,685 and $4,639,826, respectively) $ 453,255,114 $ 588,296,373
================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.63 $ 13.27 $ 11.29 $ 12.76 $ 13.85
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .35 1 .43 1 .56 .57 .48
Net realized and unrealized gain (loss) (.16) .58 1.98 (1.41) (.94)
--------------------------------------------------------------------
Total from investment operations .19 1.01 2.54 (.84) (.46)
- -----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.60) (.65) (.56) (.63) (.63)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.22 $ 13.63 $ 13.27 $ 11.29 $ 12.76
====================================================================
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 1.50% 7.74% 22.95% (6.59)% (3.30)%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $251,033 $319,478 $310,641 $202,968 $187,458
- -----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $277,049 $321,729 $252,347 $190,677 $197,514
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 2.66% 3.24% 4.48% 4.77% 3.58%
Total expenses 0.97% 0.94% 0.94% 0.99% 0.95%
Expenses after payments and waivers and
reduction to custodian expenses 0.96% 0.94% 0.94% 0.99% 0.95%
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 50% 54% 61% 52% 69%
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.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS B YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.65 $ 13.29 $ 11.30 $ 12.79 $ 13.87
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .24 1 .33 1 .43 .43 .38
Net realized and unrealized gain (loss) (.15) .58 2.02 (1.38) (.93)
--------------------------------------------------------------------------
Total from investment operations .09 .91 2.45 (.95) (.55)
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.50) (.55) (.46) (.54) (.53)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.24 $ 13.65 $ 13.29 $ 11.30 $ 12.79
==========================================================================
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 0.68% 6.92% 22.07% (7.44)% (3.97)%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $58,483 $ 84,816 $133,058 $154,350 $286,829
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $68,098 $102,670 $139,757 $213,259 $330,806
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.84% 2.47% 3.79% 3.95% 2.75%
Total expenses 1.79% 4 1.75% 4 1.74% 4,5 1.77% 4 1.71% 4
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 50% 54% 61% 52% 69%
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.
32 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
CLASS C YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.62 $ 13.27 $ 11.28 $ 12.76 $ 13.84
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .25 1 .33 1 .46 .46 .38
Net realized and unrealized gain (loss) (.16) .57 1.99 (1.40) (.93)
-----------------------------------------------------------------------
Total from investment operations .09 .90 2.45 (.94) (.55)
- --------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.50) (.55) (.46) (.54) (.53)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.21 $ 13.62 $ 13.27 $ 11.28 $ 12.76
=======================================================================
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 0.72% 6.89% 22.14% (7.39)% (3.98)%
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $62,231 $80,995 $82,149 $61,031 $76,846
- --------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $69,275 $82,470 $69,787 $66,391 $85,774
- --------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.89% 2.48% 3.73% 3.97% 2.80%
Total expenses 1.74% 4 1.70% 4 1.70% 4,5 1.76% 4 1.71% 4
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 50% 54% 61% 52% 69%
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.
33 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS M YEAR ENDED DECEMBER 31, 2005 2004 2003 2002 2001
- -------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.62 $ 13.27 $ 11.28 $ 12.76 $ 13.84
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .36 1 .43 1 .50 .49 .41
Net realized and unrealized gain (loss) (.16) .57 2.00 (1.40) (.93)
----------------------------------------------------------------------------
Total from investment operations .20 1.00 2.50 (.91) (.52)
- -------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.61) (.65) (.51) (.57) (.56)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.21 $ 13.62 $ 13.27 $ 11.28 $ 12.76
============================================================================
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 1.55% 7.69% 22.59% (7.16)% (3.72)%
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $79,023 $100,877 $114,600 $108,426 $144,612
- -------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $86,969 $106,194 $110,337 $122,897 $160,919
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 2.72% 3.24% 4.16% 4.24% 3.04%
Total expenses 0.91% 4 0.95% 4,5 1.32% 4,5 1.51% 4 1.45% 4
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 50% 54% 61% 52% 69%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
34 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
CLASS N YEAR ENDED DECEMBER 31, 2005 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 .28 2 .37 2 .49 .55 .42
Net realized and unrealized gain (loss) (.15) .58 2.00 (1.43) (.84)
-------------------------------------------------------------------
Total from investment operations .13 .95 2.49 (.88) (.42)
- ----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.54) (.59) (.51) (.59) (.50)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.22 $13.63 $13.27 $11.29 $12.76
===================================================================
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 1.04% 7.31% 22.45% (6.92)% (3.02)%
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $2,485 $2,131 $1,458 $ 388 $ 36
- ----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $2,378 $1,781 $ 743 $ 205 $ 10
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.17% 2.79% 3.87% 4.38% 5.45%
Total expenses 1.45% 1.37% 1.37% 1.43% 1.22%
Expenses after payments and waivers and
reduction to custodian expenses 1.43% 1.37% 1.35% 1.38% 1.22%
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 50% 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.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
35 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Convertible Securities Fund (the Fund), a portfolio of the Bond Fund
Series, is registered under the Investment Company Act of 1940, as amended, as
an open-end management investment company. The Fund's investment objective is to
seek a high level of total return on its assets through a combination of current
income and capital appreciation. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B, Class C, Class M and Class N shares.
Class A shares are sold at their offering price, which is normally net asset
value plus a front-end sales charge. Class B, Class C and Class N shares are
sold without a front-end sales charge but may be subject to a contingent
deferred sales charge (CDSC). Class M shares are sold with a reduced front-end
sales charge. Class N shares are sold only through retirement plans. Retirement
plans that offer Class N shares may impose charges on those accounts. All
classes of shares have identical rights and voting privileges with respect to
the Fund in general and exclusive voting rights on matters that affect that
class alone. Earnings, net assets and net asset value per share may differ due
to each class having its own expenses, such as transfer and shareholder
servicing agent fees and shareholder communications, directly attributable to
that class. Class A, B, C, M and N have separate distribution and/or service
plans. Class B shares will automatically convert to Class A shares six years
after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ are valued based on the closing
price provided by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the closing "bid" and "asked"
prices, and if not, at the closing bid price. Securities traded on foreign
exchanges are valued based on the last sale price on the principal exchange on
which the security is traded, in the country that is identified by the portfolio
pricing service, prior to the time when the Fund's assets are valued. In the
absence of a sale, the security is valued at the official closing price on the
principal exchange. Corporate, government and municipal debt instruments having
a remaining maturity in excess of sixty days and all mortgage-backed securities
will be valued at the mean between the "bid" and "asked" prices. Futures
contracts traded on a commodities or futures exchange will be valued at the
final settlement price or official closing price on the principal exchange as
reported by such principal exchange at its trading session ending at, or most
recently prior to, the
36 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
time when the Fund's assets are valued. Securities (including restricted
securities) for which market quotations are not readily available are valued at
their fair value. Foreign and domestic securities whose values have been
materially affected by what the Manager identifies as a significant event
occurring before the Fund's assets are valued but after the close of their
respective exchanges will be fair valued. Fair value is determined in good faith
using consistently applied procedures under the supervision of the Board of
Trustees. Short-term "money market type" debt securities with remaining
maturities of sixty days or less are valued at amortized cost (which
approximates market value).
- --------------------------------------------------------------------------------
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 December 31, 2005, the market
value of these securities comprised 4.3% of the Fund's net assets and resulted
in unrealized cumulative gains of $487,536.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal. In the event of default by the other party to the agreement,
retention of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be
37 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
able to offset against income and gains realized in future years and unrealized
appreciation or depreciation of securities and other investments for federal
income tax purposes.
NET UNREALIZED
APPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2,3,4 TAX PURPOSES
-----------------------------------------------------------------------------
$378,987 $-- $104,114,259 $19,942,222
1. As of December 31, 2005, the Fund had $101,795,766 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of December 31, 2005,
details of the capital loss carryforwards were as follows:
EXPIRING
-----------------------------
2009 $ 11,328,770
2010 90,466,996
------------
Total $101,795,766
============
2. As of December 31, 2005, the Fund had $2,318,493 of post-October losses
available to offset future realized capital gains, if any. Such losses, if
unutilized, will expire in 2014.
3. During the fiscal year ended December 31, 2005, the Fund utilized $7,504,322
of capital loss carryforward to offset capital gains realized in that fiscal
year.
4. During the fiscal year ended December 31, 2004, the Fund utilized $22,626,011
of capital loss carryforward to offset capital gains realized in that fiscal
year.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for December 31, 2005. Net assets of
the Fund were unaffected by the reclassifications.
INCREASE TO
REDUCTION TO ACCUMULATED NET
ACCUMULATED NET REALIZED LOSS
INVESTMENT LOSS ON INVESTMENTS
----------------------------------------
$8,689,329 $8,689,329
38 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
The tax character of distributions paid during the years ended December 31, 2005
and December 31, 2004 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
--------------------------------------------------------------------
Distributions paid from:
Ordinary income $21,005,819 $28,013,994
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of December 31, 2005 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.
Federal tax cost of securities $430,041,688
=============
Gross unrealized appreciation $ 35,798,443
Gross unrealized depreciation (15,856,221)
-------------
Net unrealized appreciation $ 19,942,222
=============
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for the
Fund's independent trustees. Benefits are based on years of service and fees
paid to each trustee during the years of service. During the year ended December
31, 2005, the Fund's projected benefit obligations were decreased by $23,574 and
payments of $2,545 were made to retired trustees, resulting in an accumulated
liability of $89,945 as of December 31, 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
39 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
may have passed. Non-cash dividends included in dividend income, if any, are
recorded at the fair market value of the securities received. Interest income,
which includes accretion of discount and amortization of premium, is accrued as
earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts to the extent they are not
offset by positive cash balances maintained by the Fund. 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. At December 31, 2005, the
Fund had $413 of such earnings on cash balances available to offset future
custodian fees or interest expenses incurred during the next fiscal year.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of beneficial
interest of each class. Transactions in shares of beneficial interest were as
follows:
YEAR ENDED DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2004
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------
CLASS A
Sold 2,229,111 $ 29,269,773 6,358,012 $ 84,644,732
Dividends and/or
distributions
reinvested 717,744 9,447,315 900,277 12,114,223
Redeemed (7,396,919) (96,917,253) (7,215,971) (95,704,601)
--------------------------------------------------------------
Net increase (decrease) (4,450,064) $(58,200,165) 42,318 $ 1,054,354
==============================================================
- -------------------------------------------------------------------------------------------
CLASS B
Sold 384,419 $ 5,032,394 1,168,753 $ 15,636,529
Dividends and/or
distributions
reinvested 118,262 1,559,371 193,385 2,607,930
Redeemed (2,299,068) (30,167,229) (5,155,900) (68,695,394)
--------------------------------------------------------------
Net decrease (1,796,387) $(23,575,464) (3,793,762) $(50,450,935)
==============================================================
40 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
YEAR ENDED DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2004
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------
CLASS C
Sold 369,150 $ 4,830,334 1,078,891 $ 14,393,979
Dividends and/or
distributions reinvested 125,570 1,652,747 162,119 2,182,505
Redeemed (1,730,481) (22,534,583) (1,486,132) (19,726,325)
--------------------------------------------------------------
Net decrease (1,235,761) $(16,051,502) (245,122) $ (3,149,841)
==============================================================
- --------------------------------------------------------------------------------------------
CLASS M
Sold 58,022 $ 752,410 140,463 $ 1,876,605
Dividends and/or
distributions reinvested 206,256 2,712,110 265,627 3,571,401
Redeemed (1,688,476) (22,058,275) (1,637,323) (21,751,112)
--------------------------------------------------------------
Net decrease (1,424,198) $(18,593,755) (1,231,233) $(16,303,106)
==============================================================
- --------------------------------------------------------------------------------------------
CLASS N
Sold 71,550 $ 939,101 102,523 $ 1,367,550
Dividends and/or
distributions reinvested 6,529 86,038 5,527 74,505
Redeemed (46,439) (605,625) (61,549) (810,710)
--------------------------------------------------------------
Net increase 31,640 $ 419,514 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 year ended December 31, 2005, were as
follows:
PURCHASES SALES
- ----------------------------------------------------------
Investment securities $231,523,499 $380,576,483
- ----------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of 0.625% of the first $50 million of average annual net assets of
the Fund, 0.50% of the next $250 million and 0.4375% of average annual net
assets over $300 million.
- --------------------------------------------------------------------------------
ACCOUNTING FEES. Accounting fees paid to the Manager were in accordance with the
accounting services agreement with the Fund which provides for an annual fee of
$12,000 for the first $30 million of average daily net assets and $9,000 for
each additional $30 million of average daily net assets. During the year ended
December 31, 2005, the Fund paid $154,236 to the Manager for accounting and
pricing services.
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per
41 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
account fee. For the year ended December 31, 2005, the Fund paid $784,346 to OFS
for services to the Fund.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12B-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares. Reimbursement is made
periodically at an annual rate of up to 0.25% of the average annual net assets
of Class A shares of the Fund. The Distributor currently uses all of those fees
to pay dealers, brokers, banks and other financial institutions periodically for
providing personal services and maintenance of accounts of their customers that
hold Class A shares. Any unreimbursed expenses the Distributor incurs with
respect to Class A shares in any fiscal year cannot be recovered in subsequent
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 December 31,
2005 for Class B, Class C and Class N shares were $2,401,687, $2,308,403 and
$29,903, 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.
42 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
CLASS A CLASS B CLASS C CLASS N
CLASS A CLASS M CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- ------------------------------------------------------------------------------------------------------------------
December 31, 2005 $114,807 $3,336 $966 $195,627 $15,359 $2,726
- ------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 year ended December 31, 2005,
OFS waived $385 for Class N shares. This undertaking may be amended or withdrawn
at any time.
- --------------------------------------------------------------------------------
5. ILLIQUID SECURITIES
As of December 31, 2005, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund will not invest more than 10% of its net assets (determined at the time of
purchase and reviewed periodically) in illiquid securities. Securities that are
illiquid are marked with the applicable footnote on the Statement of
Investments.
- --------------------------------------------------------------------------------
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,
rescission of the funds' investment advisory agreements, an accounting of all
fees paid, and an award of attorneys' fees and litigation expenses.
43 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. LITIGATION Continued
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.
44 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER BOND FUND SERIES:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Convertible Securities Fund (a portfolio of the Bond Fund Series),
including the statement of investments, as of December 31, 2005, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 2005, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Convertible Securities Fund as of December 31, 2005, the results of
its operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with U.S.
generally accepted accounting principles.
KPMG LLP
Denver, Colorado
February 14, 2006
45 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2006, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2005. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Dividends, if any, paid by the Fund during the fiscal year ended December
31, 2005 which are not designated as capital gain distributions should be
multiplied by 11.58% to arrive at the amount eligible for the corporate
dividend-received deduction.
A portion, if any, of the dividends paid by the Fund during the fiscal
year ended December 31, 2005 which are not designated as capital gain
distributions are eligible for lower individual income tax rates to the extent
that the Fund has received qualified dividend income as stipulated by recent tax
legislation. $2,468,350 of the Fund's fiscal year taxable income may be eligible
for the lower individual income tax rates. In early 2006, shareholders of record
will receive information regarding the percentage of distributions that are
eligible for lower individual income tax rates.
Recent tax legislation allows a regulated investment company to designate
distributions not designated as capital gain distributions, as either interest
related dividends or short-term capital gain dividends, both of which are exempt
from the U.S. withholding tax applicable to non U.S. taxpayers. For the fiscal
year ended December 31, 2005, $13,982,384 or 66.56% of the ordinary
distributions paid by the Fund qualifies as an interest related dividend. The
Fund did not distribute a short-term capital gain.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
46 | 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 the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
47 | 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
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services by the Manager and its affiliates,
(v) the extent to which economies of scale are realized as the Fund grows and
whether fee levels reflect these economies of scale for Fund investors and (vi)
other benefits to the Manager from its relationship with the Fund. The Board was
aware that there are alternatives to retaining the Manager.
NATURE AND EXTENT OF SERVICES. The Board considered information on the
nature and extent of the services provided to the Fund and information regarding
the Manager's key personnel that provide such services. The Manager's duties
include providing the Fund with the services of the portfolio manager and the
Manager's investment team, who provide research, analysis and other advisory
services in regard to the Fund's investments; securities trading services;
oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing, and supervising
the activities of, all administrative and clerical personnel that are necessary
in order to provide effective corporate administration for the Fund; compiling
and maintaining records with respect to the Fund's operations; preparing and
filing reports required by the Securities and Exchange Commission; preparing
periodic reports regarding the operations of the Fund for its shareholders;
preparing proxy materials for shareholder meetings; and preparing the
registration statements required by Federal and state securities laws for the
sale of the Fund's shares. The Manager also provides the Fund with office space,
facilities and equipment.
48 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
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 took account of the facts that the Manager has had over forty
years of experience as an investment adviser and that its assets under
management rank it among the top mutual fund managers in the United States. The
Board evaluated the Manager's administrative, accounting, legal and compliance
services, and information the Board has received regarding the experience and
professional qualifications of the Manager's personnel and the size and
functions of its staff. In its evaluation of the quality of the portfolio
management services provided, the Board considered the experience of Edward
Everett and the Manager's Growth investment team and analysts. Mr. Everett has
had over 13 years of experience managing equity investments. The Board members
also considered their experiences with the Manager and its officers and other
personnel through their service as directors or trustees of the Fund and other
funds advised by the Manager. The Board considered 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. In light of the foregoing, the Board concluded that the Fund
benefits from the services provided under the Agreement as a result of the
Manager's experience, reputation, personnel, operations, and resources.
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the investment performance of the Fund and the
Manager at each Board meeting, including comparative performance information.
The Board also reviewed information, prepared by the Manager and by the
independent consultant, comparing the Fund's historical performance to relevant
market indices and to the performance of other convertible securities funds
advised by other investment advisers. The Board noted that the Fund's three-year
and five-year performance were below its peer group average and that its
one-year and ten-year performance were disappointing.
MANAGEMENT FEES AND EXPENSES. The Board reviewed 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 asset levels and distribution features. The Board noted that the
Fund's contractual and actual management fees and total expenses are lower than
its peer group average. The Board also evaluated to what extent the fees charged
and the services provided to the Fund are comparable to the fees and services
for other clients or accounts advised by the Manager.
49 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited/Continued
- --------------------------------------------------------------------------------
ECONOMIES OF SCALE. The Board reviewed the extent to which the Manager may
realize economies of scale in managing and supporting the Fund, to what extent
those economies of scale benefit the Fund shareholders 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 not experienced recent asset growth
and that, based on current asset levels, the Fund has passed its last management
fee breakpoint.
BENEFITS TO THE MANAGER. The Board considered information regarding the
Manager's costs in serving as the Fund's investment adviser, including the costs
associated with the personnel and systems necessary to manage the Fund, and
information regarding the Manager's profitability from its relationship with the
Fund. The Board 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 to considering the profits
realized by the Manager, the Board considered information 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 for services
provided and research provided to the Manager in connection with permissible
brokerage arrangements (soft dollar arrangements).
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.
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 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.
50 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS
FUND, LENGTH OF SERVICE, AGE HELD; NUMBER OF PORTFOLIOS IN THE FUND COMPLEX CURRENTLY OVERSEEN
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL,
TRUSTEES COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
THOMAS W. COURTNEY, Principal of Courtney Associates, Inc. (venture capital firm) (since 1982); General
Chairman of the Board Partner of Trivest Venture Fund (private venture capital fund); President of
of Trustees (since 2001); Investment Counseling Federated Investors, Inc. (1973-1982); Trustee of the fol-
Trustee (since 1995) lowing open-end investment companies: Cash Assets Trust, PIMCO Advisors VIT,
Age: 72 Tax Free Trust of Arizona (since 1984) and four funds for the Hawaiian Tax Free
Trust. Oversees 10 portfolios in the OppenheimerFunds complex.
JOHN CANNON, Director of Neuberger Berman Income Managers Trust, Neuberger & Berman
Trustee (since 1999) Income Funds and Neuberger Berman Trust, (open-end investment companies)
Age: 75 (1995-present); Director of Neuberger Berman Equity Funds (open-end invest-
ment company) (since November 2000); Trustee, Neuberger Berman Mutual
Funds (open-end investment company) (since October 1994); Mr. Cannon held
the following positions at CDC Investment Advisors (registered investment
adviser): Chairman and Treasurer (December 1993-February 1996), Independent
Consultant and Chief Investment Officer (1996-June 2000) and Consultant
and Director (December 1993-February 1999). Oversees 3 portfolios in the
OppenheimerFunds complex.
PAUL Y. CLINTON, Principal of Clinton Management Associates (financial and venture capital con-
Trustee (since 1995) sulting firm) (since 1996); Trustee of PIMCO Advisors VIT (open-end investment
Age: 75 company); Trustee of Capital Cash Management Trust (money market fund)
(1979-December 2004); Trustee of Narragansett Insured Tax-Free Income Fund
(tax-exempt bond fund) (1996-December 2004); Trustee of Prime Cash Fund
(1996-December 2004); and Director of OCC Cash Reserves, Inc. (open-end
investment company) (1989-December 2002). Oversees 10 portfolios in the
OppenheimerFunds complex.
DAVID K. DOWNES, President, Chief Executive Officer and Board Member of CRAFund Advisors, Inc.
Trustee (since 2005) (investment management company) (since January 2004); President of The
Age: 66 Community Reinvestment Act Qualified Investment Fund (investment manage-
ment company) (since January 2004); Independent Chairman of the Board of
Trustees of Quaker Investment Trust (registered investment company) (since
January 2004); Director of Internet Capital Group (information technology com-
pany) (since October 2003); Chief Operating Officer and Chief Financial Officer
of Lincoln National Investment Companies, Inc. (subsidiary of Lincoln National
Corporation, a publicly traded company) and Delaware Investments U.S., Inc.
(investment management subsidiary of Lincoln National Corporation) (1995-
2003); President, Chief Executive Officer and Trustee of Delaware Investment
Family of Funds (1995-2003); President and Board Member of Lincoln National
Convertible Securities Funds, Inc. and the Lincoln National Income Funds, TDC
(1995-2003); Chairman and Chief Executive Officer of Retirement Financial
Services, Inc. (registered transfer agent and investment adviser and subsidiary of
Delaware Investments U.S., Inc.) (1995-2003); President and Chief Executive
Officer of Delaware Service Company, Inc. (1995-2003); Chief Administrative
Officer, Chief Financial Officer, Vice Chairman and Director of Equitable Capital
Management Corporation (investment subsidiary of Equitable Life Assurance
Society) (1985-1992); Corporate Controller of Merrill Lynch & Company (finan-
cial services holding company) (1977-1985); held the following positions at the
Colonial Penn Group, Inc. (insurance company): Corporate Budget Director
51 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
DAVID K. DOWNES, (1974-1977), Assistant Treasurer (1972-1974) and Director of Corporate Taxes
Continued (1969-1972); held the following positions at Price Waterhouse & Company
(financial services firm): Tax Manager (1967-1969), Tax Senior (1965-1967) and
Staff Accountant (1963-1965); United States Marine Corps (1957-1959). Oversees
10 portfolios in the OppenheimerFunds complex.
ROBERT G. GALLI, A director or trustee of other Oppenheimer funds. Oversees 48 portfolios in the
Trustee (since 1998) OppenheimerFunds complex.
Age: 72
LACY B. HERRMANN, Founder and Chairman Emeritus of Aquila Management Corporation (open-end
Trustee (since 1995) investment company) (since December 2004); Chairman and Chief Executive
Age: 76 Officer of Aquila Management Corporation (since August 1984); Chairman of
the Board and President of Aquila Management Corporation (August 1984-
December 1984); Vice President, Director and Secretary of Aquila Distributors,
Inc. (distributor of Aquila Management Corporation); Treasurer of Aquila Dis-
tributors, Inc.; President and Chairman of the Board of Trustees of Capital Cash
Management Trust ("CCMT"); President and Director of STCM Management
Company, Inc. (sponsor and adviser to CCMT); Chairman, President and Director
of InCap Management Corporation (nature of business); Sub-Advisor and
Administrator of Prime Cash Fund & Short Term Asset Reserves (nature of
business); Director of OCC Cash Reserves, Inc. (open-end investment company)
(until June 2003); Trustee of OCC Accumulation Trust (open-end investment
company); Chairman of the Board of Trustees and President of Hawaiian Tax-Free
Trust (open-end investment company) (February 1985-December 2003); Trustee
Emeritus of Brown University (since June 1983). Oversees 10 portfolios in the
OppenheimerFunds complex.
BRIAN F. WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since September 1995);
Trustee (since 2001) Director of Special Value Opportunities Fund, LLC (registered investment com-
Age: 62 pany) (since September 2004); Member, Zurich Financial Investment Advisory
Board (affiliate of the Manager's parent company) (since October 2004); Board
of Governing Trustees of The Jackson Laboratory (non-profit) (since August
1990); Trustee of the Institute for Advanced Study (non-profit educational insti-
tute) (since May 1992); Special Limited Partner of Odyssey Investment Partners,
LLC (private equity investment) (January 1999-September 2004); Trustee of
Research Foundation of AIMR (2000-2002) (investment research, non-profit);
Governor, Jerome Levy Economics Institute of Bard College (August 1990-
September 2001) (economics research); Director of Ray & Berendtson, Inc. (May
2000-April 2002) (executive search firm); President and Chief Executive Officer
of the Delaware Group of Mutual Funds (1992-1995); Chairman, President and
Chief Executive Officer of Equitable Capital Management Corporation (1985-
1992); Executive Vice President and Chief Investment Officer at The Equitable
Life Assurance Society of the U.S. (1979-1992); Vice President and Co-manager at
Smith Barney, Harris Upham and Company (1970-1979); Engineer, Sperry
Gyroscope Company (1966-1970); former governor of the Association for
Investment Management and Research; former chairman of the Institute of
Chartered Financial Analysts; Chartered Financial Analyst. Oversees 48 portfolios
in the OppenheimerFunds complex.
- -----------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET,
AND OFFICER 11TH FLOOR, NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN
INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFI-
CER FOR AN ANNUAL TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR.
MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC.
AND ITS AFFILIATES.
52 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President
President and (since September 2000) of the Manager; President and director or trustee of
Principal Executive Officer other Oppenheimer funds; President and Director of Oppenheimer Acquisition
(since 2001) Corp. ("OAC") (the Manager's parent holding company) and of Oppenheimer
and Trustee Partnership Holdings, Inc. (holding company subsidiary of the Manager) (since
(since 2005) July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the
Age: 56 Manager) (since November 2001); Chairman and Director of Shareholder
Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent
subsidiaries of the Manager) (since July 2001); President and Director of
OppenheimerFunds Legacy Program (charitable trust program established by
the Manager) (since July 2001); Director of the following investment advisory
subsidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial
Asset Management Corporation, Trinity Investment Management Corporation
and Tremont Capital Management, Inc. (since November 2001), HarbourView
Asset Management Corporation and OFI Private Investments, Inc. (since July
2001); President (since November 1, 2001) and Director (since July 2001) of
Oppenheimer Real Asset Management, Inc.; Executive Vice President of Mass-
achusetts Mutual Life Insurance Company (OAC's parent company) (since
February 1997); Director of DLB Acquisition Corporation (holding company
parent of Babson Capital Management LLC) (since June 1995); Member of the
Investment Company Institute's Board of Governors (since October 3, 2003);
Chief Operating Officer of the Manager (September 2000-June 2001); President
and Trustee of MML Series Investment Fund and MassMutual Select Funds
(open-end investment companies) (November 1999-November 2001); Director
of C.M. Life Insurance Company (September 1999-August 2000); President,
Chief Executive Officer and Director of MML Bay State Life Insurance Company
(September 1999-August 2000); Director of Emerald Isle Bancorp and Hibernia
Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June
1998). Oversees 87 portfolios in the OppenheimerFunds complex.
- -----------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. EVERETT
THE FUND AND ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK
10281-1008, FOR MESSRS. VANDEHEY AND WIXTED, 6803 S. TUCSON WAY, CENTENNIAL,
COLORADO 80112-3924. EACH OFFICER SERVES FOR AN ANNUAL TERM OR UNTIL HIS OR HER
RESIGNATION, RETIREMENT DEATH OR REMOVAL.
EDWARD EVERETT, Vice President of the Manager since January 2000; Assistant Vice President of the
Vice President and Manager and of the Fund (January 1996-January 2000). An officer of 1 portfolio
Portfolio Manager in the OppenheimerFunds complex.
(since 2000)
Age: 39
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since
Vice President and March 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial
Chief Compliance Officer Asset Management Corporation and Shareholder Services, Inc. (since June 1983).
(since 2004 Former Vice President and Director of Internal Audit of the Manager (1997-
Age: 55 February 2004). An officer of 87 portfolios in the OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999);
Treasurer and Treasurer of the following: HarbourView Asset Management Corporation,
Principal Financial Shareholder Financial Services, Inc., Shareholder Services, Inc., Oppenheimer
and Accounting Officer Real Asset Management Corporation, and Oppenheimer Partnership Holdings,
(since 1999) Inc. (since March 1999), OFI Private Investments, Inc. (since March 2000),
Age: 46 OppenheimerFunds International Ltd. (since May 2000), OppenheimerFunds
plc (since May 2000), OFI Institutional Asset Management, Inc. (since November
53 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
BRIAN W. WIXTED, 2000), and OppenheimerFunds Legacy Program (charitable trust program
Continued established by the Manager) (since June 2003); Treasurer and Chief Financial
Officer of OFI Trust Company (trust company subsidiary of the Manager)
(since May 2000); Assistant Treasurer of the following: OAC (since March
1999),Centennial Asset Management Corporation (March 1999-October 2003)
and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and
Chief Operating Officer of Bankers Trust Company-Mutual Fund Services
Division (March 1995-March 1999). An officer of 87 portfolios in the
OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since
Secretary (since 2001) March 2002) of the Manager; General Counsel and Director of the Distributor
Age: 57 (since December 2001); General Counsel of Centennial Asset Management
Corporation (since December 2001); Senior Vice President and General Counsel
of HarbourView Asset Management Corporation (since December 2001);
Secretary and General Counsel of OAC (since November 2001); Assistant
Secretary (since September 1997) and Director (since November 2001) of
OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice
President and Director of Oppenheimer Partnership Holdings, Inc. (since
December 2002); Director of Oppenheimer Real Asset Management, Inc.
(since November 2001); Senior Vice President, General Counsel and Director
of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since
December 2001); Senior Vice President, General Counsel and Director of OFI
Private Investments, Inc. and OFI Trust Company (since November 2001); Vice
President of OppenheimerFunds Legacy Program (since June 2003); Senior Vice
President and General Counsel of OFI Institutional Asset Management, Inc.
(since November 2001); Director of OppenheimerFunds (Asia) Limited (since
December 2003); Senior Vice President (May 1985-December 2003), Acting
General Counsel (November 2001-February 2002) and Associate General
Counsel (May 1981-October 2001) of the Manager; Assistant Secretary
of the following: Shareholder Services, Inc. (May 1985-November 2001),
Shareholder Financial Services, Inc. (November 1989-November 2001), and
OppenheimerFunds International Ltd. (September 1997-November 2001).
An officer of 87 portfolios in the OppenheimerFunds complex.
The Fund's Statement of Additional Information contains additional information
about the Fund's Trustees and Officers and is available without charge upon
request, by calling 1.800.525.7048.
54 | OPPENHEIMER CONVERTIBLE SECURITIES FUND
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees of the registrant has determined that David Downes, a
member of the Board's Audit Committee, is an audit committee financial expert
and that Mr. Downes is "independent" for purposes of this Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The principal accountant for the audit of the registrant's annual financial
statements billed $20,000 in fiscal 2005 and $20,000 in fiscal 2004.
(b) Audit-Related Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees during the last two fiscal years.
The principal accountant for the audit of the registrant's annual financial
statements billed $156,805 in fiscal 2005 and $39,500 in fiscal 2004 to the
registrant's investment adviser or any entity controlling, controlled by, or
under common control with the adviser that provides ongoing services to the
registrant.
Such services: internal control reviews.
(c) Tax Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees to the registrant during the last two fiscal
years.
The principal accountant for the audit of the registrant's annual financial
statements billed $5,000 in fiscal 2005 and $6,000 in fiscal 2004 to the
registrant's investment adviser or any entity controlling, controlled by, or
under common control with the adviser that provides ongoing services to the
registrant.
Such services include: Computations of capital gain tax liability, preparation
of tax returns, preparation of Form 5500 and tax consultations on pass through
of foreign withholding taxes and mortgage dollar roll transactions.
(d) All Other Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees in fiscal 2005 and $74 in fiscal 2004.
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees during the last two fiscal years to the
registrant's investment adviser or any entity controlling, controlled by, or
under common control with the adviser that provides ongoing services to the
registrant.
Such fees include the cost to the principal accountant of attending audit
committee meetings.
(e) (1) During its regularly scheduled periodic meetings, the registrant's
audit committee will pre-approve all audit, audit-related, tax and other
services to be provided by the principal accountants of the registrant.
The audit committee has delegated pre-approval authority to its Chairman
for any subsequent new engagements that arise between regularly scheduled
meeting dates provided that any fees such pre-approved are presented to
the audit committee at its next regularly scheduled meeting.
Under applicable laws, pre-approval of non-audit services maybe waived
provided that: 1) the aggregate amount of all such services provided
constitutes no more than five percent of the total amount of fees paid by
the registrant to it principal accountant during the fiscal year in which
services are provided 2) such services were not recognized by the
registrant at the time of engagement as non-audit services and 3) such
services are promptly brought to the attention of the audit committee of
the registrant and approved prior to the completion of the audit.
(2) 100%
(f) Not applicable as less than 50%.
(g) The principal accountant for the audit of the registrant's annual
financial statements billed $161,805 in fiscal 2005 and $45,574 in fiscal
2004 to the registrant and the registrant's investment adviser or any
entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant related to
non-audit fees. Those billings did not include any prohibited non-audit
services as defined by the Securities Exchange Act of 1934.
(h) The registrant's audit committee of the board of trustees has considered
whether the provision of non-audit services that were rendered to the
registrant's investment adviser, and any entity controlling, controlled
by, or under common control with the investment adviser that provides
ongoing services to the registrant that were not pre-approved pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with
maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
THE FUND'S AUDIT COMMITTEE PROVISIONS WITH RESPECT TO NOMINATIONS OF
DIRECTORS/TRUSTEES TO THE RESPECTIVE BOARDS
1. The Fund's 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 December 31, 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 have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a) (1) Exhibit attached hereto.
(2) Exhibits attached hereto.
(3) Not applicable.
(b) Exhibit attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Bond Fund Series
By: /s/ John V. Murphy
------------------
John V. Murphy
Principal Executive Officer
Date: February 14, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ John V. Murphy
------------------
John V. Murphy
Principal Executive Officer
Date: February 14, 2006
By: /s/ Brian W. Wixted
-------------------
Brian W. Wixted
Principal Financial Officer
Date: February 14, 2006