-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WXpRVxNwFkw/FikdilFuoNwvD7nx7Fo9Egcb7OzyRTTo6uqTxKGDGqA3K2rSrhH2 EzUB25DSh9Pc3M8JaGXH3g== 0000935069-06-000688.txt : 20060303 0000935069-06-000688.hdr.sgml : 20060303 20060303160137 ACCESSION NUMBER: 0000935069-06-000688 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20051231 FILED AS OF DATE: 20060303 DATE AS OF CHANGE: 20060303 EFFECTIVENESS DATE: 20060303 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPPENHEIMER BOND FUND SERIES CENTRAL INDEX KEY: 0000788959 IRS NUMBER: 166289311 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-04576 FILM NUMBER: 06663990 BUSINESS ADDRESS: STREET 1: 350 LINDEN OAKS CITY: ROCHESTER STATE: NY ZIP: 14625-2807 BUSINESS PHONE: 7163838700 MAIL ADDRESS: STREET 1: 350 LINDEN OAKS CITY: ROCHESTER STATE: NY ZIP: 14625-2807 FORMER COMPANY: FORMER CONFORMED NAME: OPPENHEIMER CONVERTIBLE SECURITIES FUND DATE OF NAME CHANGE: 20001130 FORMER COMPANY: FORMER CONFORMED NAME: OPPENHEIMER BOND FUND FOR GROWTH /MA/ DATE OF NAME CHANGE: 19970910 FORMER COMPANY: FORMER CONFORMED NAME: ROCHESTER FUND SERIES DATE OF NAME CHANGE: 19940325 0000788959 S000004497 Oppenheimer Convertible Securities Fund C000012368 A C000012369 B C000012370 C C000012371 N C000018180 M N-CSR 1 ra345_18661ncsr.txt RA345_18661NCSR 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 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOP CONVERTIBLE CORPORATE BOND AND NOTES SECTORS - -------------------------------------------------------------------------------- Consumer Discretionary 12.9% - -------------------------------------------------------------------------------- Health Care 12.9 - -------------------------------------------------------------------------------- Information Technology 12.3 - -------------------------------------------------------------------------------- Industrials 6.8 - -------------------------------------------------------------------------------- Financials 4.0 - -------------------------------------------------------------------------------- Telecommunication Services 3.5 - -------------------------------------------------------------------------------- Energy 3.0 - -------------------------------------------------------------------------------- Utilities 2.5 - -------------------------------------------------------------------------------- Materials 0.9 Portfolio holdings and strategies are subject to change. Percentages are as of December 31, 2005 and are based on net assets. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PORTFOLIO ALLOCATION [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Convertible Corporate Bonds and Notes 59.3% Common and Preferred Stocks 33.8 Structured Notes 4.3 Cash Equivalents 2.6 - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- 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 EX-99.CODE ETH 2 ra345_18661ethics.txt RA345_18661ETHICS EX-99.CODE ETH CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS OF THE OPPENHEIMER FUNDS AND OF OPPENHEIMERFUNDS, INC. This Code of Ethics for Principal Executive and Senior Financial Officers (referred to in this document as the "Code") has been adopted by each of the investment companies for which OppenheimerFunds, Inc. or one of its subsidiaries or affiliates (referred to collectively in this document as "OFI") acts as investment adviser (individually, a "Fund" and collectively, the "Funds"), and by OFI to effectuate compliance with Section 406 under the Sarbanes-Oxley Act of 2002 and the rules adopted to implement Section 406. This Code applies to each Fund's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions ("Covered Officers"). A listing of positions currently within the ambit of Covered Officers is attached as EXHIBIT A. 1 1. PURPOSE OF THE CODE This Code sets forth standards and procedures that are reasonably designed to deter wrongdoing and promote: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely, and understandable disclosure in reports and documents that a Fund files with, or submits to, the U.S. Securities and Exchange Commission ("SEC") and in other public communications made by the Fund; o compliance with applicable governmental laws, rules and regulations; o the prompt internal reporting of violations of this Code to the Code Administrator identified below; and - ---------- 1. The obligations imposed by this Code on Covered Officers are separate from and in addition to any obligations that may be imposed on such persons as Covered Persons under the Code of Ethics adopted by the Oppenheimer Funds dated May 15, 2002, under Rule 17j-1 of the Investment Company Act of 1940, as amended and any other code of conduct applicable to Covered Officers in whatever capacity they serve. This Code does not incorporate by reference any provisions of the Rule 17j-1 Code of Ethics and accordingly, any violations or waivers granted under the Rule 17j-1 Code of Ethics will not be considered a violation or waiver under this Code. o accountability for adherence to this Code. In general, the principles that govern honest and ethical conduct, including the avoidance of conflicts of interest between personal and professional relationships, reflect, at the minimum, the following: (1) the duty at all times in performing any responsibilities as a Fund financial officer, controller, accountant or principal executive officer to place the interests of the Funds ahead of personal interests; (2) the fundamental standard that Covered Officers should not take inappropriate advantage of their positions; (3) the duty to assure that a Fund's financial statements and reports to its shareholders are prepared honestly and accurately in accordance with applicable rules, regulations and accounting standards; and (4) the duty to conduct the Funds' business and affairs in an honest and ethical manner. Each Covered Officer should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. It is acknowledged that, as a result of the contractual relationship between each Fund and OFI, of which the Covered Officers are also officers or employees, and subject to OFI's fiduciary duties to each Fund, the Covered Officers will, in the normal course of their duties, be involved in establishing policies and implementing decisions that will have different effects on OFI and the Funds. It is further acknowledged that the participation of the Covered Officers in such activities is inherent in the contractual relationship between each Fund and OFI and is consistent with the expectations of the Board of Trustees/Directors of the performance by the Covered Officers of their duties as officers of the Funds. 2. PROHIBITIONS The specific provisions and reporting requirements of this Code are concerned primarily with promoting honest and ethical conduct and avoiding conflicts of interest in personal and professional relationships. No Covered Officer may use information concerning the business and affairs of a Fund, including the investment intentions of a Fund, or use his or her ability to influence such investment intentions, for personal gain to himself or herself, his or her family or friends or any other person or in a manner detrimental to the interests of a Fund or its shareholders. No Covered Officer may use his or her personal influence or personal relationships to influence the preparation and issuance of financial reports of a Fund whereby the Covered Officer would benefit personally to the detriment of the Fund and its shareholders. No Covered Officer shall intentionally for any reason take any action or fail to take any action in connection with his or her official acts on behalf of a Fund that causes the Fund to violate applicable laws, rules and regulations. No Covered Officer shall, in connection with carrying out his or her official duties and responsibilities on behalf of a Fund: (i) employ any device, scheme or artifice to defraud a Fund or its shareholders; (ii) intentionally cause a Fund to make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading in its official documents, regulatory filings, financial statements or communications to the public; (iii) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any Fund or its shareholders; (iv) engage in any manipulative practice with respect to any Fund; (v) use his or her personal influence or personal relationships to influence any business decision, investment decisions, or financial reporting by a Fund whereby the Covered Officer would benefit personally to the detriment of the Fund or its shareholders; (vi) intentionally cause a Fund to fail to comply with applicable laws, rules and regulations, including failure to comply with the requirement of full, fair, accurate, understandable and timely disclosure in reports and documents that a Fund files with, or submits to, the SEC and in other public communications made by the Fund; (vii) intentionally mislead or omit to provide material information to the Fund's independent auditors or to the Board of Trustees/Directors or the officers of the Fund or its investment adviser in connection with financial reporting matters; (viii) fail to notify the Code Administrator or the Chief Executive Officer of the Fund or its investment adviser promptly if he or she becomes aware of any existing or potential violations of this Code or applicable laws; (ix) retaliate against others for, or otherwise discourage the reporting of, actual or apparent violations of this Code; or (x) fails to acknowledge or certify compliance with this Code if requested to do so. 3. REPORTS OF CONFLICTS OF INTERESTS If a Covered Officer becomes aware of a conflict of interest under this Code or, to the Covered Officer's reasonable belief, the appearance of one, he or she must immediately report the matter to the Code's Administrator. If the Code Administrator is involved or believed to be involved in the conflict of interest or appearance of conflict of interest, the Covered Officer shall report the matter directly to the OFI's Chief Executive Officer. Upon receipt of a report of a conflict, the Code Administrator will take prompt steps to determine whether a conflict of interest exists. If the Code Administrator determines that an actual conflict of interest exists, the Code Administrator will take steps to resolve the conflict. If the Code Administrator determines that the appearance of a conflict exists, the Code Administrator will take appropriate steps to remedy such appearance. If the Code Administrator determines that no conflict or appearance of a conflict exists, the Code Administrator shall meet with the Covered Officer to advise him or her of such finding and of his or her reason for taking no action. In lieu of determining whether a conflict or appearance of conflict exists, the Code Administrator may in his or her discretion refer the matter to the Fund's Board of Trustees/Directors. 4. WAIVERS Any Covered Officer requesting a waiver of any of the provisions of this Code must submit a written request for such waiver to the Code Administrator, setting forth the basis of such request and all necessary facts upon which such request can be evaluated. The Code Administrator shall review such request and make a written determination thereon, which shall be binding. The Code Administrator may in reviewing such request, consult at his discretion with legal counsel to OFI or to the Fund. In determining whether to waive any of the provisions of this Code, the Code Administrator shall consider whether the proposed waiver: (i) is prohibited by this Code; (ii) is consistent with honest and ethical conduct; and (iii) will result in a conflict of interest between the Covered Officer's personal and professional obligations to a Fund. In lieu of determining whether to grant a waiver, the Code Administrator in his or her discretion may refer the matter to the appropriate Fund's Board of Trustees/Directors. 5. REPORTING REQUIREMENTS (a) Each Covered Officer shall, upon becoming subject to this Code, be provided with a copy of this Code and shall affirm in writing that he or she has received, read, understands and shall adhere to this Code. (b) At least annually, all Covered Officers shall be provided with a copy of this Code and shall certify that they have read and understand this Code and recognize that they are subject thereto. (c) At least annually, all Covered Officers shall certify that they have complied with the requirements of this Code and that they have disclosed or reported any violations of this Code to the Code Administrator or the Chief Executive Officer of the Fund or its investment adviser. (d) The Code Administrator shall submit a quarterly report to the Board of Trustees/Directors of each Fund containing (i) a description of any report of a conflict of interest or apparent conflict and the disposition thereof; (ii) a description of any request for a waiver from this Code and the disposition thereof; (iii) any violation of the Code that has been reported or found and the sanction imposed; (iv) interpretations issued under the Code by the Code Administrator; and (v) any other significant information arising under the Code including any proposed amendments. (e) Each Covered Officer shall notify the Code Administrator promptly if he or she knows of or has a reasonable belief that any violation of this Code has occurred or is likely to occur. Failure to do so is itself a violation of this Code. (f) Any changes to or waivers of this Code, including "implicit" waivers as defined in applicable SEC rules, will, to the extent required, be disclosed by the Code Administrator or his or her designee as provided by applicable SEC rules. 2 6. ANNUAL RENEWAL At least annually, the Board of Trustees/Directors of each Fund shall review the Code and determine whether any amendments (including any amendments that may be recommended by OFI or the Fund's legal counsel) are necessary or desirable, and shall consider whether to renew and/or amend the Code. 7. SANCTIONS Any violation of this Code of Ethics shall be subject to the imposition of such sanctions by OFI as may be deemed appropriate under the circumstances to achieve the purposes of this Code and may include, without limitation, a letter of censure, suspension from employment or termination of employment, in the sole discretion of OFI. 8. ADMINISTRATION AND CONSTRUCTION (a) The administration of this Code of Ethics shall be the responsibility of OFI's General Counsel or his designee as the "Code Administrator" of this Code, acting under the terms of this Code and the oversight of the Trustees/Directors of the Funds. (b) The duties of such Code Administrator will include: (i) Continuous maintenance of a current list of the names of all Covered Officers; (ii) Furnishing all Covered Officers a copy of this Code and initially and periodically informing them of their duties and obligations thereunder; (iii) Maintaining or supervising the maintenance of all records required by this Code, including records of waivers granted hereunder; - ---------- 2. An "implicit waiver" is the failure to take action within a reasonable period of time regarding a material departure from a provision of this Code that has been made known to the General Counsel, the Code Administrator, an executive officer of the Fund or OFI. (iv) Issuing interpretations of this Code which appear to the Code Administrator to be consistent with the objectives of this Code and any applicable laws or regulations; (v) Conducting such inspections or investigations as shall reasonably be required to detect and report any violations of this Code, with his or her recommendations, to the Chief Executive Officer of OFI and to the Trustees/Directors of the affected Fund(s) or any committee appointed by them to deal with such information; and (vi) Periodically conducting educational training programs as needed to explain and reinforce the terms of this Code. (c) In carrying out the duties and responsibilities described under this Code, the Code Administrator may consult with legal counsel, who may include legal counsel to the applicable Funds, and such other persons as the Administrator shall deem necessary or desirable. The Code Administrator shall be protected from any liability hereunder or under any applicable law, rule or regulation, for decisions made in good faith based upon his or her reasonable judgment. 9. REQUIRED RECORDS The Administrator shall maintain and cause to be maintained in an easily accessible place, the following records for the period required by applicable SEC rules (currently six years following the end of the fiscal year of OFI in which the applicable event or report occurred): (a) A copy of any Code which has been in effect during the period; (b) A record of any violation of any such Code and of any action taken as a result of such violation, during the period; (c) A copy of each annual report pursuant to the Code made by a Covered Officer during the period; (d) A copy of each report made by the Code Administrator pursuant to this Code during the period; (e) A list of all Covered Officers who are or have been required to make reports pursuant to this Code during the period, plus those person(s) who are or were responsible for reviewing these reports; (f) A record of any request to waive any requirement of this Code, the decision thereon and the reasons supporting the decision; and (g) A record of any report of any conflict of interest or appearance of a conflict of interest received by the Code Administrator or discovered by the Code Administrator during the period, the decision thereon and the reasons supporting the decision. 10. AMENDMENTS AND MODIFICATIONS This Code may not be amended or modified except by an amendment in writing which is approved or ratified by OFI and by a majority vote of the Independent Trustees/Directors of each of the applicable Funds. 11. CONFIDENTIALITY. This Code is identified for the internal use of the Funds and OFI. Reports and records prepared or maintained under this Code are considered confidential and shall be maintained and protected accordingly to the extent permitted by applicable laws, rules and regulations. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Trustees/Directors of the affected Fund(s) and their counsel, the independent auditors of the affected Funds and/or OFI, and to OFI, except as such disclosure may be required pursuant to applicable judicial or regulatory process. Dated as of: June 25, 2003 Adopted by Board I of the Oppenheimer Funds June 13, 2003 /s/ ROBERT G. ZACK - ------------------ Robert G. Zack, Secretary Adopted by Board II of the Oppenheimer/Centennial Funds June 24, 2003 /s/ ROBERT G. ZACK - ------------------ Robert G. Zack, Secretary Adopted by Board III of the Oppenheimer Funds June 9, 2003 /s/ ROBERT G. ZACK - ------------------ Robert G. Zack, Secretary Adopted by Board IV of the Oppenheimer Funds May 21, 2003 /s/ ROBERT G. ZACK - ------------------ Robert G. Zack, Secretary Adopted by the Boards of Directors of OppenheimerFunds, Inc. and its subsidiaries and affiliates that act as investment adviser to the Oppenheimer or Centennial funds June 1, 2003 /s/ ROBERT G. ZACK - ------------------ Robert G. Zack, Senior Vice President and General Counsel Exhibit A Positions Covered by this Code of Ethics for Senior Officers EACH OPPENHEIMER OR CENTENNIAL FUND Principal Executive Officer Principal Financial Officer Treasurer Assistant Treasurer PERSONNEL OF OFI WHO BY VIRTUE OF THEIR JOBS PERFORM CRITICAL FINANCIAL AND ACCOUNTING FUNCTIONS FOR OFI ON BEHALF OF A FUND, INCLUDING: Treasurer Senior Vice President/Fund Accounting Vice President/Fund Accounting EX-99.CERT 3 ra345_18661ex302.txt RA345_18661EX302 Exhibit 99.CERT Section 302 Certifications CERTIFICATIONS I, John V. Murphy, certify that: 1. I have reviewed this report on Form N-CSR of Bond Fund Series; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of Trustees (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 14, 2006 /s/ John V. Murphy - ------------------ John V. Murphy Principal Executive Officer Exhibit 99.CERT Section 302 Certifications CERTIFICATIONS I, Brian W. Wixted, certify that: 1. I have reviewed this report on Form N-CSR of Bond Fund Series; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of Trustees (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 14, 2006 /s/ Brian W. Wixted - ------------------- Brian W. Wixted Principal Financial Officer EX-99.906 4 ra345_18661ex906.txt RA345_18661EX906 EX-99.906CERT Section 906 Certifications CERTIFICATION PURSUANT TO 18 U.S.C SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 John V. Murphy, Principal Executive Officer, and Brian W. Wixted, Principal Financial Officer, of Bond Fund Series (the "Registrant"), each certify to the best of his knowledge that: 1. The Registrant's periodic report on Form N-CSR for the period ended December 31, 2005 (the "Form N-CSR") fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. ss. 1350 and is not being filed as part of the Form N-CSR filed with the Commission. Principal Executive Officer Principal Financial Officer Bond Fund Series Bond Fund Series /s/ John V. Murphy /s/ Brian W. Wixted - ------------------ ------------------- John V. Murphy Brian W. Wixted Date: February 14, 2006 Date: February 14, 2006 -----END PRIVACY-ENHANCED MESSAGE-----