<PAGE>
-------------------------------
Annual Report December 31, 1998
-------------------------------
OPPENHEIMER
Total Return
Fund, Inc.
[GRAPHIC]
[LOGO]
OppenmheimerFunds(R)
THE RIGHT WAY TO INVEST
<PAGE>
[PHOTO]
James C. Swain
Chairman
Oppenheimer
Total Return Fund, Inc.
[PHOTO]
Bridget A. Macaskill
President
Oppenheimer
Total Return Fund, Inc.
Dear shareholder,
- --------------------------------------------------------------------------------
In retrospect, 1998 has been an unsettling year for the financial markets.
Around the world, stock and bond markets experienced considerable instability,
with particular tumult being felt in Southeast Asia, Russia and Latin America.
The U.S. stock market was not immune from the extreme volatility, as it climbed
to record levels through July before correcting sharply in the third quarter and
rebounding to new highs in the fourth quarter. In the bond market, yields on
U.S. Treasury securities declined to record lows before rising modestly late in
the year.
Does the swift recovery of the U.S. stock market and the favorable
economic environment for the bond market mean that domestic stocks and bonds
will continue to prosper? We are optimistic over the long term, but we do expect
that concerns about corporate earnings growth in a slow-growth economy will
contribute to more stock market volatility in 1999. In the bond market, the
Federal Reserve Board's decisions to reduce short-term interest rates should
help create a positive climate for fixed income securities. While lower interest
rates are generally good for bond prices, it will become more difficult for bond
funds to maintain their dividends at current levels if yields decline further.
As an Oppenheimer fund shareholder, you may wonder how this potential
volatility will affect you. If you maintain a long-term perspective, as we do,
short-term volatility over the coming months should have little bearing on your
ability to achieve your future financial goals. That's why we continue to
suggest that you adhere to your long-term investment plan. In fact, we are very
encouraged that most of our shareholders stayed the course during last summer's
stock market correction, avoiding the temptation of selling into a temporarily
declining market.
Finally, I would like to thank those shareholders who contacted us about
our revised account statement. Response has been very positive, and we are
pleased that many of you find the new format easier to read and more
informative. If you have any questions about the new statement or any other
matter, please don't hesitate to call us at 1-800-525-7048. In the meantime,
thank you for choosing OppenheimerFunds, The Right Way to Invest.
Sincerely,
/s/ James C. Swain /s/ Bridget A. Macaskill
James C. Swain Bridget A. Macaskill
January 25, 1999
3 Oppenheimer Total Return Fund, Inc.
<PAGE>
"While the
U.S. economy
should continue
to grow more
slowly in 1999,
we see little
evidence of a
recession."
An interview with your Fund's managers
- --------------------------------------------------------------------------------
How did the Fund perform over the one-year period that ended December 31, 1998?
We were pleased with the performance of Oppenheimer Total Return Fund, Inc.
during the volatile investment environment that characterized much of the
period. The Fund combines growth-oriented and value-oriented investment
approaches, producing a blended style that worked particularly well in 1998.
The Fund's performance was led by its growth component, as the combination
of a moderate growth environment, low inflation and low interest rates created a
very favorable setting for growth investing. While 1998 was a challenging year
for value investing, our value component of the portfolio helped cushion the
sharp price declines experienced by many growth stocks in the second half of the
year.
Why has the U.S. stock market been so volatile recently?
Last summer's stock market decline was a response to the spread of the global
financial crisis that began in Asia in late 1997. When it became apparent during
the third quarter of 1998 that the crisis had spread to Latin America and
Russia, many investors shifted assets away from investments they perceived as
risky. Instead, they preferred the relatively safe haven of U.S. government
bonds.
This "flight to quality" contributed to a scarcity of capital in many
markets when banks and other lenders became reluctant to extend credit to
businesses. The resulting credit crunch led to a slow-down in the economies of
countries that had been growing, especially nations in Latin America with high
budget deficits. Large exporters in the United States experienced a reduction in
overseas demand, and investors became concerned that
4 Oppenheimer Total Return Fund, Inc.
<PAGE>
[PHOTO]
Portfolio Management
Team (l to r)
John Doney
Bruce Bartlett
these companies' earnings growth rates would slow. As a result, stock prices
fell.
In October, the International Monetary Fund, the U.S. Federal Reserve
Board and other nations' central banks took steps to stop the spreading
financial crisis. Perhaps most significant, the Japanese government announced a
plan to restructure its ailing banking system and stimulate its economy. With a
possible end to the financial crisis in sight, investors became more comfortable
assuming the risks inherent in the equity markets and stocks rebounded.
How did you manage the Fund in this environment?
We continued to employ the same disciplined investment approach that has led to
the Fund's success in the past. Both the growth and value components of the
portfolio focused on the fundamental prospects of individual companies, not on
broad economic trends affecting entire markets or industries. This "bottom up"
approach to buying and selling stocks led us to raise the level of cash in the
portfolio from about 4% at the start of the year to more than 12% at the end of
the year. Conversely, the amount allocated to common stocks declined slightly.
We also reduced our bond holdings after selling some of our bonds at a profit
following the market's rally. Our exposure to convertible securities--higher
yielding investments that also provide some exposure to the stock
market--remained fairly constant at 7%.
5 Oppenheimer Total Return Fund, Inc.
<PAGE>
Avg Annual Total Returns
For the Periods Ended 12/31/98(1)
Class A
1 year 5 year 10 year
- ---------------------------------------
14.19% 15.87% 16.13%
- ---------------------------------------
Class B
Since
1 year 5 year Inception
- ---------------------------------------
15.25% 16.05% 16.66%
- ---------------------------------------
Class C
Since
1 year 5 year Inception
- ---------------------------------------
19.20% N/A 22.32%
- ---------------------------------------
Class Y
Since
1 year 5 year Inception
- ---------------------------------------
21.33% N/A 20.38%
- ---------------------------------------
An interview with your Fund's managers
- --------------------------------------------------------------------------------
In what industries did you find the greatest investment opportunities?
Although the technology sector has been highly volatile this year, the
technology companies selected for the portfolio generally performed well. That's
because most of our technology companies achieved above-average earnings growth
derived from higher revenues. For example, Dell Computer Corp. was one of the
Fund's top performers in the last fiscal year. In our opinion, Dell Computer
Corp. is an exceptional company with a business model that we believe cannot be
replicated easily by its competitors. EMC Corp., which manufactures advanced,
high-end data storage for network and computer systems, has been a major
beneficiary of network and Internet computing.
In the retail industry, Wal-Mart Stores, Inc. and Home Depot, Inc. were
outstanding performers. They both experienced strong sales and earnings growth
in an economic environment conducive to strong consumer spending.
1. Total returns include changes in share price and reinvestment of dividends
and capital gains distributions in a hypothetical investment for the periods
shown. Class A returns include the current maximum initial sales charge of
5.75%. Class A shares were first publicly offered on 10/2/47. The Fund's maximum
sales charge for Class A shares was higher prior to 4/1/91, so actual
performance may have been lower. Class B returns include the applicable
contingent deferred sales charge of 5% (1-year), 1% (5-year and since inception
on 5/3/93). Class C returns for the one-year result include the contingent
deferred sales charge of 1%. Class C shares have an inception date of 8/29/95.
Class Y shares were first publicly offered on 6/1/94 and are offered only to
certain institutional investors under special agreements with the Distributor.
An explanation of the different performance calculations is in the Fund's
prospectus. Class B and C shares are subject to an annual 0.75% asset-based
sales charge.
6 Oppenheimer Total Return Fund, Inc.
<PAGE>
We also increased our holdings of companies making consumer goods that are
relatively immune from the vagaries of economic conditions. In this sector, we
focused predominantly on pharmaceutical and medical product companies that have
generally not been adversely affected by the competitive and regulatory
pressures surrounding managed healthcare.
How did your holdings in the financial services industry--the Fund's largest
sector concentration--fare?
Our financial holdings performed well during the first half of the year, when
they benefited from a strong economy. In the third quarter, however, many
financial stocks were hard hit during the market decline because of concerns
regarding overseas loans and investment-related losses. We adjusted our
financial exposure by reducing our holdings of banks and increasing our
positions in insurance and diversified financial companies. These companies are
generally not as vulnerable as banks to financial problems in overseas markets,
and we believe they may benefit as their customers shift assets from bank
accounts to longer-term financial assets such as stocks and bonds.
Have any companies been disappointments over the past year?
Unfortunately, our investment in the nation's largest operator of surgery and
medical rehabilitation facilities performed poorly over the past year. The
company experienced pricing pressure from managed care providers that resulted
in constrained revenue and earnings growth.
7 Oppenheimer Total Return Fund, Inc.
<PAGE>
An interview with your Fund's managers
- --------------------------------------------------------------------------------
We were also disappointed in the returns generated by several holdings in the
energy services industry. These companies help the major energy producers
explore and drill for oil, and their stock prices have been hurt by the recent
record-low oil prices.
Finally, one area of relative weakness is not an industry but an asset
class--real estate investment trusts (REITs). While we have had only a small
level of participation in these real estate investments, they languished when
investors preferred other types of financial assets during last summer's "flight
to quality." Yet, we continue to find their growth rates, income yields and
valuations attractive, and we are optimistic that they will perform well over
the long term.
What is your outlook for the future?
We are optimistic about the Fund's potential in 1999. While we believe the U.S.
economy should continue to grow more slowly, we see little evidence of a
recession. We believe that the blend of growth and value-oriented approaches
should be particularly beneficial in a slow-growth economic environment. We
expect such an environment to benefit both types of companies:
2. Portfolio is subject to change. Percentages are as of December 31, 1998, and
are based on net assets.
8 Oppenheimer Total Return Fund, Inc.
<PAGE>
[GRAPHIC]
Asset Allocation2
o Stocks 77.0%
o Cash
Equivalents 12.4
o Bonds 8.3
o Other 2.3
fast-growing businesses experiencing sustainable, above average earnings growth;
as well as companies whose positive prospects do not appear to be reflected in
their stock prices. In fact, we believe this approach to investing should help
Oppenheimer Total Return Fund, Inc. prosper in almost any economic environment,
which we regard as an important part of The Right Way to Invest.
Top 10 Stock Holdings2
- --------------------------------------------------------------------------------
Tyco International Ltd. 2.7%
- --------------------------------------------------------------------------------
Home Depot, Inc. 2.3
- --------------------------------------------------------------------------------
CVS Corp. 2.3
- --------------------------------------------------------------------------------
Freddie Mac 2.1
- --------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 1.9
- --------------------------------------------------------------------------------
Cardinal Health, Inc. 1.8
- --------------------------------------------------------------------------------
Dell Computer Corp. 1.8
- --------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 1.7
- --------------------------------------------------------------------------------
Philip Morris Cos., Inc. 1.4
- --------------------------------------------------------------------------------
Compuware Corp. 1.4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Common Stocks--Top 5 Industries2
- --------------------------------------------------------------------------------
Diversified Financial 8.5%
- --------------------------------------------------------------------------------
Healthcare/Drugs 6.1
- --------------------------------------------------------------------------------
Banks 6.0
- --------------------------------------------------------------------------------
Retail--Specialty 5.9
- --------------------------------------------------------------------------------
Healthcare/Supplies & Services 4.4
- --------------------------------------------------------------------------------
9 Oppenheimer Total Return Fund, Inc.
<PAGE>
Fund performance
- --------------------------------------------------------------------------------
How Has the Fund Performed? Below is a discussion, by the Manager, of the Fund's
performance during its fiscal year ended December 31, 1998, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index.
o Management's Discussion of Performance. During the Fund's fiscal year
that ended December 31, 1998, Oppenheimer Total Return Fund, Inc.'s performance
was positively influenced by the management team's blend of value-oriented and
growth-oriented investment approaches. The portfolio's growth-oriented holdings
helped the Fund participate in much of the stock market's gains early in the
year. Later in the year, when the stock market experienced sharp declines, the
Fund's value component helped it decline less than its unmanaged benchmark, the
S&P 500 Index, although the Fund's investments in the financial services
industry were hard hit. In addition, the Fund's relatively small holdings in the
energy services industry performed poorly during the fiscal year. The Fund's
policy of seeking to maintain a steady dividend for its Class A shares did not
materially affect portfolio management strategies during its last fiscal year.
The Fund's portfolio holdings, allocations and management strategies are subject
to change.
o 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 the Fund held until December 31, 1998. In the case of Class A
shares, performance is measured over a ten-year period. In the case of Class B
shares, performance is measured from the inception of the class on May 3, 1993.
In the case of Class C shares, performance is measured from the inception of the
class on August 29, 1995. In the case of Class Y shares, performance is measured
from the inception of the class on June 1, 1994.
10 Oppenheimer Total Return Fund, Inc.
<PAGE>
The Fund's performance reflects the deduction of the 5.75% maximum initial sales
charge on Class A shares, and the applicable contingent deferred sales charge
for Class B and Class C shares. The graphs assume that all dividends and capital
gains distributions were reinvested in additional shares.
The Fund's performance is compared to the performance of the S&P 500
Index. 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 dividends but
does not consider the effect of capital gains or transaction costs, and none of
the data in the graphs shows the effect of taxes. The Fund's performance
reflects the effects of the Fund's business and operating expenses. While index
comparisons may be useful to provide a benchmark for the Fund's performance, it
must be noted that the Fund's investments are not limited to the investments in
the index.
11 Oppenheimer Total Return Fund, Inc.
<PAGE>
Fund performance
- --------------------------------------------------------------------------------
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Total Return Fund, Inc. (Class A) S&P 500 Index
[GRAPHIC]
Oppenheimer Total Return
Fund, Inc. Class A S&P 500 Index
12/31/88 9,425 10,000
12/31/89 11,240 13,163
12/31/90 10,805 12,754
12/31/91 14,722 16,631
12/31/92 16,612 17,896
12/31/93 20,139 19,696
12/31/94 18,557 19,955
12/31/95 24,147 27,445
12/31/96 28,911 33,743
12/31/97 36,829 44,997
12/31/98 44,620 57,854
Average Annual Total Return of Class A Shares of the Fund at 12/31/98(1)
1 Year 14.19% 5 Year 15.87% 10 Year 16.13%
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Total Return Fund, Inc. (Class B) S&P 500 Index
[GRAPHIC]
Oppenheimer Total Return
Fund, Inc. Class B S&P 500 Index
5/3/93 10000 10000
12/31/93 11309 10807
12/31/94 10332 10949
12/31/95 13330 15058
12/31/96 15835 18,513
12/31/97 19,978 24,688
12/31/98 23,925 31,743
Average Annual Total Return of Class B Shares of the Fund at 12/31/98(2)
1 Year 15.26% 5 Year 16.04% Life 16.66%
The returns and the ending account values in the graphs show change in share
value and include reinvestment of all dividends and capital gains distributions.
The performance information for the S&P 500 index begins on 12/31/88 for Class
A, 4/30/93 for Class B, 8/31/95 for Class C and 5/31/94 for Class Y.
1. The average annual total returns are shown net of the applicable 5.75%
maximum initial sales charge.
2. Class B shares of the Fund were first publicly offered on 5/3/93. The average
annual total returns are shown net of the applicable 5% (1-year), 1% (5-year and
since inception) contingent deferred sales charges. The ending account value in
the graph is net of the applicable 1% contingent deferred sales charge.
12 Oppenheimer Total Return Fund, Inc.
<PAGE>
Class C Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Total Return Fund, Inc. (Class C) S&P 500 Index
[GRAPHIC]
Oppenheimer Total Return
Fund, Inc. Class C S&P 500 Index
8/29/95 10,000 10,000
12/31/95 10882 11049
12/31/96 12915 13584
12/31/97 16302 18114
12/31/98 19,596 23,290
Average Annual Total Return of Class C Shares of the Fund at 12/31/98(3)
1 Year 19.20% Life 22.32%
Class Y Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Total Return Fund, Inc. (Class Y) S&P 500 Index
[GRAPHIC]
Oppenheimer Total Return
Fund, Inc. Class Y S&P 500 Index
6/1/94 10,000 10,000
12/31/94 9686 10230
12/31/95 12613 14069
12/31/96 15120 17297
12/31/97 19283 23066
12/31/98 23396 29658
Average Annual Total Return of Class Y Shares of the Fund at 12/31/98(4)
1 Year 21.33% Life 20.38%
3. Class C shares of the Fund were first publicly offered on 8/29/95. The
average annual total returns are shown net of the applicable 1% contingent
deferred sales charge for the one-year period.
4. Class Y shares of the Fund were first publicly offered on 6/1/94, and are
offered only to certain institutional investors under special agreements with
the Distributor.
Past performance is not predictive of future performance. Graphs are not drawn
to same scale.
13 Oppenheimer Total Return Fund, Inc.
<PAGE>
Financials
- --------------------------------------------------------------------------------
14 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments December 31, 1998
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
================================================================================
Common Stocks--75.2%
- --------------------------------------------------------------------------------
Basic Materials--1.1%
- --------------------------------------------------------------------------------
Chemicals--0.3%
International Flavors & Fragrances, Inc. 260,000 $ 11,488,750
- --------------------------------------------------------------------------------
Paper--0.8%
Sonoco Products Co. 330,000 9,776,250
- --------------------------------------------------------------------------------
Union Camp Corp. 310,000 20,925,000
--------------
30,701,250
- --------------------------------------------------------------------------------
Capital Goods--7.3%
- --------------------------------------------------------------------------------
Aerospace/Defense--0.5%
Goodrich (B.F.) Co. 200,000 7,175,000
- --------------------------------------------------------------------------------
Precision Castparts Corp. 268,600 11,885,550
- --------------------------------------------------------------------------------
Raytheon Co., Cl. A 12,754 659,222
--------------
19,719,772
- --------------------------------------------------------------------------------
Electrical Equipment--0.7%
AMP, Inc. 370,706 19,299,881
- --------------------------------------------------------------------------------
Honeywell, Inc. 100,000 7,531,250
--------------
26,831,131
- --------------------------------------------------------------------------------
Industrial Services--1.9%
Allied Waste Industries, Inc. (New)(1) 860,790 20,336,164
- --------------------------------------------------------------------------------
Republic Services, Inc., Cl. A(1) 1,151,000 21,221,562
- --------------------------------------------------------------------------------
ServiceMaster Co. (The) 702,150 15,491,184
- --------------------------------------------------------------------------------
Waste Management, Inc. (New) 359,250 16,750,031
--------------
73,798,941
- --------------------------------------------------------------------------------
Manufacturing--4.2%
AlliedSignal, Inc. 300,000 13,293,750
- --------------------------------------------------------------------------------
American Standard Cos., Inc.(1) 285,300 10,270,800
- --------------------------------------------------------------------------------
Hillenbrand Industries, Inc. 400,000 22,750,000
- --------------------------------------------------------------------------------
Tenneco, Inc. (New) 300,000 10,218,750
- --------------------------------------------------------------------------------
Tyco International Ltd. 1,410,000 106,366,875
--------------
162,900,175
- --------------------------------------------------------------------------------
Consumer Cyclicals--11.1%
- --------------------------------------------------------------------------------
Autos & Housing--0.6%
Lear Corp.(1) 271,800 10,464,300
- --------------------------------------------------------------------------------
Maytag Corp. 220,000 13,695,000
--------------
24,159,300
15 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Leisure & Entertainment--1.0%
Carnival Corp. 500,000 $ 24,000,000
- --------------------------------------------------------------------------------
Circus Circus Enterprises, Inc.(1) 200,000 2,287,500
- --------------------------------------------------------------------------------
Hasbro, Inc. 200,000 7,225,000
- --------------------------------------------------------------------------------
Mirage Resorts, Inc.(1) 300,000 4,481,250
--------------
37,993,750
- --------------------------------------------------------------------------------
Media--0.7%
Donnelley (R.R.) & Sons Co. 375,000 16,429,687
- --------------------------------------------------------------------------------
Fox Entertainment Group, Inc., A Shares(1) 381,000 9,596,437
- --------------------------------------------------------------------------------
R.H. Donnelley Corp. 100,000 1,456,250
--------------
27,482,374
- --------------------------------------------------------------------------------
Retail: General--2.9%
Federated Department Stores, Inc.(1) 300,000 13,068,750
- --------------------------------------------------------------------------------
Kohl's Corp.(1) 440,000 27,032,500
- --------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 895,000 72,886,562
--------------
112,987,812
- --------------------------------------------------------------------------------
Retail: Specialty--5.9%
Abercrombie & Fitch Co., Cl. A(1) 350,012 24,763,349
- --------------------------------------------------------------------------------
AutoZone, Inc.(1) 500,000 16,468,750
- --------------------------------------------------------------------------------
General Nutrition Cos., Inc.(1) 400,000 6,500,000
- --------------------------------------------------------------------------------
Home Depot, Inc.(2) 1,457,000 89,150,187
- --------------------------------------------------------------------------------
Intimate Brands, Inc., Cl. A 400,000 11,950,000
- --------------------------------------------------------------------------------
Linens 'N Things, Inc.(1) 555,800 22,023,575
- --------------------------------------------------------------------------------
OfficeMax, Inc.(1) 1,900,000 23,275,000
- --------------------------------------------------------------------------------
Republic Industries, Inc.(1) 1,900,000 28,025,000
- --------------------------------------------------------------------------------
Sherwin-Williams Co. 302,200 8,877,125
--------------
231,032,986
- --------------------------------------------------------------------------------
Consumer Staples--7.9%
- --------------------------------------------------------------------------------
Beverages--0.5%
Anheuser-Busch Cos., Inc. 300,000 19,687,500
- --------------------------------------------------------------------------------
Consumer Services--0.7%
Dun & Bradstreet Corp. (New) 600,000 18,937,500
- --------------------------------------------------------------------------------
Young & Rubicam, Inc.(1) 307,000 9,939,125
--------------
28,876,625
- --------------------------------------------------------------------------------
Entertainment--0.8%
Brinker International, Inc.(1) 500,000 14,437,500
- --------------------------------------------------------------------------------
Starbucks Corp.(1) 330,000 18,521,250
--------------
32,958,750
16 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Food--0.6%
General Mills, Inc. 100,000 $ 7,775,000
- --------------------------------------------------------------------------------
RJR Nabisco Holdings Corp. 552,000 16,387,500
--------------
24,162,500
- --------------------------------------------------------------------------------
Food & Drug Retailers--3.4%
CVS Corp. 1,604,364 88,240,020
- --------------------------------------------------------------------------------
Kroger Co.(1) 200,000 12,100,000
- --------------------------------------------------------------------------------
U.S. Foodservice, Inc.(1) 196,900 9,648,100
- --------------------------------------------------------------------------------
Walgreen Co. 385,000 22,546,562
--------------
132,534,682
- --------------------------------------------------------------------------------
Household Goods--0.5%
Newell Co. 400,000 16,500,000
- --------------------------------------------------------------------------------
Tupperware Corp. 125,000 2,054,687
--------------
18,554,687
- --------------------------------------------------------------------------------
Tobacco--1.4%
Philip Morris Cos., Inc. 1,025,000 54,837,500
- --------------------------------------------------------------------------------
Energy--1.9%
- --------------------------------------------------------------------------------
Energy Services & Producers--0.3%
Schlumberger Ltd. 253,600 11,697,300
- --------------------------------------------------------------------------------
Oil: Domestic--1.6%
Conoco, Inc., Cl. A(1) 624,600 13,038,525
- --------------------------------------------------------------------------------
Exxon Corp. 300,000 21,937,500
- --------------------------------------------------------------------------------
Mobil Corp. 100,000 8,712,500
- --------------------------------------------------------------------------------
Unocal Corp. 300,000 8,756,250
- --------------------------------------------------------------------------------
USX-Marathon Group 300,000 9,037,500
--------------
61,482,275
- --------------------------------------------------------------------------------
Financial--18.0%
- --------------------------------------------------------------------------------
Banks--6.0%
Bank One Corp. 330,000 16,850,625
- --------------------------------------------------------------------------------
BankAmerica Corp. (New) 582,900 35,046,862
- --------------------------------------------------------------------------------
Chase Manhattan Corp. (New) 350,000 23,821,875
- --------------------------------------------------------------------------------
East West Bancorp, Inc.(1)(3) 1,000,000 9,250,000
- --------------------------------------------------------------------------------
Fifth Third Bancorp 150,000 10,696,875
- --------------------------------------------------------------------------------
First Tennessee National Corp. 427,000 16,252,687
- --------------------------------------------------------------------------------
First Union Corp. 713,000 43,359,313
- --------------------------------------------------------------------------------
Fleet Financial Group, Inc. 200,600 8,964,313
- --------------------------------------------------------------------------------
KeyCorp 400,000 12,800,000
17 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Banks (continued)
National City Corp. 360,000 $ 26,100,000
- --------------------------------------------------------------------------------
PNC Bank Corp. 270,000 14,613,750
- --------------------------------------------------------------------------------
Summit Bancorp 360,000 15,727,500
--------------
233,483,800
- --------------------------------------------------------------------------------
Diversified Financial--8.0%
American Express Co. 225,000 23,006,250
- --------------------------------------------------------------------------------
Anthracite Capital, Inc. 400,000 3,125,000
- --------------------------------------------------------------------------------
Associates First Capital Corp., Cl. A 618,000 26,187,750
- --------------------------------------------------------------------------------
Citigroup, Inc. 849,999 42,074,975
- --------------------------------------------------------------------------------
Countrywide Credit Industries, Inc. 250,000 12,546,875
- --------------------------------------------------------------------------------
Freddie Mac 1,298,800 83,691,425
- --------------------------------------------------------------------------------
Household International, Inc. 759,990 30,114,604
- --------------------------------------------------------------------------------
Imperial Credit Commercial Mortgage
Investment Corp. 500,000 4,687,500
- --------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 100,000 7,100,000
- --------------------------------------------------------------------------------
Providian Financial Corp. 615,000 46,125,000
- --------------------------------------------------------------------------------
Schwab (Charles) Corp. 590,700 33,189,956
--------------
311,849,335
- --------------------------------------------------------------------------------
Insurance--3.1%
Allstate Corp. 250,000 9,656,250
- --------------------------------------------------------------------------------
American General Corp. 300,000 23,400,000
- --------------------------------------------------------------------------------
Hartford Financial Services Group, Inc. 400,000 21,950,000
- --------------------------------------------------------------------------------
NAC Re Corp. 161,700 7,589,794
- --------------------------------------------------------------------------------
St. Paul Cos., Inc. 400,000 13,900,000
- --------------------------------------------------------------------------------
SunAmerica, Inc. 532,500 43,199,063
--------------
119,695,107
- --------------------------------------------------------------------------------
Real Estate Investment Trusts--0.5%
AMB Property Corp. 216,100 4,754,200
- --------------------------------------------------------------------------------
Arden Realty, Inc. 222,500 5,159,219
- --------------------------------------------------------------------------------
Avalonbay Communities, Inc. 45,000 1,541,250
- --------------------------------------------------------------------------------
Correctional Properties Trust 83,000 1,499,188
- --------------------------------------------------------------------------------
Health Care Property Investors, Inc. 91,000 2,798,250
- --------------------------------------------------------------------------------
Kilroy Realty Corp. 184,400 4,241,200
--------------
19,993,307
- --------------------------------------------------------------------------------
Savings & Loans--0.4%
Local Financial Corp.(1) 400,000 3,600,000
- --------------------------------------------------------------------------------
Washington Mutual, Inc. 300,000 11,456,250
--------------
15,056,250
18 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Healthcare--10.5%
- --------------------------------------------------------------------------------
Healthcare/Drugs--6.1%
Abbott Laboratories 375,000 $ 18,375,000
- --------------------------------------------------------------------------------
American Home Products Corp. 300,000 16,893,750
- --------------------------------------------------------------------------------
Amgen, Inc.(1) 125,000 13,070,313
- --------------------------------------------------------------------------------
Biogen, Inc.(1) 250,000 20,750,000
- --------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 485,000 64,899,063
- --------------------------------------------------------------------------------
Lynx Therapeutics, Inc. (New)(1)(3) 15,390 176,985
- --------------------------------------------------------------------------------
Merck & Co., Inc. 100,000 14,768,750
- --------------------------------------------------------------------------------
Mylan Laboratories, Inc. 300,000 9,450,000
- --------------------------------------------------------------------------------
Pfizer, Inc. 210,000 26,341,875
- --------------------------------------------------------------------------------
Pharmacia & Upjohn, Inc. 450,000 25,481,250
- --------------------------------------------------------------------------------
Warner Lambert Co. 350,000 26,315,625
--------------
236,522,611
- --------------------------------------------------------------------------------
Healthcare/Supplies & Services--4.4%
Bausch & Lomb, Inc. 200,000 12,000,000
- --------------------------------------------------------------------------------
Cardinal Health, Inc. 947,400 71,883,975
- --------------------------------------------------------------------------------
Guidant Corp. 269,200 29,679,300
- --------------------------------------------------------------------------------
HealthSouth Corp.(1) 646,548 9,981,085
- --------------------------------------------------------------------------------
McKesson Corp. 370,000 29,253,125
- --------------------------------------------------------------------------------
Medtronic, Inc. 239,100 17,753,175
--------------
170,550,660
- --------------------------------------------------------------------------------
Technology--9.3%
- --------------------------------------------------------------------------------
Computer Hardware--4.0%
3Com Corp.(1) 50,000 2,240,625
- --------------------------------------------------------------------------------
Cisco Systems, Inc.(1) 522,000 48,448,125
- --------------------------------------------------------------------------------
Dell Computer Corp.(1) 970,000 70,991,875
- --------------------------------------------------------------------------------
EMC Corp.(1) 410,000 34,850,000
--------------
156,530,625
- --------------------------------------------------------------------------------
Computer Software/Services--2.9%
Compuware Corp.(1) 680,000 53,125,000
- --------------------------------------------------------------------------------
HBO & Co. 270,000 7,745,625
- --------------------------------------------------------------------------------
J.D. Edwards & Co.(1) 130,500 3,702,938
- --------------------------------------------------------------------------------
Microsoft Corp.(1) 354,200 49,123,113
--------------
113,696,676
- --------------------------------------------------------------------------------
Communications Equipment--0.7%
General Instrument Corp.(1) 100,000 3,393,750
- --------------------------------------------------------------------------------
Lucent Technologies, Inc. 200,000 22,000,000
--------------
25,393,750
19 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Electronics--1.7%
Motorola, Inc. 275,000 $ 16,792,188
- --------------------------------------------------------------------------------
Uniphase Corp.(1)(2) 525,000 36,421,875
- --------------------------------------------------------------------------------
Waters Corp.(1) 150,000 13,087,500
--------------
66,301,563
- --------------------------------------------------------------------------------
Telecommunications--5.3%
- --------------------------------------------------------------------------------
Telephone Utilities--3.5%
Bell Atlantic Corp. 896,800 50,949,450
- --------------------------------------------------------------------------------
BellSouth Corp. 400,000 19,950,000
- --------------------------------------------------------------------------------
GTE Corp. 500,000 33,718,750
- --------------------------------------------------------------------------------
SBC Communications, Inc. 600,000 32,175,000
--------------
136,793,200
- --------------------------------------------------------------------------------
Telecommunications/Technology--1.8%
Airtouch Communications, Inc.(1) 100,000 7,212,500
- --------------------------------------------------------------------------------
MCI WorldCom, Inc.(1) 712,800 51,143,400
- --------------------------------------------------------------------------------
Qwest Communications International, Inc.(1) 268,203 13,410,150
--------------
71,766,050
- --------------------------------------------------------------------------------
Utilities--2.8%
- --------------------------------------------------------------------------------
Electric Utilities--2.3%
Allegheny Energy, Inc. 210,000 7,245,000
- --------------------------------------------------------------------------------
Carolina Power & Light Co. 110,000 5,176,875
- --------------------------------------------------------------------------------
CINergy Corp. 134,800 4,633,750
- --------------------------------------------------------------------------------
DQE, Inc. 144,100 6,331,394
- --------------------------------------------------------------------------------
Illinova Corp. 300,000 7,500,000
- --------------------------------------------------------------------------------
New Century Energies, Inc. 400,000 19,500,000
- --------------------------------------------------------------------------------
Southern Co. 298,500 8,675,156
- --------------------------------------------------------------------------------
Texas Utilities Co. 200,000 9,337,500
Unicom Corp. 500,000 19,281,250
--------------
87,680,925
- --------------------------------------------------------------------------------
Gas Utilities--0.5%
Enron Corp. 325,000 18,545,313
--------------
Total Common Stocks (Cost $1,863,977,330) 2,927,747,232
20 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Preferred Stocks--1.8%
- --------------------------------------------------------------------------------
Big Flower Press Holdings, Inc., $3.00 Cv
Preferred Stock(4) 100,000 $ 4,712,500
- --------------------------------------------------------------------------------
Dollar General Corp., 8.50% Cv. Preferred Stock 271,100 9,657,937
- --------------------------------------------------------------------------------
Microsoft Corp., $2.196 Cv., Series A 205,000 20,038,750
- --------------------------------------------------------------------------------
Newell Financial Trust I, 5.25% Cv. Preferred
Stock(4) 163,000 8,598,250
- --------------------------------------------------------------------------------
TCI Communications, Inc., $2.125 Cv. Cum., Series A 100,000 11,725,000
- --------------------------------------------------------------------------------
TCI Pacific Communications, Inc., 5% Cv. Cum. Sr
Preferred, Cl. A 50,000 14,068,750
--------------
Total Preferred Stocks (Cost $49,412,656) 68,801,187
================================================================================
Other Securities--2.3%
- --------------------------------------------------------------------------------
Cooper Industries, Inc., 6% Debt Exchangeable
Nts. for Common Stock of Wyman-Gordon Co., 1/1/99 365,000 3,558,750
- --------------------------------------------------------------------------------
Houston Industries, Inc., 7% Automatic Common
Exchange Securities, Exchangeable for Time
Warner, Inc. Common Stock, 7/1/00 211,000 22,445,125
- --------------------------------------------------------------------------------
MediaOne Group, Inc., 6.25% Cv. Premium Income
Exchangeable Securities for Airtouch
Communications, Inc. common stock 430,100 28,601,650
- --------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 6.25% Structured
Yield Product Exchangeable for Stock of IMC
Global, Inc. 90,900 2,158,875
- --------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 7.25% Structured
Yield Product Exchangeable for Common Stock of
SunAmerica, Inc., 6/15/99 75,000 5,587,500
- --------------------------------------------------------------------------------
Premier Parks, Inc., 7.50% Cum. Cv. Premium
Income Equity Securities, Non-Vtg 232,000 13,746,000
- --------------------------------------------------------------------------------
St. George Bank, ADR $1.35 Cv. Structured
Yield Product Exchangeable for Common Stock
of St. George Bank, ADR(4) 90,000 4,275,000
- --------------------------------------------------------------------------------
Texas Utilities Co., 9.25% Cv. Preferred
Redeemable Increased Dividend Equity Securities 117,600 6,629,700
- --------------------------------------------------------------------------------
Union Pacific Capital Trust, 6.25% Cum. Term
Income Deferrable Equity Securities, Non-Vtg 87,600 4,073,400
- --------------------------------------------------------------------------------
Total Other Securities (Cost $75,335,511) 91,076,000
--------------
Units
================================================================================
Rights, Warrants and Certificates--0.0%
- --------------------------------------------------------------------------------
American Satellite Network, Inc. Wts., Exp. 6/99 100,000 --
- --------------------------------------------------------------------------------
Iwerks Entertainment, Inc. Wts., Exp. 7/99 48,379 --
--------------
Total Rights, Warrants and Certificates (Cost $0) --
21 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Face Market Value
Amount(5) See Note 1
================================================================================
U.S. Government Obligations--5.2%
- --------------------------------------------------------------------------------
U.S. Treasury Bonds, 6.625%, 2/15/27 $ 25,675,000 $ 30,376,734
- --------------------------------------------------------------------------------
U.S. Treasury Bonds, STRIPS, 6.92%, 11/15/18(6) 54,000,000 17,994,582
- --------------------------------------------------------------------------------
U.S. Treasury Bonds, STRIPS, 6.17%, 2/15/20(6) 100,000,000 30,965,500
- --------------------------------------------------------------------------------
U.S. Treasury Bonds, STRIPS, 6.51%, 8/15/19(6) 100,000,000 31,836,700
- --------------------------------------------------------------------------------
U.S. Treasury Nts., 6.25%, 2/15/07 31,200,000 34,232,266
- --------------------------------------------------------------------------------
U.S. Treasury Nts., 6.25%, 3/31/99 10,000,000 10,040,630
- --------------------------------------------------------------------------------
U.S. Treasury Nts., 6.625%, 3/31/02 30,050,000 31,768,499
- --------------------------------------------------------------------------------
U.S. Treasury Nts., 7.75%, 11/30/99 10,000,000 10,275,000
- --------------------------------------------------------------------------------
U.S. Treasury Nts., 7.75%, 12/31/99 5,000,000 5,151,565
--------------
Total U.S. Government Obligations
(Cost $178,460,468) 202,641,476
================================================================================
Non-Convertible Corporate Bonds and Notes--0.0%
- --------------------------------------------------------------------------------
Dresdner Finance BV, 5.50% Gtd. Nts., 4/30/04DEM
(Cost $279,377) 417,000 395,587
================================================================================
Convertible Corporate Bonds and Notes--3.1%
- --------------------------------------------------------------------------------
Affiliated Computer Services, Inc., 4% Cv. Sub.
Nts., 3/15/05(4) 5,000,000 6,025,000
- --------------------------------------------------------------------------------
EMC Corp., 3.25% Cv. Sub. Nts., 3/15/02(4) 5,000,000 18,712,500
- --------------------------------------------------------------------------------
HealthSouth Corp., 3.25% Cv. Sub. Nts., 4/1/03 10,000,000 8,550,000
- --------------------------------------------------------------------------------
Home Depot, Inc., 3.25% Cv. Sub. Nts., 10/1/01 18,600,000 49,104,000
- --------------------------------------------------------------------------------
IRSA-Inversiones y Representaciones SA, 4.50%
Puttable & Redeemable Cv. Knockout Securities,
8/2/03(4) 7,758,000 7,583,445
- --------------------------------------------------------------------------------
Level One Communications, Inc., 4% Cv. Sub. Nts.,
9/1/04(4) 3,500,000 5,166,875
- --------------------------------------------------------------------------------
Offshore Logistics, Inc., 6% Cv. Sub. Nts.,
12/15/03(4) 5,000,000 4,318,750
- --------------------------------------------------------------------------------
Sanifill, Inc., 5% Cv. Sub. Debs., 3/1/06 2,000,000 3,342,500
- --------------------------------------------------------------------------------
Scandinavian Broadcasting System SA,
7.25% Cv. Sub. Debs., 8/1/05 3,000,000 3,101,250
- --------------------------------------------------------------------------------
Sunrise Assisted Living, Inc., 5.50% Cv. Nts.,
6/15/02(4) 3,409,000 5,062,365
- --------------------------------------------------------------------------------
Tower Automotive, Inc., 5% Cv. Sub. Nts.,
8/1/04(4) 3,340,000 3,740,800
- --------------------------------------------------------------------------------
United Waste Systems, Inc., 4.50% Cv. Sub.
Nts., 6/1/01 4,333,000 6,797,394
--------------
Total Convertible Corporate Bonds and Notes
(Cost $75,144,248) 121,504,879
22 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Face Market Value
Amount(5) See Note 1
===============================================================================
Short-Term Notes--7.1%(7)
- -------------------------------------------------------------------------------
CIESCO LP, 5.20%, 1/12/99 $ 25,000,000 $ 24,960,278
- -------------------------------------------------------------------------------
CIT Group Holdings, Inc., 5.17%, 1/14/99 25,000,000 24,953,326
- -------------------------------------------------------------------------------
CIT Group Holdings, Inc., 5.19%, 1/8/99 50,000,000 49,949,542
- -------------------------------------------------------------------------------
Ford Motor Credit Co., 5.41%, 1/6/99 50,000,000 49,962,431
- -------------------------------------------------------------------------------
Goldman Sachs Group, LP, 5.01%, 1/7/99 50,000,000 49,958,250
- -------------------------------------------------------------------------------
Household Finance Corp., 5.41%, 1/5/99 25,000,000 24,984,972
- -------------------------------------------------------------------------------
Prudential Funding Corp., 5.17%, 1/4/99 50,000,000 49,978,458
--------------
Total Short-Term Notes (Cost $274,747,257) 274,747,257
===============================================================================
Repurchase Agreements--5.4%
- -------------------------------------------------------------------------------
Repurchase agreement with First Chicago Capital
Markets, 4.75%, dated 12/31/98, to be repurchased
at $208,810,147 on 1/4/99, collateralized by U.S.
Treasury Nts., 4%--8.875%, 2/15/99--7/15/06, with
a value of $212,958,322 (Cost $208,700,000) 208,700,000 208,700,000
- -------------------------------------------------------------------------------
Total Investments, at Value (Cost $2,726,056,847) 100.1% 3,895,613,618
- -------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (0.1) (2,592,031)
----------- --------------
Net Assets 100.0% $3,893,021,587
=========== ==============
1. Non-income producing security.
2. A sufficient amount of liquid assets has been designated to cover outstanding
written call options, as follows:
Shares Expiration Exercise Premium Market Value
Subject to Call Date Price Received See Note 1
- --------------------------------------------------------------------------------
Home Depot, Inc. 300,000 1/99 $60 $568,230 $750,000
- --------------------------------------------------------------------------------
Uniphase Corp. 41,200 1/99 70 103,739 97,850
-------- --------
$671,969 $847,850
======== ========
3. Identifies issues considered to be illiquid or restricted--See Note 7 of
Notes to Financial Statements.
4. 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
Directors. These securities amount to $68,195,485 or 1.75% of the Fund's net
assets as of December 31, 1998.
5. Face amount is reported in U.S. Dollars, except for those denoted in the
following currency: DEM--German Mark
6. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
7. Short-term notes are generally traded on a discount basis; the interest rate
is the discount rate received by the Fund at the time of purchase.
See accompanying Notes to Financial Statements.
23 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1998
- --------------------------------------------------------------------------------
================================================================================
Assets
Investments, at value (cost $2,726,056,847)--see
accompanying statement $ 3,895,613,618
- -------------------------------------------------------------------------------
Cash 131,816
- -------------------------------------------------------------------------------
Receivables and other assets:
Interest and dividends 6,536,698
Shares of capital stock sold 4,019,327
Investments sold 1,251,158
Other 61,883
---------------
Total assets 3,907,614,500
===============================================================================
Liabilities
Options written, at value (premiums received $671,969)--
see accompanying statement--Note 6 847,850
- -------------------------------------------------------------------------------
Payables and other liabilities:
Shares of capital stock redeemed 10,746,750
Distribution and service plan fees 1,854,588
Shareholder reports 404,495
Transfer and shareholder servicing agent fees 282,651
Custodian fees 52,740
Other 403,839
---------------
Total liabilities 14,592,913
===============================================================================
Net Assets $ 3,893,021,587
===============
===============================================================================
Composition of Net Assets
Par value of shares of capital stock $ 31,931,393
- -------------------------------------------------------------------------------
Additional paid-in capital 2,691,179,033
- -------------------------------------------------------------------------------
Undistributed net investment income 846,860
- -------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (316,931)
- -------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 1,169,381,232
---------------
Net assets $ 3,893,021,587
===============
24 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share
(based on net assets of $2,594,323,957 and 212,058,856
shares of capital stock outstanding) $ 12.23
Maximum offering price per share (net asset value
plus sales charge of 5.75% of offering price) $ 12.98
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes
applicable contingent deferred sales charge) and
offering price per share (based on net assets of
$1,201,740,764 and 99,290,242 shares of capital
stock outstanding) $ 12.10
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $58,082,426 and 4,788,118
shares of capital stock outstanding) $ 12.13
- --------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price
per share (based on net assets of $38,874,440 and 3,176,712
shares of capital stock outstanding) $ 12.24
See accompanying Notes to Financial Statements.
25 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
===============================================================================
Investment Income
Dividends (net of foreign withholding taxes of $66,486) $ 42,750,608
- -------------------------------------------------------------------------------
Interest 34,268,156
-------------
Total income 77,018,764
===============================================================================
Expenses
Management fees--Note 4 18,483,834
- -------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 4,589,529
Class B 10,798,037
Class C 464,989
- -------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4:
Class A 2,614,545
Class B 1,181,708
Class C 50,663
Class Y 78,349
- -------------------------------------------------------------------------------
Shareholder reports 744,134
- -------------------------------------------------------------------------------
Custodian fees and expenses 133,216
- -------------------------------------------------------------------------------
Legal, auditing and other professional fees 81,333
- -------------------------------------------------------------------------------
Directors' fees and expenses 81,187
- -------------------------------------------------------------------------------
Insurance expenses 29,396
- -------------------------------------------------------------------------------
Registration and filing fees:
Class A 62,630
Class B 56,441
Class C 6,063
Class Y 3,336
- -------------------------------------------------------------------------------
Other 79,332
-------------
Total expenses 39,538,722
===============================================================================
Net Investment Income 37,480,042
===============================================================================
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments (including premiums on options exercised) 244,260,875
Closing and expiration of option contracts written--Note 6 556,961
Foreign currency transactions (1,385,983)
-------------
Net realized gain 243,431,853
- -------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 395,617,079
Translation of assets and liabilities denominated in
foreign currencies 1,429,964
-------------
Net change 397,047,043
-------------
Net realized and unrealized gain 640,478,896
===============================================================================
Net Increase in Net Assets Resulting from Operations $ 677,958,938
=============
See accompanying Notes to Financial Statements.
26 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997
==========================================================================================
<S> <C> <C>
Operations
Net investment income $ 37,480,042 $ 35,274,289
- ------------------------------------------------------------------------------------------
Net realized gain 243,431,853 344,889,410
- ------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 397,047,043 324,212,131
--------------- ---------------
Net increase in net assets resulting from operations 677,958,938 704,375,830
==========================================================================================
Dividends and Distributions to Shareholders
Dividends from net investment income:
Class A (30,566,836) (25,899,439)
Class B (5,719,175) (4,145,345)
Class C (263,905) (125,521)
Class Y (455,751) (304,885)
- ------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (172,164,137) (233,156,326)
Class B (80,057,166) (103,661,283)
Class C (3,815,686) (3,743,308)
Class Y (2,532,986) (2,706,730)
==========================================================================================
Capital Stock Transactions
Net increase in net assets resulting from
capital stock transactions--Note 2:
Class A 96,918,666 179,892,536
Class B 100,622,566 136,818,203
Class C 16,796,414 16,813,077
Class Y 8,780,891 6,041,378
==========================================================================================
Net Assets
Total increase 605,501,833 670,198,187
- ------------------------------------------------------------------------------------------
Beginning of period 3,287,519,754 2,617,321,567
--------------- ---------------
End of period (including undistributed net investment
income of $846,860 and $460,757, respectively) $ 3,893,021,587 $ 3,287,519,754
=============== ===============
</TABLE>
See accompanying Notes to Financial Statements.
27 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
-------------------------------------------
Year Ended December 31,
1998 1997 1996
============================================================================================
<S> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $ 11.00 $ 9.77 $ 9.35
- --------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .16 .16 .20
Net realized and unrealized gain (loss) 2.09 2.49 1.63
----------- ----------- -----------
Total income (loss) from investment operations 2.25 2.65 1.83
- --------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.15) (.14) (.20)
Distributions from net realized gain (.87) (1.28) (1.21)
----------- ----------- -----------
Total dividends and distributions
to shareholders (1.02) (1.42) (1.41)
- --------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.23 $ 11.00 $ 9.77
=========== =========== ===========
============================================================================================
Total Return, at Net Asset Value(3) 21.16% 27.39% 19.73%
============================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $ 2,594,324 $ 2,237,603 $ 1,826,599
- --------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 2,387,815 $ 2,045,166 $ 1,684,726
- --------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.31% 1.43% 1.96%
Expenses 0.86% 0.89% 0.90%
- --------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 38.1% 91.7% 117.5%
</TABLE>
1. For the period from June 1, 1994 (inception of offering) to December 31,
1994.
2. For the period from August 29, 1995 (inception of offering) to December 31,
1995.
3. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), 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 of less than one full year.
28 Oppenheimer Total Return Fund, Inc.
<PAGE>
<TABLE>
<CAPTION>
Class B
- ---------------------------- ----------------------------------------------------------------------
Year Ended December 31,
1995 1994 1998 1997 1996 1995 1994
======================================================================================================
<S> <C> <C> <C> <C> <C> <C>
$ 7.80 $ 8.69 $ 10.89 $ 9.70 $ 9.29 $ 7.76 $ 8.66
- ------------------------------------------------------------------------------------------------------
.23 .23 .06 .07 .12 .15 .17
2.09 (.91) 2.08 2.45 1.62 2.08 (.91)
- ----------- ----------- ----------- --------- ---------- ---------- ----------
2.32 (.68) 2.14 2.52 1.74 2.23 (.74)
- ------------------------------------------------------------------------------------------------------
(.22) (.21) (.06) (.05) (.12) (.15) (.16)
(.55) -- (.87) (1.28) (1.21) (.55) --
- ----------- ----------- ----------- --------- ---------- ---------- ----------
(.77) (.21) (.93) (1.33) (1.33) (.70) (.16)
- ------------------------------------------------------------------------------------------------------
$ 9.35 $ 7.80 $ 12.10 $ 10.89 $ 9.70 $ 9.29 $ 7.76
=========== =========== =========== ========= ========== ========== ==========
======================================================================================================
30.12% (7.86)% 20.25% 26.17% 18.78% 29.03% (8.64)%
======================================================================================================
$ 1,550,710 $ 1,235,637 $ 1,201,741 $ 986,713 $ 754,918 $ 589,804 $ 429,427
- ------------------------------------------------------------------------------------------------------
$ 1,394,245 $ 1,261,729 $ 1,080,395 $ 877,911 $ 671,593 $ 510,744 $ 360,773
- ------------------------------------------------------------------------------------------------------
2.53% 2.88% 0.50% 0.62% 1.15% 1.70% 2.11%
0.92% 1.01% 1.67% 1.71% 1.71% 1.75% 1.87%
- ------------------------------------------------------------------------------------------------------
84.8% 117.2% 38.1% 91.7% 117.5% 84.8% 117.2%
</TABLE>
4. Annualized.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1998, were $1,253,379,444 and $1,600,426,044, respectively.
29 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
-------------------------------------------------
Year Ended December 31,
1998 1997 1996 1995(2)
==================================================================================================
<S> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $ 10.92 $ 9.72 $ 9.33 $ 9.19
- --------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .06 .07 .16 .07
Net realized and unrealized gain (loss) 2.08 2.46 1.57 .73
-------- -------- -------- --------
Total income (loss) from investment operations 2.14 2.53 1.73 .80
- --------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.06) (.05) (.13) (.11)
Distributions from net realized gain (.87) (1.28) (1.21) (.55)
-------- -------- -------- --------
Total dividends and distributions
to shareholders (.93) (1.33) (1.34) (.66)
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.13 $ 10.92 $ 9.72 $ 9.33
======== ======== ======== ========
==================================================================================================
Total Return, at Net Asset Value(3) 20.20% 26.23% 18.67% 8.82%
==================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $ 58,082 $ 36,657 $ 17,554 $ 1,655
- --------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 46,558 $ 27,349 $ 8,277 $ 784
- --------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 0.50% 0.63% 1.05% 1.42%(4)
Expenses 1.67% 1.72% 1.76% 1.77%(4)
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 38.1% 91.7% 117.5% 84.8%
</TABLE>
1. For the period from June 1, 1994 (inception of offering) to December 31,
1994.
2. For the period from August 29, 1995 (inception of offering) to December 31,
1995.
3. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), 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 of less than one full year.
30 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y
- --------------------------------------------------------------
Year Ended December 31,
1998 1997 1996 1995 1994(1)
==============================================================
$ 11.00 $ 9.77 $ 9.35 $ 7.80 $ 8.23
- --------------------------------------------------------------
.17 .18 .23 .20 .15
2.10 2.48 1.61 2.13 (.41)
- -------- -------- -------- -------- --------
2.27 2.66 1.84 2.33 (.26)
- --------------------------------------------------------------
(.16) (.15) (.21) (.23) (.17)
(.87) (1.28) (1.21) (.55) --
- -------- -------- -------- -------- --------
(1.03) (1.43) (1.42) (.78) (.17)
- --------------------------------------------------------------
$ 12.24 $ 11.00 $ 9.77 $ 9.35 $ 7.80
======== ======== ======== ======== ========
==============================================================
21.33% 27.53% 19.88% 30.23% (3.15)%
==============================================================
$ 38,874 $ 26,546 $ 18,252 $ 6,709 $ 1,074
- --------------------------------------------------------------
$ 33,687 $ 21,977 $ 13,083 $ 3,944 $ 320
- --------------------------------------------------------------
1.39% 1.60% 2.08% 2.51% 4.07%(4)
0.80% 0.74% 0.77% 0.87% 0.96%(4)
- --------------------------------------------------------------
38.1% 91.7% 117.5% 84.8% 117.2%
4. Annualized.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1998, were $1,253,379,444 and $1,600,426,044, respectively.
See accompanying Notes to Financial Statements.
31 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Oppenheimer Total Return Fund, Inc. (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment objective is to seek high
total return. The Fund intends to seek its investment objective through
investment in securities which it believes will provide a high return, including
investments which are expected to provide opportunities for growth or to produce
income, or both. The Fund's investment advisor is OppenheimerFunds, Inc. (the
Manager). The Fund offers Class A, Class B, Class C and Class Y shares. Class A
shares are sold with a front-end sales charge. Class B and Class C shares may be
subject to a contingent deferred sales charge. All classes of shares have
identical rights to earnings, assets and voting privileges, except that each
class has its own expenses directly attributable to that class and exclusive
voting rights with respect to matters affecting that class. Classes A, B and C
have separate distribution and/or service plans. No such plan has been adopted
for Class Y shares. Class B shares will automatically convert to Class A shares
six years after the date of purchase. The following is a summary of significant
accounting policies consistently followed by the Fund.
- --------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Directors. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Directors to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount. Forward foreign currency exchange contracts are valued
based on the closing prices of the forward currency contract rates in the London
foreign exchange markets on a daily basis as provided by a reliable bank or
dealer. Options are valued based upon the last sale price on the principal
exchange on which the option is traded or, in the absence of any transactions
that day, the value is based upon the last sale price on the prior trading date
if it is within the spread between the closing bid and asked prices. If the last
sale price is outside the spread, the closing bid is used.
32 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Foreign Currency Translation. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on
investments is separately identified from the fluctuations arising from changes
in market values of securities held and reported with all other foreign currency
gains and losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily 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 continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
- --------------------------------------------------------------------------------
Distributions to Shareholders. Dividends and distributions to shareholders are
recorded on the ex-dividend date.
33 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies (continued)
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of the recognition of certain foreign currency gains (losses)
as ordinary income (loss) for tax purposes. The character of the distributions
made during the year from net investment income or net realized gains may differ
from its ultimate characterization for federal income tax purposes. Also, due to
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or realized gain
was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders
to reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended December 31, 1998, amounts have been reclassified to reflect a
decrease in paid-in capital of $872,248, a decrease in undistributed net
investment income of $88,272, and a decrease in accumulated net realized loss on
investments of $960,520.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date) and dividend income is recorded on the
ex-dividend date. Discount on securities purchased is amortized over the life of
the respective securities, in accordance with federal income tax requirements.
Realized gains and losses on investments and options written and unrealized
appreciation and depreciation are determined on an identified cost basis, which
is the same basis used for federal income tax purposes.
The preparation of financial statements in conformity with 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.
34 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
2. Capital Stock
The Fund has authorized 450 million, 200 million, 200 million and 10 million
shares of $.10 par value Class A, Class B, Class C and Class Y capital stock,
respectively. Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1998 Year Ended December 31, 1997
---------------------------- ----------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 20,090,100 $ 238,366,108 18,977,566 $ 206,996,029
Dividends and
distributions reinvested 16,639,080 191,036,172 22,473,543 244,366,731
Redeemed (28,120,324) (332,483,614) (24,890,415) (271,470,224)
----------- ------------- ------------ -------------
Net increase 8,608,856 $ 96,918,666 16,560,694 $ 179,892,536
=========== ============= ============ =============
- -------------------------------------------------------------------------------------------
Class B:
Sold 13,699,912 $ 160,764,683 12,559,650 $ 135,933,408
Dividends and
distributions reinvested 7,233,729 82,019,204 9,542,266 102,769,569
Redeemed (12,211,618) (142,161,321) (9,385,924) (101,884,774)
----------- ------------- ------------ -------------
Net increase 8,722,023 $ 100,622,566 12,715,992 $ 136,818,203
=========== ============= ============ =============
- -------------------------------------------------------------------------------------------
Class C:
Sold 2,117,847 $ 24,988,182 1,650,829 $ 17,900,517
Dividends and
distributions reinvested 344,352 3,914,027 345,135 3,728,540
Redeemed (1,031,386) (12,105,795) (444,581) (4,815,980)
----------- ------------- ------------ -------------
Net increase 1,430,813 $ 16,796,414 1,551,383 $ 16,813,077
=========== ============= ============ =============
- -------------------------------------------------------------------------------------------
Class Y:
Sold 1,821,738 $ 21,338,887 1,064,357 $ 11,578,084
Dividends and
distributions reinvested 260,255 2,988,737 276,903 3,011,615
Redeemed (1,318,484) (15,546,733) (796,261) (8,548,321)
----------- ------------- ------------ -------------
Net increase 763,509 $ 8,780,891 544,999 $ 6,041,378
=========== ============= ============ =============
</TABLE>
35 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
3. Unrealized Gains and Losses on Investments
As of December 31, 1998, net unrealized appreciation on investments and options
written of $1,169,380,890 was composed of gross appreciation of $1,237,456,000,
and gross depreciation of $68,075,110.
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 0.75% of the first
$100 million of net assets, 0.70% of the next $100 million, 0.65% of the next
$100 million, 0.60% of the next $100 million, 0.55% of the next $100 million,
and 0.50% of net assets in excess of $500 million. The Fund's management fee for
the year ended December 31, 1998 was 0.52% of the average annual net assets for
Class A, Class B, Class C and Class Y shares.
For the year ended December 31, 1998, commissions (sales charges
paid by investors) on sales of Class A shares totaled $3,975,257, of which
$1,342,124 was retained by OppenheimerFunds Distributor, Inc. (OFDI), a
subsidiary of the Manager, as general distributor, and by an affiliated
broker/dealer. Sales charges advanced to broker/dealers by OFDI on sales of the
Fund's Class A, Class B and Class C shares totaled $75,535, $4,675,603 and
$187,049, respectively. Amounts paid to an affiliated broker/dealer for Class B
and Class C shares were $482,203 and $10,755, respectively. During the year
ended December 31, 1998, OFDI received contingent deferred sales charges of
$1,193,722 and $17,665, respectively, upon redemption of Class B and Class C
shares as reimbursement for sales commissions advanced by OFDI at the time of
sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund and other Oppenheimer
funds. OFS's total costs of providing such services are allocated ratably to
these funds.
The Fund has adopted a Service Plan for Class A shares to reimburse
OFDI for a portion of its costs incurred in connection with the personal service
and maintenance of shareholder accounts that hold Class A shares. Reimbursement
is made quarterly at an annual rate that may not exceed 0.25% of the average
annual net assets of Class A shares of the Fund. OFDI uses the service fee to
reimburse brokers, dealers, banks and other financial institutions quarterly for
providing personal service and maintenance of accounts of their customers that
hold Class A shares. During the year ended December 31, 1998, OFDI paid $379,901
to an affiliated broker/dealer as reimbursement for Class A personal service and
maintenance expenses.
36 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
The Fund has adopted Distribution and Service Plans for Class B and Class C
shares to compensate OFDI for its costs in distributing Class B and Class C
shares and servicing accounts. Under the Plans, the Fund pays OFDI an annual
asset-based sales charge of 0.75% per year on Class B and Class C shares for its
services rendered in distributing Class B and Class C shares. OFDI also receives
a service fee of 0.25% per year to compensate dealers for providing personal
services for accounts that hold Class B and Class C shares. Each fee is computed
on the average annual net assets of Class B and Class C shares, determined as of
the close of each regular business day. During the year ended December 31, 1998,
OFDI paid $167,204 and $8,841, respectively, to an affiliated broker/dealer as
compensation for Class B and Class C personal service and maintenance expenses
and retained $8,406,270 and $293,061, respectively, as compensation for Class B
and Class C sales commissions and service fee advances, as well as financing
costs. If either Plan is terminated by the Fund, the Board of Directors may
allow the Fund to continue payments of the asset-based sales charge to OFDI for
distributing shares before the Plan was terminated. As of December 31, 1998,
OFDI had incurred excess distribution and servicing costs of $13,282,499 for
Class B and $496,032 for Class C.
================================================================================
5. Forward Contracts
A forward foreign currency exchange contract (forward contract) is a commitment
to purchase or sell a foreign currency at a future date, at a negotiated rate.
The Fund uses forward contracts to seek to manage foreign currency
risks. They may also be used to tactically shift portfolio currency risk. The
Fund generally enters into forward contracts as a hedge upon the purchase or
sale of a security denominated in a foreign currency. In addition, the Fund may
enter into such contracts as a hedge against changes in foreign currency
exchange rates on portfolio positions.
Forward contracts are valued based on the closing prices of the
forward currency contract rates in the London foreign exchange markets on a
daily basis as provided by a reliable bank or dealer. The Fund will realize a
gain or loss upon the closing or settlement of the forward transaction.
Securities held in segregated accounts to cover net exposure on
outstanding forward contracts are noted in the Statement of Investments where
applicable. Unrealized appreciation or depreciation on forward contracts is
reported in the Statement of Assets and Liabilities. Realized gains and losses
are reported with all other foreign currency gains and losses in the Fund's
Statement of Operations.
Risks include the potential inability of the counterparty to meet
the terms of the contract and unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
37 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
6. Option Activity
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call
options to hedge against adverse movements in the value of portfolio holdings.
When an option is written, the Fund receives a premium and becomes obligated to
sell or purchase the underlying security at a fixed price, upon exercise of the
option.
Options are valued daily based upon the last sale price on the
principal exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are noted in
the Statement of Investments where applicable. Shares subject to call,
expiration date, exercise price, premium received and market value are detailed
in a footnote to the Statement of Investments. Options written are reported as a
liability in the Statement of Assets and Liabilities. Gains and losses are
reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur
a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. The Fund also has the additional risk of not
being able to enter into a closing transaction if a liquid secondary market does
not exist.
Written option activity for the year ended December 31, 1998 was as follows:
Call Options
------------------------------
Number of Amount of
Options Premiums
- --------------------------------------------------------------------------------
Options outstanding as of December 31, 1997 -- $ --
Options written 11,362 1,620,446
Options closed or expired (7,450) (887,479)
Options exercised (500) (60,998)
------ ----------
Options outstanding as of December 31, 1998 3,412 $ 671,969
====== ==========
38 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
7. Illiquid and Restricted Securities
As of December 31, 1998, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual restrictions on resale, and are valued under methods approved
by the Board of Directors as reflecting fair value. 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 intends to invest no more than
10% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid and restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limit. The aggregate value of illiquid or restricted securities
subject to this limitation as of December 31, 1998 was $9,426,985, which
represents 0.24% of the Fund's net assets.
================================================================================
8. Bank Borrowings
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the year ended
December 31, 1998.
39 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
The Board of Directors and Shareholders of
Oppenheimer Total Return Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Total Return Fund, Inc. as of
December 31, 1998, the related statement of operations for the year then ended,
the statements of changes in net assets for the years ended December 31, 1998
and 1997, and the financial highlights for the period January 1, 1994, to
December 31, 1998. 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 generally accepted
auditing standards. 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, 1998, by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other auditing
procedures. 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, such financial statements and financial highlights
present fairly, in all material respects, the financial position of Oppenheimer
Total Return Fund, Inc. as of December 31, 1998, the results of its operations,
the changes in its net assets, and the financial highlights for the respective
stated periods, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Denver, Colorado
January 25, 1999
40 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Federal Income Tax Information (Unaudited)
- --------------------------------------------------------------------------------
================================================================================
In early 1999, shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1998. Regulations of
the U.S. Treasury Department require the Fund to report this information to the
Internal Revenue Service.
Dividends paid by the Fund during the fiscal year ended December 31,
1998 which are not designated as capital gain distributions should be multiplied
by 100% to arrive at the net amount eligible for the corporate dividend-received
deduction.
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.
41 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Oppenheimer Total Return Fund, Inc.
- --------------------------------------------------------------------------------
================================================================================
Officers and Directors James C. Swain, Chairman and Chief Executive Officer
Bridget A. Macaskill, Director and President
Robert G. Avis, Director
William A. Baker, Director
Charles Conrad, Jr., Director
Jon S. Fossel, Director
Sam Freedman, Director
Raymond J. Kalinowski, Director
C. Howard Kast, Director
Robert M. Kirchner, Director
Ned M. Steel, Director
George C. Bowen, Director, Vice President,
Treasurer and Assistant Secretary
Andrew J. Donohue, Vice President and Secretary
Bruce Bartlett, Vice President
John P. Doney, Vice President
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
================================================================================
Investment Advisor OppenheimerFunds, Inc.
================================================================================
Distributor OppenheimerFunds Distributor, Inc.
================================================================================
Transfer and Shareholder OppenheimerFunds Services
Servicing Agent
================================================================================
Custodian of The Bank of New York
Portfolio Securities
================================================================================
Independent Auditors Deloitte & Touche LLP
================================================================================
Legal Counsel Myer, Swanson, Adams & Wolf, P.C.
This is a copy of a report to shareholders of
Oppenheimer Total Return Fund, Inc. This report must
be preceded or accompanied by a Prospectus of
Oppenheimer Total Return Fund, Inc. For material
information concerning the Fund, see the Prospectus.
Shares of Oppenheimer funds are not deposits or
obligations of any bank, are not guaranteed by any
bank, are not insured by the FDIC or any other agency,
and involve investment risks, including the possible
loss of the principal amount invested.
42 Oppenheimer Total Return Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
OppenheimerFunds Family
- --------------------------------------------------------------------------------
================================================================================
Real Asset Funds
- --------------------------------------------------------------------------------
Real Asset Fund Gold & Special Minerals
Fund
================================================================================
Global Stock Funds
- --------------------------------------------------------------------------------
Developing Markets Fund International Growth Fund Quest Global Value Fund
International Small Global Fund Global Growth & Income
Company Fund Fund
================================================================================
Stock Funds
- --------------------------------------------------------------------------------
Enterprise Fund MidCap Fund Growth Fund
Discovery Fund Capital Appreciation Fund Disciplined Value Fund
Quest Small Cap Value Fund Quest Capital Value Fund Quest Value Fund
Large Cap Growth Fund
================================================================================
Stock & Bond Funds
- --------------------------------------------------------------------------------
Main Street Growth & Total Return Fund Disciplined Allocation
Income Fund1 Quest Balanced Fund
Quest Opportunity Value Fund Multiple Strategies Fund
Value Fund Equity Income Fund Convertible Securities
Fund
================================================================================
Taxable Bond Funds
- --------------------------------------------------------------------------------
International Bond Fund Champion Income Fund U.S. Government Trust
World Bond Fund Strategic Income Fund Limited-Term Government
High Yield Fund Bond Fund Fund
================================================================================
Municipal Bond Funds
- --------------------------------------------------------------------------------
California Municipal Fund2 Pennsylvania Municipal Rochester Division:
Florida Municipal Fund2 Fund2 Rochester Fund Municipals
New Jersey Municipal Fund2 Municipal Bond Fund Limited Term New York
New York Municipal Fund2 Insured Municipal Fund Municipal Fund
New York Municipal Fund2 Intermediate Municipal
Fund
================================================================================
Money Market Funds3
- --------------------------------------------------------------------------------
Money Market Fund Cash Reserves
1. On 12/22/98, the Fund's name was changed from "Main Street Income & Growth
Fund."
2. Available only to investors in certain states.
3. An investment in money market funds is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
these funds may seek to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in these funds.
Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc., Two
World Trade Center, New York, NY 10048-0203.
(C) Copyright 1999 OppenheimerFunds, Inc. All rights reserved.
43 Oppenheimer Total Return Fund, Inc.
<PAGE>
Information and services
- --------------------------------------------------------------------------------
As an Oppenheimer fund shareholder, you have some special privileges. Whether
it's automatic investment plans, informative newsletters and hotlines, or ready
account access, you can benefit from services designed to make investing simple.
And when you need help, our Customer Service Representatives are only a
toll-free phone call away. They can provide information about your account and
handle administrative requests. You can reach them at our General Information
number.
When you want to make a transaction, you can do it easily by calling our
toll-free Telephone Transactions number or by visiting our website. And, by
enrolling in AccountLink, a convenient service that "links" your Oppenheimer
funds accounts and your bank checking or savings account, you can use the
Telephone Transactions number or website to make investments.
For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week.
PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.
You can count on us whenever you need assistance. That's why the
International Customer Service Association, an independent, nonprofit
organization made up of over 3,200 customer service management professionals
from around the country, honored the Oppenheimer funds' transfer agent,
OppenheimerFunds Services, with their Award of Excellence in 1993.
So call us today, or visit us at our website at www.oppenheimerfunds.com--
we're here to help.
Internet
24-hr access to account
information. Online
transactions now available
- -------------------------
www.oppenheimerfunds.com
- -------------------------
General Information
Mon-Fri 8:30am-9pm ET
Sat 10am-4pm ET
- -------------------------
1-800-525-7048
- -------------------------
Account Transactions
Mon-Fri 8:30am-8pm ET
- -------------------------
1-800-852-8457
- -------------------------
PhoneLink
24-hr automated information
and automated transactions
- -------------------------
1-800-533-3310
- -------------------------
Telecommunication Device
for the Deaf (TDD)
Mon-Fri 8:30am-2pm ET
- -------------------------
1-800-843-4461
- -------------------------
OppenheimerFunds
Information Hotline
24 hours a day, timely and
insightful messages on the
economy and issues that
affect your investments
- -------------------------
1-800-835-3104
- -------------------------
RA0420.001.1298 March 1, 1999 [LOGO] OppenheimerFunds(R)
Distributor, Inc.
