[LOGO] THE
BOND FUND
FOR GROWTH
- --------------------------------------------------------------------------------
[ARTWORK]
- --------------------------------------------------------------------------------
[LOGO] OppenheimerFunds(R) Annual Report
December 31, 1995
<PAGE>
- --------------------------------------------------------------------------------
To Fellow Shareholders
- --------------------------------------------------------------------------------
[PHOTOGRAPH]
January 29, 1996
Dear Fellow Shareholder,
The returns witnessed in the financial markets during 1995 were nothing
less than exceptional. Almost all domestic stock indices hit new highs over the
course of the year, including the Dow Jones Industrial Average which surpassed
the never-before seen 5000 mark. The bond market also turned in a very strong
performance as interest rates declined during the year and a slowing economy
kept inflation in check.
Fueled by the strong stock market and declining interest rates,
convertible securities in general also performed quite well. The Bond Fund For
Growth experienced one of its best years in recent memory, achieving strong
capital appreciation and providing attractive income for its investors.
As we move forward into 1996, we believe The Bond Fund For Growth will
continue to be one of your best investment options for income and growth
potential.
Sincerely,
/s/ Michael S. Rosen
Michael S. Rosen
Portfolio Manager
================================================================================
A Bond Fund With Real Growth Potential
- --------------------------------------------------------------------------------
STANDARDIZED YIELD
For the 30 days ended 12/31/95(1)
- --------------------------------------------------------------------------------
Class A Class B Class Y
5.29% 5.29% 5.97%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
According to Lipper Analytical Services, Inc., The Bond Fund For Growth is the
#1 performing convertible securities fund for both the 3- and 5-Year periods
ended 12/31/95 based on the performance of its Class A Shares.(2)
- --------------------------------------------------------------------------------
{5 star ranking] MORNINGSTAR(3)
1. Standardized yield is net investment income calculated on a yield-to-maturity
basis for the 30-day period ended 12/31/95, divided by the maximum offering
price at the end of the period, compounded semi-annually and then annualized.
Falling net asset values will tend to artificially raise yields.
2. Source: Lipper Analytical Services, Inc., 12/31/95, an independent mutual
fund monitoring service. The Bond Fund For Growth is characterized by Lipper as
a Convertible Securities Fund. The Lipper total return rankings of the Fund's
Class A Shares for the 3-year period included 21 convertible securities funds,
and for the 5-year period included 18 convertible securities funds. Within the
same category, performance of the Fund's Class A Shares was also ranked 4th out
of 33 funds for the 1-year period. Lipper performance does not take sales
charges into consideration and assumes the reinvestment of dividends and capital
gains distributions.
3. Source: Morningstar Mutual Funds, 12/31/95. Morningstar, Inc., an independent
mutual fund monitoring service, produces proprietary monthly rankings of funds
in broad investment categories based on risk-adjusted investment returns, after
considering the effect of sales charges and expenses. Investment return measures
a fund's 3-,5- and 10-year average annual total returns in excess of 90 day U.S.
Treasury bill returns. Risk measures a fund's performance below 90-day Treasury
bill returns. Risk and returns are combined to produce star rankings, reflecting
performance relative to the average fund in a fund category. Five stars is the
"highest" ranking (top 10%), 4 stars is "above average" (next 22.5%) and 1 star
is the lowest (bottom 10%). THE BOND FUND FOR GROWTH IS CATEGORIZED AS A
"HYBRID" FUND. THE 5-STAR CURRENT RANKING IS A WEIGHTED AVERAGE OF THE FUND'S 3-
AND 5-YEAR RANKINGS, WHICH WERE 4 AND 5 STARS RESPECTIVELY, WEIGHTED 40%/60%.
212 AND 137 HYBRID FUNDS WERE RATED FOR THE 3- AND 5-YEAR PERIODS RESPECTIVELY.
THIS MORNINGSTAR PROPRIETARY RATING REFLECTS HISTORICAL RISK-ADJUSTED
PERFORMANCE AS OF DECEMBER 31, 1995. THE RATINGS ARE SUBJECT TO CHANGE EVERY
MONTH.
Past performance is not predictive of future investment results. Investment
return and principal value on an investment in the Fund will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost.
THE BOND FUND FOR GROWTH
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance
- --------------------------------------------------------------------------------
January 29, 1996
The convertible market in general and The Bond Fund For Growth in
particular benefited from a number of identifiable trends in 1995. Small to
mid-sized capitalization companies, which comprise a significant portion of
issuers of convertible securities, produced stellar gains during 1995 despite
lagging large capitalization stocks in the fourth quarter of the year.
Convertibles also benefited throughout 1995 from a favorable supply/demand
environment. New convertible issuance, though strong, was not able to keep pace
with conversions and redemptions of outstanding securities which created
considerable excess demand for convertibles throughout the year.
The Bond Fund For Growth continued to receive healthy inflows of new money
over the course of the year. In fact, during 1995, assets in The Bond Fund For
Growth doubled to end the year at $276 million. A significant positive
consequence of the Fund's growth in assets is a corresponding decline in the per
share operating expenses. We are pleased that a growing number of investors are
beginning to recognize that a fund comprised of convertible securities can be an
integral part of their portfolio designed to meet long term growth and income
objectives.
We have been able to put these new cash inflows to work in the convertible
market using our traditional "bargain hunting" strategy which involves the
purchase of existing convertibles as well as participation in a number of
attractive new issues brought to market during the year. At year end, the Fund's
portfolio is comprised of more than 150 securities.
- --------------------------------------------------------------------------------
TOTAL RETURN (12/31/95)
- --------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
NAV MOP NAV MOP
- --------------------------------------------------------------------------------
Class A
1 Year 26.00% 21.91% 26.00% 21.91%
5 Year 20.55% 19.77% 154.62% 146.49%
Life of Fund 10.36% 9.97% 156.79% 148.34%
(9.57 yr)
- --------------------------------------------------------------------------------
Class B
Life of Fund 15.09% 11.59% 15.09% 11.59%
(.667 yr)
- --------------------------------------------------------------------------------
Class Y
Life of Fund 15.42% 15.42% 15.42% 15.42%
(.667 yr)
- --------------------------------------------------------------------------------
For periods ended 12/31/95. All returns include changes in share price and
assume reinvestment of dividends and capital gains at net asset value. NAV
stands for Net Asset Value and returns at NAV do not reflect payment of sales
charges. Returns at Maximum Offering Price (MOP) reflect payment of the maximum
sales charge. The maximum sales charge for Class A Shares is 3.25%. Performance
of Class B Shares reflects the deduction of the contingent deferred sales charge
(CDSC) of 3.5%, which is applicable on all share redemptions during the first
year, and declines thereafter as detailed in the prospectus. While all classes
have the same investment portfolio, the performance of Class B Shares and Class
Y Shares will differ from that of Class A Shares primarily due to the different
expenses the classes of shares incur. Class B Shares and Class Y Shares were
introduced on May 1, 1995. Class A Shares have an inception date of June 3,
1986.
THE VALUE OF $10,000 INVESTED IN YOUR FUND COMPARED TO THE
GOLDMAN SACHS CONVERTIBLE 100 INDEX AND THE CPI
[The following table was represented by a line chart in the printed material.]
The Value of $10,000 Invested in The Bond Fund For Growth compared to the
Goldman Sachs Convertible 100 Index and the CPI
The Bond Fund For Growth -- Class A $24,916
The Bond Fund For Growth -- Class B $11,135
The Bond Fund For Growth -- Class Y $11,561
Goldman Sachs Convertible 100 Index $23,174
Consumer Price Index (CPI) $14,000
This graph shows the performance of a hypothetical $10,000 investment in shares
of the Fund held since June 30, 1986. The Fund's performance is compared to the
performance of the Goldman Sachs Convertible 100 Index, an unmanaged index of
convertible securities. The unmanaged Index also has no ongoing management
expenses and incurs no transaction costs or operating expenses, which are an
integral part of mutual fund operations. None of the data shown considers the
effect of taxes. Moreover, the index performance data does not reflect any
assessment of the risk of investments included in the Index. The Fund's total
return figure assumes payment of the 3.25% maximum sales charge and reflects all
Fund expenses. It assumes that dividends and capital gains have been reinvested.
Past performance is not predictive of future investment results. An investor
cannot purchase the Index directly.
The graph also compares the Fund's performance to the Consumer Price Index
(CPI), a measure of inflation. It indicates that, for the period referenced, the
Fund has kept the purchasing power of your investment (on a total return basis)
well ahead of inflation, which should be an important consideration for
investors.
THE BOND FUND FOR GROWTH
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (continued)
- --------------------------------------------------------------------------------
We believe another important factor which contributed to the Fund's
performance during the year results from our management style which emphasizes
consideration of a broad spectrum of issues regardless of industry sector or
capitalization. We also conduct intense analysis of individual securities while
purposefully avoiding industry group allocation targets or market timing
strategies. The Fund seeks to provide competitive total returns by identifying
companies within the convertible universe which have strong long term growth
prospects. We look for securities which have, in our opinion, favorable
risk/reward profiles.
After such a strong 1995, our outlook for 1996 is decidedly more cautious
on both stocks and bonds. This strikes us as a good time for convertibles. The
versatility and hedge characteristics of convertibles offer investors a myriad
of ways to tailor a portfolio to specific goals and market expectations.
Convertibles not only provide some downside protection in declining markets, but
may also offer attractive upside participation in times of rising markets like
1995.
We believe that inflation pressures will remain fairly subdued and economic
growth will be moderate in the coming year. In such an environment, the Federal
Reserve Board might be inclined to lower interest rates in an effort to maintain
a satisfactory level of economic growth. However, if Congress and the White
House fail to come up with a credible resolution to the budget dilemma, interest
rates might well be negatively impacted as the year progresses. The dollar
should remain firm as world financial markets reward U.S. steps toward fiscal
responsibility and the Federal Reserve's inflation control. The Fund's emphasis
on higher yielding convertibles, we believe, will help the Fund regardless of
the movement in the markets.(1)
1. Lower rated, higher yielding securities generally pose a greater risk to
principal than higher rated securities. They are rated lower because there is a
greater possibility that negative changes in the issuer's business condition or
in general economic conditions may hinder the issuer's ability to pay principal
and interest on securities.
THE BOND FUND FOR GROWTH
<PAGE>
The Bond Fund For Growth
Portfolio of Investments
December 31, 1995
<TABLE>
<CAPTION>
Par Value/ Interest Maturity Market
Shares Security Description Rate Date Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONVERTIBLE DEBT - 86.3%
Banks-Other Major - 2.3%
$ 500,000 Bangkok Bank Public Co. Ltd. (a) (d) 3.25% 03/03/04 $ 532,500
$5,000,000 Mitsubishi Bank, Ltd. 3.00% 11/30/02 5,775,000
-----------
Total $ 6,307,500
- ------------------------------------------------------------------------------------------------------------------------------------
Banks-Regional - 1.2%
$2,977,000 First Republic Bancorp Inc. 7.25% 12/01/02 $ 3,192,832
- ------------------------------------------------------------------------------------------------------------------------------------
Biotechnology - 1.3%
$1,750,000 Chiron Corp. (d) 1.90% 11/17/00 1,788,273
15,000 Lehman Brothers Holdings Inc. - Amgen Inc. YEELDS 6.50% 01/15/97(g) 915,000
14,000 Salomon Inc. - Amgen Inc. ELKS 6.50% 02/01/97(g) 909,118
-----------
Total $ 3,612,391
- ------------------------------------------------------------------------------------------------------------------------------------
Broadcasting - 1.0%
$1,505,000 Rogers Communications, Inc. LYONS 0.00% 05/20/13 522,987
$2,050,000 Scandinavian Broadcasting System SA 7.25% 08/01/05 2,103,812
-----------
Total $ 2,626,799
- ------------------------------------------------------------------------------------------------------------------------------------
Building Materials - 2.8%
$6,000,000 Cemex, S.A. de C.V. 4.25% 11/01/97 5,073,720
$4,500,000 Empresas ICA Sociedad Controladora, S.A. de C.V. 5.00% 03/15/04 2,370,915
$ 500,000 Nippon Denro Ispat Ltd. (a) (d) 3.00% 04/01/01 280,625
-----------
Total $ 7,725,260
- ------------------------------------------------------------------------------------------------------------------------------------
Computer Hardware - 7.0%
$ 300,000 Comptronix Corp. 6.75% 03/01/02 152,250
$3,425,000 Conner Peripherals, Inc. 6.50% 03/01/02 3,476,375
$2,000,000 EMC Corp. 4.25% 01/01/01 1,998,120
$ 450,000 SubMicron Systems Corp. (a) (b) (e) 9.00% 12/15/97 427,262
$6,000,000 Telxon Corp. (d) 5.75% 01/01/03 6,435,000
$ 400,000 Telxon Corp. 7.50% 06/01/12 415,000
$7,200,000 Unisys Corp. 8.25% 08/01/00 6,403,464
-----------
Total $19,307,471
- ------------------------------------------------------------------------------------------------------------------------------------
Computer Software - 3.5%
$3,117,000 MacNeal-Schwendler Corp. 7.875% 08/18/04 3,586,483
15,000 Salomon Inc. - Microsoft Corp. ELKS 5.000% 11/01/96(g) 1,560,000
$4,000,000 SoftKey International Inc. (d) 5.500% 11/01/00 3,005,000
$2,000,000 Spectrum Holobyte, Inc. (d) 6.500% 09/15/02 1,470,000
-----------
Total $ 9,621,483
- ------------------------------------------------------------------------------------------------------------------------------------
Conglomerates - 0.9%
$2,500,000 Alfa, S.A. de C.V. (d) 8.00% 09/15/00 $ 2,423,425
- ------------------------------------------------------------------------------------------------------------------------------------
Drugs - 1.7%
10,000 Bear Stearns Cos. Inc. - Merck & Co., Inc. CHIPS 5.50% 02/11/97(g) 455,000
$ 500,000 IVAX Corp. (d) 6.50% 11/15/01 531,560
$ 900,000 MEDIQ Inc. (NutraMax Products, Inc.) 7.50% 07/15/03 713,250
$2,000,000 Sandoz AG (d) 2.00% 10/06/02 1,895,000
$1,000,000 Sepracor Inc. (d) 7.00% 12/01/02 1,122,500
-----------
Total $ 4,717,310
- ------------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment - 6.5%
$ 500,000 Aeroflex, Inc. 7.50% 06/15/04 496,250
$2,000,000 California Microwave, Inc. 5.25% 12/15/03 1,700,000
$1,000,000 Cooper Industries, Inc. 7.05% 01/01/15 1,030,000
$3,331,000 Ducommun Inc. 7.75% 03/31/11 3,564,170
$5,500,000 General Instrument Corp. 5.00% 06/15/00 6,001,875
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
Par Value/ Interest Maturity Market
Shares Security Description Rate Date Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Electrical Equipment - (continued)
$2,500,000 MagneTek, Inc. 8.00% 09/15/01 $ 2,231,250
$1,800,000 Porta Systems Corp. (a) (c) 6.00% 07/01/02 603,000
$2,440,000 Recognition International, Inc. 7.25% 04/15/11 2,232,600
-----------
Total $17,859,145
- ------------------------------------------------------------------------------------------------------------------------------------
Electronics-Instruments - 11.7%
$5,000,000 ADT Operations, Inc. (ADT Ltd.) LYONS 0.00% 07/06/10 2,382,800
$2,500,000 Audiovox Corp. 6.25% 03/15/01 1,568,750
$ 355,000 Aurora Electronics, Inc. 7.75% 04/15/01 227,200
$1,500,000 Emerson Radio Corp. (a) 8.50% 08/15/02 1,095,000
$2,250,000 Laidlaw Inc. (ADT Ltd.) (d) 6.00% 01/15/99 2,683,125
$7,000,000 Thermo Electron Corp. (d) 4.25% 01/01/03 7,621,250
$8,155,000 Thermo Optek Corp. (d) 5.00% 10/15/00 8,562,750
$5,335,000 ThermoQuest Corp. (d) 5.00% 08/15/00 5,601,750
$2,500,000 Zenith Electronics Corp. (d) 8.50% 11/19/00 2,518,750
-----------
Total $32,261,375
- ------------------------------------------------------------------------------------------------------------------------------------
Electronics-Semi-Conductors - 2.0%
$5,000,000 Integrated Device Technology, Inc. 5.50% 06/01/02 4,112,500
$1,500,000 Xilinx, Inc. 5.25% 11/01/02 1,366,875
-----------
Total $ 5,479,375
- ------------------------------------------------------------------------------------------------------------------------------------
Entertainment - 2.5%
$3,000,000 Discovery Zone, Inc. LYONS 0.00% 10/14/13 787,500
$2,000,000 Hasbro, Inc. 6.00% 11/15/98 2,190,000
$3,919,100 Time Warner, Inc. 8.75% 01/10/15 4,061,167
-----------
Total $ 7,038,667
- ------------------------------------------------------------------------------------------------------------------------------------
Fertilizers - 0.5%
$ 980,000 IMC Global, Inc. (f) 6.25% 12/01/01 $ 1,265,425
- ------------------------------------------------------------------------------------------------------------------------------------
Finance Companies - 0.4%
$1,850,000 Lomas Financial Corp. (a) (c) 9.00% 10/31/03 146,261
17,000 Merrill Lynch & Co., Inc.
(MGIC Investment Corp.) STRYPES 6.50% 08/15/98(g) 881,875
-----------
Total $ 1,028,136
- ------------------------------------------------------------------------------------------------------------------------------------
Foods - 1.2%
$3,405,000 Chock Full O' Nuts Corp. 8.00% 09/15/06 $ 3,217,725
- ------------------------------------------------------------------------------------------------------------------------------------
Home Builders - 2.4%
$2,000,000 Continental Homes Holding Corp. 6.875% 11/01/02 2,377,500
$2,750,000 Engle Homes, Inc. 7.00% 03/01/03 2,413,125
$1,940,000 U.S. Home Corp. 4.875% 11/01/05 1,872,100
-----------
Total $ 6,662,725
- ------------------------------------------------------------------------------------------------------------------------------------
Hospital Management - 1.9%
$2,165,000 Beverly Enterprises, Inc. 5.50% 08/01/18 2,062,162
$ 700,000 Integrated Health Services, Inc. 5.75% 01/01/01 706,125
$1,900,000 Pacific Physicians Services, Inc. 5.50% 12/15/03 1,837,053
$ 625,000 TheraTx, Inc. (d) 8.00% 02/01/02 575,781
-----------
Total $ 5,181,121
- ------------------------------------------------------------------------------------------------------------------------------------
Hospital-Supplies - 1.6%
$3,500,000 Fisher Scientific International Inc. 4.75% 03/01/03 3,747,170
$ 500,000 Maxxim Medical, Inc. 6.75% 03/01/03 526,250
$ 500,000 Physicians Clinical Laboratory, Inc. (a) (c) (d) 7.50% 08/15/00 45,000
-----------
Total $ 4,318,420
- ------------------------------------------------------------------------------------------------------------------------------------
Insurance-Casualty - 2.4%
$4,000,000 Chubb Corp. 6.00% 05/15/98 4,495,000
$2,000,000 Trenwick Group Inc. 6.00% 12/15/99 2,300,000
-----------
Total $ 6,795,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Par Value/ Interest Maturity Market
Shares Security Description Rate Date Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insurance-Multiline - 2.0%
$4,110,000 Old Republic International Corp. 5.75% 08/15/02 $ 5,628,111
- ------------------------------------------------------------------------------------------------------------------------------------
Leisure Time - 4.3%
$2,415,000 Bell Sports Corp. 4.25% 11/15/00 1,691,997
$1,500,000 Microtel Franchise & Development Corp. (a) (b) (e) 8.00% 02/01/04 3,112,500
$1,500,000 Microtel Franchise & Development Corp. (a) (b) (e) 8.00% 02/01/05 3,112,500
$ 350,000 Travel Ports of America, Inc. (a) (b) 8.50% 01/15/05 361,371
$1,750,000 Travel Ports of America, Inc. (a) (b) (d) 8.50% 01/15/05 1,806,858
$2,000,000 WMS Industries Inc. 5.75% 11/30/02 1,720,000
-----------
Total $11,805,226
- ------------------------------------------------------------------------------------------------------------------------------------
Machinery-Industrial/Specialty - 3.8%
$3,130,000 Mascotech, Inc. 4.50% 12/15/03 2,449,225
$ 500,000 Park-Ohio Industries, Inc. 7.25% 06/15/04 505,000
$5,154,000 Raymond Corp. 6.50% 12/15/03 7,164,060
$ 500,000 Varlen Corp. 6.50% 06/01/03 505,935
-----------
Total $10,624,220
- ------------------------------------------------------------------------------------------------------------------------------------
Merchandising-Drug - 0.6%
$3,000,000 Rite Aid Corp. 0.00% 07/24/06 $ 1,673,430
- ------------------------------------------------------------------------------------------------------------------------------------
Merchandising-Specialty - 2.7%
$2,800,000 Ben Franklin Retail Stores, Inc. 7.50% 06/01/03 1,863,736
$ 400,000 Eagle Hardware & Garden, Inc. 6.25% 03/15/01 287,500
$1,385,000 General Host Corp. 8.00% 02/15/02 1,121,850
$2,000,000 Lechters, Inc. 5.00% 09/27/01 1,190,000
$2,050,000 Michaels Stores, Inc. 4.75% 01/15/03 1,609,250
$ 500,000 Pier 1 Imports, Inc. (General Host Corp.) (a) (d) 8.50% 12/01/00 420,000
$1,500,000 Sports & Recreation, Inc. 4.25% 11/01/00 1,038,750
-----------
Total $ 7,531,086
- ------------------------------------------------------------------------------------------------------------------------------------
Metals-Miscellaneous - 0.2%
$ 500,000 GE Capital Corp. Global Medium-Term Notes (a) (d) 2.50% 02/14/97 $ 512,500
- ------------------------------------------------------------------------------------------------------------------------------------
Miscellaneous Consumer Staples - 1.5%
$2,000,000 Olsten Corp. (The) (f) 4.875% 05/15/03 2,340,000
$2,000,000 Pharmaceutical Marketing Services, Inc. 6.25% 02/01/03 1,810,000
-----------
Total $ 4,150,000
- ------------------------------------------------------------------------------------------------------------------------------------
Miscellaneous Transportation - 0.3%
$ 750,000 CareLine, Inc. (Laidlaw Inc.) 8.00% 05/01/01 $ 845,625
- ------------------------------------------------------------------------------------------------------------------------------------
Oil-Integrated Domestic - 0.6%
$ 750,000 Oryx Energy Co. 7.50% 05/15/14 673,125
$1,000,000 USX - US Steel Group, Inc.\USX - Marathon Group 7.00% 06/15/17 950,620
-----------
Total $ 1,623,745
- ------------------------------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 2.3%
$6,295,000 Repap Enterprises, Inc. 8.50% 08/01/97 $ 6,287,131
- ------------------------------------------------------------------------------------------------------------------------------------
Pollution Control - 1.3%
35,000 Browning-Ferris Industries, Inc. ACES-a 7.25% 06/30/98(g) 1,098,125
$ 458,000 Roy F. Weston, Inc. 7.00% 04/15/02 403,040
$2,466,000 WMX Technologies, Inc. 2.00% 01/24/05 2,120,760
-----------
Total $ 3,621,925
- ------------------------------------------------------------------------------------------------------------------------------------
Publishing & Printing - 2.0%
$ 750,000 Graphic Industries, Inc. 7.00% 05/15/06 703,125
$1,132,000 National Education Corp. 6.50% 05/15/11 803,720
$1,210,000 Scantron Corp. (John H. Harland Co.) 6.75% 06/01/11 1,179,750
$3,000,000 Thomas Nelson, Inc. 5.75% 11/30/99 2,906,250
-----------
Total $ 5,592,845
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Par Value/ Interest Maturity Market
Shares Security Description Rate Date Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Real Estate - 1.9%
$2,000,000 Henderson Capital International Ltd. 5.00% 10/27/96 $ 2,057,500
$ 500,000 Hysan Development Co. Ltd. (a) (d) 6.75% 06/01/00 535,000
$2,885,000 Patten Corp. 8.25% 05/15/12 2,603,713
-----------
Total $ 5,196,213
- ------------------------------------------------------------------------------------------------------------------------------------
Restaurants - 1.4%
$3,000,000 Flagstar Cos. Inc. 10.00% 11/01/14 1,672,500
$2,000,000 Grand Metropolitan PLC (d) 6.50% 01/31/00 2,323,740
-----------
Total $ 3,996,240
- ------------------------------------------------------------------------------------------------------------------------------------
Telecommunications - 1.6%
$2,500,000 Compania Telecomunicacion Chile SA 4.50% 01/15/03 2,781,250
10,000 First Chicago NBD Corp.
(Nextel Communications, Inc.) DECS 5.50% 02/15/97(g) 180,000
25,000 Sprint Corp. (Southern New England
Telecommunications Corp.) DECS 8.25% 03/31/00(g) 950,000
$ 500,000 Telekom Malaysia Berhad (a) (d) 4.00% 10/03/04 487,500
-----------
Total $ 4,398,750
- ------------------------------------------------------------------------------------------------------------------------------------
Textile-Apparel & Products - 2.4%
$5,000,000 Danskin, Inc. (a) (b) (e) 8.00% 09/01/02 $ 6,845,250
- ------------------------------------------------------------------------------------------------------------------------------------
Tobacco - 1.2%
$ 300,000 Dimon, Inc. 7.75% 09/30/06 397,197
$4,334,000 Standard Commercial Corp. 7.25% 03/31/07 3,066,305
-----------
Total $ 3,463,502
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities-Electric - 1.4%
$3,753,000 AES Corp. 6.50% 03/15/02 $ 3,935,959
- ------------------------------------------------------------------------------------------------------------------------------------
Total convertible debt (cost $228,952,658) $238,373,343
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Annual Market
Shares Security Description Dividend Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS - 14.2%
Aerospace/Defense - 0.3%
20,000 Kaman Corp. Series 2 $ 3.25 $ 957,500
- ------------------------------------------------------------------------------------------------------------------------------------
Automobiles - 0.1%
2,000 Ford Motor Co. Series A $ 4.20 $ 189,500
- ------------------------------------------------------------------------------------------------------------------------------------
Banks-Regional - 0.1%
7,500 Mid Am, Inc. Series A $ 1.8125 $ 274,215
- ------------------------------------------------------------------------------------------------------------------------------------
Building Materials - 1.8%
85,000 Owens-Corning Capital L.L.C. MIPS (d) $ 3.25 $ 5,084,020
- ------------------------------------------------------------------------------------------------------------------------------------
Chemicals - 0.0%
2,150 LSB Industries, Inc. Series 2 $ 3.25 $ 72,025
- ------------------------------------------------------------------------------------------------------------------------------------
Computer Hardware - 0.1%
82,020 Comptronix Corp. Series A 6.00% $ 287,070
- ------------------------------------------------------------------------------------------------------------------------------------
Conglomerates - 0.7%
15,000 Alco Standard Corp. ACES-b $ 5.04 1,282,500
15,000 Corning Delaware, L.P. MIPS $ 3.00 755,625
-----------
Total $ 2,038,125
- ------------------------------------------------------------------------------------------------------------------------------------
Finance Companies - 1.6%
70,000 Phoenix Duff & Phelps Corp. Series A $ 1.50 1,767,500
30,000 Travelers Group, Inc. Series B (f) $ 2.75 2,617,500
-----------
Total $ 4,385,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Annual Market
Shares Security Description Dividend Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Insurance-Casualty - 0.5%
25,000 St. Paul Capital L.L.C. MIPS $ 3.00 $ 1,406,250
- ------------------------------------------------------------------------------------------------------------------------------------
Insurance-Life - 0.2%
8,000 Conseco, Inc. Series D $ 3.25 $ 424,000
- ------------------------------------------------------------------------------------------------------------------------------------
Insurance-Miscellaneous - 0.3%
15,000 Alexander & Alexander Services, Inc. (d) $ 3.625 $ 729,375
- ------------------------------------------------------------------------------------------------------------------------------------
Metals-Steel - 0.5%
30,000 WHX Corp. Series B $ 3.75 $ 1,275,000
- ------------------------------------------------------------------------------------------------------------------------------------
Miscellaneous Capital Goods-Technology - 0.0%
20,000 KENETECH Corp. PRIDES $ 1.67 $ 35,620
- ------------------------------------------------------------------------------------------------------------------------------------
Oil & Gas Products - 0.6%
85,000 ICO, Inc. $ 1.6875 $ 1,734,510
- ------------------------------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 1.1%
40,000 International Paper Co. $ 2.625 1,812,480
5,000 James River Corp. Series K $ 3.375 230,625
18,600 James River Corp. Series L $ 3.500 862,575
-----------
Total $ 2,905,680
- ------------------------------------------------------------------------------------------------------------------------------------
Pollution Control - 0.4%
65,000 International Technology Corp. $ 1.75 $ 1,145,625
- ------------------------------------------------------------------------------------------------------------------------------------
Real Estate - 0.5%
110,000 Capstead Mortgage Corp. Series B $ 1.26 $ 1,430,000
- ------------------------------------------------------------------------------------------------------------------------------------
Savings & Loan - 3.6%
89,000 ONBANCorp, Inc. Series B $ 1.6875 2,497,518
176,840 RCSB Financial, Inc. Series B (f) $ 1.75 6,531,939
17,500 Sovereign Bancorp, Inc. Series B $ 3.125 1,000,773
-----------
Total $10,030,230
- ------------------------------------------------------------------------------------------------------------------------------------
Telecommunications - 0.1%
4,000 Philippine Long Distance Telephone Co. Series III $ 3.50 $ 208,248
- ------------------------------------------------------------------------------------------------------------------------------------
Tobacco - 1.1%
483,900 RJR Nabisco Holdings Corp. PERCS $0.60125 $ 3,084,862
- ------------------------------------------------------------------------------------------------------------------------------------
Truckers - 0.6%
50,000 Arkansas Best Corp. Series A $ 2.875 $ 1,581,250
- ------------------------------------------------------------------------------------------------------------------------------------
Total convertible preferred stocks (cost $36,798,972) $39,278,105
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Market
Shares Security Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS AND WARRANTS - 3.4%
Banks-Regional - 0.2%
13,910 Fleet Financial Group, Inc. (f) $ 566,833
- ------------------------------------------------------------------------------------------------------------------------------------
Computer Hardware - 0.0%
27,000 SubMicron Systems Corp., warrants, strike $14.00,
Expires 12/13/00 (a) (b) (e) $ 49,059
- ------------------------------------------------------------------------------------------------------------------------------------
Drugs - 0.4%
10,020 American Home Products Corp. (f) $ 971,940
- ------------------------------------------------------------------------------------------------------------------------------------
Insurance-Casualty - 0.5%
30,001 Orion Capital Corp. $ 1,301,293
- ------------------------------------------------------------------------------------------------------------------------------------
Hospital Management - 0.2%
9,100 Columbia/HCA Healthcare Corp. (f) $ 461,825
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Security Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Leisure Time - 0.0%
5,000 Travel Ports of America, Inc., warrants, strike $3.60,
Expires 01/15/05 (b) $ 4,235
- ------------------------------------------------------------------------------------------------------------------------------------
Miscellaneous-Financial - 1.0%
63,159 SunAmerica, Inc. $ 3,000,066
- ------------------------------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 0.2%
9,272 Federal Paper Board Co., Inc. $ 480,985
- ------------------------------------------------------------------------------------------------------------------------------------
Savings & Loan - 0.2%
17,588 Progressive Bank, Inc. $ 507,854
- ------------------------------------------------------------------------------------------------------------------------------------
Tobacco - 0.7%
22,000 Philip Morris Cos., Inc. (f) $ 1,991,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total common stocks and warrants (cost $4,070,180) $ 9,335,090
====================================================================================================================================
Total investments (cost $269,821,810) - 103.9% $286,986,538
------------
</TABLE>
CALL OPTIONS OUTSTANDING - (0.3%)
<TABLE>
<CAPTION>
Exercise
Shares Month/
Subject Liabilities for Call Exercise Market
To Call Options Outstanding Price Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
10,000 American Home Products Corp. Jan/90 ($ 73,120)
9,100 Columbia/HCA Healthcare Corp. Feb/50 (21,321)
13,900 Fleet Financial Group, Inc. Apr/40 (36,488)
15,000 IMC Global, Inc. Apr/40 (51,555)
25,000 Olsten Corp. (The) Feb/40 (29,675)
22,000 Philip Morris Cos., Inc. Mar/80 (262,614)
39,500 RCSB Financial, Inc. Jan/25 (8,611)
40,000 RCSB Financial, Inc. Jan/22.5 (55,000)
42,000 RCSB Financial, Inc. Apr/25 (49,854)
20,000 Travelers Group, Inc. Mar/60 (96,240)
- ------------------------------------------------------------------------------------------------------------------------------------
Total call options outstanding (premiums received $580,692) ($684,478)
------------
Other assets and liabilities (net) - (3.6%) (9,994,470)
------------
Net assets at market - 100.0% $276,307,590
============
</TABLE>
(a) Illiquid security.
(b) Fair valued security.
(c) Non-income producing security.
(d) SEC Rule 144A restriction (See Note 3).
(e) Restricted security (See Note 3).
(f) Security held in connection with call option outstanding.
(g) Redeemable in cash at the lesser of a multiple of the issue price or an
amount based on the price of the stated company's common stock at maturity.
See accompanying notes to financial statements.
================================================================================
Portfolio Abbreviations:
ACES-a Automatic Common Exchange Securities
ACES-b Automatically Convertible Equity Securities
CHIPS Common-linked Higher Income Participation Securities
DECS Debt Exchangeable for Common Stock
ELKS Equity-Linked Securities
LYONS Liquid Yield Option Notes
MIPS Monthly Income Preferred Securities
PERCS Preferred Equity Redemption Cumulative Stock
PRIDES Preferred Redeemable Increased Dividend Equity Securities
STRYPES Structured Yield Product Exchangeable for Stock
YEELDS Yield Enhanced Equity Linked Debt Securities
Asset Composition Table
December 31, 1995 (Unaudited)
Percentage
Rating of Bonds
---------- ----------
AAA 0.2%
AA 6.7%
A 14.3%
BBB 12.0%
BB 10.8%
B 27.2%
Below B 2.8%
Not rated 26.0%
-----
Total 100.0%
=====
6
<PAGE>
The Bond Fund For Growth
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments at market (Cost $269,821,810) $286,986,538
Cash and cash equivalents 22,476
Dividends and interest receivable 3,597,928
Receivable for capital shares sold 4,686,950
Receivable for investments sold 1,175,000
Other assets 43,518
-------------
Total assets 296,512,410
-------------
Liabilities
Payable for investments purchased 8,658,887
Payable for capital shares repurchased 475,798
Demand note payable to Bank (Interest rate 6.5% at 12/31/95) 9,120,000
Call options outstanding (Premiums received $580,692) 684,478
Accrued taxes 1,094,278
Other liabilities 171,379
-------------
Total liabilities 20,204,820
-------------
Net Assets $276,307,590
=============
=====================================================================================
Represented by
Paid in capital $259,414,130
Excess of distributions over net investment income (40,930)
Accumulated net realized loss on investments and options (126,552)
Net unrealized appreciation of investments and options 17,060,942
-------------
Total - Representing net assets applicable to capital shares
outstanding $276,307,590
=============
=====================================================================================
Computation of net asset value and offering price
Class A Shares:
Net asset value and redemption price per share
($239,340,681 divided by 17,143,195 shares) $13.96
=============
Offering price per share (100/96.75 of $13.96) * $14.43
=============
Class B Shares:
Net asset value, redemption price and offering price per
share ($34,465,026 divided by 2,464,766 shares) + $13.98
=============
Class Y Shares:
Net asset value, redemption price and offering price per
share ($2,501,883 divided by 179,155 shares) $13.96
=============
</TABLE>
* On single retail sales of less than $250,000. On sales of $250,000 or more
and on group sales the offering price is reduced.
+ Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
See accompanying notes to financial statements.
7
<PAGE>
The Bond Fund For Growth
================================================================================
Statement of Operations
Year ended December 31, 1995
Inventment Income:
Interest $ 10,382,346
Dividends 2,502,387
------------
Total investment income 12,884,733
------------
Expenses:
Distribution fees - Class A 1,324,659
Distribution fees - Class B 92,392
Distribution fees - Class Y 3,032
Management fees 1,030,091
Shareholder servicing
agent fees - Class A 230,475
Shareholder servicing
agent fees - Class B 14,271
Shareholder servicing
agent fees - Class Y 764
Registration fees 89,072
Accounting and auditing 82,499
Shareholder communications 51,538
Custodian fees 30,507
Legal fees 27,930
Trustees' fees 15,000
Miscellaneous 10,470
Interest 52,337
------------
Total expenses 3,055,037
Expenses paid indirectly (Note 4) (25,560)
------------
Net expenses 3,029,477
------------
Net investment income 9,855,256
------------
Realized and unrealized gain
(loss) on investments and options:
Net realized gain on investments 10,092,619
Net realized loss on options (619,854)
------------
Total net realized gain 9,472,765
------------
Net increase in unrealized
appreciation:
Investments 21,450,248
Options 8,410
------------
Total increase in unrealized
appreciation 21,458,658
------------
Net gain on investments
and options 30,931,423
------------
Net increase in net assets
resulting from operations $ 40,786,679
============
================================================================================
Statement of Changes in Net Assets
Year ended December 31, 1995 1994
------------- -------------
Increase in net assets -
Operations:
Net investment income .................. $ 9,855,256 $ 5,552,021
Net realized gain from
security transactions ................ 9,472,765 2,246,856
Increase (decrease) in
unrealized appreciation .............. 21,458,658 (10,516,166)
------------- -------------
Increase (decrease) in net
assets resulting
from operations ...................... 40,786,679 (2,717,289)
------------- -------------
Distributions to shareholders
from:
Net investment income -
Class A .............................. (11,839,019) (5,616,654)
Net investment income -
Class B .............................. (728,015) --
Net investment income -
Class Y .............................. (92,063) --
Capital gains - Class A ................ (8,052,576) (1,445,043)
Capital gains - Class B ................ (1,126,719) --
Capital gains - Class Y ................ (80,834) --
------------- -------------
Total distributions
to shareholders .................... (21,919,226) (7,061,697)
------------- -------------
Fund share transactions:
Increase in net assets
derived from Fund share
transactions (Note 5) ................ 130,749,104 67,095,060
------------- -------------
Increase in net assets ................... 149,616,557 57,316,074
Net assets:
Beginning of year ........................ 126,691,033 69,374,959
------------- -------------
End of year (including excess of
distributions over net investment
income of $40,930 - 1995 and
$24,929 - 1994) ........................ $ 276,307,590 $ 126,691,033
============= =============
See accompanying notes to financial statements.
8
<PAGE>
The Bond Fund For Growth
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class A
------------------------------------------------------------------------------
Year ended December 31,
1995 1994 1993 1992 (a) 1991 (b)
-------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $12.20 $13.16 $11.43 $9.37 $7.88
-------- -------- ------- ------- ------
Income from investment operations:
Net investment income 0.70 0.68 0.59 0.69 0.65
Net realized and unrealized gain
(loss) on investments 2.42 (0.81) 1.79 2.15 1.53
-------- -------- ------- ------- ------
Total from investment operations 3.12 (0.13) 2.38 2.84 2.18
-------- -------- ------- ------- ------
Less distributions to shareholders from:
Net investment income (0.87) (0.69) (0.65) (0.78) (0.69)
Capital gains (0.49) (0.14) -- -- --
-------- -------- ------- ------- ------
Total distributions (1.36) (0.83) (0.65) (0.78) (0.69)
-------- -------- ------- ------- ------
Net asset value, end of year $13.96 $12.20 $13.16 $11.43 $9.37
======== ======== ======= ======= ======
Total return (excludes sales load) 26.00% (1.12%) 21.23% 31.19% 28.50%
Ratios/supplemental data:
Net assets, end of year (000 omitted) $239,341 $126,691 $69,375 $10,241 $6,403
Ratio of total expenses
to average net assets 1.58%(c) 1.66% 1.78% 1.93% 2.01%
Ratio of total expenses (excluding
interest) to average net assets (d) 1.56%(c) 1.65% 1.75% 1.91% 1.94%
Ratio of net investment income to
average net assets 5.12% 5.24% 4.70% 6.62% 7.60%
Portfolio turnover rate 57.51% 52.82% 88.66% 80.09% 48.55%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Net of fees and expenses waived or reimbursed by Fielding Management
Company, Inc. which amounted to $0.01 per share. Without reimbursement, the
ratios would have been 2.06%, 2.04% and 6.50%, respectively.
(b) Net of fees and expenses waived or reimbursed by Fielding Management
Company, Inc. and Rochester Fund Services, Inc., which amounted to $0.07
per share. Without reimbursement, the ratios would have been 2.82%, 2.75%
and 6.79%, respectively.
(c) Effective in 1995, the ratios do not include reductions from custodian fee
offset arrangements. The 1995 ratio of total expenses and the ratio of
total expenses (excluding interest) to average net assets are 1.57% and
1.54%, respectively, after including this reduction. See Note 4.
(d) During the periods shown above, the Fund's interest expense was
substantially offset by the incremental interest income generated on bonds
purchased with borrowed funds.
Per share information has been determined on the basis of the weighted number of
shares outstanding during the period.
9
<PAGE>
The Bond Fund For Growth
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class B Class Y
----------------------- -----------------------
Period ended Period ended
December 31, 1995 (d) December 31, 1995 (d)
----------------------- -----------------------
<S> <C> <C>
Net asset value, beginning of period $13.11 $13.11
----------------------- -----------------------
Income from investment operations:
Net investment income 0.45 0.54
Net realized and unrealized gain
on investments 1.51 1.48
----------------------- -----------------------
Total from investment operations 1.96 2.02
----------------------- -----------------------
Less distributions to shareholders from:
Net investment income (0.60) (0.68)
Capital gains (0.49) (0.49)
----------------------- -----------------------
Total distributions (1.09) (1.17)
----------------------- -----------------------
Net asset value, end of period $13.98 $13.96
======================= =======================
Total return (excludes sales load) 15.09%(d) 15.42%(d)
Ratios/supplemental data:
Net assets, end of period (000 omitted) $34,465 $2,502
Ratio of total expenses
to average net assets 1.69%(a)(b) 1.05%(a)(c)
Ratio of total expenses (excluding
interest) to average net assets (e) 1.64%(a)(b) 1.01%(a)(c)
Ratio of net investment income to
average net assets 4.82%(a) 5.63%(a)
Portfolio turnover rate 57.51% 57.51%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Annualized.
(b) Effective in 1995, the ratios do not include reductions from custodian fee
offset arrangements. The 1995 ratio of total expenses and the ratio of
total expenses (excluding interest) to average net assets are 1.68%
and1.63%, respectively, after including this reduction. See Note 4.
(c) Effective in 1995, the ratios do not include reductions from custodian fee
offset arrangements. The 1995 ratio of total expenses and the ratio of
total expenses (excluding interest) to average net assets are 1.03%
and1.00%, respectively, after including this reduction. See Note 4.
(d) For the period from May 1, 1995 (inception of offering) to December 31,
1995.
(e) During the periods shown above, the Fund's interest expense was
substantially offset by the incremental interest income generated on bonds
purchased with borrowed funds.
Per share information has been determined on the basis of the weighted number of
shares outstanding during the period.
10
<PAGE>
The Bond Fund For Growth
Notes to Financial Statements
December 31, 1995
Note 1. Significant Accounting Policies:
The Bond Fund For Growth (the "Fund") is a series of Rochester Fund Series which
is registered under the Investment Company Act of 1940, as amended, as a
non-diversified, open-end management investment company. The Fund seeks a high
level of total return on its assets through a combination of current income and
capital appreciation. The Fund offers Class A, Class B and Class Y shares. Class
A shares are sold with a front-end sales charge. Class B shares may be subject
to a contingent deferred sales charge. Class Y shares are sold only to qualified
institutions and are not subject to any sales charge. All three classes of
shares have identical rights to earnings, assets and voting privileges, except
that each class has its own distribution plan, expenses directly attributable to
a particular class and exclusive voting rights with respect to matters affecting
a single class. 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 in the preparation of its
financial statements:
Security valuation. Investments in securities traded on a national securities
exchange are valued at the closing sales price on the last business day of the
period; securities traded in the over-the-counter market, listed securities for
which no sale was reported on that date and exchange traded convertible bonds
where the last sales price is not considered to be representative of the most
recent bid and ask prices are valued at the mean between the bid and ask prices.
In some instances, securities which trade on an exchange or in the
over-the-counter market, but trade more actively in a dealer market, are valued
at the mean of the reported bid and ask price by a dealer. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by the Board of Trustees.
Security transactions and related investment income. Security transactions are
recorded on the trade date. Cost is determined and realized gains and losses are
based upon the specific identification method for both financial statement and
federal income tax purposes. Interest income is recorded on the accrual basis.
In computing net investment income, the Fund accretes original issue discount.
Market discount is accreted at the time of sale (to the extent of the lesser of
the accrued market discount or the disposition gain) and is treated as income,
rather than capital gain. Dividend income is recorded on the ex-dividend date.
Call options. Call options are written by the Fund only on securities owned by
the Fund and all such options are listed on a national securities exchange. When
the Fund sells an option, the premium received is recorded in the Statement of
Assets and Liabilities as an asset and as an equivalent liability. The amount of
the liability is subsequently adjusted to reflect the current market value of
the option written. The Fund's use of written options involves, to varying
degrees, elements of market risk in excess of the amount recognized in the
Statement of Assets and Liabilities. The contract amounts reflect the extent of
the Fund's involvement in these financial instruments. Risks arise from the
possible movements in securities' values underlying these instruments. The
Fund's activities in written options are conducted through regulated exchanges
which do not result in counterparty credit risks.
Allocation of income, expenses and gains and losses. Income, expenses (other
than those attributable to a specific class) and 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.
Distributions to shareholders. Income distributions are declared and recorded
separately for Class A, Class B and Class Y shares each day based on estimated
net investment income. Such distributions are paid quarterly. Capital gain
distributions, if any, are recorded on the ex-dividend date and paid annually.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences include the treatment of wash sales.
Reclassifications are made to the Fund's capital accounts to reflect income and
gains available for distribution (or available capital loss carryovers) under
income tax regulations.
Federal income taxes. During any particular year, the Fund is required to
distribute certain minimum amounts of net realized capital gains and net
investment income in order to avoid a federal income or excise tax. It is the
Fund's intention to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
taxable and tax-exempt income to shareholders. As of December 31, 1995, the Fund
has an accrued tax liability of $1,094,278 for net unrealized gains at the time
of the acquisition of Rochester Tax Managed Fund, Inc. by the Fund (see Note 6).
11
<PAGE>
Other. The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
Note 2. Management Fee and Other Transactions with Affiliated Parties:
Ronald H. Fielding, President and a trustee of the Fund, is also an officer,
director, and controlling shareholder of Fielding Management Company, Inc.
("FMC"), the Fund's investment adviser, as well as an officer, director and
controlling shareholder of Rochester Fund Distributors, Inc. ("RFD"), the Fund's
principal underwriter, and an officer, director and controlling shareholder of
Rochester Fund Services, Inc. ("RFS"), the Fund's shareholder servicing,
accounting and pricing agent. See Note 7.
The management fee payable to FMC is based on an annual rate of .625% of average
daily net assets up to $50 million, .50% of average daily net assets on the next
$250 million, and .4375% of average daily net assets in excess of $300 million.
During 1995, FMC received fees of $1,030,091 for management and investment
advisory services.
The Fund has adopted a distribution plan with respect to its Class A shares (the
"Class A Plan") pursuant to Rule 12b-1 of the Investment Company Act of 1940, as
amended, which permits the Fund to pay an asset based sales charge of up to .50%
per annum of its relative net assets attributable to Class A Shares for certain
sales related distribution expenses and a service fee of up to .25% per annum of
relative net assets attributable to Class A shares for expenses incurred in
connection with the maintenance of shareholder accounts. For the year ended
December 31, 1995, the Fund paid distribution fees on the Class A Plan of
$1,324,659 to RFD. From this amount, RFD made payments of $780,467 to broker
dealers and financial institutions.
The Fund has adopted a separate distribution plan with respect to its Class B
shares (the "Class B Plan") pursuant to Rule 12b-1 of the Investment Company Act
of 1940, as amended, which permits the Fund to pay an asset based sales charge
of up to .75% per annum of its relative net assets attributable to Class B
Shares for certain sales related distribution expenses and a service fee of up
to .25% per annum of relative net assets attributable to Class B shares for
expenses incurred in connection with the maintenance of shareholder accounts.
For the year ended December 31, 1995, the Fund paid distribution fees on the
Class B Plan of $92,392 to RFD.
The Fund has also adopted a distribution plan with respect to its Class Y shares
(the "Class Y Plan") pursuant to Rule 12b-1 of the Investment Company Act of
1940, as amended, which permits the Fund to pay a service fee of up to .25% per
annum of relative net assets attributable to Class Y shares for expenses
incurred in connection with the maintenance of shareholder accounts. For the
year ended December 31, 1995, the Fund paid distribution fees on the Class Y
Plan of $3,032 to RFD. From this amount, RFD made payments of $471 to broker
dealers and financial institutions.
For the year ended December 31, 1995, RFD, acting as underwriter, received
$228,970 as its portion of the sales charge from the sale of Class A shares of
the Fund. Class B shares are sold without an initial sales charge; however, RFD
pays a sales commission of 3% (including a prepaid service fee of .25%) to
dealers who sell Class B shares. A contingent deferred sales charge is imposed
on Class B share redemptions within six years of purchase. During 1995, RFD
received contingent deferred sales charges of $5,001 from redemptions of Class B
shares. Class Y shares are sold without an initial sales charge or a contingent
deferred sales charge.
The shareholder servicing agent fee charged by RFS to the Fund is based on an
annual maintenance fee of $24.12 for each Class A and Class Y shareholder
account and $26.02 for each Class B shareholder account. For the year ended
December 31, 1995, RFS received $230,475, $14,271 and $764 in shareholder
servicing agent fees for Class A, Class B and Class Y shares, respectively.
During 1995, the Fund was charged $62,450 by RFS for pricing and accounting
services.
Note 3. Portfolio Information:
Purchases at cost and proceeds from sales of investment securities for the year
ended December 31, 1995 were $258,429,455 and $136,312,744, respectively.
12
<PAGE>
The Fund had transactions in call options as follows:
Number of
Contracts Premiums
--------- -----------
Options Outstanding at
December 31, 1994 0 $ 0
Options written 5,740 1,282,510
Options acquired as a result of the
June 28, 1995 acquisition of
Rochester Tax Managed Fund, Inc. 655 92,417
Options expired, exercised and
terminated in closing purchase
transactions (4,030) (794,235)
------ -----------
Options outstanding at
December 31, 1995 2,365 $ 580,692
====== ===========
The Fund has no specific percentage limitation on restricted securities except
to the extent of the security's liquidity. The Fund may not invest more than 15%
of its net assets in illiquid securities. At December 31, 1995, the Fund held
$20,372,186 in illiquid securities (constituting 7.4% of net assets). The Fund
held $72,537,853 in restricted securities at December 31, 1995, comprising
approximately 26.3% of net assets. The majority of these securities, although
not registered under the Securities Act of 1933, as amended (the "Act"), may be
resold to certain qualified institutional buyers in reliance upon Rule 144A
under the Act and are considered to be liquid due to the active institutional
market that exists for these securities.
<TABLE>
<CAPTION>
Date of Purchase % of Net
Description Acquisition Cost Assets
----------- ----------- ---- ------
<S> <C> <C> <C>
Alexander & Alexander Services, Inc., $3.625+ 3/94 & 1/95 $ 638,750 0.3%
Alfa, S.A. de C.V., 8.0%, 2000+ 9/95 2,500,000 0.9%
Bangkok Bank Public Co. Ltd., 3.25%, 2004+ 2/94 500,000 0.2%
Chiron Corp., 1.9%, 2000+ 11/93 & 1/95 1,340,263 0.6%
Danskin, Inc., 8.0%, 2002 8/95 5,000,000 2.5%
GE Capital Corp., Global Med-Term Notes, 2.5%, 1997+ 1/94 500,000 0.2%
Grand Metropolitan PLC, 6.5%,2000+ 1/95 & 9/95 2,070,313 0.8%
Hysan Development Co. Ltd., 6.75%, 2000+ 5/95 500,000 0.2%
IVAX Corp., 6.5%, 2001+ 9/94 465,000 0.2%
Laidlaw Inc. (ADT Ltd.), 6.0%, 1999+ 12/93 - 4/94 2,347,500 1.0%
Microtel Franchise & Dev. Corp., 8.0%, 2004 1/94 1,500,000 1.1%
Microtel Franchise & Dev. Corp., 8.0%, 2005 1/95 1,500,000 1.1%
Nippon Denro Ispat Ltd., 3.0%, 2001+ 3/94 500,000 0.1%
Owens-Corning Capital L.L.C. MIPS, $3.25+ 5/95 - 10/95 4,461,250 1.8%
Physicians Clinical Laboratory, Inc., 7.5%, 2000+ 2/94 515,000 0.0%
Pier 1 Imports, Inc. (General Host), 8.5%, 2000+ 12/94 470,000 0.2%
Sandoz AG, 2.0%, 2002+ 9/95 1,623,400 0.7%
Sepracor Inc., 7.0%, 2002+ 11/95 1,000,000 0.4%
SoftKey International Inc., 5.5%, 2000+ 10/95 - 12/95 3,682,500 1.1%
Spectrum Holobyte, Inc., 6.5%, 2002+ 9/95 2,000,000 0.5%
SubMicron Systems Corp., 9.0%, 1997 12/95 450,000 0.2%
SubMicron Systems Corp., warrants, strike $14.00, 2000 12/95 0 0.0%
Telekom Malaysia Berhad, 4.0%, 2004+ 9/94 500,000 0.2%
Telxon Corp., 5.75%, 2003+ 12/95 6,000,000 2.3%
TheraTx, Inc., 8.0%, 2002+ 4/95 571,875 0.2%
Thermo Electron Corp., 4.25%, 2003+ 11/95 7,000,000 2.8%
Thermo Optek Corp., 5.0%, 2000+ 9/95 & 12/95 8,184,475 3.1%
ThermoQuest Corp., 5.0%, 2000+ 7/95 - 12/95 5,555,875 2.0%
Travel Ports of America, Inc., 8.5%, 2005+ 2/95 & 8/95 1,750,625 0.7%
Zenith Electronics Corp., 8.5%, 2000+ 9/95 - 11/95 2,562,500 0.9%
----
26.3%
====
</TABLE>
+SEC Rule 144A restriction.
13
<PAGE>
Investments in non-U.S. issuers equals approximately 14.18% of net assets at
December 31, 1995. All investments of foreign issuers are denominated in U.S.
dollars.
Unrealized appreciation (depreciation) at December 31, 1995 based on cost of
securities for federal income tax purposes of $269,966,460 was:
Gross unrealized appreciation $30,279,334
Gross unrealized depreciation (13,259,256)
-----------
Net unrealized appreciation $17,020,078
===========
Note 4. Bank Borrowings and Expense Offset Arrangements:
The Fund may borrow up to 5% of its total net assets from a bank to purchase
portfolio securities, or for temporary and emergency purposes. The Fund has
entered into an agreement which enables it to participate with other funds
managed by FMC, or an affiliate of FMC, in an unsecured line of credit with a
bank which permits borrowings up to $70 million, collectively. Interest is
charged to each fund, based on its borrowings, at a rate equal to the New York
Interbank Offer Rate (NIBOR) plus .75%. Borrowings are payable on demand.
The Fund had borrowings of $9,120,000 outstanding at December 31, 1995. For the
year ended December 31, 1995, the average monthly loan balance was $768,898 at a
weighted average interest rate of 7.115%. The maximum amount of borrowings
outstanding at any month-end was $9,120,000.
The Fund's custodian bank has agreed to reduce its fees when the Fund maintains
cash on deposit in the non-interest bearing custody account. For the year ended
December 31, 1995, custodian fee offset arrangements reduced expenses by
$25,560.
Note 5. Shares of Beneficial Interest:
The Agreement and Declaration of Trust permits the Fund to issue an unlimited
number of shares of beneficial interest of each class, par value $.01 per share.
Transactions in Fund shares were as follows:
Class A:
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994
---- ----
Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 7,217,942 $ 99,835,909 5,704,417 $ 74,824,458
Shares issued on reinvestment
of distributions 1,158,342 16,067,613 415,454 5,248,037
Shares issued in connection
with the acquisition of
Rochester Tax Managed Fund, Inc. 660,637 9,039,351
Shares repurchased (2,278,192) (31,392,544) (1,008,951) (12,977,435)
---------- ------------ ---------- ------------
Net increase in
shares outstanding 6,758,729 $ 93,550,329 5,110,920 $ 67,095,060
========== ============ ========== ============
</TABLE>
Class B:
Period May 1 - December 31, 1995
--------------------------------
Shares Amount
---------- ------------
Shares sold 2,362,379 $ 33,327,370
Shares issued on reinvestment
of distributions 114,523 1,597,930
Shares repurchased (12,136) (175,070)
---------- ------------
Net increase
in shares outstanding 2,464,766 $ 34,750,230
========== ============
14
<PAGE>
Class Y:
Period May 1 - December 31, 1995
--------------------------------
Shares Amount
-------- -----------
Shares sold 167,169 $ 2,280,841
Shares issued on reinvestment
of distributions 12,344 172,794
Shares repurchased (358) (5,090)
-------- -----------
Net increase
in shares outstanding 179,155 $ 2,448,545
======== ===========
Note 6. Acquisition:
On June 28, 1995, the Fund acquired all of the assets and liabilities of
Rochester Tax Managed Fund, Inc. (RTMF). The acquisition was accomplished by a
tax-free exchange of 660,637 Class A shares of the Fund (valued at $9,039,351)
for 760,094 shares of RTMF. The net assets of RTMF were valued at $9,039,351 and
included unrealized appreciation of $4,275,694. Prior to the acquisition, RTMF
did not distribute its net investment income or realized gains and was taxed as
a C corporation. Accordingly, an accrued tax liability was assumed by the Fund
on the date of the acquisition (see Note 1). During the second half of 1995,
approximately $2,788,000 of accumulated earnings and profits resulting from the
June 28, 1995 acquisition of RTMF was distributed to shareholders of the Fund.
The aggregate net assets of the Fund after the acquisition were $189,184,982.
Note 7. Subsequent Event:
On January 4, 1996, FMC (the Fund's investment adviser), RFD (the Fund's
principal underwriter) and RFS (the Fund's shareholder servicing, accounting and
pricing agent) consummated a transaction with OppenheimerFunds, Inc. ("OFI"),
which resulted in the sale to OFI of certain assets of FMC, RFD and RFS,
including the transfer of the investment advisory agreement and other contracts
with the Fund and the use of the name "The Rochester Funds". This transaction
received approval by the Fund's shareholders on December 20, 1995.
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of The Bond Fund For Growth
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Bond Fund For Growth (the
"Fund") at December 31, 1995, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1995 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Rochester, New York
January 30, 1996
16
<PAGE>
FEDERAL TAX INFORMATION (Unaudited)
In early 1996, shareholders received information regarding all dividends and
distributions paid to them by the Fund during calendar year 1995. Regulations of
the U.S. Treasury Department require the Fund to report this information to the
Internal Revenue Service.
The Fund paid four quarterly income dividends and one short-term capital gain in
1995. A long-term capital gain distribution of $0.147 per share was paid to
shareholders of record on December 26, 1995, which was designated as a "capital
gain distribution" for federal income tax purposes. Whether received in stock or
cash, the capital gain distribution should be treated as a gain from the sale of
capital assets held for more than one year (long-term capital gains). Income
dividends, short-term capital gain distributions and long term capital gain
distributions are subject to federal, state and local taxes.
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.
- --------------------------------------------------------------------------------
SHAREHOLDER MEETINGS (Unaudited)
On December 20, 1995, a special meeting of shareholders was held at which the
following were approved: (a) new Investment Advisory Agreement with
OppenheimerFunds, Inc. (Proposal 1), (b) election of the six trustees named
below (Proposal 2) , (c) new Amended and Restated Distribution and/or Service
Plans and Agreements with OppenheimerFunds Distributor, Inc. (Proposal 3) (d)
ratification of Price Waterhouse LLP as independent accountants of the Fund for
fiscal year 1995 (Proposal 4) and (e) elimination of the fundamental investment
policy which, as to 50% of the total assets of the Fund, limits the amount of
voting securities of any issuer in which the Fund may invest to 10%(Proposal 5).
The following is a report of the votes cast:
<TABLE>
<CAPTION>
Withheld/
Proposal For Against Abstain Total
- -------- --- ------- ------- -----
<S> <C> <C> <C> <C>
Proposal 1 10,444,978 515,304 503,669 11,463,951
Proposal 2
John Cannon 11,020,341 443,610 11,463,951
Paul Clinton 11,024,859 439,092 11,463,951
Thomas Courtney 11,027,253 436,698 11,463,951
Lacy Herrmann 11,021,105 442,846 11,463,951
George Loft 11,012,532 451,419 11,463,951
Bridget Macaskill 11,016,948 447,003 11,463,951
Proposal 3 10,342,697 534,815 586,439 11,463,951
Proposal 4 10,955,349 132,837 375,765 11,463,951
Proposal 5 8,019,100 513,781 615,401 11,463,951*
</TABLE>
*includes 2,315,669 broker non votes
<PAGE>
- --------------------------------------------------------------------------------
The Bond Fund For Growth
- --------------------------------------------------------------------------------
- --------------------------------------------------
Convertible Securities and Professional Management
- --------------------------------------------------
Convertible securities are bonds or preferred stocks that pay a fixed rate
of interest or dividend. But, because convertible securities are
corporate-issued bonds or preferred stock that may be exchanged for a set number
of shares of common stock, the investor in convertible securities also gains the
potential growth of a stock based investment.
Thus, in addition to providing a pre-determined level of current income,
convertible securities have an equity component, or conversion feature, that
creates potential for capital appreciation. While common stocks may offer
greater growth potential and other fixed income investments may produce more
income, it is this dual nature of convertibles that may make them ideally suited
to fulfill the objectives of many investors.
Unfortunately for the individual investor, convertibles can be complicated.
Since the return on convertible securities is driven by factors that influence
both the bond and equity markets, evaluation can be complex. Owning one or a few
individual issues subjects the investor to the volatility associated with a
particular market sector, and many convertible issues may not be available
through the more common investment markets.
The Bond Fund For Growth, known prior to 1993 as the Rochester Convertible
Fund, was established in recognition of these aspects of the convertible market.
We believed that a mutual fund format was the most efficient way to manage these
unique securities.
Today, The Bond Fund For Growth provides investors with the benefits of a
portfolio of issues, lower transaction costs, liquidity and professional
management characteristic of mutual fund investing. In addition, the Fund has
provided shareholders with the benefits of convertible securities in a
convenient investment vehicle.
- --------------------------------------
The Rochester Division Investment Team
- --------------------------------------
The analysis of convertible securities can be both technical in nature and
time intensive. An assessment of the fixed income security must be combined with
an evaluation of the equity characteristics to determine each issue's ultimate
contribution to The Bond Fund For Growth. Under the direction of Mike Rosen, The
Bond Fund For Growth is supported by the flexible, responsive Rochester Division
investment team.
[PHOTOGRAPH]
Standing: Tony Tanner, Rich Stein, Dan Loughran.
Seated: Ron Fielding, Mike Rosen, Ted Everett.
Michael S. Rosen, CFA; President: Rochester Division of OppenheimerFunds,
Inc., has directed the long-term investment strategies and overall composition
of the portfolio since the Fund's inception in 1986. Mike graduated from the
University of Rochester, where he received his BA in Economics, and the William
E. Simon Graduate School of Business Administration, University of Rochester,
where he received an MBA in both Finance and Marketing.
The Rochester Division investment team also includes:
Ronald H. Fielding, CFA; Chairman, Rochester Division of OppenheimerFunds,
Inc.
Edward N. Everett, Assistant Vice President and Assistant Portfolio Manager
Anthony A. Tanner,CFA; Vice President
Richard A. Stein,CFA; Vice President
Daniel G. Loughran, Junior Research Analyst
THE BOND FUND FOR GROWTH
<PAGE>
- --------------------------------
The Benefit of A Broad Portfolio
- --------------------------------
Many financial consultants advise that one component of risk associated
with a mutual fund investment can be assessed by reviewing the portfolio's
concentration among industry sectors.
The Bond Fund For Growth attempts to reduce volatility by intentionally
including issues across a broad spectrum of industries.(1) By including
convertible securities regardless of sector or capitalization level, the Fund's
portfolio works in concert to reduce the impact of individual sector
fluctuations caused by adverse market conditions.
[ARTWORK]
- --------------------------------------------------------------------------------
INDUSTRY CONCENTRATION
(as of December 31, 1995)(percent of Total Net Assets)
Aerospace/Defense 0.3%
- --------------------------------------------------------------------------------
Automobiles 0.1%
- --------------------------------------------------------------------------------
Banks-Other Major 2.3%
- --------------------------------------------------------------------------------
Banks-Regional 1.5%
- --------------------------------------------------------------------------------
Biotechnology 1.3%
- --------------------------------------------------------------------------------
Broadcasting 1.0%
- --------------------------------------------------------------------------------
Building Materials 4.6%
- --------------------------------------------------------------------------------
Computer Hardware 7.1%
- --------------------------------------------------------------------------------
Computer Software 3.5%
- --------------------------------------------------------------------------------
Conglomerates 1.6%
- --------------------------------------------------------------------------------
Drugs 2.1%
- --------------------------------------------------------------------------------
Electrical Equipment 6.5%
- --------------------------------------------------------------------------------
Electronics-Instruments 11.7%
- --------------------------------------------------------------------------------
Electronics-Semi-Conductors 2.0%
- --------------------------------------------------------------------------------
Entertainment 2.5%
- --------------------------------------------------------------------------------
Fertilizers 0.5%
- --------------------------------------------------------------------------------
Finance Companies 2.0%
- --------------------------------------------------------------------------------
Foods 1.2%
- --------------------------------------------------------------------------------
Home Builders 2.4%
- --------------------------------------------------------------------------------
Hospital Management 2.1%
- --------------------------------------------------------------------------------
Hospital-Supplies 1.6%
- --------------------------------------------------------------------------------
Insurance-Casualty 3.4%
- --------------------------------------------------------------------------------
Insurance-Life 0.2%
- --------------------------------------------------------------------------------
Insurance-Miscellaneous 0.3%
- --------------------------------------------------------------------------------
Insurance-Multiline 2.0%
- --------------------------------------------------------------------------------
Leisure Time 4.3%
- --------------------------------------------------------------------------------
Machinery-Industrial/Specialty 3.8%
- --------------------------------------------------------------------------------
Merchandising-Drug 0.6%
- --------------------------------------------------------------------------------
Merchandising-Specialty 2.7%
- --------------------------------------------------------------------------------
Metals-Miscellaneous 0.2%
- --------------------------------------------------------------------------------
Metals-Steel 0.5%
- --------------------------------------------------------------------------------
Miscellaneous Consumer Staples 1.5%
- --------------------------------------------------------------------------------
Miscellaneous Transportation 0.3%
- --------------------------------------------------------------------------------
Miscellaneous-Financial 1.0%
- --------------------------------------------------------------------------------
Oil & Gas Products 0.6%
- --------------------------------------------------------------------------------
Oil-Integrated Domestic 0.6%
- --------------------------------------------------------------------------------
Paper & Forest Products 3.6%
- --------------------------------------------------------------------------------
Pollution Control 1.7%
- --------------------------------------------------------------------------------
Publishing & Printing 2.0%
- --------------------------------------------------------------------------------
Real Estate 2.4%
- --------------------------------------------------------------------------------
Restaurants 1.4%
- --------------------------------------------------------------------------------
Savings & Loan 3.8%
- --------------------------------------------------------------------------------
Telecommunications 1.7%
- --------------------------------------------------------------------------------
Textile-Apparel & Products 2.4%
- --------------------------------------------------------------------------------
Tobacco 3.0%
- --------------------------------------------------------------------------------
Truckers 0.6%
- --------------------------------------------------------------------------------
Utilities-Electric 1.4%
- --------------------------------------------------------------------------------
- -------------------------------------------------
Risk-Adjusted Total Returns-Balance or Leverage?
- -------------------------------------------------
We all know that investing entails the careful balance of risk and reward.
But is it possible that convertible securities provide a better balance than
both the equity and bond markets?
In a recent study conducted by Salomon Brothers, the risk-adjusted returns
of the convertible market were compared to those of other noted indices. Using
data gathered since the inception of the Salomon Brothers Convertible Securities
Index in December of 1991, Salomon Brothers determined that the convertible
market's 2.2% annual return per unit of risk, or Sharpe ratio, is 37.5%, 69.2%
and 22.2% better than the Standard & Poor's 500 Index, the NASDAQ Composite and
Salomon Brothers Broad Investment Grade (BIG) Index respectively.(2)
Better risk-adjusted total returns are a key to understanding the potential
of convertible securities and an investment in The Bond Fund For Growth.
1. The Bond Fund For Growth's portfolio is subject to change.
2. Source: Salomon Brothers Convertible Securities Monthly, October 1995. The
Salomon Brothers Convertible Securities Index is an unmanaged,
market-capitalization weighted index of all convertible securities greater than
$50 million priced at market value. The Standard & Poor's 500 Composite Index
and the NASDAQ Composite Index are unmanaged indices widely regarded as
indicators of domestic stock market performance, which includes reinvestment of
dividends.The Salomon Brothers Broad Investment Grade Index is also unmanaged,
and is designed to cover the investment-grade universe of bonds issued in the
United States, including U.S. Treasury, Government-sponsored, mortgage and
corporate securities. The data was compiled for the 12/91 to 8/95 period. Used
by permission. All rights reserved. These indices cannot be purchased directly.
THE BOND FUND FOR GROWTH
<PAGE>
[ARTWORK]
- ---------------------------------------
Performance Potential in Varied Markets
- ---------------------------------------
The growth potential of convertible securities is derived from their
ability, at the holder's option, to be converted into a specified number of
shares of the issuing company's common stock. Holding interest rates constant,
convertibles typically move in the same direction as the underlying common
stock.
Fortunately, the significant advantage of convertibles is that they do not,
in general, exhibit the extreme fluctuations that can be typical of the equity
markets.
In rising equity markets, the conversion feature often provides an
advantage over other fixed income investments. Because the convertible security
is exchangeable for the company's common stock, its value tends to increase as
the value of the underlying common stock rises.
In falling equity markets, the value of a convertible may also fall, but
typically less because of its value as a straight bond. Should the conversion
feature prove to be totally worthless, the convertible still has value as a
fixed income security. As with any bond, it will eventually mature at par.
As a result, convertibles generally fare well within theoretically defined
parameters during all types of markets. More importantly, they will
characteristically pay a higher level of current income than would be available
from the common stock(1): providing income, and the potential for growth, to
investors.
1. The substance of this claim was recently supported by Smith Barney in its
December 1995 publication Convertible Monthly, where it reports, for December
29, 1995, an average yield on 295 domestic convertible bonds (the domestic bond
portion of its convertible bond index) as 6.32% and an average dividend yield on
the underlying common stock as 1.46%.
THE BOND FUND FOR GROWTH
<PAGE>
- --------------------------------------------------------------------------------
Welcome to the OppenheimerFunds Family
- --------------------------------------------------------------------------------
[PHOTOGRAPH]
Bridget A. Macaskill, President
and CEO, OppenheimerFunds, Inc.
[PHOTOGRAPH]
Ronald H. Fielding
Chairman, Rochester Division
[PHOTOGRAPH]
Michael S. Rosen
President, Rochester Division
With the recent vote by shareholders to appoint OppenheimerFunds, Inc. as
the investment adviser to The Bond Fund For Growth, we are glad to welcome you
to the OppenheimerFunds family.
Let us first assure you that it is our full intention to maintain The
Rochester Funds' reputation as an innovative force in the management of mutual
funds. We see The Bond Fund For Growth, with its concentration in the
under-acknowledged asset class of convertible securities, as an important
consideration for investors seeking favorable risk-adjusted total returns. We
are pleased to say that the Fund continues to be managed by the same portfolio
management team and in the same investment style.
At OppenheimerFunds, our goal is to provide superior investment products
and services to help investors meet their long-term financial goals. With the
completion of The Rochester Funds acquisition, we currently manage (with a
subsidiary) more than $40 billion in assets, including more than 40 mutual
funds. Now, as an Oppenheimer fund shareholder, we invite you to explore this
broad spectrum of investments designed to increase the flexibility and
diversification of your investment portfolio.
Again, all of us at OppenheimerFunds look forward to serving you and to
helping you meet your investment objectives in the years to come.
- -------------------------
OppenheimerFunds Services
- -------------------------
On or about March 11th, shareholders of The Bond Fund For Growth will be
afforded the opportunity to take advantage of the special privileges that
traditional Oppenheimer fund investors have known for years.
These services, designed to keep you in-the-know and on-the-go, are your
access to current account information, informative news, automatic investment
plans and more.
o Account transactions and transfers are just a toll-free telephone call
away at 1-800-852-8457 during normal business hours. Plus, enroll in AccountLink
and use our telephone transaction feature to make investments directly from a
bank checking or savings account.
o Automated information on your account or any of the Oppenheimer funds is
available 24 hours a day, 7 days a week with OppenheimerFunds PhoneLink at
1-800-533-3310.
o Insightful information on the economy and issues that affect your
investments is available 24 hours a day on the OppenheimerFunds Information
Hotline - 1-800-835-3104.
Call our Toll-Free Customer Service today at 1-800-525-7048 for more information
on how to take advantage of your new financial relationship with the
OppenheimerFunds family.
[ARTWORK]
- --------------------------------------------------------------------------------
PLEASE NOTE: These services will be made available to The Bond Fund For Growth
shareholders beginning on or about March 11th.
- --------------------------------------------------------------------------------
THE BOND FUND FOR GROWTH
<PAGE>
[LOGO] THE
BOND FUND
FOR GROWTH
OppenheimerFunds, Inc.
Rochester Division
350 Linden Oaks
Rochester, New York 14625-2807
716-383-1300
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, NY 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, NY 10048-0203
Independent Accountants
Price Waterhouse LLP
Rochester, New York
Transfer and Shareholder
Services Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, CO 80217-5270
800-552-1129
This Annual Report is for the information of shareholders of The Bond Fund For
Growth. It must be preceded or accompanied by a current prospectus for the Fund.
For material information concerning the Fund, please see the prospectus. Shares
of the Fund are not deposits or obligations of any bank, are not guaranteed by
the FDIC or any other agency, and involve investment risks, including possible
loss of the principal amount involved.
For free copies of a prospectus, please contact OppenheimerFunds Distributor,
Inc. at the address listed. The prospectus contains more complete information
about the Fund, including charges and expenses. Please read the prospectus
carefully before investing or sending money.
RA0345.001.0196 February 29, 1996
================================================================================
[LOGO] OppenheimerFunds(R) ==============
Bulk Rate
OppenheimerFunds Distributor, Inc. US Postage
Rochester Division PAID
350 Linden Oaks Rochester, NY
Rochester, NY 14625-2807 Permit No. 491
==============
