<PAGE>
-------------------------------
Annual Report December 31, 1998
-------------------------------
OPPENHEIMER
Convertible
Securities Fund
[GRAPHIC]
[LOGO]
OppenheimerFunds(R)
THE RIGHT WAY TO INVEST
<PAGE>
[PHOTO]
Bridget A. Macaskill
President
Oppenheimer
Convertible
Securities Fund
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/ Bridget A. Macaskill
Bridget A. Macaskill
January 25, 1999
3 Oppenheimer Convertible Securities Fund
<PAGE>
"We are
optimistic
about the
prospects
for convertible
securities
regardless
of common
stock market
conditions
in 1999."
An interview with your Fund's manager
- --------------------------------------------------------------------------------
How did the Fund perform over the one-year period that ended December 31, 1998?
We were generally pleased with the performance of Oppenheimer Convertible
Securities Fund throughout the volatile investment environment that
characterized much of the period. Most of the Fund's gains were achieved during
the first half of the year when investors appeared encouraged by strong economic
growth and low inflation in the United States.
In contrast, the second half of the year was extremely volatile for the
convertible securities market. Certain investment companies, known as hedge
funds, had borrowed money to buy bonds in the global markets. When bond prices
began to fall, lenders demanded repayment of their loans, and many hedge funds
were forced to sell their holdings at a substantial loss. This worsened
conditions in the global bond markets even further, because security prices tend
to fall when the number of sellers greatly exceeds the number of buyers.
In addition, the financial crisis in Southeast Asia and persistent
recession in Japan began to adversely affect U.S. corporate earnings and
economic growth during the second half of the year. Fear of a potential
recession led to declining prices for the common stocks and convertible
securities of many companies.
Why should events overseas affect convertible securities from issuers in the
United States?
Economic weakness overseas can affect the profits of U.S. companies doing
business in foreign markets.
4 Oppenheimer Convertible Securities Fund
<PAGE>
[PHOTO]
Portfolio Management
Team (l to r)
Ted Everett
Mike Rosen
(Portfolio Manager)
For example, investor sentiment in the United States turned negative at mid-year
when the Asian financial crisis spread to Russia, which effectively defaulted on
many of its government bonds. The spread of the "Asian contagion" to other
emerging markets renewed concerns that developed markets--including the United
States--might suffer. As a result, many U.S. and foreign investors shifted their
assets away from investments they perceived as risky. Emerging-market debt,
high-yield corporate bonds, small-capitalization stocks and convertible
securities such as preferred stocks were particularly hard hit during this
"flight to quality."
When the fourth quarter of the year began, however, many of the concerns
about the global financial crisis began to ease. Investors appeared encouraged
when the International Monetary Fund, the U.S. Federal Reserve Board and other
nations' central banks announced measures designed to stimulate global economic
growth. Perhaps most significant, the Japanese government announced plans to
restructure its ailing banking system and boost its economy. With a possible end
to the financial crisis in sight, the perceived risks to the U.S. economy
appeared to be lower than they were just a few months earlier. As a result, the
convertible securities market rebounded, reversing much--but not all--of its
previous declines.
5 Oppenheimer Convertible Securities Fund
<PAGE>
Avg Annual Total Returns
For the Periods Ended 12/31/98(1)
Class A
Since
1 year 5 year Inception
- ---------------------------------
- -1.90% N/A 11.33%
- ---------------------------------
Class B
Since
1 year 5 year Inception
- ---------------------------------
- -1.54% N/A 11.74%
- ---------------------------------
Class C
Since
1 year 5 year Inception
- ---------------------------------
2.35% N/A 10.17%
- ---------------------------------
Class M
1 year 5 year 10 year
- ---------------------------------
0.21% 10.07% 12.61%
- ---------------------------------
An interview with your Fund's manager
- --------------------------------------------------------------------------------
Historically, haven't convertible securities helped limit losses in declining
stock markets?
Yes, convertible securities often help protect investors from the brunt of the
volatility in the stock market. That's because convertible securities' yields
effectively serve somewhat as a cushion during periods of market weakness. It's
important to keep in mind, however, that most issuers of convertible securities
are relatively small companies, and that small-capitalization stocks were
particularly hard-hit during last summer's stock market declines.
How was the Fund managed in this environment?
We continued to employ the same disciplined, value-oriented investment approach
that has guided the Fund in the past. We focus on the fundamental prospects of
individual issuers of convertible securities that we believe are priced
inexpensively, not on broad economic trends affecting entire markets or
industries.
During the first half of the year, our investment discipline helped us
identify a number of securities in the portfolio whose prices had appreciated to
the point at which we no longer considered them attractively valued. By
eliminating these securities before the stock market declines in the third
quarter, we were able to avoid holding those investments that we believed were
most vulnerable to stock market volatility.
6 Oppenheimer Convertible Securities Fund
<PAGE>
After the stock market's third quarter declines, our investment process helped
us find convertible securities of financially sound companies selling at
attractive prices. In some cases, in our opinion, prices of individual
convertible securities declined to unwarranted levels during the "flight to
quality" mentioned earlier. We sought to take advantage of temporary market
inefficiencies--periods in which security prices do not reflect their true
values--to acquire these investments at relatively low prices.
In what industries did you find the most attractive investment opportunities?
The biotechnology industry did well in 1998 after several years of lackluster
returns. A number of bio-technology companies announced approvals of significant
new drugs during the year, and others appear to be successfully negotiating the
different phases of the Food and Drug Administration's approval process.
1. Total returns includes 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 5/1/95. The Fund's maximum
sales charge for Class A shares was lower prior to 3/11/96, so actual
performance may have been higher. Class B returns include the applicable
contingent deferred sales charge of 5% (1-year) and 3% (since inception on
5/1/95). Class C returns for the one-year result include the contingent deferred
sales charge of 1%. Class C shares have an inception date of 3/11/96. Class M
returns include the current maximum initial sales charge of 3.25%. Class M
shares have an inception date of 6/3/86. Prior to March 11, 1996, Class M shares
were designated as Class A shares. Class B and C shares are subject to an annual
0.75% asset-based sales charge. Class M shares are subject to an annual 0.50%
asset-based sales charge. An explanation of the different performance
calculations is in the Fund's prospectus.
7 Oppenheimer Convertible Securities Fund
<PAGE>
An interview with your Fund's manager
- --------------------------------------------------------------------------------
In addition, many pharmaceutical companies have performed nicely. That's
because investors have appeared to prefer companies that are not very sensitive
to changes in the economy. In fact, people often buy medicine regardless of
economic conditions, which tends to benefit pharmaceutical companies.
Another area of the market that provided attractive returns isn't so much
an industry as a group of related industries: consumer-related companies such as
retailers and advertising agencies. These companies benefited from strong
consumer spending. Despite market volatility and expectations of slower economic
growth, Americans continue to spend money at department and specialty stores.
In addition, some areas of the technology industry have done very well in
1998, especially manufacturers of personal computers. The leaders in this
segment have benefited from increased demand for lower-priced home and business
computers. Finally, many telecommunications companies have turned in good
performance, primarily as a result of higher demand for voice, image and data
transmission services worldwide.
8 Oppenheimer Convertible Securities Fund
<PAGE>
What is your outlook for convertible securities in 1999?
We are optimistic about the prospects for convertible securities regardless of
common stock market conditions in 1999. If the stock market continues to be
turbulent, we expect convertible securities to help provide a cushion against
the full brunt of any declines. If the stock market advances in 1999,
convertible securities should help provide some participation in any gains.
Of the two market scenarios outlined above, we believe that the second is
more likely. Most issuers of convertible securities have not performed as well
as larger companies over the past few years and, as a result, their common
stocks are attractively valued. In addition, because we believe that slower
global economic growth will limit earnings potential for large companies in
1999, small companies appear poised to deliver comparatively higher rates of
earnings growth.
Finally, we believe that convertible securities' relatively high yields
will make them increasingly attractive to income-oriented investors in 1999.
9 Oppenheimer Convertible Securities Fund
<PAGE>
Asset Allocation2
[GRAPHIC]
o Convertible
Corporate Bonds
& Notes 62.5%
o Other Securities 15.5
o Structured
Instruments 7.5
o Preferred Stocks 6.5
o Cash Equivalents 6.3
o Common Stocks 1.7
Investors seeking investments that offer both current income and growth
potential may find them in the convertible securities market. If income and
growth are important to your financial goals then, in our opinion, convertible
securities may be a valuable part of The Right Way to Invest.
Top 10 Holdings2
- --------------------------------------------------------------------------------
Berkshire Hathaway, Inc. Nts. 1.7%
- --------------------------------------------------------------------------------
WMX Technologies, Inc. Nts. 1.5
- --------------------------------------------------------------------------------
Chiron Corp. Nts. 1.5
- --------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. STRYPES (Sun America, Inc.) 1.4
- --------------------------------------------------------------------------------
Thermo Electron Corp. Nts. 1.3
- --------------------------------------------------------------------------------
Pennzoil Co. Debs 1.2
- --------------------------------------------------------------------------------
Comverse Technology, Inc. Debs 1.2
- --------------------------------------------------------------------------------
Owens Corning Capital LLC MIPS 1.2
- --------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., Linked Nts. 1.1
- --------------------------------------------------------------------------------
Bankers Trust Linked Nts. (ACC Corp.) 1.1
- --------------------------------------------------------------------------------
Sector Breakdown -- Convertible Corporate Bonds and Notes3
- --------------------------------------------------------------------------------
Technology 17.2%
- --------------------------------------------------------------------------------
Capital Goods 14.2
- --------------------------------------------------------------------------------
Healthcare 10.0
- --------------------------------------------------------------------------------
Consumer Cyclicals 8.9
- --------------------------------------------------------------------------------
Telecommunications 6.2
- --------------------------------------------------------------------------------
Financial 2.7
- --------------------------------------------------------------------------------
Energy 2.4
- --------------------------------------------------------------------------------
Consumer Staples 0.9
- --------------------------------------------------------------------------------
Basic Materials 0.5
- --------------------------------------------------------------------------------
Transportation 0.4
- --------------------------------------------------------------------------------
2. Portfolio is subject to change. Percentages are as of December 31, 1998, and
are based on total market value of investments.
3. Portfolio is subject to change. Percentages are as of December 31, 1998, and
are based on net assets.
10 Oppenheimer Convertible Securities Fund
<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 sector index
and two broad-based market indices.
o Management's Discussion of Performance. During the Fund's fiscal year
that ended December 31, 1998, Oppenheimer Convertible Securities Fund's
performance was strongly influenced by global market conditions. While strong
U.S. economic growth and low inflation supported the market's rise during the
first half of the year, problems experienced by hedge funds and the spread of
the global financial crisis precipitated sharp market declines in the third
quarter. When financial crisis-related concerns eased in the fourth quarter, the
Fund participated in some of the market's rebound. 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 and B shares,
performance is measured from the inception of the classes on May 1, 1995. In the
case of Class C shares, from the inception of the class on March 11, 1996. In
the case of Class M shares, performance is measured for a ten-year period. The
Fund's performance reflects the deduction of the 5.75% and 3.25% maximum initial
sales charge on Class A and Class M shares, respectively, 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 Goldman Sachs
Convertible Bond 100 Index, the Lehman Brothers Aggregate Bond Index and the S&P
500 Index. The Goldman Sachs Convertible Bond 100 Index is an unmanaged index of
convertible securities. The Lehman Brothers Aggregate Bond Index is a
broad-based, unmanaged index of U.S. corporate bond issues, U.S. government
securities and mortgage-backed securities, widely recognized as a measure of the
performance of the domestic debt securities market. The 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 indices.
11 Oppenheimer Convertible Securities Fund
<PAGE>
Fund performance
- --------------------------------------------------------------------------------
CLASS A SHARES
Comparison of Change in Value of $10,000 Hypothetical Investements in:
Oppenheimer Convertible Securities Fund (Class A), Goldman Sachs Convertible
Bond 100 Index, Lehman Brothers Aggregate Bond Index, and S&P 500 Index
[GRAPHIC]
Oppenheimer Goldman Sachs Lehman
Convertible Convertible Brothers
Securities S&P 500 Bond 100 Aggregate
Fund Class A Index Index Bond Index
5/1/95 9,425 10,000 10,000 10,000
12/31/95 10,890 12,176 11,481 11,123
12/31/96 11,992 14,970 13,055 11,527
12/31/97 14,243 19,963 15,601 12,640
12/31/98 14,825 25,667 16,807 13,738
Average Annual Total Return of Class A Shares of the Fund at 12/31/98(1)
1 Year -1.90% Life 11.33%
CLASS B SHARES
Comparison of Change in Value of $10,000 Hypothetical Investements in:
Oppenheimer Convertible Securities Fund (Class B), Goldman Sachs Convertible
Bond 100 Index, Lehman Brothers Aggregate Bond Index, and S&P 500 Index
[GRAPHIC]
Oppenheimer Goldman Sachs Lehman
Convertible Convertible Brothers
Securities S&P 500 Bond 100 Aggregate
Fund Class B Index Index Bond Index
5/1/95 10,000 10,000 10,000 10,000
12/31/95 11,509 12,176 11,481 11,123
12/31/96 12,577 14,970 13,055 11,527
12/31/97 14,832 19,963 15,601 12,640
12/31/98 15,022 25,667 16,807 13,738
Average Annual Total Return of Class B Shares of the Fund at 12/31/98(2)
1 Year -1.54% Life 11.74%
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 all three indices begins on 4/30/95 for Class A
and Class B, 2/29/96 for Class C and 12/31/88 for Class M.
1. The inception date of Class A shares was 5/1/95. 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 5/1/95. The average
annual total returns are shown net of the applicable 5% (1-year) and 3% (since
inception) contingent deferred sales charges. The ending account value in the
graph is net of the applicable 3% contingent deferred sales charge.
12 Oppenheimer Convertible Securities Fund
<PAGE>
Class C Shares
Comparison of Change in Value of $10,000 Hypothetical Investements in:
Oppenheimer Convertible Securities Fund (Class C), Goldman Sachs Convertible
Bond 100 Index, Lehman Brothers Aggregate Bond Index, and S&P 500 Index
[GRAPHIC]
Oppenheimer Goldman Sachs Lehman
Convertible Convertible Brothers
Securities S&P 500 Bond 100 Aggregate
Fund Class C Index Index Bond Index
3/11/96 10,000 10,000 10,000 10,000
12/31/96 10,775 11,781 10,870 10,477
12/31/97 12,701 15,710 12,990 11,488
12/31/98 13,121 20,199 13,994 12,486
Average Annual Total Return of Class C Shares of the Fund at 12/31/98(3)
1 Year 2.35% Life 10.17%
Class M Shares
Comparison of Change in Value of $10,000 Hypothetical Investements in:
Oppenheimer Convertible Securities Fund (Class M), Goldman Sachs Convertible
Bond 100 Index, Lehman Brothers Aggregate Bond Index, and S&P 500 Index
[GRAPHIC]
Oppenheimer Goldman Sachs Lehman
Convertible Convertible Brothers
Securities S&P 500 Bond 100 Aggregate
Fund Class M Index Index Bond Index
12/31/88 9,675 10,000 10,000 10,000
12/31/89 10,462 13,163 10,744 11,453
12/31/90 9,611 12,754 9,640 12,479
12/31/91 12,349 16,631 12,310 14,476
12/31/92 16,199 17,896 14,183 15,548
12/31/93 19,641 19,696 16,963 17,064
12/31/94 19,407 19,955 16,140 16,566
12/31/95 24,453 27,445 20,583 19,626
12/31/96 26,795 33,743 23,404 20,339
12/31/97 31,670 44,997 27,968 22,302
12/31/98 32,803 57,854 30,131 24,240
Average Annual Total Return of Class M Shares of the Fund at 12/31/98(4)
1 Year 0.21% 5 Year 10.07% 10 Year 12.61%
3. Class C shares of the Fund were first publicly offered on 3/11/96. The
average annual total returns are shown net of the applicable 1% contingent
deferred sales charge for the one-year period.
4. Class M shares of the Fund were first publicly offered on 6/3/86. The average
annual total returns are shown net of the applicable 3.25% maximum initial sales
charge.
Past performance is not predictive of future performance. Graphs are not drawn
to same scale.
13 Oppenheimer Convertible Securities Fund
<PAGE>
Financials
- --------------------------------------------------------------------------------
14 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
==========================================================================================================
<S> <C> <C>
Convertible Corporate Bonds and Notes--63.4%
- ----------------------------------------------------------------------------------------------------------
Basic Materials--0.5%
- ----------------------------------------------------------------------------------------------------------
Gold & Precious Minerals--0.2%
Coeur D'Alene Mines Corp., 7.25% Cv. Unsec. Sub. Debs., 10/31/05 $ 3,000,000 $ 1,781,250
- ----------------------------------------------------------------------------------------------------------
Metals--0.3%
Homestake Mining Co., 5.50% Cv. Sub. Nts., 6/23/00(1) 4,000,000 3,845,000
- ----------------------------------------------------------------------------------------------------------
Capital Goods--14.2%
- ----------------------------------------------------------------------------------------------------------
Aerospace/Defense--1.1%
Kellstrom Industries, Inc., 5.50% Cv. Unsec. Sub. Nts., 6/15/03 3,000,000 3,078,750
- ----------------------------------------------------------------------------------------------------------
Orbital Sciences Corp., 5% Cv. Unsec. Sub. Nts., 10/1/02(2) 5,000,000 8,287,500
--------------
11,366,250
- ----------------------------------------------------------------------------------------------------------
Industrial Services--9.6%
Cendant Corp., 3% Cv. Sub. Nts., 2/15/02 6,000,000 5,647,500
- ----------------------------------------------------------------------------------------------------------
Corestaff, Inc., 2.94% Cv. Sub. Nts., 8/15/04 7,000,000 5,617,500
- ----------------------------------------------------------------------------------------------------------
Danka Business Systems plc, 6.75% Cv. Sub. Nts., 4/1/02 3,550,000 1,189,250
- ----------------------------------------------------------------------------------------------------------
EMCOR Group, Inc., 5.75% Cv. Sub. Nts., 4/1/05 5,000,000 4,281,250
- ----------------------------------------------------------------------------------------------------------
Getty Images, Inc., 4.75% Cv. Sub. Nts., 6/1/03(1) 5,000,000 3,968,750
- ----------------------------------------------------------------------------------------------------------
Inacom Corp., 4.50% Cv. Sub. Debs., 11/1/04 2,500,000 2,181,250
- ----------------------------------------------------------------------------------------------------------
Interpublic Group Cos.:
1.80% Cv. Sub. Debs., 9/16/04(1) 4,000,000 4,460,000
1.80% Cv. Sub. Nts., 9/16/04 7,000,000 7,805,000
- ----------------------------------------------------------------------------------------------------------
Mail-Well I Corp., 5% Sub. Nts., 11/1/02 5,000,000 4,493,750
- ----------------------------------------------------------------------------------------------------------
Mansur Industries, Inc., 8.25% Cv. Sub. Nts., 2/18/03(3) 4,165,000 4,206,650
- ----------------------------------------------------------------------------------------------------------
Phoenix Investment Partners Corp., 6% Cv. Unsec. Sub.
Debs., 11/1/15 7,817,500 8,716,511
- ----------------------------------------------------------------------------------------------------------
Pride International, Inc., Zero Coupon Cv. Sub. Debs.,
5.80%, 4/24/18(4) 20,000,000 5,525,000
- ----------------------------------------------------------------------------------------------------------
Robbins & Myers, Inc., 6.50% Unsec. Sub. Nts., 9/1/03 1,500,000 1,449,375
- ----------------------------------------------------------------------------------------------------------
Thermo Ecotek Corp., 4.875% Cv. Sub. Debs., 4/15/04(1) 5,000,000 4,262,500
- ----------------------------------------------------------------------------------------------------------
Thermo Fibertek, Inc., 4.50% Cv. Sub. Debs., 7/15/04(1) 5,000,000 4,231,250
- ----------------------------------------------------------------------------------------------------------
Thermo TerraTech, Inc.:
4.625% Cv. Sub. Debs., 5/1/03(1) 1,500,000 1,276,875
4.625% Cv. Sub. Nts., 5/1/03 1,798,000 1,530,547
- ----------------------------------------------------------------------------------------------------------
U.S. Filter Corp., 4.50% Cv. Sub. Nts., 12/15/01 8,000,000 7,550,000
- ----------------------------------------------------------------------------------------------------------
WMX Technologies, Inc., 2% Cv. Sub. Nts., 1/24/05(2) 16,350,000 16,063,875
- ----------------------------------------------------------------------------------------------------------
World Color Press, Inc., 6% Cv. Sub. Nts., 10/1/07 5,500,000 5,458,750
--------------
99,915,583
- ----------------------------------------------------------------------------------------------------------
Manufacturing--3.5%
Berkshire Hathaway, Inc., 1% Sr. Exchangeable Nts., 12/2/01
(Exchangeable into Common Stock of Citigroup, Inc.) 12,000,000 18,330,000
- ----------------------------------------------------------------------------------------------------------
Hexcel Corp. (New), 7% Cv. Unsec. Sub. Nts., 8/1/03 4,250,000 3,554,062
</TABLE>
15 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
==========================================================================================================
<S> <C> <C>
Manufacturing (continued)
Mark IV Industries, Inc., 4.75% Cv. Sub. Nts., 11/1/04 $12,000,000 $ 9,615,000
- ----------------------------------------------------------------------------------------------------------
Synetic, Inc., 5% Cv. Sub. Debs., 2/15/07 5,000,000 4,343,750
--------------
35,842,812
- ----------------------------------------------------------------------------------------------------------
Consumer Cyclicals--8.9%
- ----------------------------------------------------------------------------------------------------------
Autos & Housing--5.5%
Hudson Hotels Corp., 7.50% Cv. Sub. Debs., 7/1/01(3) 7,500,000 2,292,000
- ----------------------------------------------------------------------------------------------------------
Lennar Corp., Zero Coupon Cv. Debs., 3.88%, 7/29/18(4) 16,540,000 7,380,975
- ----------------------------------------------------------------------------------------------------------
Magna International, Inc., 4.875% Cv. Sub. Debs., 2/15/05(1) 10,000,000 10,287,500
- ----------------------------------------------------------------------------------------------------------
MascoTech, Inc., 4.50% Cv. Sub. Debs., 12/15/03 11,000,000 8,965,000
- ----------------------------------------------------------------------------------------------------------
Rouse Co., 5.75% Cv. Sub. Nts., 7/23/02 10,450,000 10,854,938
- ----------------------------------------------------------------------------------------------------------
Security Capital U.S. Realty, 2% Cv. Sr. Unsec. Bonds, 5/22/03
(converts to shares of Security Capital U.S. Realty)(3) 14,500,000 11,455,000
- ----------------------------------------------------------------------------------------------------------
Speedway Motorsports, Inc., 5.75% Cv. Sub. Debs., 9/30/03 4,000,000 4,340,000
- ----------------------------------------------------------------------------------------------------------
Sunbeam Corp., Zero Coupon Cv. Sub. Debs., 5.96%, 3/25/18(1)(4) 9,500,000 1,116,250
--------------
56,691,663
- ----------------------------------------------------------------------------------------------------------
Media--0.3%
Thomas Nelson, Inc., 5.75% Cv. Nts., 11/30/99(1) 3,000,000 3,030,000
- ----------------------------------------------------------------------------------------------------------
Retail: General--0.2%
Travel Ports of America, Inc., 8.50% Cv. Sr. Sub. Debs.,
1/15/05 (Reg S)(3) 2,407,000 2,589,595
- ----------------------------------------------------------------------------------------------------------
Retail: Specialty--2.9%
Corporate Express, Inc., 4.50% Cv. Sub. Nts., 7/1/00 4,000,000 3,460,000
- ----------------------------------------------------------------------------------------------------------
Costco Cos., Inc., Zero Coupon Cv. Sub. Nts.:
3.50%, 8/19/17(1)(2)(4) 8,000,000 6,660,000
3.91%, 8/19/17(2)(4) 7,000,000 5,827,500
- ----------------------------------------------------------------------------------------------------------
Home Depot, Inc., 3.25% Cv. Sub. Nts., 10/1/01(2) 4,000,000 10,560,000
- ----------------------------------------------------------------------------------------------------------
Nine West Group, Inc., 5.50% Cv. Sub. Nts., 7/15/03 5,000,000 3,943,750
--------------
30,451,250
- ----------------------------------------------------------------------------------------------------------
Consumer Staples--0.9%
- ----------------------------------------------------------------------------------------------------------
Entertainment--0.4%
Imax Corp., 5.75% Cv. Debs., 4/1/03 3,000,000 4,428,750
- ----------------------------------------------------------------------------------------------------------
Tobacco--0.5%
Standard Commercial Corp., 7.25% Cv. Sub. Debs., 3/31/07 6,098,000 4,664,970
- ----------------------------------------------------------------------------------------------------------
Energy--2.4%
- ----------------------------------------------------------------------------------------------------------
Energy Services & Producers--0.9%
Diamond Offshore Drilling, Inc., 3.75% Cv. Unsec. Sub. Nts., 2/15/07 6,000,000 5,587,500
- ----------------------------------------------------------------------------------------------------------
Nabors Industries, Inc., 5% Cv. Sub. Nts., 5/15/06 4,000,000 3,910,000
--------------
9,497,500
</TABLE>
16 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
==========================================================================================================
<S> <C> <C>
Oil: Domestic--1.5%
Pennzoil Co., 4.95% Cv. Debs., 8/15/08 $13,378,000 $ 13,143,885
- ----------------------------------------------------------------------------------------------------------
Remington Oil & Gas Corp., 8.25% Cv. Sub. Nts., 12/1/02 2,000,000 1,970,000
--------------
15,113,885
- ----------------------------------------------------------------------------------------------------------
Financial--2.7%
- ----------------------------------------------------------------------------------------------------------
Banks--0.5%
Deutsche Bank Finance NV, 2% Cv. Nts., 12/22/03
(exchangeable to Allianz) 4,500,000 5,685,075
- ----------------------------------------------------------------------------------------------------------
Diversified Financial--1.8%
Bell Atlantic Financial Services Corp.:
4.25% Sr. Exchangeable Nts., 9/15/05
(exchangeable for shares of Cable
& Wireless Communications plc or cash)(1) 8,000,000 8,290,000
5.75% Cv. Sr. Unsec. Nts., 4/1/03
(cv. into common stock of Telecom Corp. of New Zealand)(1) 10,000,000 10,362,500
--------------
18,652,500
- ----------------------------------------------------------------------------------------------------------
Insurance--0.4%
Penn Treaty American Corp., 6.25% Cv. Sub. Nts., 12/1/03 3,250,000 3,558,750
- ----------------------------------------------------------------------------------------------------------
Westbridge Capital Corp., 7.50% Cv. Sub. Nts., 5/1/04(3)(5) 1,130,000 189,275
--------------
3,748,025
- ----------------------------------------------------------------------------------------------------------
Healthcare--10.0%
- ----------------------------------------------------------------------------------------------------------
Healthcare/Drugs--5.6%
ALZA Corp., 5% Cv. Sub. Debs., 5/1/06(2) 6,000,000 8,677,500
- ----------------------------------------------------------------------------------------------------------
Athena Neurosciences, Inc., 4.75% Cv. Nts., 11/15/04(1) 5,000,000 5,887,500
- ----------------------------------------------------------------------------------------------------------
Centocor, Inc., 4.75% Cv. Unsec. Sub. Debs., 2/15/05(2) 4,000,000 4,235,000
- ----------------------------------------------------------------------------------------------------------
Chiron Corp., 1.90% Cv. Sub. Nts., 11/17/00(1) 15,000,000 15,318,750
- ----------------------------------------------------------------------------------------------------------
Fuisz Technologies Ltd.:
7% Cv. Sub. Debs., 10/15/04(1) 6,000,000 6,517,500
7% Cv. Sub. Debs., 10/15/04 850,000 923,313
- ----------------------------------------------------------------------------------------------------------
Roche Holdings, Inc.:
Zero Coupon Cv. Liquid Yield Option Nts., 5.49%, 4/20/10(1)(4) 12,000,000 7,792,560
Zero Coupon Exchangeable Liquid Yield Option Nts.,
6.38%, 5/6/12(1)(4) 10,000,000 5,343,800
- ----------------------------------------------------------------------------------------------------------
Sepracor, Inc., 7% Nts., 12/15/05(1) 3,000,000 2,973,750
--------------
57,669,673
- ----------------------------------------------------------------------------------------------------------
Healthcare/Supplies & Services--4.4%
Concentra Managed Care, Inc.:
4.50% Cv. Sub. Nts., 3/15/03(1) 2,000,000 1,522,500
6% Cv. Unsec. Sub. Nts., 12/15/01 2,000,000 1,705,000
- ----------------------------------------------------------------------------------------------------------
Equity Corp. International, 4.50% Cv. Unsec. Sub. Debs., 12/31/04 1,000,000 1,198,750
</TABLE>
17 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
==========================================================================================================
<S> <C> <C>
Healthcare/Supplies & Services (continued)
Genzyme Corp. (General Division), 5.25% Cv. Sub. Unsec.
Nts., 6/1/05 $ 4,000,000 $ 5,670,000
- ----------------------------------------------------------------------------------------------------------
HEALTHSOUTH Corp., 3.25% Cv. Sub. Nts., 4/1/03 4,500,000 3,847,500
- ----------------------------------------------------------------------------------------------------------
NovaCare, Inc., 5.50% Cv. Sub. Debs., 1/15/00 3,250,000 2,405,000
- ----------------------------------------------------------------------------------------------------------
Omnicare, Inc., 5% Cv. Sub. Debs., 12/1/07(1) 5,000,000 5,431,250
- ----------------------------------------------------------------------------------------------------------
PhyCor, Inc., 4.50% Cv. Sub. Debs., 2/15/03 5,000,000 3,025,000
- ----------------------------------------------------------------------------------------------------------
Quintiles Transnational Corp., 4.25% Cv. Sub. Nts., 5/31/00(2) 6,000,000 8,175,000
- ----------------------------------------------------------------------------------------------------------
St. Jude Medical, Inc., 5.75% Cv. Sub. Nts., 8/15/01 6,000,000 6,360,000
- ----------------------------------------------------------------------------------------------------------
ThermoTrex Corp., 3.25% Cv. Gtd. Bonds, 11/1/07 4,000,000 2,800,000
- ----------------------------------------------------------------------------------------------------------
Veterinary Centers of America, Inc.:
5.25% Cv. Sub. Debs., 5/1/06 4,050,000 3,361,500
5.25% Cv. Unsec. Sub. Debs., Series REGS, 5/1/06 570,000 473,100
--------------
45,974,600
- ----------------------------------------------------------------------------------------------------------
Technology--17.2%
- ----------------------------------------------------------------------------------------------------------
Computer Hardware--2.0%
Adaptec, Inc., 4.75% Cv. Sub. Nts., 2/1/04 4,000,000 3,110,000
- ----------------------------------------------------------------------------------------------------------
Level One Communications, Inc., 4% Cv. Sub. Nts., 9/1/04 3,000,000 4,428,750
- ----------------------------------------------------------------------------------------------------------
Quantum Corp., 7% Cv. Sub. Nts., 8/1/04 4,500,000 4,303,125
- ----------------------------------------------------------------------------------------------------------
Telxon Corp.:
5.75% Cv. Sub. Nts., 1/1/03(1) 2,250,000 1,769,063
5.75% Cv. Sub. Nts., 1/1/03 4,500,000 3,538,125
- ----------------------------------------------------------------------------------------------------------
Western Digital Corp., Zero Coupon Cv. Unsec. Sub. Debs.,
8.39%, 2/18/18(4) 10,000,000 3,037,500
--------------
20,186,563
- ----------------------------------------------------------------------------------------------------------
Computer Software/Services--4.7%
BEA Systems, Inc., 4% Sub. Nts., 6/15/05(1) 7,000,000 4,698,750
- ----------------------------------------------------------------------------------------------------------
HNC Software, Inc., 4.75% Cv. Unsec. Sub. Nts., 3/1/03 6,500,000 7,109,375
- ----------------------------------------------------------------------------------------------------------
Hyperion Solutions Corp., 4.50% Cv. Unsec. Debs., 3/15/05 4,000,000 2,920,000
- ----------------------------------------------------------------------------------------------------------
MacNeal-Schwendler Corp., 7.875% Cv. Sub. Debs., 8/18/04 2,517,000 2,337,664
- ----------------------------------------------------------------------------------------------------------
National Data Corp., 5% Cv. Sub. Nts., 11/1/03 8,100,000 8,687,250
- ----------------------------------------------------------------------------------------------------------
Network Associates, Inc., Zero Coupon Cv. Sub.
Debs., 4.53%, 2/13/18(1)(2)(4) 14,000,000 8,487,500
- ----------------------------------------------------------------------------------------------------------
PLATINUM Technology, Inc., 6.75% Cv. Sub. Nts., 11/15/01(2) 3,000,000 4,102,500
- ----------------------------------------------------------------------------------------------------------
Beyond.Com Corp., 7.25% Cv. Sub. Nts., 12/1/03(1) 4,000,000 4,885,000
- ----------------------------------------------------------------------------------------------------------
Tecnomatix Technologies Ltd.:
5.25% Cv. Sub. Nts., 8/15/04(1) 3,000,000 2,347,500
5.25% Cv. Sub. Nts., 8/15/04 4,200,000 3,286,500
--------------
48,862,039
</TABLE>
18 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
==========================================================================================================
<S> <C> <C>
Electronics--10.5%
Advanced Micro Devices, Inc., 6% Cv. Sub. Nts., 5/15/05 $ 6,000,000 $ 6,157,500
- ----------------------------------------------------------------------------------------------------------
Analog Devices, Inc., 3.50% Cv. Sub. Nts., 12/1/00(2) 6,000,000 9,075,000
- ----------------------------------------------------------------------------------------------------------
Atmel Corp., Zero Coupon Cv. Sub. Debs., 7.25%, 4/21/18(1)(4) 15,000,000 4,631,250
- ----------------------------------------------------------------------------------------------------------
California Microwave, Inc., 5.25% Cv. Sub. Nts., 12/15/03 9,645,000 5,847,281
- ----------------------------------------------------------------------------------------------------------
Checkpoint Systems, Inc.:
5.25% Cv. Sub. Debs., 11/1/05 3,900,000 3,280,875
5.25% Cv. Unsec. Bonds, 11/1/05(1) 5,200,000 4,374,500
- ----------------------------------------------------------------------------------------------------------
Cirrus Logic, Inc., 6% Cv. Sub Nts., 12/15/03 7,000,000 5,153,750
- ----------------------------------------------------------------------------------------------------------
Itron, Inc., 6.75% Unsec. Sub. Nts., 3/31/04 2,325,000 1,534,500
- ----------------------------------------------------------------------------------------------------------
National Semiconductor Corp., 6.50% Cv. Sub. Debs., 10/1/02 7,500,000 6,618,750
- ----------------------------------------------------------------------------------------------------------
Park Electrochemical Corp., 5.50% Cv. Sub. Nts., 3/1/06 2,000,000 1,792,500
- ----------------------------------------------------------------------------------------------------------
Solectron Corp., 6% Cv. Sub. Nts., 3/1/06(1)(2) 4,000,000 10,880,000
- ----------------------------------------------------------------------------------------------------------
Thermo Electron Corp., 4.25% Cv. Sub. Nts., 1/1/03(1) 15,500,000 13,814,375
- ----------------------------------------------------------------------------------------------------------
Thermo Instrument Systems, Inc.:
3.75% Cv. Sr. Unsec. Nts., 9/15/00 1,085,000 1,236,900
4% Cv. Gtd. Nts., Series RG, 1/15/05 3,999,999 3,265,000
- ----------------------------------------------------------------------------------------------------------
Thermo Optek Corp., 5% Cv. Sub. Debs., 10/15/00(1) 9,535,000 9,141,681
- ----------------------------------------------------------------------------------------------------------
Thermo Voltek Corp., 3.75% Cv. Sub. Debs., 11/15/00 2,470,000 2,395,900
- ----------------------------------------------------------------------------------------------------------
ThermoQuest Corp., 5% Cv. Sub. Debs., 8/15/00(1) 9,775,000 9,787,219
- ----------------------------------------------------------------------------------------------------------
Xilinx, Inc., 5.25% Cv. Sub. Nts., 11/1/02(2) 8,000,000 10,420,000
--------------
109,406,981
- ----------------------------------------------------------------------------------------------------------
Telecommunications--6.2%
- ----------------------------------------------------------------------------------------------------------
Telephone Utilities--1.0%
GTE Corp., 6% Cv. Sub. Debs., 4/1/12 (Cv. into Cash
at 96.657% of Face)(3) 11,004,000 10,646,370
- ----------------------------------------------------------------------------------------------------------
Telecommunications/Technology--5.2%
Aspect Telecommunications, Inc., Zero Coupon Cv. Sub. Debs.,
7.98%, 8/10/18(1)(4) 7,500,000 1,762,500
- ----------------------------------------------------------------------------------------------------------
Comverse Technology, Inc., 5.75% Cv. Sub. Debs., 10/1/06(2) 8,065,000 12,914,081
- ----------------------------------------------------------------------------------------------------------
France Telecom, ADN, 2% Unsub. Nts., 1/1/04(3) 5,432,000 5,377,680
- ----------------------------------------------------------------------------------------------------------
Gilat Satellite Networks Ltd., 6.50% Cv. Sub. Nts., 6/3/04(1) 7,250,000 10,222,500
- ----------------------------------------------------------------------------------------------------------
International CableTel, Inc., 7% Cv. Sub. Nts., 6/15/08 2,000,000 3,057,500
- ----------------------------------------------------------------------------------------------------------
NTL, Inc., 7% Cv. Sub. Nts., 12/15/08(1)(2) 5,000,000 5,412,500
- ----------------------------------------------------------------------------------------------------------
Premiere Technologies, Inc., 5.75% Cv. Sub. Nts., 7/1/04 3,500,000 1,820,000
- ----------------------------------------------------------------------------------------------------------
SmarTalk TeleServices, Inc.:
5.75% Cv. Sub. Nts., 9/15/04(1) 9,000,000 2,497,500
5.75% Cv. Sub. Nts., 9/15/04 1,000,000 277,500
- ----------------------------------------------------------------------------------------------------------
U.S. Cellular Corp., Zero Coupon Cv. Sub. Liquid Yield
Option Nts., 5.82%, 6/15/15(4) 26,000,000 10,692,500
--------------
54,034,261
</TABLE>
19 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
==========================================================================================================
<S> <C> <C>
Transportation--0.4%
- ----------------------------------------------------------------------------------------------------------
Air Transportation--0.3%
Continental Airlines, Inc., 6.75% Cv. Sub. Nts., 4/15/06(2) $ 3,000,000 $ 3,652,500
- ----------------------------------------------------------------------------------------------------------
Shipping--0.1%
Offshore Logistics, Inc., 6% Cv. Unsec. Sub. Nts., 12/15/03 1,000,000 863,750
--------------
Total Convertible Corporate Bonds and Notes (Cost $643,049,575) 658,600,845
<CAPTION>
Shares
==========================================================================================================
<S> <C> <C>
Preferred Stocks--6.6%
- ----------------------------------------------------------------------------------------------------------
Budget Group, Inc., 6.25% Cv.(1) 104,000 4,030,000
- ----------------------------------------------------------------------------------------------------------
Danskin, Inc., $88.2722 Cv. Preferred, Series D
(Cv. into 1,471,203 Restricted Common Shares)(3)(6) 88 882,722
- ----------------------------------------------------------------------------------------------------------
Estee Lauder Co., 6.25% Cv. Preferred Stock 75,000 5,812,500
- ----------------------------------------------------------------------------------------------------------
K-Mart Financing I, 7.75% Cv. Preferred Stock 135,000 7,821,563
- ----------------------------------------------------------------------------------------------------------
Medpartners, Inc., 6.50% Cv., Non-Vtg 195,200 1,500,600
- ----------------------------------------------------------------------------------------------------------
Microsoft Corp., $2.196 Cv., Series A 80,000 7,820,000
- ----------------------------------------------------------------------------------------------------------
Monsanto Co., 6.50% Cv.(6) 201,500 9,873,500
- ----------------------------------------------------------------------------------------------------------
Owens-Illinois, Inc., 4.75% Cv. Preferred Stock 151,400 6,434,500
- ----------------------------------------------------------------------------------------------------------
Sealed Air Corp. (New), $2.00 Cv. Preferred Stock, Series A 150,000 7,781,250
- ----------------------------------------------------------------------------------------------------------
Sensormatic Electronics Corp., 6.50% Cv.(1)(6) 225,000 2,981,250
- ----------------------------------------------------------------------------------------------------------
Skytel Communications, Inc., $2.25 Cv. Sub. Debs 171,100 5,325,489
- ----------------------------------------------------------------------------------------------------------
Sun Financing I, 7% Cv.(1)(6) 40,000 430,000
- ----------------------------------------------------------------------------------------------------------
Unocal Corp., 6.25% Cv. Preferred 125,000 6,109,375
- ----------------------------------------------------------------------------------------------------------
Winstar Communications, Inc., 7% Cv. Cum. Preferred Stock,
Series D, Non-Vtg 50,000 2,300,000
--------------
Total Preferred Stocks (Cost $68,977,400) 69,102,749
==========================================================================================================
Other Securities--15.7%
- ----------------------------------------------------------------------------------------------------------
Basic Materials--0.9%
- ----------------------------------------------------------------------------------------------------------
Metals--0.3%
USX Capital Trust, 6.75% Cv. Preferred Stock 80,200 3,363,387
- ----------------------------------------------------------------------------------------------------------
Paper--0.6%
International Paper Capital Trust, 5.25% Cv. Preferred Securities, 7/20/25
(Cv. into Common Stock of International Paper Co.) 125,000 6,046,875
- ----------------------------------------------------------------------------------------------------------
Capital Goods--3.7%
- ----------------------------------------------------------------------------------------------------------
Aerospace/Defense--0.7%
Coltec Capital Trust, 5.25% Cv. Preferred Stock(1) 150,000 6,637,500
- ----------------------------------------------------------------------------------------------------------
Industries Services--1.4%
Central Parking Financial Trust, 5.25% Cv.(6) 100,000 1,987,500
- ----------------------------------------------------------------------------------------------------------
Owens & Miner Trust I, 5.375% Cv. Preferred Stock(1) 160,000 7,580,000
</TABLE>
20 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
==========================================================================================================
<S> <C> <C>
Industries Services (continued)
United Rental Trust I, 6.50% Cv. Quarterly Income
Preferred Securities(1) 110,000 $ 5,293,750
--------------
14,861,250
- ----------------------------------------------------------------------------------------------------------
Manufacturing--1.6%
CNF Trust I, $2.50 Term Convertible Securities, Series A, 6/1/12
(Cv. into Common Stock of CNF Transportation, Inc.) 150,000 8,531,250
- ----------------------------------------------------------------------------------------------------------
Elsag Bailey Financing Trust, 5.50% Cv. Trust Originated
Preferred Securities, 12/31/35 (Cv. into Common Stock of
Elsag Bailey Process Automation NV) 125,000 7,609,375
--------------
16,140,625
- ----------------------------------------------------------------------------------------------------------
Consumer Cyclicals--3.4%
- ----------------------------------------------------------------------------------------------------------
Autos & Housing--2.7%
Daimler Benz AG, ADNs representing 5.75% Sub.
Mandatory Cv. Nts. 27,988 2,718,334
- ----------------------------------------------------------------------------------------------------------
Equity Office Properties Trust,
5.25% Cum. Cv. Preferred, Series B, Non-Vtg 125,000 4,796,875
- ----------------------------------------------------------------------------------------------------------
Fleetwood Capital Trust, 6% Cv 20,000 937,500
- ----------------------------------------------------------------------------------------------------------
Fleetwood Enterprises Capital Trust I, 6% Cv. Preferred Stock(1) 100,000 4,687,500
- ----------------------------------------------------------------------------------------------------------
Kaufman & Broad Home Corp., 8.25% Cv. Preferred Redeemable
Increased Dividend Equity Securities 300,000 2,700,000
- ----------------------------------------------------------------------------------------------------------
Owens Corning Capital LLC, 6.50% Cv. Monthly Income
Preferred Securities, Non-Vtg.(1) 250,000 12,468,750
--------------
28,308,959
- ----------------------------------------------------------------------------------------------------------
Media--0.7%
News Corp. Ltd., 5% Exchangeable Trust Originated
Preferred Securities, 1/2/16 (Exchangeable for Ordinary
Shares of British Sky Broadcasting Group plc)(1) 80,000 6,950,000
- ----------------------------------------------------------------------------------------------------------
Consumer Staples--2.7%
- ----------------------------------------------------------------------------------------------------------
Consumer Services--0.2%
Central Parking Financial Trust, 5.25% Cv. Preferred Stock(1) 105,000 2,086,875
- ----------------------------------------------------------------------------------------------------------
Entertainment--1.0%
Houston Industries, Inc., 7% Automatic Common Exchange Securities,
Exchangeable for Time Warner, Inc. Common Stock, 7/1/00 100,000 10,637,500
- ----------------------------------------------------------------------------------------------------------
Food--0.6%
Suiza Capital Trust II/Suiza Foods Corp., 5.50% Cv. Preferred Stock 150,000 6,543,750
- ----------------------------------------------------------------------------------------------------------
Household Goods--0.9%
Newell Financial Trust I, 5.25% Cv. Preferred Stock(1) 175,000 9,231,250
</TABLE>
21 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
==========================================================================================================
<S> <C> <C>
Energy--0.7%
- ----------------------------------------------------------------------------------------------------------
Energy Services & Producers--0.7%
El Paso Energy Corp. Capital Trust I, 4.75% Cv. Preferred Stock 150,000 $ 7,181,250
- ----------------------------------------------------------------------------------------------------------
Financial--1.0%
- ----------------------------------------------------------------------------------------------------------
Banks--1.0%
National Australia Bank Ltd., ExCaps (each ExCap consists of
$25 principal amount of 7.875% Perpetual Capital Security and
a purchase contract entitling the holder to exchange ExCaps
for ordinary shares of the bank)(7) 372,900 10,394,588
- ----------------------------------------------------------------------------------------------------------
Telecommunications--1.8%
- ----------------------------------------------------------------------------------------------------------
Telecommunications/Technology--0.4%
Corning Delaware LP, 6% Cv. Monthly Income Preferred Securities 66,400 4,648,000
- ----------------------------------------------------------------------------------------------------------
Telephone Utilities--1.4%
MediaOne Group, Inc., 6.25% Cv. Premium Income Exchangeable
Securities for Airtouch Communications, Inc. Common Stock 147,900 9,835,350
- ----------------------------------------------------------------------------------------------------------
SBC Communications, Inc., 7.75% Debt Exchangeable for
Common Stock (exchangeable for shares of Telefonos de Mexico) 100,000 4,450,000
--------------
14,285,350
- ----------------------------------------------------------------------------------------------------------
Transportation--0.9%
- ----------------------------------------------------------------------------------------------------------
Railroads & Truckers--0.9%
Union Pacific Capital Trust, 6.25% Cum. Term Income Deferrable
Equity Securities, Non-Vtg 200,000 9,300,000
- ----------------------------------------------------------------------------------------------------------
Utilities--0.6%
- ----------------------------------------------------------------------------------------------------------
Gas Utilities--0.6%
AES Trust I, $2.6875 Term Convertible Securities, Series A, 3/31/27
(Cv. into Common Stock of The AES Corp.)(2) 95,500 6,637,249
--------------
Total Other Securities (Cost $155,471,877) 163,254,408
==========================================================================================================
Common Stocks--1.7%
- ----------------------------------------------------------------------------------------------------------
American Home Products Corp. 40,080 2,257,005
- ----------------------------------------------------------------------------------------------------------
Danskin, Inc.(6)(8) 3,557,210 3,557,210
- ----------------------------------------------------------------------------------------------------------
Danskin, Inc. Restricted Common Shares(3)(6)(8) 289,251 173,551
- ----------------------------------------------------------------------------------------------------------
Orion Capital Corp. 60,002 2,388,830
- ----------------------------------------------------------------------------------------------------------
Philip Morris Cos., Inc. 66,000 3,531,000
- ----------------------------------------------------------------------------------------------------------
Sensormatic Electronics Corp.(3)(6) 30,803 204,095
- ----------------------------------------------------------------------------------------------------------
SunAmerica, Inc.(2) 65,923 5,348,003
- ----------------------------------------------------------------------------------------------------------
Travel Ports of America, Inc. 111,831 307,535
--------------
Total Common Stocks (Cost $8,998,576) 17,767,229
</TABLE>
22 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Units See Note 1
==========================================================================================================
<S> <C> <C>
Rights, Warrants and Certificates--0.0%
- ----------------------------------------------------------------------------------------------------------
Danskin, Inc. Wts., Exp. 10/04(3) 367,801 $ 117,696
- ----------------------------------------------------------------------------------------------------------
Portion of Danskin, Inc. Promissory Nt., to be used to purchase
53,309 shares of Restricted Common Stock in Rights Offering(3) -- 15,993
- ----------------------------------------------------------------------------------------------------------
Submicron Systems Corp. Wts., Exp. 1/01(3) 27,000 --
--------------
Total Rights, Warrants and Certificates (Cost $15,993) 133,689
<CAPTION>
Face
Amount
==========================================================================================================
<S> <C> <C>
Structured Instruments--7.6%
- ----------------------------------------------------------------------------------------------------------
Bankers Trust Linked Nts., 3.10%, 11/5/02 (ACC Corp.)(3) $ 8,000,000 11,650,000
- ----------------------------------------------------------------------------------------------------------
Bear Stearns Cos., Inc. Equity Linked Participation Securities,
3%, 9/17/02 (NETA)(3) 8,000,000 9,321,600
- ----------------------------------------------------------------------------------------------------------
J.P. Morgan & Co., Inc., Mandatory Exchangeable Debt Securities,
5%, 7/21/00 (exchangeable into Ethan Allen common stock) 14,060,000 6,057,048
- ----------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 7.25% Structured Yield Product
Exchangeable for Common Stock of SunAmerica, Inc., 6/15/99 195,000 14,527,500
- ----------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., Principal-Protected Technology
Basket Performance Linked Nts., Series B, 7%, 8/18/00 10,000,000 12,000,000
- ----------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., Principal-Protected Technology
Basket Performance Linked Nts., Zero Coupon, 2/2/05
(based on the performance of Microsoft Corp.
and Hewlett-Packard Co.) 5,000,000 6,775,000
- ----------------------------------------------------------------------------------------------------------
NationsBank NA/Frontier Corp. Linked Certificates of Deposits,
6%, 5/22/00(3) 10,000,000 10,950,000
- ----------------------------------------------------------------------------------------------------------
NationsBank NA/The Boeing Co. BA Enhanced Yield Equity-
Linked Certificates of Deposits, 5%, 7/15/00(3) 10,000,000 7,563,000
--------------
Total Structured Instruments (Cost $70,040,702) 78,844,148
- ----------------------------------------------------------------------------------------------------------
Repurchase Agreements--6.4%
- ----------------------------------------------------------------------------------------------------------
Repurchase agreement with First Chicago Capital Markets, 4.75%,
dated 12/31/98, to be repurchased at $66,435,044 on 1/4/99,
collateralized by U.S. Treasury Nts., 4%-8.875%, 2/15/99-7/15/06,
with a value of $67,754,828, (Cost $66,400,000) 66,400,000 66,400,000
- ----------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $1,012,954,123) 101.4% 1,054,103,068
- ----------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (1.4) (14,811,378)
-------------- --------------
Net Assets 100.0% $1,039,291,690
============== ==============
</TABLE>
23 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $269,666,948 or 25.95% of the Fund's net
assets as of December 31, 1998.
2. A sufficient amount of liquid assets has been designated to cover outstanding
written call options, as follows:
<TABLE>
<CAPTION>
Shares Expiration Exercise Premium Market Value
Subject to Call Date Price Received See Note 1
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AES Corp. 70,000 2/99 $45.00 $ 280,391 $ 315,000
AES Corp. 50,000 5/99 50.00 198,493 200,000
ALZA Corp., Cl. A 40,000 1/99 50.00 128,796 125,000
ALZA Corp., Cl. A 50,000 4/99 47.50 267,241 350,000
ALZA Corp., Cl. A 40,000 4/99 55.00 118,796 115,000
Analog Devices, Inc. 50,000 3/99 22.50 154,745 475,000
Analog Devices, Inc. 50,000 3/99 30.00 160,995 225,000
Centocor, Inc. 30,000 4/99 50.00 227,842 116,250
Centocor, Inc. 30,000 4/99 55.00 160,345 69,375
Comverse Technology, Inc. 50,000 1/99 50.00 242,242 1,043,750
Comverse Technology, Inc. 50,000 4/99 50.00 348,488 1,125,000
Continental Airlines, Inc. 50,000 3/99 40.00 242,242 78,125
Costco Cos., Inc. 50,000 4/99 55.00 329,739 918,750
Costco Cos., Inc. 30,000 4/99 60.00 182,844 423,750
Home Depot, Inc. 50,000 1/99 45.00 148,495 775,000
Home Depot, Inc. 50,000 1/99 50.00 142,245 562,500
Home Depot, Inc. 50,000 2/99 55.00 142,245 381,250
NTL, Inc. 50,000 3/99 60.00 298,490 212,500
Network Associates, Inc. 50,000 3/99 60.00 254,741 493,750
Orbital Sciences Corp. 50,000 3/99 35.00 160,995 493,750
Orbital Sciences Corp. 50,000 6/99 35.00 248,492 568,750
PLATINUM Technology, Inc. 100,000 6/99 20.00 296,990 362,500
Quintiles Transnational Corp. 40,000 1/99 50.00 178,794 160,000
Quintiles Transnational Corp. 40,000 4/99 55.00 178,794 185,000
Solectron Corp. 100,000 4/99 60.00 648,228 3,287,500
SunAmerica, Inc. 65,000 1/99 80.00 289,915 178,750
WMX Technologies, Inc. 75,000 1/99 60.00 148,889 4,687
WMX Technologies, Inc. 50,000 4/99 50.00 201,618 150,000
Xilinx, Inc. 100,000 3/99 50.00 684,477 1,600,000
---------- -----------
$7,066,607 $14,995,937
========== ===========
</TABLE>
24 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. Identifies issues considered to be illiquid or restricted--See Note 6 of
Notes to Financial Statements.
4. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
5. Non-income producing--issuer is in default.
6. Non-income producing security.
7. Units may be comprised of several components, such as debt and equity and/or
warrants to purchase equity at some point in the future. For units which
represent debt securities, face amount disclosed represents total underlying
principal.
8. Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer, and is or was an affiliate, as defined in the
Investment Company Act of 1940, at or during the period ended December 31, 1998.
The aggregate fair value of securities of affiliated companies held by the Fund
as of December 31, 1998, amounts to $3,730,761. Transactions during the period
in which the issuer was an affiliate are as follows:
<TABLE>
<CAPTION>
Shares Shares
December 31, Gross Gross December 31, Dividend
1997 Additions Reductions 1998 Income
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Danskin, Inc. 3,492,903 620,107 555,800 3,557,210 $9,830
- -----------------------------------------------------------------------------------------------------------
Danskin, Inc., Restricted Common Shares -- 289,251 -- 289,251 --
------
$9,830
======
</TABLE>
See accompanying Notes to Financial Statements.
25 Oppenheimer Convertible Securities Fund
<PAGE>
- -------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1998
- -------------------------------------------------------------------------------
===============================================================================
Assets
Investments, at value--see accompanying statement:
Unaffiliated companies (cost $1,008,403,530) $ 1,050,372,307
Affiliated companies (cost $4,550,593) 3,730,761
- -------------------------------------------------------------------------------
Cash 122,731
- -------------------------------------------------------------------------------
Receivables and other assets:
Interest and dividends 7,715,839
Investments sold 1,033,583
Shares of beneficial interest sold 822,041
Other 24,622
---------------
Total assets 1,063,821,884
===============================================================================
Liabilities
Options written, at value (premiums received $7,066,607)--
see accompanying statement--Note 5 14,995,937
- -------------------------------------------------------------------------------
Payables and other liabilities:
Dividends and distributions 5,492,593
Shares of beneficial interest redeemed 2,476,540
Accrued taxes--Note 1 693,569
Distribution and service plan fees 658,275
Trustees' fees 35,851
Other 177,429
---------------
Total liabilities 24,530,194
===============================================================================
Net Assets $ 1,039,291,690
===============
===============================================================================
Composition of Net Assets
Paid-in capital $ 1,012,046,201
- -------------------------------------------------------------------------------
Overdistributed net investment income (14,718)
- -------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (5,959,408)
- -------------------------------------------------------------------------------
Net unrealized appreciation on investments 33,219,615
---------------
Net assets $ 1,039,291,690
===============
26 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share
(based on net assets of $221,692,547 and 14,935,710
shares of beneficial interest outstanding) $14.84
Maximum offering price per share (net asset value
plus sales charge of 5.75% of offering price) $15.75
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $445,544,069 and 29,971,680
shares of beneficial interest outstanding) $14.87
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $108,338,699 and 7,302,632
shares of beneficial interest outstanding) $14.84
- --------------------------------------------------------------------------------
Class M Shares:
Net asset value and redemption price (based on net assets
of $263,716,375 and 17,769,379 shares of beneficial interest
outstanding) $14.84
Maximum offering price per share (net asset value plus
sales charge of 3.25% of offering price) $15.34
See accompanying Notes to Financial Statements.
27 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
=======================================================================================
Investment Income
Interest (net of foreign withholding taxes of $30,202) $ 50,509,005
- ---------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies 7,381,732
Affiliated companies 9,830
------------
Total income 57,900,567
=======================================================================================
Expenses
Management fees--Note 4 4,873,274
- ---------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 536,141
Class B 4,419,303
Class C 1,060,207
Class M 2,161,536
- ---------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4:
Class A 313,164
Class B 641,775
Class C 141,340
Class M 383,420
- ---------------------------------------------------------------------------------------
Accounting service fees--Note 4 312,803
Shareholder reports 249,451
Registration and filing fees 106,351
Custodian fees and expenses 66,846
Trustees' fees and expenses 61,766
Legal, auditing and other professional fees 54,801
Other 71,676
------------
Total expenses 15,453,854
=======================================================================================
Net Investment Income 42,446,713
=======================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain on:
Investments:
Unaffiliated companies (including premiums on options exercised) 16,380,409
Affiliated companies 6,006
Closing and expiration of option contracts written--Note 5 4,105,294
------------
Net realized gain 20,491,709
- ---------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (35,159,142)
------------
Net realized and unrealized loss (14,667,433)
\=======================================================================================
Net Increase in Net Assets Resulting from Operations $ 27,779,280
============
</TABLE>
See accompanying Notes to Financial Statements.
28 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997
============================================================================================
<S> <C> <C>
Operations
Net investment income $ 42,446,713 $ 31,909,758
- --------------------------------------------------------------------------------------------
Net realized gain 20,491,709 54,059,260
- --------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (35,159,142) 43,452,225
-------------- --------------
Net increase in net assets resulting
from operations 27,779,280 129,421,243
============================================================================================
Dividends and Distributions to Shareholders
Dividends from net investment income:
Class A (10,037,164) (6,865,016)
Class B (16,743,718) (11,617,988)
Class C (4,038,450) (2,462,263)
Class M (11,627,381) (11,859,099)
- --------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (5,790,061) (10,306,904)
Class B (11,634,294) (20,590,978)
Class C (2,833,142) (4,572,611)
Class M (6,896,262) (16,003,763)
============================================================================================
Beneficial Interest Transactions
Net increase (decrease) in net assets resulting from
beneficial interest transactions--Note 2:
Class A 38,763,260 91,206,809
Class B 79,998,589 157,527,088
Class C 27,838,755 44,261,278
Class M (24,143,434) 3,408,746
============================================================================================
Net Assets
Total increase 80,635,978 341,546,542
- --------------------------------------------------------------------------------------------
Beginning of period 958,655,712 617,109,170
-------------- --------------
End of period (including overdistributed net investment
income of $14,718 for the year ended December 31, 1998) $1,039,291,690 $ 958,655,712
============== ==============
</TABLE>
See accompanying Notes to Financial Statements.
29 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
----------------------------------------------------
Year Ended December 31,
1998 1997 1996(1) 1995(3)
============================================================================================================
<S> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $15.32 $14.27 $13.96 $13.11
- ------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .70 .71(4) .73(4) .54(4)
Net realized and unrealized gain (loss) (.08) 1.93(4) .65(4) 1.48(4)
------ ------ ------ ------
Total income (loss) from
investment operations .62 2.64 1.38 2.02
- ------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.70) (.72) (.72) (.68)
Distributions from net realized gain (.40) (.87) (.35) (.49)
------ ------ ------ ------
Total dividends and distributions
to shareholders (1.10) (1.59) (1.07) (1.17)
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.84 $15.32 $14.27 $13.96
====== ====== ====== ======
============================================================================================================
Total Return, at Net Asset Value(5) 4.08% 18.77% 10.13% 15.54%
============================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $221,693 $192,212 $93,578 $2,502
- ------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $220,423 $145,929 $41,617 $1,799
- ------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.55% 4.58% 5.11% 5.63%(6)
Expenses 0.93% 0.95% 0.98%(7) 1.05%(6)(7)
Expenses (excluding interest)(8) 0.93% 0.95% 0.97% 1.01%(6)
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(9) 90.2% 78.5% 52.7% 57.5%
</TABLE>
1. On January 4, 1996, OppenheimerFunds, Inc. became the investment advisor to
the Fund.
2. For the period from March 11, 1996 (inception of offering) to December 31,
1996.
3. For the period from May 1, 1995 (inception of offering) to December 31, 1995.
4. Per share information has been determined based on average shares outstanding
for the period.
5. 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.
6. Annualized.
30 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
----------------------------------------------------
Year Ended December 31,
1998 1997 1996(1) 1995(3)
============================================================================================================
<S> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $15.35 $14.29 $13.98 $13.11
- ------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .58 .59(4) .62(4) .45(4)
Net realized and unrealized gain (loss) (.08) 1.94(4) .65(4) 1.51(4)
------ ------ ------ ------
Total income (loss) from
investment operations .50 2.53 1.27 1.96
- ------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.58) (.60) (.61) (.60)
Distributions from net realized gain (.40) (.87) (.35) (.49)
------ ------ ------ ------
Total dividends and distributions
to shareholders (.98) (1.47) (.96) (1.09)
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.87 $15.35 $14.29 $13.98
====== ====== ====== ======
============================================================================================================
Total Return, at Net Asset Value(5) 3.30% 17.93% 9.28% 15.09%
============================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $445,544 $383,755 $211,176 $34,465
- ------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $441,677 $296,426 $113,784 $15,184
- ------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 3.79% 3.80% 4.31% 4.82%(6)
Expenses 1.69% 1.72% 1.75%(7) 1.69%(6)(7)
Expenses (excluding interest)(8) 1.69% 1.72% 1.73% 1.64%(6)
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(9) 90.2% 78.5% 52.7% 57.5%
</TABLE>
<TABLE>
<CAPTION>
Class C
------------------------------------
Year Ended December 31,
1998 1997 1996(1)(2)
============================================================================================
<S> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $15.32 $14.27 $14.03
- --------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .58 .59(4) .50(4)
Net realized and unrealized gain (loss) (.08) 1.93(4) .59(4)
------ ------ ------
Total income (loss) from
investment operations .50 2.52 1.09
- --------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.58) (.60) (.50)
Distributions from net realized gain (.40) (.87) (.35)
------ ------ ------
Total dividends and distributions
to shareholders (.98) (1.47) (.85)
- --------------------------------------------------------------------------------------------
Net asset value, end of period $14.84 $15.32 $14.27
====== ====== ======
============================================================================================
Total Return, at Net Asset Value(5) 3.32% 17.88% 7.74%
============================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $108,339 $85,397 $38,312
- --------------------------------------------------------------------------------------------
Average net assets (in thousands) $105,974 $62,343 $18,550
- --------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 3.81% 3.82% 4.32%(6)
Expenses 1.68% 1.70% 1.68%(6)(7)
Expenses (excluding interest)(8) 1.68% 1.70% 1.67%(6)
- --------------------------------------------------------------------------------------------
Portfolio turnover rate(9) 90.2% 78.5% 52.7%
</TABLE>
7. The expense ratios reflect the effect of gross expenses paid indirectly by
the Fund.
8. 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.
9. 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 $986,431,333 and $886,460,630, respectively.
31 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class M
--------------------------------------------------------------------
Year Ended December 31,
1998 1997 1996(1) 1995 1994
=============================================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $15.32 $14.27 $13.96 $12.20 $13.16
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .62 .62(4) .65(4) .70(4) .68(4)
Net realized and unrealized gain (loss) (.08) 1.94(4) .66(4) 2.42(4) (.81)(4)
------ ------ ------ ------ ------
Total income (loss) from
investment operations .54 2.56 1.31 3.12 (.13)
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.62) (.64) (.65) (.87) (.69)
Distributions from net realized gain (.40) (.87) (.35) (.49) (.14)
------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (1.02) (1.51) (1.00) (1.36) (.83)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.84 $15.32 $14.27 $13.96 $12.20
====== ====== ====== ====== ======
=============================================================================================================================
Total Return, at Net Asset Value(5) 3.58% 18.19% 9.58% 26.00% (1.12)%
=============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $263,716 $297,292 $274,043 $239,341 $126,691
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $288,953 $285,621 $264,936 $181,719 $106,829
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.02% 4.05% 4.59% 5.12% 5.24%
Expenses 1.43% 1.46% 1.58%(7) 1.58%(7) 1.66%
Expenses (excluding interest)(8) 1.43% 1.46% 1.55% 1.56% 1.65%
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(9) 90.2% 78.5% 52.7% 57.5% 52.8%
</TABLE>
1. On January 4, 1996, OppenheimerFunds, Inc. became the investment advisor to
the Fund.
2. For the period from March 11, 1996 (inception of offering) to December 31,
1996.
3. For the period from May 1, 1995 (inception of offering) to December 31, 1995.
4. Per share information has been determined based on average shares outstanding
for the period.
5. 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.
6. Annualized.
7. The expense ratios reflect the effect of gross expenses paid indirectly by
the Fund.
8. 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.
9. 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 $986,431,333 and $886,460,630 respectively.
See accompanying Notes to Financial Statements.
32 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Oppenheimer Convertible Securities Fund (the Fund), a portfolio of the Bond Fund
Series, is registered under the Investment Company Act of 1940, as amended, as a
non-diversified, open-end management investment company. The Fund's investment
objective is to seek a high level of total return on its assets through a
combination of current income and capital appreciation. The Fund intends to seek
its objective by investing primarily in convertible fixed income securities. The
Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund
offers Class A, Class B, Class C and Class M shares. Class A and Class M 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 distribution and/or service plan, expenses directly
attributable to that particular class and exclusive voting rights with respect
to matters affecting that 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.
- --------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted equity 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 debt securities are
valued by a portfolio pricing service approved by the Board of Trustees. 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. 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. 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. Securities for which market
quotations are not readily available are valued at fair value under consistently
applied procedures established by the Board of Trustees to determine fair value
in good faith.
- --------------------------------------------------------------------------------
Security Credit Risk. The Fund invests in high yield securities, which may be
subject to a greater degree of credit risk, greater market fluctuations and risk
of loss of income and principal, and may be more sensitive to economic
conditions than lower yielding, higher rated fixed income securities. The Fund
may not invest in securities with bond ratings of less than C at the time of
purchase nor may it invest in securities in default at the time of purchase. As
of December 31, 1998, securities with an aggregate market value of $189,275,
representing 0.02% of the Fund's net assets, were in default.
33 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies (continued)
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. During 1995, the Fund
acquired all of the assets and liabilities of another investment company which
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. As of December 31, 1998, the remaining accrued
tax liability for net unrealized gains on investments at the time of the
acquisition was $693,569.
- --------------------------------------------------------------------------------
Trustees' Fees and Expenses. The Fund has adopted a nonfunded retirement plan
for the Fund's independent trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the year ended
December 31, 1998, a provision of $31,483 was made for the Fund's projected
benefit obligations resulting in an accumulated liability of $31,483 at December
31, 1998.
- --------------------------------------------------------------------------------
Distributions to Shareholders. The Fund intends to declare dividends separately
for Class A, Class B, Class C and Class M shares from net investment income each
day the New York Stock Exchange is open for business and pay such dividends
quarterly. Distributions from net realized gains on investments, if any, will be
declared at least once each year.
34 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and 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 $2,037, a decrease in undistributed net
investment income of $14,718, and an increase in accumulated net realized gain
on investments of $16,755.
- --------------------------------------------------------------------------------
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. 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.
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.
35 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest of each class. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1998 Year Ended December 31, 1997
---------------------------- ----------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 5,704,233 $ 89,040,791 7,279,999 $ 111,599,725
Dividends and distributions
reinvested 919,205 13,833,726 932,388 14,314,572
Redeemed (4,231,755) (64,111,257) (2,225,551) (34,707,488)
---------- ------------- ----------- -------------
Net increase 2,391,683 $ 38,763,260 5,986,836 $ 91,206,809
========== ============= =========== =============
- -----------------------------------------------------------------------------------------
Class B:
Sold 7,980,117 $ 125,356,682 10,397,158 $ 160,305,660
Dividends and distributions
reinvested 2,002,880 30,266,988 1,506,208 23,000,990
Redeemed (5,015,731) (75,625,081) (1,674,594) (25,779,562)
---------- ------------- ----------- -------------
Net increase 4,967,266 $ 79,998,589 10,228,772 $ 157,527,088
========== ============= =========== =============
- -----------------------------------------------------------------------------------------
Class C:
Sold 2,882,218 $ 45,258,884 3,123,899 $ 47,976,523
Dividends and distributions
reinvested 504,006 7,600,723 309,297 4,711,704
Redeemed (1,658,804) (25,020,852) (543,468) (8,426,949)
---------- ------------- ----------- -------------
Net increase 1,727,420 $ 27,838,755 2,889,728 $ 44,261,278
========== ============= =========== =============
- -----------------------------------------------------------------------------------------
Class M:
Sold 1,011,033 $ 16,005,467 1,920,434 $ 29,581,986
Dividends and distributions
reinvested 1,254,634 18,971,816 1,354,464 20,607,753
Redeemed (3,898,845) (59,120,717) (3,076,456) (46,780,993)
---------- ------------- ----------- -------------
Net increase (decrease) (1,633,178) $ (24,143,434) 198,442 $ 3,408,746
========== ============= =========== =============
=========================================================================================
</TABLE>
3. Unrealized Gains and Losses on Investments
As of December 31, 1998, net unrealized appreciation on investments and options
written of $33,219,615 was composed of gross appreciation of $106,369,677, and
gross depreciation of $73,150,062.
36 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
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 0.625% on the first
$50 million of net assets, 0.50% of the next $250 million of net assets and
0.4375% on net assets in excess of $300 million. The Fund's management fee for
the year ended December 31, 1998 was 0.46% of the average annual net assets for
Class A, Class B, Class C and Class M shares.
Accounting fees paid to the Manager were in accordance with the
accounting services agreement with the Fund which provides for an annual fee of
$12,000 for the first $30 million of net assets and $9,000 for each additional
$30 million of net assets.
OppenheimerFunds Services (OFS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund and other Oppenheimer
funds. The Fund pays OFS an annual maintenance fee of $24.12 for each Class A
and Class M shareholder account and $26.02 for each Class B and Class C
shareholder account.
For the year ended December 31, 1998, commissions (sales charges
paid by investors) on sales of Class A and Class M shares totaled $1,551,248 and
$538,755, of which $405,691 and $52,560, respectively, were retained by
OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the Manager, as
general distributor, and by affiliated broker/dealers. Sales charges advanced to
broker/dealers by OFDI on sales of the Fund's Class A, Class B and Class C
shares totaled $117,278, $4,756,069, and $420,210, respectively. Amounts paid to
an affiliated broker/dealer for Class B and Class C shares were $142,082 and
$7,924, respectively. During the year ended December 31, 1998, OFDI received
contingent deferred sales charges of $1,222,157 and $44,768, 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.
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 $53,873
to an affiliated broker/dealer as reimbursement for Class A personal service and
maintenance expenses.
37 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
4. Management Fees and Other Transactions with Affiliates (continued)
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 $11,461 and $13,352, respectively, to an affiliated broker/dealer as
compensation for Class B and Class C personal service and maintenance expenses
and retained $3,687,225 and $711,334, 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 Trustees 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 $12,983,071 for
Class B and $1,176,312 for Class C.
The Fund has adopted a Distribution and Service Plan for Class M
shares to reimburse OFDI for its services and costs in distributing Class M
shares and servicing accounts. Under the Plan, the Fund pays OFDI an annual
asset-based sales charge of 0.50% per year on Class M shares. OFDI also receives
a service fee of 0.25% per year to reimburse dealers for providing personal
services for accounts that hold Class M shares. OFDI may pay a portion of the
asset-based sales charge which it receives from the Fund to provide additional
reimbursement to broker/dealers who sell Class M shares. Each fee is computed on
the average annual net assets of Class M shares, determined as of the close of
each regular business day. During the year ended December 31, 1998, OFDI paid
$13,666 to an affiliated broker/dealer as reimbursement for Class M personal
service and maintenance expenses and retained $1,135,805 as reimbursement for
certain Class M sales-related distribution expenses. If the Plan is terminated
by the Fund, the Board of Trustees may allow the Fund to continue payments of
the asset-based sales charge to OFDI for distributing shares before the Plan was
terminated.
38 Oppenheimer Convertible Securities Fund
<PAGE>
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================================================================================
5. Option Activity
The Fund may buy put options, or write 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 or the cost of the security for
a purchased put 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 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 10,752 $ 3,935,025
Options written 37,527 19,327,971
Options closed or expired (29,050) (14,980,447)
Options exercised (3,629) (1,215,942)
------- ------------
Options outstanding as of December 31, 1998 15,600 $ 7,066,607
======= ============
39 Oppenheimer Convertible Securities Fund
<PAGE>
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Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
6. 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 Trustees 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
15% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limit. The aggregate value of illiquid or restricted securities
subject to this limitation at December 31, 1998 was $77,635,227, which
represents 7.47% of the Fund's net assets, of which $17,925,652 is considered
restricted. Information concerning restricted securities is as follows:
<TABLE>
<CAPTION>
Valuation Per
Unit as of
Cost December 31,
Security Acquisition Dates Per Unit 1998
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bonds and Other Securities
Bankers Trust Linked Nts.,
3.10%, 11/5/02 (ACC Corp.) 10/29/97 100.00% 145.63%
- -------------------------------------------------------------------------------------------
Hudson Hotels Corp.,
7.50% Cv. Sub. Debs., 7/1/01 7/8/96 100.00 30.56
- -------------------------------------------------------------------------------------------
Travel Ports of America, Inc.,
8.50% Cv. Sr. Sub. Debs.,
1/15/05 (Reg S) 2/13/95-8/13/96 103.84 107.59
Stocks, Warrants and Other Securities
Danskin, Inc.:
$88.2722 Cv. Preferred, Series D 8/14/95 $ 5,000.00 $10,000.00
Portion of Promissory Note
to be used to purchase
53,309 shares of Restricted
Common Stock in Rights Offering 8/14/95 .30 .30
Restricted Common Shares 8/14/95 .30 .60
Wts., Exp. 10/04 8/14/95 -- .32
- -------------------------------------------------------------------------------------------
Sensormatic Electronics Corp. 6/17/98-12/18/98 8.00 6.63
- -------------------------------------------------------------------------------------------
Submicron Systems Corp. Wts.,
Exp. 1/01 12/11/95 -- --
</TABLE>
40 Oppenheimer Convertible Securities Fund
<PAGE>
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7. Bank Borrowings
The Fund may borrow up to 5% of its total 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 two other funds
managed by the Manager in an unsecured line of credit with a bank, which permits
borrowings up to $100 million, collectively. Interest is charged to each fund,
based on its borrowings, at a rate equal to the Federal Funds Rate plus 0.625%.
In addition, a commitment fee of 0.07% is allocated among the three
participating funds at the end of each quarter, based on the average daily
unused portion of the committed line. The commitment fee is allocated among the
three funds based upon their respective average net assets for the period. The
commitment fee allocated to the Fund for the year ended December 31, 1998 was
$5,049.
The Fund had no borrowings outstanding for the year ended December
31, 1998.
41 Oppenheimer Convertible Securities Fund
<PAGE>
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Report of Independent Accountants
- --------------------------------------------------------------------------------
================================================================================
To the Shareholders and Board of Trustees of
Bond Fund Series
In our opinion, the accompanying statement of assets and liabilities, including
the statement 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 Oppenheimer Convertible Securities
Fund (formerly Oppenheimer Bond Fund for Growth, the sole portfolio constituting
Bond Fund Series, hereafter referred to as the Fund) at December 31, 1998, 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 periods indicated, 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, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Denver, Colorado
January 25, 1999
42 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
Federal Income Tax Information (Unaudited)
- --------------------------------------------------------------------------------
================================================================================
In early 1999 shareholders received 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.
Distributions of $0.5971, $0.5711, $0.5708 and $0.5801 per share
were paid to Class A, Class B, Class C and Class M shareholders, respectively,
on December 31, 1998, of which, for each class of shares, $0.4010 was designated
as a "capital gain distribution" for federal income tax purposes. The capital
gain distribution should be treated by shareholders as a gain from the sale of
capital assets.
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 11.76% 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.
43 Oppenheimer Convertible Securities Fund
<PAGE>
- --------------------------------------------------------------------------------
Oppenheimer Convertible Securities Fund
- --------------------------------------------------------------------------------
================================================================================
Officers and Trustees Bridget A. Macaskill, Chairman of the Board of
Trustees and President
John Cannon, Trustee
Paul Y. Clinton, Trustee
Thomas W. Courtney, Trustee
Robert G. Galli, Trustee
Lacy B. Herrmann, Trustee
George Loft, Trustee
Michael S. Rosen, Vice President
George C. Bowen, Treasurer
Robert J. Bishop, Assistant Treasurer
Adele A. Campbell, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Andrew J. Donohue, Secretary
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 Accountants PricewaterhouseCoopers LLP
================================================================================
Legal Counsel Kirkpatrick & Lockhart LLP
This is a copy of a report to shareholders of
Oppenheimer Convertible Securities Fund. This
report must be preceded or accompanied by a
Prospectus of Oppenheimer Convertible Securities
Fund. 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.
44 Oppenheimer Convertible Securities Fund
<PAGE>
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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
Value Fund Equity Income Fund 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
New Jersey Municipal Fund2 Municipal Bond Fund Municipals
New York Municipal Fund2 Insured Municipal Fund Limited Term New York
Intermediate Municipal Municipal Fund
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.
45 Oppenheimer Convertible Securities Fund
<PAGE>
This page is intentionally left blank
46 Oppenheimer Convertible Securities Fund
<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
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www.oppenheimerfunds.com
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General Information
Mon-Fri 8:30am-9pm ET
Sat 10am-4pm ET
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1-800-525-7048
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Account Transactions
Mon-Fri 8:30am-8pm ET
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1-800-852-8457
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PhoneLink
24-hr automated information
and automated transactions
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1-800-533-3310
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Telecommunication Device
for the Deaf (TDD)
Mon-Fri 8:30am-2pm ET
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1-800-843-4461
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OppenheimerFunds
Information Hotline
24 hours a day, timely and
insightful messages on the
economy and issues that
affect your investments
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RA0345.001.1298 March 1, 1999
