UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-3864
Oppenheimer Balanced Fund
(Exact name of registrant as specified in charter)
6803 South Tucson Way, Centennial, Colorado 80112-3924
(Address of principal executive offices)
(Zip code)
Robert G. Zack, Esq.
OppenheimerFunds, Inc.
Two World Financial Center, New York, New York 10281-1008
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(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 768-3200
--------------
Date of fiscal year end: September 30
Date of reporting period: October 1, 2003 - March 31, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
STATEMENT OF INVESTMENTS March 31, 2004 / Unaudited
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MARKET VALUE
SHARES SEE NOTE 1
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COMMON STOCKS--53.6%
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CONSUMER DISCRETIONARY--10.1%
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AUTO COMPONENTS--0.2%
TRW Automotive Holdings Corp. 1 62,300 $ 1,356,271
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HOTELS, RESTAURANTS & LEISURE--1.7%
Brinker International, Inc. 1 159,600 6,053,628
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McDonald's Corp. 262,300 7,493,911
--------------
13,547,539
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HOUSEHOLD DURABLES--1.2%
Toll Brothers, Inc. 1 151,400 6,878,102
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WCI Communities, Inc. 1 94,900 2,375,347
--------------
9,253,449
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MEDIA--5.4%
AMC Entertainment, Inc. 1 195,600 3,002,460
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EchoStar Communications Corp., Cl. A 1 99,400 3,255,350
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Liberty Media Corp., Cl. A 1 1,063,400 11,644,230
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Regal Entertainment Group 64,100 1,408,918
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UnitedGlobalCom, Inc., Cl. A 1 1,958,767 16,629,932
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Viacom, Inc., Cl. B 183,900 7,210,719
--------------
43,151,609
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MULTILINE RETAIL--1.0%
Sears Roebuck & Co. 193,700 8,321,352
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SPECIALTY RETAIL--0.6%
Boise Cascade Corp. 64,517 2,235,514
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Gap, Inc. (The) 115,700 2,536,144
--------------
4,771,658
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CONSUMER STAPLES--4.0%
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BEVERAGES--1.0%
Adolph Coors Co., Cl. B 30,400 2,111,280
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Constellation Brands, Inc., Cl. A 1 182,200 5,848,620
--------------
7,959,900
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FOOD PRODUCTS--1.3%
Tyson Foods, Inc., Cl. A 417,200 7,530,460
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Unilever NV, NY Shares 41,300 2,867,872
--------------
10,398,332
9 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
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MARKET VALUE
SHARES SEE NOTE 1
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PERSONAL PRODUCTS--0.4%
Estee Lauder Cos., Inc. (The), Cl. A 80,300 $ 3,560,502
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TOBACCO--1.3%
Altria Group, Inc. 184,500 10,046,025
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ENERGY--3.7%
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ENERGY EQUIPMENT & SERVICES--0.4%
Halliburton Co. 56,800 1,726,152
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Todco, Cl. A 1 92,600 1,351,960
--------------
3,078,112
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OIL & GAS--3.3%
BP plc, ADR 69,100 3,537,920
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Devon Energy Corp. 24,300 1,413,045
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Houston Exploration Co. 1 25,800 1,154,034
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LUKOIL, Sponsored ADR 12,600 1,573,691
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Petroleo Brasileiro SA, Preference 109,000 3,183,997
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Pioneer Natural Resources Co. 1 62,000 2,002,600
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Talisman Energy, Inc. 79,800 4,689,939
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TotalFinaElf SA, Sponsored ADR 1 36,500 3,358,000
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Westport Resources Corp. 1 73,700 2,431,363
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YUKOS, ADR 50,079 3,007,745
--------------
26,352,334
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FINANCIALS--9.4%
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CAPITAL MARKETS--0.8%
Bank of New York Co., Inc. (The) 118,300 3,726,450
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UBS AG 1 33,600 2,495,765
--------------
6,222,215
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COMMERCIAL BANKS--2.7%
FleetBoston Financial Corp. 199,400 8,953,060
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SouthTrust Corp. 113,600 3,766,976
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SunTrust Banks, Inc. 6,800 474,028
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U.S. Bancorp 146,806 4,059,186
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Wells Fargo & Co. 75,300 4,267,251
--------------
21,520,501
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DIVERSIFIED FINANCIAL SERVICES--2.4%
CIT Group, Inc. 98,000 3,728,900
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Citigroup, Inc. 135,300 6,995,010
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J.P. Morgan Chase & Co. 140,600 5,898,170
10 | OPPENHEIMER BALANCED FUND
MARKET VALUE
SHARES SEE NOTE 1
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DIVERSIFIED FINANCIAL SERVICES Continued
Merrill Lynch & Co., Inc. 36,500 $ 2,173,940
--------------
18,796,020
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INSURANCE--2.5%
Chubb Corp. 68,200 4,742,628
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Platinum Underwriters Holdings Ltd. 76,000 2,435,800
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Prudential Financial, Inc. 131,000 5,866,180
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UnumProvident Corp. 166,300 2,432,969
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XL Capital Ltd., Cl. A 60,000 4,562,400
--------------
20,039,977
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REAL ESTATE--1.0%
Developers Diversified Realty Corp. 59,000 2,383,600
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Host Marriott Corp. 1 458,900 5,864,742
--------------
8,248,342
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HEALTH CARE--8.4%
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BIOTECHNOLOGY--1.4%
MedImmune, Inc. 1 271,300 6,261,604
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Wyeth 126,900 4,765,095
--------------
11,026,699
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HEALTH CARE EQUIPMENT & SUPPLIES--1.0%
Beckman Coulter, Inc. 83,000 4,526,820
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Guidant Corp. 54,100 3,428,317
--------------
7,955,137
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HEALTH CARE PROVIDERS & SERVICES--2.6%
Aetna, Inc. 54,000 4,844,880
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PacifiCare Health Systems, Inc. 1 105,800 4,184,390
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Province Healthcare Co. 1 281,900 4,482,210
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Tenet Healthcare Corp. 1 659,400 7,358,904
--------------
20,870,384
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PHARMACEUTICALS--3.4%
GlaxoSmithKline plc, ADR 85,500 3,415,725
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Novartis AG 124,360 5,281,263
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Pfizer, Inc. 193,940 6,797,597
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Schering-Plough Corp. 239,400 3,883,068
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Teva Pharmaceutical Industries Ltd., Sponsored ADR 70,600 4,476,746
11 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
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MARKET VALUE
SHARES SEE NOTE 1
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PHARMACEUTICALS Continued
Watson Pharmaceuticals, Inc. 1 74,200 $ 3,175,018
--------------
27,029,417
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INDUSTRIALS--5.9%
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AEROSPACE & DEFENSE--2.4%
Boeing Co. 52,600 2,160,282
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Empresa Brasileira de Aeronautica SA, ADR 138,400 4,442,640
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Orbital Sciences Corp. 1 593,117 7,431,756
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Raytheon Co. 165,700 5,193,038
--------------
19,227,716
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COMMERCIAL SERVICES & SUPPLIES--2.8%
Brink's Co. (The) 100,000 2,758,000
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Cendant Corp. 661,600 16,136,424
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ChoicePoint, Inc. 1 92,400 3,513,972
--------------
22,408,396
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INDUSTRIAL CONGLOMERATES--0.3%
Tyco International Ltd. 69,200 1,982,580
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ROAD & RAIL--0.4%
Burlington Northern Santa Fe Corp. 56,300 1,773,450
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Canadian National Railway Co. 45,600 1,793,448
--------------
3,566,898
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INFORMATION TECHNOLOGY--8.0%
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COMPUTERS & PERIPHERALS--3.0%
Hewlett-Packard Co. 455,879 10,412,276
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International Business Machines Corp. 143,300 13,160,672
--------------
23,572,948
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ELECTRONIC EQUIPMENT & INSTRUMENTS--1.0%
Flextronics International Ltd. 1 472,700 8,139,894
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INTERNET SOFTWARE & SERVICES--0.4%
Net2Phone, Inc. 1 633,600 3,294,720
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IT SERVICES--0.5%
CSG Systems International, Inc. 1 158,100 2,716,158
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Infosys Technologies Ltd., Sponsored ADR 14,500 1,184,650
--------------
3,900,808
12 | OPPENHEIMER BALANCED FUND
MARKET VALUE
SHARES SEE NOTE 1
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SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--0.9%
Analog Devices, Inc. 54,500 $ 2,616,545
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Intel Corp. 180,700 4,915,040
--------------
7,531,585
SOFTWARE--2.2%
Compuware Corp. 1 165,000 1,229,250
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Microsoft Corp. 397,900 9,935,563
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Take-Two Interactive Software, Inc. 1 168,800 6,208,464
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17,373,277
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MATERIALS--1.6%
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CHEMICALS--0.9%
Dow Chemical Co. 102,500 4,128,700
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Praxair, Inc. 80,600 2,991,872
--------------
7,120,572
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METALS & MINING--0.4%
Companhia Vale do Rio Doce, Sponsored ADR 74,600 3,495,010
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PAPER & FOREST PRODUCTS--0.3%
Bowater, Inc. 45,900 2,002,617
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TELECOMMUNICATION SERVICES--0.9%
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DIVERSIFIED TELECOMMUNICATION SERVICES--0.7%
IDT Corp., Cl. B 1 306,500 6,175,975
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WorldCom, Inc./WorldCom Group 1 450,000 9,000
--------------
6,184,975
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WIRELESS TELECOMMUNICATION SERVICES--0.2%
AT&T Corp. 75,400 1,475,578
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UTILITIES--1.6%
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ELECTRIC UTILITIES--0.9%
AES Corp. (The) 1 534,000 4,555,020
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PG&E Corp. 1 79,200 2,294,424
--------------
6,849,444
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GAS UTILITIES--0.7%
Kinder Morgan, Inc. 59,400 3,743,388
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Sempra Energy 72,200 2,295,960
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6,039,348
--------------
Total Common Stocks (Cost $295,516,358) 427,672,141
13 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
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MARKET VALUE
UNITS SEE NOTE 1
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RIGHTS, WARRANTS AND CERTIFICATES--0.0%
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Sun Healthcare Group, Inc. Wts., Exp. 2/28/05 1,2 (Cost $0) 496 $ 18
PRINCIPAL
AMOUNT
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ASSET-BACKED SECURITIES--8.8%
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Bank One Auto Securitization Trust, Automobile Receivable Certificates,
Series 2003-1, Cl. A2, 1.29%, 8/21/06 $ 1,730,000 1,731,704
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BMW Vehicle Owner Trust, Automobile Loan Certificates, Series 2003-A,
Cl. A2, 1.45%, 11/25/05 1,523,075 1,525,211
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Capital Auto Receivables Asset Trust, Automobile Mtg.-Backed Nts.,
Series 2003-2, Cl. A2A, 1.20%, 5/16/05 1,511,935 1,512,965
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Caterpillar Financial Asset Trust, Equipment Loan Pass-Through
Certificates, Series 2003-A, Cl. A2, 1.25%, 10/25/05 1,073,490 1,074,269
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Centex Home Equity Co. LLC, Home Equity Loan Asset-Backed Certificates:
Series 2003-A, Cl. AF1, 1.836%, 10/25/17 208,660 208,785
Series 2003-B, Cl. AF1, 1.64%, 2/25/18 429,986 430,088
Series 2003-C, Cl. AF1, 2.14%, 7/25/18 1,577,032 1,580,944
Series 2004-A, Cl. AF1, 2.03%, 6/25/19 1,074,684 1,077,103
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Chase Funding Mortgage Loan Asset-Backed Certificates,
Home Equity Mtg. Obligations:
Series 2003-3, Cl. 1A1, 1.17%, 8/25/17 3 749,112 749,437
Series 2003-4, Cl. 1A1, 1.21%, 9/25/17 3 1,731,191 1,732,174
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Chase Manhattan Auto Owner Trust, Automobile Loan
Pass-Through Certificates:
Series 2003-A, Cl. A2, 1.26%, 1/16/06 625,368 625,911
Series 2003-B, Cl. A2, 1.287%, 3/15/06 960,000 960,858
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Citibank Credit Card Issuance Trust, Credit Card Receivable Nts.,
Series 2002-A3, Cl. A3, 4.40%, 5/15/07 1,430,000 1,478,395
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CitiFinancial Mortgage Securities, Inc., Home Equity Collateralized
Mtg. Obligations:
Series 2003-1, Cl. AF1, 1.94%, 1/25/33 384,407 384,560
Series 2003-2, Cl. AF1, 1.19%, 5/25/33 3 685,243 685,537
Series 2003-3, Cl. AF1, 1.21%, 8/25/33 2,3 1,156,051 1,156,506
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DaimlerChrysler Auto Trust, Automobile Loan Pass-Through Certificates:
Series 2002-B, Cl. A2, 2.20%, 4/6/05 15,784 15,796
Series 2003-A, Cl. A2, 1.52%, 12/8/05 2,890,000 2,895,662
Series 2003-B, Cl. A2, 1.61%, 7/8/06 3,300,000 3,310,156
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Ford Credit Auto Owner Trust, Automobile Loan Pass-Through
Certificates, Series 2003-A, Cl. A2A, 1.62%, 8/15/05 552,724 553,750
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Harley-Davidson Motorcycle Trust, Motorcycle Receivable Nts.:
Series 2002-2, Cl. A1, 1.91%, 4/16/07 615,469 617,032
Series 2003-3, Cl. A1, 1.50%, 1/15/08 2,192,308 2,197,490
14 | OPPENHEIMER BALANCED FUND
PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
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ASSET-BACKED SECURITIES Continued
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Honda Auto Receivables Owner Trust, Automobile Receivable Obligations:
Series 2003-1, Cl. A2, 1.46%, 9/19/05 $ 970,845 $ 972,137
Series 2003-2, Cl. A2, 1.34%, 12/21/05 1,826,860 1,828,950
Series 2003-3, Cl. A2, 1.52%, 4/21/06 3,210,000 3,216,873
Series 2003-4, Cl. A2, 1.58%, 7/17/06 2,830,000 2,837,755
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Household Automotive Trust, Automobile Loan Certificates,
Series 2003-2, Cl. A2, 1.56%, 12/18/06 1,450,000 1,453,901
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M&I Auto Loan Trust, Automobile Loan Certificates:
Series 2002-1, Cl. A3, 2.49%, 10/22/07 1,819,958 1,834,476
Series 2003-1, Cl. A2, 1.60%, 7/20/06 2,410,000 2,416,563
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National City Auto Receivables Trust, Automobile Receivable Obligations,
Series 2004-A, Cl. A2, 1.50%, 2/15/07 1,400,000 1,399,125
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Nissan Auto Lease Trust, Automobile Lease Obligations, Series 2003-A,
Cl. A2, 1.69%, 12/15/05 1,900,000 1,904,182
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Nissan Auto Receivables Owner Trust, Automobile Receivable Nts.:
Series 2003-A, Cl. A2, 1.45%, 5/16/05 1,146,270 1,147,415
Series 2003-B, Cl. A2, 1.20%, 11/15/05 2,970,000 2,972,077
Series 2004-A, Cl. A2, 1.40%, 7/17/06 1,580,000 1,581,895
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Residential Funding Mortgage Securities II, Inc., Home Equity Loan
Pass-Through Certificates, Series 2003-HS1, Cl. AI2, 1.19%, 1/25/33 3 235,882 236,030
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Toyota Auto Receivables Owner Trust, Automobile Mtg.-Backed Obligations:
Series 2002-B, Cl. A3, 3.76%, 6/15/06 603,540 610,227
Series 2003-A, Cl. A2, 1.28%, 8/15/05 1,671,557 1,672,951
Series 2003-B, Cl. A2, 1.43%, 2/15/06 2,170,000 2,172,262
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USAA Auto Owner Trust, Automobile Loan Asset-Backed Nts.:
Series 2002-1, Cl. A3, 2.41%, 10/16/06 923,101 929,048
Series 2003-1, Cl. A2, 1.22%, 4/17/06 1,519,014 1,520,280
Series 2004-1, Cl. A2, 1.43%, 9/15/06 3,840,000 3,841,291
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Volkswagen Auto Loan Enhanced Trust, Automobile Loan
Receivable Certificates:
Series 2003-1, Cl. A2, 1.11%, 12/20/05 3,529,480 3,530,598
Series 2003-2, Cl. A2, 1.55%, 6/20/06 1,630,000 1,634,048
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Whole Auto Loan Trust, Automobile Loan Receivable Certificates:
Series 2002-1, Cl. A2, 1.88%, 6/15/05 1,179,249 1,181,452
Series 2003-1, Cl. A2A, 1.40%, 4/15/06 3,090,000 3,094,504
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Total Asset-Backed Securities (Cost $70,394,728) 70,492,373
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MORTGAGE-BACKED OBLIGATIONS--26.0%
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CIT Equipment Collateral, Equipment Receivable-Backed Nts.,
Series 2003-EF1, Cl. A2, 1.49%, 12/20/05 830,000 831,475
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Fannie Mae Whole Loan, Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Trust 2003-W6, Cl. 2A1, 2.232%, 9/25/42 2,673,138 2,674,145
15 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
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PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
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MORTGAGE-BACKED OBLIGATIONS Continued
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Federal Home Loan Mortgage Corp.:
5%, 4/15/34 4 $ 7,580,000 $ 7,617,900
5.50%, 1/1/34 957,652 982,462
5.50%, 4/15/34 4 4,288,000 4,395,200
7%, 5/1/29-11/1/33 4,849,634 5,152,755
7%, 4/15/34 4 11,492,000 12,188,703
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Federal Home Loan Mortgage Corp., Collateralized Mtg. Obligations, Gtd
Multiclass Mtg. Participation Certificates, Series 1669, Cl. G, 6.50%, 2/15/23 943,325 961,082
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Federal Home Loan Mortgage Corp., Gtd. Mtg. Pass-Through Participation
Certificates, Series 151, Cl. F, 9%, 5/15/21 103,688 103,875
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Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg. Investment
Conduit Multiclass Pass-Through Certificates:
Series 2055, Cl. ZM, 6.50%, 5/15/28 1,459,572 1,530,558
Series 2080, Cl. Z, 6.50%, 8/15/28 976,792 1,014,645
Series 2387, Cl. PD, 6%, 4/15/30 1,621,000 1,671,471
Series 2491, Cl. PE, 6%, 12/15/27 1,290,000 1,307,334
Series 2498, Cl. PC, 5.50%, 10/15/14 400,000 409,410
Series 2500, Cl. FD, 1.59%, 3/15/32 3 602,082 607,069
Series 2526, Cl. FE, 1.49%, 6/15/29 3 681,875 684,786
Series 2551, Cl. FD, 1.49%, 1/15/33 3 584,165 586,448
Series 2551, Cl. TA, 4.50%, 2/15/18 2,516,225 2,537,354
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Federal Home Loan Mortgage Corp., Interest-Only Stripped
Mtg.-Backed Security:
Series 176, Cl. IO, (7.082)%, 6/1/26 5 933,757 140,356
Series 177, Cl. B, (9.301)%, 7/1/26 5 1,599,665 238,396
Series 183, Cl. IO, (7.80)%, 4/1/27 5 1,537,305 216,090
Series 184, Cl. IO, (5.714)%, 12/1/26 5 1,512,016 217,075
Series 2130, Cl. SC, 32.35%, 3/15/29 5 1,258,560 120,384
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Federal Home Loan Mortgage Corp., Structured Pass-Through Securities,
Collateralized Mtg. Obligations:
Series H006, Cl. A1, 1.724%, 4/15/08 221,310 220,984
Series T-42, Cl. A2, 5.50%, 2/25/42 183,591 185,140
- -----------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
5%, 4/15/34 4 14,265,000 14,331,874
5.50%, 7/1/33-12/1/34 8,531,850 8,749,118
5.50%, 2/1/34-4/11/34 4 16,543,432 16,953,224
6%, 5/1/16 4,144,516 4,369,108
6.50%, 12/1/27-2/1/28 1,162,322 1,224,157
6.50%, 10/1/30-4/1/34 4 30,842,141 32,404,641
7%, 7/1/32-11/1/33 4,184,080 4,463,717
7%, 4/25/34 4 54,915,000 58,295,677
8.50%, 7/1/32 192,255 207,880
16 | OPPENHEIMER BALANCED FUND
PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- -----------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates:
Trust 1998-63, Cl. PG, 6%, 3/25/27 $ 839,497 $ 853,262
Trust 2001-50, Cl. NE, 6%, 8/25/30 1,402,344 1,446,080
Trust 2001-70, Cl. LR, 6%, 9/25/30 1,217,334 1,246,834
Trust 2001-70, Cl. PD, 6%, 3/25/29 1,240,000 1,262,504
Trust 2001-72, Cl. NH, 6%, 4/25/30 1,070,000 1,100,814
Trust 2001-74, Cl. PD, 6%, 5/25/30 430,000 440,082
Trust 2002-50, Cl. PD, 6%, 9/25/27 950,000 970,222
Trust 2002-73, Cl. PA, 5%, 1/25/17 964,539 970,270
Trust 2002-77, Cl. WF, 1.49%, 12/18/32 3 975,855 979,083
Trust 2002-94, Cl. MA, 4.50%, 8/25/09 1,724,472 1,746,702
Trust 2003-81, Cl. PA, 5%, 2/25/12 564,726 576,579
- -----------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates Interest-Only Stripped Mtg.-Backed Security:
Trust 2002-47, Cl. NS, 9.188%, 4/25/32 5 2,211,005 215,214
Trust 2002-51, Cl. S, 9.188%, 8/25/32 5 2,030,051 194,548
- -----------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security:
Trust 2002-52, Cl. SD, 13.61%, 9/25/32 5 2,696,732 237,626
Trust 2002-9, Cl. MS, 9.507%, 3/25/32 5 1,502,486 138,715
Trust 222, Cl. 2, (7.852)%, 6/1/23 5 1,960,668 312,442
Trust 240, Cl. 2, (8.424)%, 9/1/23 5 4,428,416 726,398
Trust 252, Cl. 2, (10.24)%, 11/1/23 5 2,208,816 401,125
Trust 254, Cl. 2, (7.012)%, 1/1/24 5 1,112,501 185,352
Trust 273, Cl. 2, (6.783)%, 7/1/26 5 673,465 104,502
- -----------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn.:
4.375%, 3/20/26 70,187 71,337
7%, 4/15/26 539,153 576,477
7.50%, 5/15/27 2,289,725 2,467,082
- -----------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., Interest-Only Stripped
Mtg.-Backed Security, Trust 2002-15, Cl. SM, 23.249%, 2/16/32 5 2,027,731 209,238
- -----------------------------------------------------------------------------------------------------------------------
Prudential Mortgage Capital Co. II LLC, Commercial Mtg. Pass-Through
Certificates, Series PRU-HTG 2000-C1, Cl. A2, 7.306%, 10/6/15 1,362,000 1,608,368
- -----------------------------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VII, Inc., Commercial Mtg
Pass-Through Certificates:
Series 1996-B, Cl. 1, 6.996%, 4/25/26 2,3 44,279 39,851
Series 1996-C1, Cl. F, 8.455%, 1/20/06 2,3 250,000 247,500
- -----------------------------------------------------------------------------------------------------------------------
Washington Mutual Mortgage Securities Corp., Collateralized Mtg
Obligations Pass-Through Certificates, Series 2003-AR7, Cl. A1,
1.507%, 8/25/33 3 791,495 792,215
--------------
Total Mortgage-Backed Obligations (Cost $207,163,360) 207,714,915
17 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--8.1%
- -----------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank Unsec. Bonds, Series EY06, 5.25%, 8/15/06 $ 2,476,000 $ 2,662,408
- -----------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. Unsec. Nts.:
2.875%, 12/15/06 1,685,000 1,719,099
4.50%, 1/15/13 1,270,000 1,307,300
4.875%, 11/15/13 945,000 992,121
5.50%, 7/15/06 17,200,000 18,578,477
6.625%, 9/15/09 475,000 554,278
6.875%, 9/15/10 1,000,000 1,189,453
- -----------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Unsec. Nts.:
4.25%, 7/15/07 7,750,000 8,201,197
6%, 5/15/11 4,240,000 4,835,775
7.25%, 1/15/10-5/15/30 7,130,000 8,714,124
- -----------------------------------------------------------------------------------------------------------------------
Tennessee Valley Authority Bonds:
5.375%, 11/13/08 685,000 754,752
7.125%, 5/1/30 603,000 765,912
Series C, 4.75%, 8/1/13 395,000 411,935
Series C, 6%, 3/15/13 380,000 432,407
- -----------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
5.375%, 2/15/31 2,978,000 3,246,952
6.50%, 11/15/26 510,000 627,579
STRIPS, 3.37%, 2/15/11 6 2,019,000 1,589,595
STRIPS, 3.86%, 2/15/13 6 2,098,000 1,476,388
- -----------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
1.875%, 1/31/06 1,161,000 1,169,074
3%, 2/15/09 794,000 802,871
4%, 2/15/14 2,607,000 2,642,033
5%, 2/15/11 275,000 303,660
5.25%, 5/15/04 135,000 135,728
5.75%, 8/15/10 1,131,000 1,298,883
--------------
Total U.S. Government Obligations (Cost $63,272,609) 64,412,001
- -----------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS--0.1%
- -----------------------------------------------------------------------------------------------------------------------
United Mexican States Nts., 7.50%, 1/14/12 (Cost $735,869) 665,000 774,725
- -----------------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--8.9%
- -----------------------------------------------------------------------------------------------------------------------
ABN Amro Bank NV (NY Branch), 7.125% Sub. Nts., Series B, 10/15/93 500,000 581,251
- -----------------------------------------------------------------------------------------------------------------------
Aetna, Inc., 7.375% Sr. Unsec. Nts., 3/1/06 555,000 610,874
- -----------------------------------------------------------------------------------------------------------------------
Allied Waste North America, Inc., 8.875% Sr. Nts., Series B, 4/1/08 740,000 834,350
- -----------------------------------------------------------------------------------------------------------------------
American Honda Finance Corp., 3.85% Nts., 11/6/08 425,000 436,658
- -----------------------------------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc., 7.50% Sr. Unsec. Nts., 5/1/07 1,200,000 1,365,382
- -----------------------------------------------------------------------------------------------------------------------
AXA, 8.60% Unsec. Sub. Nts., 12/15/30 1,030,000 1,359,217
- -----------------------------------------------------------------------------------------------------------------------
Bank of America Corp., 7.80% Jr. Unsec. Sub. Nts., 2/15/10 500,000 607,815
- -----------------------------------------------------------------------------------------------------------------------
Bankers Trust Corp., 7.375% Unsec. Sub. Nts., 5/1/08 140,000 162,420
- -----------------------------------------------------------------------------------------------------------------------
Beazer Homes USA, Inc., 8.625% Sr. Unsec. Nts., 5/15/11 770,000 864,325
18 | OPPENHEIMER BALANCED FUND
PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- -----------------------------------------------------------------------------------------------------------------------
Boeing Capital Corp.:
6.50% Nts., 2/15/12 8 $ 1,000,000 $ 1,128,914
7.375% Sr. Nts., 9/27/10 730,000 867,431
- -----------------------------------------------------------------------------------------------------------------------
British Telecommunications plc, 7.875% Nts., 12/15/05 1,070,000 1,173,605
- -----------------------------------------------------------------------------------------------------------------------
Caesars Entertainment, Inc., 7% Sr. Unsec. Sub. Nts., 7/15/04 685,000 695,275
- -----------------------------------------------------------------------------------------------------------------------
CenterPoint Energy, Inc.:
5.875% Nts., 6/1/08 980,000 1,019,154
8.125% Unsec. Nts., Series B, 7/15/05 335,000 358,369
- -----------------------------------------------------------------------------------------------------------------------
CIT Group, Inc., 7.75% Sr. Unsec. Unsub. Nts., 4/2/12 1,000,000 1,209,676
- -----------------------------------------------------------------------------------------------------------------------
Citigroup, Inc., 6.875% Unsec. Nts., 2/15/98 550,000 640,987
- -----------------------------------------------------------------------------------------------------------------------
Citizens Communications Co., 9.25% Sr. Nts., 5/15/11 399,000 442,469
- -----------------------------------------------------------------------------------------------------------------------
Coca-Cola Co. (The), 7.375% Unsec. Debs., 7/29/93 440,000 539,818
- -----------------------------------------------------------------------------------------------------------------------
Conectiv, Inc., 5.30% Unsec. Unsub. Nts., Series B, 6/1/05 230,000 238,548
- -----------------------------------------------------------------------------------------------------------------------
CSX Corp., 6.25% Unsec. Nts., 10/15/08 780,000 872,378
- -----------------------------------------------------------------------------------------------------------------------
D.R. Horton, Inc., 9.375% Sr. Unsec. Sub. Nts., 3/15/11 710,000 812,950
- -----------------------------------------------------------------------------------------------------------------------
DaimlerChrysler North America Holding Corp., 4.75% Unsec. Nts., 1/15/08 1,525,000 1,591,449
- -----------------------------------------------------------------------------------------------------------------------
Delphi Corp., 6.55% Nts., 6/15/06 705,000 761,239
- -----------------------------------------------------------------------------------------------------------------------
Deutsche Telekom International Finance BV, 8.50% Unsub. Nts., 6/15/10 1,050,000 1,291,015
- -----------------------------------------------------------------------------------------------------------------------
Doman Industries Ltd., 8.75% Sr. Nts., 3/15/04 1,2,9 1,400,000 350,000
- -----------------------------------------------------------------------------------------------------------------------
Dominion Resources, Inc., 8.125% Sr. Unsub. Nts., 6/15/10 725,000 883,808
- -----------------------------------------------------------------------------------------------------------------------
DTE Energy Co.:
6% Sr. Unsec. Unsub. Nts., 6/1/04 365,000 367,529
6.375% Sr. Nts., 4/15/33 855,000 863,818
- -----------------------------------------------------------------------------------------------------------------------
EOP Operating LP:
6.763% Sr. Unsec. Nts., 6/15/07 295,000 330,433
8.375% Nts., 3/15/06 560,000 625,046
- -----------------------------------------------------------------------------------------------------------------------
FedEx Corp., 2.65% Nts., 4/1/07 7 1,290,000 1,289,427
- -----------------------------------------------------------------------------------------------------------------------
FirstEnergy Corp., 5.50% Sr. Unsub. Nts., Series A, 11/15/06 845,000 899,135
- -----------------------------------------------------------------------------------------------------------------------
Ford Motor Co.:
7.70% Unsec. Debs., 5/15/97 500,000 482,101
8.90% Unsec. Unsub. Debs., 1/15/32 285,000 327,736
- -----------------------------------------------------------------------------------------------------------------------
France Telecom SA:
9% Sr. Unsec. Nts., 3/1/11 690,000 844,069
9.50% Sr. Unsec. Nts., 3/1/31 3 360,000 488,353
- -----------------------------------------------------------------------------------------------------------------------
Franklin Resources, Inc., 3.70% Nts., 4/15/08 585,000 594,409
- -----------------------------------------------------------------------------------------------------------------------
Gap, Inc. (The), 6.90% Nts., 9/15/07 695,000 774,925
- -----------------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 6.875% Unsec. Unsub. Nts., 8/28/12 1,980,000 2,142,099
- -----------------------------------------------------------------------------------------------------------------------
General Motors Corp., 8.375% Sr. Unsec. Debs., 7/15/33 550,000 625,743
- -----------------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The), 7.80% Sr. Unsec. Unsub. Nts., Series B, 1/28/10 500,000 605,635
- -----------------------------------------------------------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The), 2.375% Nts., 6/1/06 480,000 483,132
19 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- -----------------------------------------------------------------------------------------------------------------------
Health Net, Inc., 8.375% Sr. Unsec. Unsub. Nts., 4/15/11 $ 665,000 $ 819,853
- -----------------------------------------------------------------------------------------------------------------------
Hertz Corp. (The), 7.625% Sr. Nts., 6/1/12 2,165,000 2,386,839
- -----------------------------------------------------------------------------------------------------------------------
Huntsman Corp./ICI Chemical Co. plc, 13.08% Sr. Unsec. Disc. Nts., 12/31/09 6 800,000 372,000
- -----------------------------------------------------------------------------------------------------------------------
Hutchison Whampoa International Ltd., 7.45% Sr. Bonds, 11/24/33 7 685,000 719,584
- -----------------------------------------------------------------------------------------------------------------------
IT Group, Inc., 11.25% Sr. Unsec. Sub. Nts., Series B, 4/1/09 1,2,9 600,000 --
- -----------------------------------------------------------------------------------------------------------------------
John Hancock Global Funding II, 7.90% Nts., 7/2/10 7 1,300,000 1,583,379
- -----------------------------------------------------------------------------------------------------------------------
Kaiser Aluminum & Chemical Corp., 10.875% Sr. Nts., Series B, 10/15/06 1,2,9 250,000 230,000
- -----------------------------------------------------------------------------------------------------------------------
Kinder Morgan, Inc., 6.50% Sr. Unsec. Nts., 9/1/12 810,000 910,536
- -----------------------------------------------------------------------------------------------------------------------
Kroger Co. (The), 7.80% Sr. Nts., 8/15/07 1,255,000 1,450,011
- -----------------------------------------------------------------------------------------------------------------------
Leap Wireless International, Inc.:
0%/14.50% Sr. Unsec. Disc. Nts., 4/15/10 1,2,9 300,000 45,000
12.50% Sr. Nts., 4/15/10 1,2,9 600,000 108,000
- -----------------------------------------------------------------------------------------------------------------------
Liberty Media Corp., 3.50% Nts., 9/25/06 825,000 840,696
- -----------------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 4.125% Nts., Series C, 1/15/09 960,000 991,170
- -----------------------------------------------------------------------------------------------------------------------
Morgan Stanley, 6.60% Nts., 4/1/12 760,000 875,175
- -----------------------------------------------------------------------------------------------------------------------
Niagara Mohawk Power Corp., 5.375% Sr. Unsec. Nts., 10/1/04 515,000 525,097
- -----------------------------------------------------------------------------------------------------------------------
NiSource Finance Corp.:
3.20% Nts., 11/1/06 250,000 256,129
7.875% Sr. Unsec. Nts., 11/15/10 1,070,000 1,295,797
- -----------------------------------------------------------------------------------------------------------------------
Northrop Grumman Corp., 7.125% Sr. Nts., 2/15/11 870,000 1,029,779
- -----------------------------------------------------------------------------------------------------------------------
Orbcomm Global LP, Escrow Shares, 8/15/04 2,10 155,000 --
- -----------------------------------------------------------------------------------------------------------------------
Petroleos Mexicanos, 9.50% Sr. Sub. Nts., 9/15/27 510,000 637,500
- -----------------------------------------------------------------------------------------------------------------------
PF Export Receivables Master Trust, 3.748% Sr. Nts., Series B, 6/1/13 7 620,000 618,924
- -----------------------------------------------------------------------------------------------------------------------
Prudential Holdings LLC, 8.695% Bonds, Series C, 12/18/23 7 1,215,000 1,602,047
- -----------------------------------------------------------------------------------------------------------------------
Prudential Insurance Co. of America, 8.30% Nts., 7/1/25 7 1,285,000 1,628,481
- -----------------------------------------------------------------------------------------------------------------------
PSEG Energy Holdings, 7.75% Unsec. Nts., 4/16/07 810,000 860,625
- -----------------------------------------------------------------------------------------------------------------------
Pulte Homes, Inc., 8.375% Sr. Nts., 8/15/04 310,000 315,179
- -----------------------------------------------------------------------------------------------------------------------
R&B Falcon Corp., 9.50% Sr. Unsec. Nts., 12/15/08 750,000 959,606
- -----------------------------------------------------------------------------------------------------------------------
Raytheon Co., 6.50% Unsec. Nts., 7/15/05 1,155,000 1,223,583
- -----------------------------------------------------------------------------------------------------------------------
Safeway, Inc.:
2.50% Nts., 11/1/05 250,000 251,393
3.80% Sr. Unsec. Nts., 8/15/05 1,515,000 1,550,395
- -----------------------------------------------------------------------------------------------------------------------
Sprint Capital Corp., 8.75% Nts., 3/15/32 725,000 919,645
- -----------------------------------------------------------------------------------------------------------------------
Sterling Chemicals, Inc., 10% Sr. Sec. Nts., 12/19/07 2 136,379 132,288
- -----------------------------------------------------------------------------------------------------------------------
TCI Communications, Inc., 9.80% Sr. Unsec. Debs., 2/1/12 1,965,000 2,612,188
- -----------------------------------------------------------------------------------------------------------------------
TECO Energy, Inc., 10.50% Sr. Unsec. Nts., 12/1/07 680,000 795,600
- -----------------------------------------------------------------------------------------------------------------------
Telefonos de Mexico SA, 8.25% Sr. Unsec. Nts., 1/26/06 665,000 733,229
- -----------------------------------------------------------------------------------------------------------------------
Time Warner Cos., Inc., 9.125% Debs., 1/15/13 695,000 896,651
- -----------------------------------------------------------------------------------------------------------------------
Time Warner Entertainment Co. LP, 10.15% Sr. Nts., 5/1/12 308,000 417,454
20 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- -----------------------------------------------------------------------------------------------------------------------
Toll Corp., 8.25% Sr. Sub. Nts., 12/1/11 $ 770,000 $ 873,950
- -----------------------------------------------------------------------------------------------------------------------
Tyco International Group SA:
5.875% Unsec. Unsub. Nts., 11/1/04 167,000 170,818
6.375% Nts., 10/15/11 1,000,000 1,095,426
6.75% Sr. Unsub. Nts., 2/15/11 1,380,000 1,538,875
- -----------------------------------------------------------------------------------------------------------------------
Vornado Realty LP, 5.625% Sr. Unsec. Unsub. Nts., 6/15/07 945,000 1,030,763
- -----------------------------------------------------------------------------------------------------------------------
Waste Management, Inc.:
7% Sr. Nts., 7/15/28 290,000 323,395
7.375% Sr. Unsub. Nts., 8/1/10 650,000 766,832
- -----------------------------------------------------------------------------------------------------------------------
Weyerhaeuser Co., 5.50% Unsec. Unsub. Nts., 3/15/05 1,180,000 1,224,274
--------------
Total Non-Convertible Corporate Bonds and Notes (Cost $68,143,311) 71,061,133
- -----------------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES--1.6%
- -----------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG, COUNTS Corp. Sec. Credit Linked Nts., Series 2003-1,
2.89%, 1/7/05 2,3 4,250,000 4,208,775
- -----------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank, TRAC-X NA High Yield T2 Credit Linked Bonds,
6.05%, 3/25/09 7 3,865,000 3,961,625
- -----------------------------------------------------------------------------------------------------------------------
UBS AG, High Grade Credit Linked Nts., 2.753%, 12/10/04 2,3 4,250,000 4,313,750
--------------
Total Structured Notes (Cost $12,365,000) 12,484,150
- -----------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--10.8% 11
- -----------------------------------------------------------------------------------------------------------------------
Undivided interest of 5.591% in joint repurchase agreement (Principal
Amount/Market Value $1,535,928,000, with a maturity value of $1,535,971,945)
with PaineWebber, Inc., 1.03%, dated 3/31/04, to be repurchased at $85,876,457
on 4/1/04, collateralized by Federal National Mortgage Assn., 4.50%,
10/1/33--3/1/34, with a value of $1,568,601,295 (Cost $85,874,000) 85,874,000 85,874,000
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $803,465,235) 117.9% 940,485,456
- -----------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (17.9) (143,078,803)
----------------------------------
NET ASSETS 100.0% $ 797,406,653
==================================
21 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Identifies issues considered to be illiquid. See Note 9 of Notes to Financial
Statements.
3. Represents the current interest rate for a variable or increasing rate
security.
4. When-issued security to be delivered and settled after March 31, 2004. See
Note 1 of Notes to Financial Statements.
5. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows. These securities amount to $3,657,461 or 0.46% of the Fund's net assets
as of March 31, 2004.
6. Zero coupon bond reflects effective yield on the date of purchase.
7. 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 $11,403,467 or 1.43% of the Fund's net
assets as of March 31, 2004.
8. Securities with an aggregate market value of $1,128,914 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
9. Issue is in default. See Note 1 of Notes to Financial Statements.
10. Received as the result of issuer reorganization. Currently has minimal
market value.
11. The Fund may have elements of risk due to concentrated investments. Such
concentrations may subject the Fund to additional risks.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 | OPPENHEIMER BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES Unaudited
- --------------------------------------------------------------------------------
MARCH 31, 2004
- -----------------------------------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------------------------------
Investments, at value (including cost and market value of $85,874,000 in repurchase
agreements) (including securities loaned of approximately $44,406,000) (cost $803,465,235)
- --see accompanying statement of investments $940,485,456
- -----------------------------------------------------------------------------------------------------------
Cash 73,579
- -----------------------------------------------------------------------------------------------------------
Collateral for securities loaned 45,248,900
- -----------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal paydowns 3,327,807
Shares of beneficial interest sold 1,011,100
Investments sold on a when-issued basis 525,347
Futures margins 227,172
Swap contracts 99,118
Other 19,510
------------
Total assets 991,017,989
- -----------------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 45,248,900
- -----------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased on a when-issued basis 147,087,671
Shares of beneficial interest redeemed 502,141
Distribution and service plan fees 402,023
Trustees' compensation 141,660
Shareholder communications 108,337
Transfer and shareholder servicing agent fees 101,567
Other 19,037
------------
Total liabilities 193,611,336
- -----------------------------------------------------------------------------------------------------------
NET ASSETS $797,406,653
============
- -----------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
Paid-in capital $648,195,924
- -----------------------------------------------------------------------------------------------------------
Accumulated net investment income 2,130,917
- -----------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 9,935,658
- -----------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and liabilities
denominated in foreign currencies 137,144,154
------------
NET ASSETS $797,406,653
============
23 | OPPENHEIMER BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES Unaudited / Continued
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- ----------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of $649,009,057 and
46,776,617 shares of beneficial interest outstanding) $13.87
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $14.72
- ----------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $80,564,470 and 5,898,837 shares of
beneficial interest outstanding) $13.66
- ----------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $62,428,945 and 4,552,402 shares of
beneficial interest outstanding) $13.71
- ----------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $5,404,181 and 392,084 shares of
beneficial interest outstanding) $13.78
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | OPPENHEIMER BALANCED FUND
STATEMENT OF OPERATIONS Unaudited
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004
- ----------------------------------------------------------------------------------------
INVESTMENT INCOME
- ----------------------------------------------------------------------------------------
Interest $ 4,751,140
- ----------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $96,927) 2,973,828
- ----------------------------------------------------------------------------------------
Portfolio lending fees 18,586
------------
Total investment income 7,743,554
- ----------------------------------------------------------------------------------------
EXPENSES
- ----------------------------------------------------------------------------------------
Management fees 2,672,526
- ----------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 600,726
Class B 363,545
Class C 274,539
Class N 12,101
- ----------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 405,929
Class B 94,458
Class C 50,316
Class N 8,399
- ----------------------------------------------------------------------------------------
Shareholder communications:
Class A 38,912
Class B 9,368
Class C 4,120
Class N 424
- ----------------------------------------------------------------------------------------
Trustees' compensation 17,968
- ----------------------------------------------------------------------------------------
Custodian fees and expenses 8,938
- ----------------------------------------------------------------------------------------
Other 58,116
------------
Total expenses 4,620,385
Less reduction to custodian expenses (1,340)
Less voluntary waiver of transfer and shareholder servicing agent fees:
Class A (26,168)
Class B (1,925)
Class C (818)
Class N (26)
------------
Net expenses 4,590,108
- ----------------------------------------------------------------------------------------
NET INVESTMENT INCOME 3,153,446
25 | OPPENHEIMER BALANCED FUND
STATEMENT OF OPERATIONS Unaudited / Continued
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
- -----------------------------------------------------------------------------------------
Net realized gain on:
Investments (including premiums on options exercised) $ 36,549,300
Closing of futures contracts 3,428,552
Closing and expiration of option contracts written 428,486
Foreign currency transactions 213,602
-------------
Net realized gain 40,619,940
- -----------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments 31,452,289
Translation of assets and liabilities denominated in foreign currencies 103,661
Futures contracts (1,251,588)
-------------
Net change in unrealized appreciation 30,304,362
- -----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 74,077,748
=============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | OPPENHEIMER BALANCED FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, 2004 SEPTEMBER 30,
(UNAUDITED) 2003
- ------------------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------------------
Net investment income $ 3,153,446 $ 10,168,008
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) 40,619,940 (25,256,881)
- ------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 30,304,362 137,802,225
------------------------------------
Net increase in net assets resulting from operations 74,077,748 122,713,352
- ------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (890,848) (9,895,590)
Class B -- (549,555)
Class C -- (411,935)
Class N (2,442) (26,078)
- ------------------------------------------------------------------------------------------------------
Tax return of capital distribution:
Class A -- (1,438,201)
Class B -- (158,899)
Class C -- (105,519)
Class N -- (4,407)
- ------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A 12,287,361 (441,692)
Class B 8,848,971 (9,391)
Class C 10,171,700 7,175,471
Class N 1,610,369 2,289,286
- ------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------
Total increase 106,102,859 119,136,842
- ------------------------------------------------------------------------------------------------------
Beginning of period 691,303,794 572,166,952
------------------------------------
End of period (including accumulated net investment income
(loss) of $2,130,917 and $(129,239), respectively) $ 797,406,653 $ 691,303,794
====================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | OPPENHEIMER BALANCED FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, 2004 SEPT. 30,
CLASS A (UNAUDITED) 2003 2002 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.55 $ 10.51 $ 12.14 $ 14.23 $ 14.06 $ 13.69
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .07 .21 .35 .43 .53 .54
Net realized and unrealized gain (loss) 1.27 2.08 (1.29) (1.40) 1.21 1.59
-----------------------------------------------------------------------------------
Total from investment operations 1.34 2.29 (.94) (.97) 1.74 2.13
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.02) (.22) (.31) (.38) (.48) (.54)
Tax return of capital distribution -- (.03) -- -- -- --
Distributions from net realized gain -- -- (.38) (.74) (1.09) (1.22)
-----------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.02) (.25) (.69) (1.12) (1.57) (1.76)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.87 $ 12.55 $ 10.51 $ 12.14 $ 14.23 $ 14.06
===================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 10.67% 21.98% (8.58)% (7.27)% 13.31% 16.29%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $649,009 $575,799 $483,311 $562,281 $639,648 $635,603
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $622,297 $523,477 $570,796 $626,251 $644,356 $660,113
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 0.99% 1.78% 2.84% 3.16% 3.71% 3.70%
Total expenses 1.06% 3,4 1.11% 3 1.15% 3 1.01% 3 1.13% 3 1.09% 3
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 32% 205% 31% 40% 33% 15%
1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.
4. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | OPPENHEIMER BALANCED FUND
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, 2004 SEPT. 30,
CLASS B (UNAUDITED) 2003 2002 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.40 $ 10.38 $ 12.01 $ 14.08 $ 13.93 $ 13.57
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .01 .09 .25 .31 .41 .41
Net realized and unrealized gain (loss) 1.25 2.07 (1.29) (1.36) 1.19 1.58
-----------------------------------------------------------------------------------
Total from investment operations 1.26 2.16 (1.04) (1.05) 1.60 1.99
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income -- (.11) (.21) (.28) (.36) (.41)
Tax return of capital distribution -- (.03) -- -- -- --
Distributions from net realized gain -- -- (.38) (.74) (1.09) (1.22)
-----------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders -- (.14) (.59) (1.02) (1.45) (1.63)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.66 $ 12.40 $ 10.38 $ 12.01 $ 14.08 $ 13.93
===================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 10.16% 20.91% (9.38)% (7.96)% 12.30% 15.35%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 80,564 $ 64,944 $ 54,757 $ 63,487 $ 66,777 $ 68,875
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 72,730 $ 57,836 $ 64,702 $ 67,959 $ 66,956 $ 73,673
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 0.04% 0.81% 2.02% 2.37% 2.92% 2.85%
Total expenses 2.02% 3,4 2.08% 3 1.97% 3 1.81% 3 1.94% 3 1.93% 3
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 32% 205% 31% 40% 33% 15%
1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.
4. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | OPPENHEIMER BALANCED FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, 2004 SEPT. 30,
CLASS C (UNAUDITED) 2003 2002 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.44 $ 10.42 $ 12.06 $ 14.13 $ 13.97 $ 13.61
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .02 .11 .24 .31 .41 .42
Net realized and unrealized gain (loss) 1.25 2.06 (1.29) (1.37) 1.20 1.57
-----------------------------------------------------------------------------------
Total from investment operations 1.27 2.17 (1.05) (1.06) 1.61 1.99
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income -- (.12) (.21) (.27) (.36) (.41)
Tax return of capital distribution -- (.03) -- -- -- --
Distributions from net realized gain -- -- (.38) (.74) (1.09) (1.22)
-----------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders -- (.15) (.59) (1.01) (1.45) (1.63)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.71 $ 12.44 $ 10.42 $ 12.06 $ 14.13 $ 13.97
===================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 10.21% 20.98% (9.41)% (8.00)% 12.35% 15.28%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 62,429 $ 47,212 $ 33,300 $ 36,171 $ 38,522 $ 38,978
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 54,950 $ 38,407 $ 37,412 $ 39,030 $ 38,597 $ 43,701
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 0.12% 0.90% 2.03% 2.37% 2.92% 2.85%
Total expenses 1.92% 3,4 1.98% 3 1.96% 3 1.81% 3 1.94% 3 1.93% 3
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 32% 205% 31% 40% 33% 15%
1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.
4. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30 | OPPENHEIMER BALANCED FUND
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, 2004 SEPT. 30,
CLASS N (UNAUDITED) 2003 2002 2001 1
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.49 $ 10.48 $ 12.13 $ 13.67
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .05 .20 .39 .24
Net realized and unrealized gain (loss) 1.25 2.01 (1.38) (1.48)
--------------------------------------------------------------------
Total from investment operations 1.30 2.21 (.99) (1.24)
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.01) (.17) (.28) (.30)
Tax return of capital distribution -- (.03) -- --
Distributions from net realized gain -- -- (.38) --
--------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.01) (.20) (.66) (.30)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.78 $ 12.49 $ 10.48 $ 12.13
====================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 10.38% 21.27% (8.94)% (9.30)%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 5,404 $ 3,349 $ 798 $ 95
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 4,848 $ 1,604 $ 454 $ 12
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 0.46% 1.24% 2.49% 5.81%
Total expenses 1.60% 1.76% 1.48% 1.32%
Expenses after expense reimbursement or fee waiver and
reduction to custodian expenses N/A 4,5 1.62% N/A 4 N/A 4
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 32% 205% 31% 40%
1. For the period from March 1, 2001 (inception of offering) to September 30,
2001.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Balanced Fund (the Fund), formerly Oppenheimer Multiple Strategies
Fund, is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Fund's investment objective is to
seek high total investment return consistent with preservation of principal. The
Fund's investment advisor is OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B, Class C and Class N shares. Class A
shares are sold at their offering price, which is normally net asset value plus
a front-end sales charge. Class B, Class C and Class N shares are sold without a
front-end sales charge but may be subject to a contingent deferred sales charge
(CDSC). Class N shares are sold only through retirement plans. Retirement plans
that offer Class N shares may impose charges on those accounts. All classes of
shares have identical rights and voting privileges with respect to the Fund in
general and exclusive voting rights on matters that affect that class alone.
Earnings, net assets and net asset value per share may differ by minor amounts
due to each class having its own expenses directly attributable to that class.
Classes A, B, C and N have separate distribution and/or service plans. Class B
shares will automatically convert to Class A shares six years after the date of
purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. Securities listed or traded on National Stock Exchanges or
other domestic or foreign exchanges are valued based on the last sale price of
the security traded on that exchange prior to the time when the Fund's assets
are valued. Securities traded on NASDAQ are valued based on the closing price
provided by NASDAQ prior to the time when the Fund's assets are valued. In the
absence of a sale, the security is valued at the last sale price on the prior
trading day, if it is within the spread of the closing bid and asked prices, and
if not, at the closing bid price. Securities may be valued primarily using
dealer-supplied valuations or a portfolio pricing service authorized by the
Board of Trustees. Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value. Foreign
securities whose values have been materially affected by what the Manager
identifies as a significant event occurring before the Fund's assets are valued
but after the close of their respective foreign exchanges will be fair valued.
Fair value is determined in good faith using consistently applied procedures
under the supervision of the Board of Trustees. Short-term "money market type"
debt securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
STRUCTURED NOTES. The Fund invests in index-linked structured notes whose
principal and/or interest depend on the performance of an underlying index. The
structured notes are leveraged, which increases the volatility of each note's
market value relative to the change in the underlying index. Fluctuations in
value of these securities are recorded as unrealized gains and losses in the
accompanying financial statements. The Fund records a realized gain or loss when
a structured note is sold or matures. As of March 31, 2004,
32 | OPPENHEIMER BALANCED FUND
the market value of these securities comprised 1.6% of the Fund's net assets,
and resulted in unrealized gains of $119,150.
- --------------------------------------------------------------------------------
SECURITIES ON A WHEN ISSUED BASIS. Delivery and payment for securities that have
been purchased by the Fund on a when issued basis can take place a month or more
after the trade date. Normally the settlement date occurs within six months
after the trade date; however, the Fund may, from time to time, purchase
securities whose settlement date extends six months or more beyond trade date.
During this period, such securities do not earn interest, are subject to market
fluctuation and may increase or decrease in value prior to their delivery. The
Fund maintains segregated assets with a market value equal to or greater than
the amount of its purchase commitments. The purchase of securities on a when
issued basis may increase the volatility of the Fund's net asset value to the
extent the Fund executes such purchases while remaining substantially fully
invested. As of March 31, 2004, the Fund had entered into net when issued
commitments of $146,562,324.
In connection with its ability to purchase securities on a when issued
basis, the Fund may enter into forward roll transactions with respect to
mortgage-related securities. Forward roll transactions require the sale of
securities for delivery in the current month, and a simultaneous agreement with
the same counterparty to repurchase similar (same type, coupon and maturity) but
not identical securities on a specified future date. The Fund records the
incremental difference between the forward purchase and sale of each forward
roll as fee income or realized gain (loss) on investments.
Risks of entering into forward roll transactions include the potential
inability of the counterparty to meet the terms of the agreement; the potential
of the Fund to receive inferior securities to what was sold to the counterparty
at redelivery; counterparty credit risk; and the potential pay down speed
variance between the mortgage-related pools.
- --------------------------------------------------------------------------------
SECURITY CREDIT RISK. The Fund invests in high-yield securities, which may be
subject to a greater degree of credit risk, market fluctuations and loss of
income and principal, and may be more sensitive to economic conditions than
lower-yielding, higher-rated fixed-income securities. The Fund may acquire
securities in default, and is not obligated to dispose of securities whose
issuers subsequently default. As of March 31, 2004, securities with an aggregate
market value of $733,000, representing 0.09% of the Fund's net assets, were in
default.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
33 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. Secured by U.S. government securities, these balances
are invested in one or more repurchase agreements. Securities pledged as
collateral for repurchase agreements are held by a custodian bank until the
agreements mature. Each agreement requires that the market value of the
collateral be sufficient to cover payments of interest and principal. In the
event of default by the other party to the agreement, retention of the
collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes primarily due to the recognition of paydown
gains and losses as capital gain or loss for tax purposes and the recognition of
certain foreign currency gains (losses) as ordinary income (loss) for tax
purposes. The character of dividends and distributions made during the fiscal
year from net investment income or net realized gains may differ from their
ultimate characterization for federal income tax purposes. Also, due to timing
of dividends and distributions, the fiscal year in which amounts are distributed
may differ from the fiscal year in which the income or net realized gain was
recorded by the Fund.
As of March 31, 2004, the Fund had available for federal income tax
purposes an estimated unused capital loss carryforward of zero. This estimated
capital loss carryforward represents carryforward as of the end of the last
fiscal year, increased for losses deferred under tax accounting rules to the
current fiscal year and is increased or decreased by capital losses or gains
realized in the first six months of the current fiscal year. During the six
months ended March 31, 2004 and the year ended September 30, 2003, the Fund used
$24,497,839 and $0, respectively, of carryforward to offset capital gains
realized.
As of September 30, 2003, the Fund had available for federal income tax purposes
post-October losses of $20,597,738 and unused capital loss carryforwards as
follows:
34 | OPPENHEIMER BALANCED FUND
EXPIRING
--------------------------
2009 $ 28,532
2011 3,871,569
----------
Total $3,900,101*
==========
*Includes $28,532 from capital loss carryforward acquired in the September 4,
2003 merger with Oppenheimer Select Managers QM Active Balanced Fund.
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for the
Fund's independent trustees. Benefits are based on years of service and fees
paid to each trustee during the years of service. During the six months ended
March 31, 2004, the Fund's projected benefit obligations were increased by
$6,886 and payments of $10,442 were made to retired trustees, resulting in an
accumulated liability of $121,974 as of March 31, 2004.
The Board of Trustees has adopted a deferred compensation plan for
independent trustees that enables trustees to elect to defer receipt of all or a
portion of the annual compensation they are entitled to receive from the Fund.
Under the plan, deferred amounts are treated as though equal dollar amounts had
been invested in shares of the Fund or are invested in other Oppenheimer funds
selected by the Trustee. Deferral of trustees' fees under the plan will not
affect the net assets of the Fund, and will not materially affect the Fund's
assets, liabilities or net investment income per share. Amounts will be deferred
until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income distributions, if any, are declared
and paid quarterly. Capital gain distributions, if any, are declared and paid
annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable,
represents earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / 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:
SIX MONTHS ENDED MARCH 31, 2004 YEAR ENDED SEPTEMBER 30, 2003
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------
CLASS A
Sold 3,369,975 $ 45,414,441 4,105,517 $ 47,076,255
Dividends and/or
distributions reinvested 57,107 798,338 867,685 10,173,237
Acquisition-Note 11 -- -- 460,912 5,789,058
Redeemed (2,517,425) (33,925,418) (5,572,268) (63,480,242)
------------------------------------------------------------------------
Net increase (decrease) 909,657 $ 12,287,361 (138,154) $ (441,692)
========================================================================
- --------------------------------------------------------------------------------------------------------
CLASS B
Sold 1,506,159 $ 20,018,018 1,845,061 $ 21,105,571
Dividends and/or
distributions reinvested -- -- 56,269 654,993
Acquisition-Note 11 -- -- 61,992 768,077
Redeemed (845,005) (11,169,047) (2,000,366) (22,538,032)
------------------------------------------------------------------------
Net increase (decrease) 661,154 $ 8,848,971 (37,044) $ (9,391)
========================================================================
- --------------------------------------------------------------------------------------------------------
CLASS C
Sold 1,054,723 $ 14,094,971 1,252,468 $ 14,407,664
Dividends and/or
distributions reinvested -- -- 40,146 469,075
Acquisition-Note 11 -- -- 93,553 1,163,802
Redeemed (296,046) (3,923,271) (787,972) (8,865,070)
------------------------------------------------------------------------
Net increase 758,677 $ 10,171,700 598,195 $ 7,175,471
========================================================================
- --------------------------------------------------------------------------------------------------------
CLASS N
Sold 248,076 $ 3,303,764 170,483 $ 1,997,262
Dividends and/or
distributions reinvested 173 2,417 2,505 29,692
Acquisition-Note 11 -- -- 47,795 597,438
Redeemed (124,270) (1,695,812) (28,893) (335,106)
------------------------------------------------------------------------
Net increase 123,979 $ 1,610,369 191,890 $ 2,289,286
========================================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the six months ended March 31, 2004, were
$264,049,271 and $208,728,509, respectively.
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager are in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of 0.75% of the first $200 million of average annual net assets of
the Fund, 0.72% of the
36 | OPPENHEIMER BALANCED FUND
next $200 million, 0.69% of the next $200 million, 0.66% of the next $200
million, 0.60% of the next $700 million, and 0.58% of average annual net assets
in excess of $1.5 billion.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the six months ended March 31, 2004, the Fund paid
$545,805 to OFS for services to the Fund.
OFS has voluntarily agreed to limit transfer and shareholder servicing
agent fees for all classes, up to an annual rate of 0.35% of average net assets
per class. This undertaking may be amended or withdrawn at any time.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate of up to 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor currently uses the fees it receives
from the Fund to pay brokers, dealers and other financial institutions for
personal services and account maintenance services they provide for their
customers who hold Class A shares. Any unreimbursed expenses the Distributor
incurs with respect to Class A shares in any fiscal year cannot be recovered in
subsequent years. Fees incurred by the Fund under the plan are detailed in the
Statement of Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class N
shares to compensate the Distributor for its services in connection with the
distribution of these shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% per year on
Class B shares and on Class C shares and 0.25% per year on Class N shares. The
Distributor also receives a service fee of up to 0.25% per year under each plan.
If either the Class B, Class C or Class N plan is terminated by the Fund or by
the shareholders of a class, the Board of Trustees and its independent trustees
must determine whether the Distributor shall be entitled to payment from the
Fund of all or a portion of the service fee and/or asset-based sales charge in
respect to shares sold prior to the effective date of such termination. The
Distributor's aggregate uncompensated expenses under the plan at March 31, 2004
for Class B, Class C and Class N shares were $2,779,141, $1,132,966 and $83,762,
respectively. Fees incurred by the Fund under the plans are detailed in the
Statement of Operations.
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption proceeds
prior to remittance,
37 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
as applicable. The sales charges retained by the Distributor from the sale of
shares and the CDSC retained by the Distributor on the redemption of shares is
shown in the table below for the period indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
SIX MONTHS RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- --------------------------------------------------------------------------------------------------------
March 31, 2004 $200,126 $387 $68,392 $2,728 $610
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts to settle specific purchases or sales of securities
denominated in a foreign currency and for protection from adverse exchange rate
fluctuation. Risks to the Fund include the potential inability of the
counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using prevailing foreign currency exchange rates.
Unrealized appreciation and depreciation on foreign currency contracts are
reported in the Statement of Assets and Liabilities as a receivable or payable
and in the Statement of Operations with the change in unrealized appreciation or
depreciation.
The Fund may realize a gain or loss upon the closing or settlement of the
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.
As of March 31, 2004, the Fund had no outstanding foreign currency
contracts.
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a negotiated price on a stipulated future
date. Futures contracts are traded on a commodity exchange. The Fund may buy and
sell futures contracts that relate to broadly based securities indices
"financial futures" or debt securities "interest rate futures" in order to gain
exposure to or protection from changes in market value of stock and bonds or
interest rates. The Fund may also buy or write put or call options on these
futures contracts.
The Fund generally sells futures contracts as a hedge against increases in
interest rates and decreases in market value of portfolio securities. The Fund
may also purchase futures contracts to gain exposure to market changes as it may
be more efficient or cost effective than actually buying fixed income
securities.
38 | OPPENHEIMER BALANCED FUND
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund recognizes a realized gain or loss when the contract is
closed or has expired.
Cash held by the broker to cover initial margin requirements on open
futures contracts is noted in the Statement of Assets and Liabilities.
Securities held in collateralized accounts to cover initial margin requirements
on open futures contracts are noted in the Statement of Investments. The
Statement of Assets and Liabilities reflects a receivable and/or payable for the
daily mark to market for variation margin. Realized gains and losses are
reported on the Statement of Operations as closing and expiration of futures
contracts. The net change in unrealized appreciation and depreciation is
reported on the Statement of Operations.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
As of March 31, 2004, the Fund had outstanding futures contracts as follows:
UNREALIZED
EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS MARCH 31, 2004 (DEPRECIATION)
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CONTRACTS TO PURCHASE
U.S. Long Bonds 6/21/04 233 $26,576,563 $ 396,298
U.S. Treasury Nts., 10 yr 6/21/04 327 37,737,844 78,266
----------
474,564
----------
CONTRACTS TO SELL
U.S. Treasury Nts., 2 yr 6/30/04 65 13,986,172 (37,119)
U.S. Treasury Nts., 5 yr 6/21/04 263 29,866,938 (414,392)
----------
(451,511)
----------
$ 23,053
==========
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7. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call options to
hedge against adverse movements in the value of portfolio holdings. When an
option is written, the Fund receives a premium and becomes obligated to sell or
purchase the underlying security at a fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction.
39 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
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7. OPTION ACTIVITY Continued
When an option is exercised, the proceeds on sales for a written call option,
the purchase cost for a written put option, or the cost of the security for a
purchased put or call option is adjusted by the amount of premium received or
paid.
Securities designated to cover outstanding call options are noted in the
Statement of Investments where applicable. Contracts subject to call, expiration
date, exercise price, premium received and market value are detailed in a note
to the Statement of Investments. Options written are reported as a liability in
the Statement of Assets and Liabilities. Realized gains and losses are reported
in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur
a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. The Fund also has the additional risk of not
being able to enter into a closing transaction if a liquid secondary market does
not exist.
Written option activity for the six months ended March 31, 2004 was as follows:
CALL OPTIONS
-----------------------------------
NUMBER OF AMOUNT OF
CONTRACTS PREMIUMS
- ----------------------------------------------------------------------
Options outstanding as of
September 30, 2003 6,826 $ 1,028,982
Options closed or expired (2,929) (428,486)
Options exercised (3,897) (600,496)
--------------------------------
Options outstanding as of
March 31, 2004 -- $ --
================================
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8. TOTAL RETURN SWAP CONTRACTS
The Fund may enter into a total return swap transaction to maintain a total
return on a particular investment, or portion of its portfolio, or for other
non-speculative purposes. Because the principal amount is not exchanged, it
represents neither an asset nor a liability to either counterparty, and is
referred to as notional. The Fund records an increase or decrease to interest
income, in the amount due to or owed by the Fund at termination or settlement.
Total return swaps are subject to risks (if the counterparty fails to meet its
obligations).
40 | OPPENHEIMER BALANCED FUND
As of March 31, 2004, the Fund had entered into the following total return swap
agreements:
PAID BY RECEIVED BY
THE FUND AT THE FUND AT
NOTIONAL MARCH 31, MARCH 31, TERMINATION UNREALIZED
SWAP COUNTERPARTY AMOUNT 2004 2004 DATE APPRECIATION
- --------------------------------------------------------------------------------------------------------
One-Month Value of
LIBOR less total return of
50 basis Lehman Brothers
Deutsche Bank AG $11,582,889 points CMBS Index 6/30/04 $99,118
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9. ILLIQUID SECURITIES
As of March 31, 2004, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund intends to invest no more than 10% of its net assets (determined at the
time of purchase and reviewed periodically) in illiquid securities. The
aggregate value of illiquid securities subject to this limitation as of March
31, 2004 was $10,831,688, which represents 1.36% of the Fund's net assets.
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10. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of US
Treasury obligations or cash, against the loaned securities and maintains
collateral in an amount not less than 100% of the market value of the loaned
securities during the period of the loan. The market value of the loaned
securities is determined at the close of business of the funds and any
additional required collateral is delivered to the Fund on the next business
day. If the borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the Fund could experience delays and
cost in recovering the securities loaned or in gaining access to the collateral.
Cash collateral is invested in cash equivalents. As of March 31, 2004, the Fund
had on loan securities valued at approximately $44,406,000. Cash of $45,248,900
was received as collateral for the loans, and has been invested in approved
instruments.
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11. ACQUISITION OF OPPENHEIMER SELECT MANAGERS QM ACTIVE BALANCED FUND
On September 4, 2003, the Fund acquired all of the net assets of Oppenheimer
Select Managers QM Active Balanced Fund, pursuant to an Agreement and Plan of
Reorganization approved by the Oppenheimer Select Managers QM Active Balanced
Fund shareholders on August 29, 2003. The Fund issued (at an exchange ratio of
0.743061 for Class A, 0.748082 for Class B, 0.746018 for Class C and 0.746337
for Class N of the Fund to one share of Oppenheimer Balanced Fund) 460,912,
61,992, 93,553 and 47,795 shares of beneficial interest for Class A, Class B,
Class C and Class N, respectively, valued at $5,789,058, $768,077, $1,163,802
and $597,438 in exchange for the net assets, resulting in combined Class A net
assets of $576,426,341, Class B net assets of $63,310,584,
41 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
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11. ACQUISITION OF OPPENHEIMER SELECT MANAGERS QM ACTIVE BALANCED FUND Continued
Class C net assets of $45,976,371 and Class N net assets of $2,902,200 on
September 4, 2003. The net assets acquired included net unrealized appreciation
of $535,545 and unused capital loss carryforward of $28,532 potential
utilization subject to tax limitation. The exchange qualified as a tax-free
reorganization for federal income tax purposes.
- --------------------------------------------------------------------------------
12. BORROWING AND LENDING ARRANGEMENTS
The Fund entered into an "interfund borrowing and lending arrangement" with
other funds in the Oppenheimer funds complex, to allow funds to borrow for
liquidity purposes. The arrangement was initiated pursuant to exemptive relief
granted by the Securities and Exchange Commission (the SEC) to allow these
affiliated funds to lend money to, and borrow money from, each other, in an
attempt to reduce borrowing costs below those of bank loan facilities. The SEC's
order requires the Fund's Board of Trustees to adopt operating policies and
procedures to administer interfund borrowing and lending. Under the arrangement
the Fund may lend money to other Oppenheimer funds and may borrow from other
Oppenheimer funds at a rate set by the Fund's Board of Trustees, based upon a
recommendation by the Manager. The Fund's borrowings, if any, are subject to
asset coverage requirements under the Investment Company Act and the provisions
of the SEC order and other applicable regulations. If the Fund borrows money,
there is a risk that the loan could be called on one day's notice, in which case
the Fund might have to borrow from a bank at higher rates if a loan were not
available from another Oppenheimer fund. If the Fund lends money to another
fund, it will be subject to the risk that the other fund might not repay the
loan in a timely manner, or at all.
The Fund had no interfund borrowings or loans outstanding during the six
months ended or at March 31, 2004.
42 | OPPENHEIMER BALANCED FUND
PORTFOLIO PROXY VOTING
POLICIES AND PROCEDURES Unaudited
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- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.225.5677, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund will be
required to file new Form N-PX, with its complete proxy voting record for the 12
months ended June 30th, no later than August 31st of each year. The first such
filing is due no later than August 31, 2004, for the twelve months ended June
30, 2004. Once filed, the Fund's Form N-PX filing will be available (i) without
charge, upon request, by calling the Fund toll-free at 1.800.225.5677, and (ii)
on the SEC's website at www.sec.gov.
43 | OPPENHEIMER BALANCED FUND
ITEM 2. CODE OF ETHICS
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer, principal
accounting officer or controller or persons performing similar functions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The Board of Trustees of the registrant has determined that Edward V.
Regan, the Chairman of the Board's Audit Committee, possesses the technical
attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as
an "audit committee financial expert," and has designated Mr. Regan as the Audit
Committee's financial expert. Mr. Regan is an "independent" Trustee pursuant to
paragraph (a)(2) of Item 3 to Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable to semiannual reports.
ITEM 5. NOT APPLICABLE
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable
ITEM 7. NOT APPLICABLE
ITEM 8. NOT APPLICABLE
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At a meeting of the Board of Trustees of the registrant held on
February 18, 2004, the Board adopted (1) a policy that, should the Board
determine that a vacancy exists or is likely to exist on the Board, the
Governance Committee of the Board, which is comprised entirely of independent
trustees, shall consider any candidates for Board membership recommended by the
registrant's security holders and (2) a policy that security holders wishing to
submit a nominee for election to the Board may do so by mailing their submission
to the offices of OppenheimerFunds, Inc., Two World Financial Center, 225
Liberty Street - 11th Floor, New York, NY 10281-1008, to the attention of the
Chair of the Governance Committee. Prior to February 18, 2004, the Board did not
have a formalized policy with respect to consideration of security holder
nominees or a procedure by which security holders may make their submissions. In
addition to security holder nominees, the Governance Committee may also consider
nominees recommended by independent Board members or recommended by any other
Board members and is authorized under its Charter, upon Board approval, to
retain an executive search firm to assist in screening potential candidates.
Upon Board approval, the Governance Committee may also obtain legal, financial,
or other external counsel that may be necessary or desirable in the screening
process.
ITEM 10. CONTROLS AND PROCEDURES
(a) Based on their evaluation of registrant's disclosure controls and
procedures (as defined in rule 30a-2(c) under the Investment
Company Act of 1940 (17 CFR 270.30a-2(c)) as of March 31, 2004,
registrant's principal executive officer and principal financial
officer found registrant's disclosure controls and procedures to
provide reasonable assurances that information required to be
disclosed by registrant in the reports that it files under the
Securities Exchange Act of 1934 (a) is accumulated and
communicated to registrant's management, including its principal
executive officer and principal financial officer, to allow timely
decisions regarding required disclosure, and (b) is recorded,
processed, summarized and reported, within the time periods
specified in the rules and forms adopted by the U.S. Securities
and Exchange Commission.
(b) There have been no significant changes in registrant's internal
controls over financial reporting that occurred during the
registrant's last fiscal half-year that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 11. EXHIBITS.
(A) EXHIBIT ATTACHED HERETO. (ATTACH CODE OF ETHICS AS EXHIBIT)
(B) EXHIBITS ATTACHED HERETO. (ATTACH CERTIFICATIONS AS EXHIBITS)