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
(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 - September 30, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
TOP HOLDINGS AND ALLOCATIONS
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TOP TEN COMMON STOCK INDUSTRIES
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Media 6.0%
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Oil & Gas 3.6
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Software 3.2
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Insurance 3.1
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Pharmaceuticals 2.9
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Commercial Banks 2.8
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Diversified Financial Services 2.7
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Commercial Services & Supplies 2.7
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Computers & Peripherals 2.6
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Aerospace & Defense 2.4
Portfolio holdings and allocations are subject to change. Percentages are as of
September 30, 2004, and are based on net assets.
TOP TEN COMMON STOCK HOLDINGS
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UnitedGlobalCom, Inc., Cl. A 2.9%
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Cendant Corp. 1.8
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Take-Two Interactive Software, Inc. 1.7
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Altria Group, Inc. 1.6
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International Business Machines Corp. 1.6
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Microsoft Corp. 1.4
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Freescale Semiconductor, Inc., Cl. A 1.4
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Genworth Financial, Inc., Cl. A 1.3
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Liberty Media Corp., Cl. A 1.3
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IDT Corp., Cl. B 1.3
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Portfolio holdings and allocations are subject to change. Percentages are as of
September 30, 2004, and are based on net assets. For more current Fund holdings,
please visit www.oppenheimerfunds.com.
8 | OPPENHEIMER BALANCED FUND
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PORTFOLIO ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Bonds and Notes 50.2%
Stocks 44.3
Cash Equivalents 5.5
Portfolio holdings and allocations are subject to change. Percentages are as of
September 30, 2004, and are based on total investments
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9 | OPPENHEIMER BALANCED FUND
FUND PERFORMANCE DISCUSSION
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HOW HAS THE FUND PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS, INC., OF
THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR ENDED SEPTEMBER 30, 2004, FOLLOWED
BY A GRAPHICAL COMPARISON OF THE FUND'S PERFORMANCE TO APPROPRIATE BROAD-BASED
MARKET INDICES.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. The Fund achieved strong returns
compared to its benchmark during the reporting period. While both asset classes
contributed positively to performance overall, the Fund benefited from its
modest emphasis on bonds over stocks during the second half of the reporting
period.
Among equities, the Fund produced better returns than its benchmark in the
financials sector, where performance was driven by favorable stock selection.
The Fund enjoyed particularly strong results from the initial public offering of
Genworth Financial, Inc., an insurance company spun off by GE Capital. A Swiss
banking conglomerate and JP Morgan Chase also fared well, supported by good
results in private wealth management and a recovery from litigation concerns,
respectively. Early in the reporting period, the Fund also benefited from its
relatively heavy exposure to real estate investment trusts.
A managed care provider and a medical equipment provider drove gains in
the Fund's health care sector. Among consumer staples companies, the Fund
benefited from relatively light exposure to well-known beverage companies and a
more intent focus on certain individual stocks, such as a meat purveyor and a
wine-and-spirits provider that enjoyed favorable supply-and-demand trends. The
Fund's industrials area benefited from strong contributions from defense and
aerospace companies and the ongoing turnaround at franchiser Cendant Corp., one
of the Fund's larger positions. Individual stocks in the information technology,
utilities and materials sectors also contributed positively to the Fund's
performance.
On the other hand, the Fund's returns from the energy, telecommunications
and consumer discretionary areas lagged industry averages. The Fund's
telecommunications investments were hurt by its lack of exposure to a U.S.
mobile phone service provider, which was acquired during the reporting period,
and an unfavorable legal ruling favoring regional Bell operating companies over
smaller competitors. The consumer discretionary group was hurt when the Fund's
media holdings suffered from lackluster advertising spending. Although energy
stocks generally fared well, relatively light exposure to the area prevented the
Fund from participating fully in its gains.
Among bonds, the Fund's returns were driven by its relatively heavy
exposure to mortgage-backed securities and corporate bonds, including high-yield
securities. The Fund also added value through its shorter-than-average duration
position during the reporting period's second half as investors anticipated
higher interest rates. The Fund's
10 | OPPENHEIMER BALANCED FUND
small positions in commercial mortgages and asset-backed securities also helped
boost fixed-income returns.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each class of shares of the
Fund held until September 30, 2004. In the case of Class A and Class C shares,
performance is measured over a ten-fiscal-year period; in the case of Class B
shares, from the inception of the class on August 29, 1995. In the case of Class
N shares, performance is measured from inception of the Class on March 1, 2001.
The Fund's performance reflects the deduction of the maximum initial sales
charge on Class A shares, the applicable contingent deferred sales charge on
Class B, Class C, and Class N shares, and reinvestments of all dividends and
capital gains distributions. Past performance cannot guarantee future results.
The Fund's performance is compared to the performance of the Standard &
Poor's (S&P) 500 Index, a broad-based index of equity securities widely regarded
as a general measure of the performance of the U.S. equity securities market.
The Fund's performance is also compared to the Lehman Brothers Aggregate Bond
Index, an unmanaged index of U.S. Government Treasury and agency issues,
investment grade corporate bond issues and fixed-rate mortgage-backed
securities. That index is widely regarded as a measure of the performance of the
domestic debt securities market. Index performance reflects the reinvestment of
income but does not consider the effect of transaction costs, and none of the
data in the graphs shows the effect of taxes. The Fund's performance reflects
the effects of the Fund's business and operating expenses. While index
comparisons may be useful to provide a benchmark for the Fund's performance, it
must be noted that the Fund's investments are not limited to the investments in
either index.
11 | OPPENHEIMER BALANCED FUND
FUND PERFORMANCE DISCUSSION
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CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Balanced Fund (Class A)
S&P 500 Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer
Balanced Fund Lehman Brothers
Date (Class A) S&P 500 Index Aggregate Bond Index
12/31/1993 9,425 10,000 10,000
03/31/1994 9,126 9,621 9,713
06/30/1994 9,039 9,662 9,613
09/30/1994 9,449 10,133 9,672
12/31/1994 9,276 10,131 9,708
03/31/1995 9,896 11,117 10,198
06/30/1995 10,536 12,176 10,819
09/30/1995 11,141 13,143 11,032
12/31/1995 11,389 13,934 11,502
03/31/1996 11,851 14,682 11,298
06/30/1996 12,195 15,340 11,362
09/30/1996 1 12,667 15,814 11,572
12/31/1996 13,351 17,131 11,919
03/31/1997 13,445 17,591 11,853
06/30/1997 14,662 20,660 12,288
09/30/1997 15,893 22,207 12,696
12/31/1997 15,724 22,845 13,070
03/31/1998 16,858 26,029 13,274
06/30/1998 16,899 26,893 13,584
09/30/1998 15,144 24,224 14,158
12/31/1998 16,833 29,378 14,206
03/31/1999 17,040 30,841 14,135
06/30/1999 18,314 33,011 14,011
09/30/1999 17,611 30,955 14,106
12/31/1999 18,617 35,557 14,089
03/31/2000 19,676 36,371 14,400
06/30/2000 19,815 35,405 14,651
09/30/2000 19,955 35,062 15,092
12/31/2000 19,840 32,321 15,727
03/31/2001 19,626 28,491 16,204
06/30/2001 20,800 30,158 16,296
09/30/2001 18,505 25,733 17,047
12/31/2001 20,174 28,482 17,055
03/31/2002 20,286 28,561 17,071
06/30/2002 18,790 24,737 17,701
09/30/2002 16,918 20,466 18,512
12/31/2002 18,035 22,190 18,804
03/31/2003 17,833 21,491 19,066
06/30/2003 19,982 24,798 19,542
09/30/2003 20,637 25,454 19,514
12/31/2003 22,347 28,551 19,576
03/31/2004 22,838 29,034 20,096
06/30/2004 22,603 29,534 19,605
09/30/2004 22,778 28,981 20,232
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE FUND AT
9/30/04
1-Year 4.03% 5-Year 4.04% 10-Year 8.55%
1. The Fund changed its fiscal year end from 12/31 to 9/30.
12 | OPPENHEIMER BALANCED FUND
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Balanced Fund (Class B)
S&P 500 Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer
Balanced Fund Lehman Brothers
Date (Class B) S&P 500 Index Aggregate Bond Index
08/29/1995 10,000 10,000 10,000
09/30/1995 10,241 10,422 10,097
12/31/1995 10,444 11,049 10,528
03/31/1996 10,825 11,642 10,341
06/30/1996 11,113 12,163 10,400
09/30/1996 1 11,526 12,540 10,592
12/31/1996 12,121 13,584 10,910
03/31/1997 12,176 13,949 10,849
06/30/1997 13,246 16,382 11,247
09/30/1997 14,332 17,609 11,621
12/31/1997 14,143 18,114 11,963
03/31/1998 15,144 20,639 12,149
06/30/1998 15,140 21,324 12,433
09/30/1998 13,544 19,208 12,959
12/31/1998 15,020 23,295 13,002
03/31/1999 15,176 24,455 12,938
06/30/1999 16,275 26,175 12,824
09/30/1999 15,623 24,545 12,911
12/31/1999 16,482 28,194 12,895
03/31/2000 17,379 28,840 13,180
06/30/2000 17,468 28,074 13,409
09/30/2000 17,545 27,802 13,814
12/31/2000 17,426 25,628 14,395
03/31/2001 17,195 22,592 14,831
06/30/2001 18,187 23,913 14,915
09/30/2001 16,166 20,404 15,603
12/31/2001 17,624 22,584 15,610
03/31/2002 17,722 22,647 15,625
06/30/2002 16,415 19,614 16,202
09/30/2002 14,780 16,228 16,944
12/31/2002 15,755 17,595 17,211
03/31/2003 15,579 17,041 17,450
06/30/2003 17,456 19,663 17,887
09/30/2003 18,029 20,183 17,861
12/31/2003 19,523 22,639 17,917
03/31/2004 19,952 23,022 18,394
06/30/2004 19,746 23,418 17,944
09/30/2004 19,899 22,980 18,518
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE FUND AT
9/30/04
1-Year 4.26% 5-Year 4.02% Since Inception (8/29/95) 7.87%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
BECAUSE CLASS B SHARES CONVERT TO CLASS A SHARES 72 MONTHS AFTER PURCHASE,
SINCE-INCEPTION RETURN FOR CLASS B SHARES USES CLASS A PERFORMANCE FOR THE
PERIOD AFTER CONVERSION. SEE PAGE 16 FOR FURTHER PERFORMANCE INFORMATION.
1. The Fund changed its fiscal year end from 12/31 to 9/30.
13 | OPPENHEIMER BALANCED FUND
FUND PERFORMANCE DISCUSSION
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CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Balanced Fund (Class C)
S&P 500 Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer
Balanced Fund Lehman Brothers
Date (Class C) S&P 500 Index Aggregate Bond Index
12/31/1993 10,000 10,000 10,000
03/31/1994 9,654 9,621 9,713
06/30/1994 9,537 9,662 9,613
09/30/1994 9,953 10,133 9,672
12/31/1994 9,750 10,131 9,708
03/31/1995 10,377 11,117 10,198
06/30/1995 11,020 12,176 10,819
09/30/1995 11,637 13,143 11,032
12/31/1995 11,864 13,934 11,502
03/31/1996 12,322 14,682 11,298
06/30/1996 12,649 15,340 11,362
09/30/1996 1 13,116 15,814 11,572
12/31/1996 13,799 17,131 11,919
03/31/1997 13,861 17,591 11,853
06/30/1997 15,085 20,660 12,288
09/30/1997 16,319 22,207 12,696
12/31/1997 16,116 22,845 13,070
03/31/1998 17,241 26,029 13,274
06/30/1998 17,247 26,893 13,584
09/30/1998 15,433 24,224 14,158
12/31/1998 17,107 29,378 14,206
03/31/1999 17,284 30,841 14,135
06/30/1999 18,545 33,011 14,011
09/30/1999 17,791 30,955 14,106
12/31/1999 18,766 35,557 14,089
03/31/2000 19,797 36,371 14,400
06/30/2000 19,885 35,405 14,651
09/30/2000 19,987 35,062 15,092
12/31/2000 19,837 32,321 15,727
03/31/2001 19,589 28,491 16,204
06/30/2001 20,715 30,158 16,296
09/30/2001 18,387 25,733 17,047
12/31/2001 20,004 28,482 17,055
03/31/2002 20,085 28,561 17,071
06/30/2002 18,570 24,737 17,701
09/30/2002 16,671 20,466 18,512
12/31/2002 17,734 22,190 18,804
03/31/2003 17,505 21,491 19,066
06/30/2003 19,577 24,798 19,542
09/30/2003 20,168 25,454 19,514
12/31/2003 21,806 28,551 19,576
03/31/2004 22,227 29,034 20,096
06/30/2004 21,964 29,534 19,605
09/30/2004 22,073 28,981 20,232
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE FUND AT
9/30/04
1-Year 8.45% 5-Year 4.41% 10-Year 8.29%
1. The Fund changed its fiscal year end from 12/31 to 9/30.
14 | OPPENHEIMER BALANCED FUND
CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Balanced Fund (Class N)
S&P 500 Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer
Balanced Fund Lehman Brothers
Date (Class N) S&P 500 Index Aggregate Bond Index
03/01/2001 10,000 10,000 10,000
03/31/2001 9,640 9,367 10,050
06/30/2001 10,197 9,915 10,107
09/30/2001 9,070 8,460 10,573
12/31/2001 9,876 9,364 10,578
03/31/2002 9,930 9,390 10,588
06/30/2002 9,190 8,132 10,979
09/30/2002 8,266 6,728 11,482
12/31/2002 8,793 7,295 11,663
03/31/2003 8,678 7,065 11,825
06/30/2003 9,719 8,153 12,121
09/30/2003 10,025 8,368 12,103
12/31/2003 10,843 9,387 12,141
03/31/2004 11,065 9,545 12,464
06/30/2004 10,936 9,710 12,159
09/30/2004 11,004 9,528 12,548
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE FUND AT
9/30/04
1-Year 8.77% 5-Year N/A Since Inception (3/1/01) 2.71%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD. SEE
PAGE 16 FOR FURTHER INFORMATION.
15 | OPPENHEIMER BALANCED FUND
NOTES
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Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. The Fund's total returns shown do
not reflect the deduction of income taxes on an individual's investment. Taxes
may reduce your actual investment returns on income or gains paid by the Fund or
any gains you may realize if you sell your shares.
Investors should consider the Fund's investment objectives, risks, and other
charges and expenses carefully before investing. The Fund's prospectus contains
this and other information about the Fund, and may be obtained by asking your
financial advisor, calling us at 1.800.525.7048 or visiting our website at
www.oppenheimerfunds.com. Read the prospectus carefully before investing.
The Fund's investment strategy and focus can change over time. The mention of
specific fund holdings does not constitute a recommendation by OppenheimerFunds,
Inc.
CLASS A shares of the Fund were first publicly offered on 4/24/87. Unless
otherwise noted, Class A returns include the current maximum initial sales
charge of 5.75%. The Fund's maximum sales charge for Class A shares was lower
prior to 4/1/91, so actual performance may have been higher.
CLASS B shares of the Fund were first publicly offered on 8/29/95. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 2% (5-year). Because Class B shares convert to
Class A shares 72 months after purchase, the "since-inception" return for Class
B uses Class A performance for the period after conversion. Class B shares are
subject to an annual 0.75% asset-based sales charge.
CLASS C shares of the Fund were first publicly offered on 12/1/93. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
CLASS N shares of the Fund were first publicly offered on 3/1/01. Class N shares
are offered only through retirement plans. Unless otherwise noted, Class N
returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
An explanation of the calculation of performance is in the Fund's Statement of
Additional Information.
16 | OPPENHEIMER BALANCED FUND
FUND EXPENSES
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FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include sales charges (loads) on purchase payments,
contingent deferred sales charges on redemptions; and redemption fees, if any;
and (2) ongoing costs, including management fees; distribution and service fees;
and other Fund expenses. These examples are intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended September 30, 2004.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio for each class of shares, and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front-end
or contingent deferred sales charges (loads), or a $12.00 fee imposed annually
on accounts valued at less than $500.00 (subject to exceptions described in
17 | OPPENHEIMER BALANCED FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
the Statement of Additional Information). Therefore, the "hypothetical" lines of
the table are useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(4/1/04) (9/30/04) SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
Class A Actual $1,000.00 $ 997.30 $ 5.31
- --------------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,019.70 5.37
- --------------------------------------------------------------------------------
Class B Actual 1,000.00 991.80 10.06
- --------------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,014.95 10.18
- --------------------------------------------------------------------------------
Class C Actual 1,000.00 993.10 9.66
- --------------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,015.35 9.77
- --------------------------------------------------------------------------------
Class N Actual 1,000.00 994.50 7.76
- --------------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,017.25 7.85
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 183/366
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended September 30, 2004 are as follows:
CLASS EXPENSE RATIOS
- ------------------------
Class A 1.06%
- ------------------------
Class B 2.01
- ------------------------
Class C 1.93
- ------------------------
Class N 1.55
The expense ratios reflect voluntary reimbursements of expenses by the Fund's
Transfer Agent that can be terminated at any time, without advance notice. The
"Financial Highlights" tables in the Fund's financial statements, included in
this report, also show the gross expense ratios, without such reimbursements.
18 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS September 30, 2004
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VALUE
SHARES SEE NOTE 1
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COMMON STOCKS--52.6%
- -------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--9.5%
- -------------------------------------------------------------------------------
AUTO COMPONENTS--0.1%
TRW Automotive Holdings Corp. 1 31,600 $ 595,660
- -------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--0.9%
McDonald's Corp. 269,300 7,548,479
- -------------------------------------------------------------------------------
HOUSEHOLD DURABLES--0.9%
Toll Brothers, Inc. 1 110,000 5,096,300
- -------------------------------------------------------------------------------
WCI Communities, Inc. 1 97,400 2,269,420
-----------
7,365,720
- -------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--0.4%
IAC/InterActiveCorp 1 144,400 3,179,688
- -------------------------------------------------------------------------------
MEDIA--6.0%
AMC Entertainment, Inc. 1 61,200 1,171,368
- -------------------------------------------------------------------------------
EchoStar Communications Corp., Cl. A 1 99,400 3,093,328
- -------------------------------------------------------------------------------
Liberty Media Corp., Cl A 1 1,244,000 10,847,680
- -------------------------------------------------------------------------------
Liberty Media International, Inc., A Shares 1 65,504 2,185,344
- -------------------------------------------------------------------------------
Regal Entertainment Group 65,800 1,256,780
- -------------------------------------------------------------------------------
UnitedGlobalCom, Inc., Cl. A 1 3,192,567 23,848,475
- -------------------------------------------------------------------------------
Viacom, Inc., Cl. B 188,800 6,336,128
-----------
48,739,103
- -------------------------------------------------------------------------------
MULTILINE RETAIL--1.0%
Sears Roebuck & Co. 198,800 7,922,180
- -------------------------------------------------------------------------------
SPECIALTY RETAIL--0.2%
Gap, Inc. (The) 118,800 2,221,560
- -------------------------------------------------------------------------------
CONSUMER STAPLES--3.1%
- -------------------------------------------------------------------------------
BEVERAGES--0.9%
Constellation Brands, Inc., Cl. A 1 187,000 7,117,220
- -------------------------------------------------------------------------------
FOOD PRODUCTS--0.6%
Tyson Foods, Inc., Cl. A 328,900 5,268,978
- -------------------------------------------------------------------------------
TOBACCO--1.6%
Altria Group, Inc. 282,400 13,284,096
- -------------------------------------------------------------------------------
ENERGY--3.9%
- -------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.3%
Halliburton Co. 58,300 1,964,127
- -------------------------------------------------------------------------------
OIL & GAS--3.6%
BP plc, ADR 70,900 4,078,877
- -------------------------------------------------------------------------------
Kinder Morgan, Inc. 61,000 3,832,020
- -------------------------------------------------------------------------------
LUKOIL, Sponsored ADR 62,300 7,725,200
- -------------------------------------------------------------------------------
Petroleo Brasileiro SA, Preference 112,000 3,679,776
19 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- -------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
OIL & GAS Continued
Talisman Energy, Inc. 245,800 $ 6,389,553
- -------------------------------------------------------------------------------
TotalFinaElf SA, Sponsored ADR 37,500 3,831,375
-----------
29,536,801
- -------------------------------------------------------------------------------
FINANCIALS--10.2%
- -------------------------------------------------------------------------------
CAPITAL MARKETS--0.3%
UBS AG 34,492 2,435,023
- -------------------------------------------------------------------------------
COMMERCIAL BANKS--2.8%
Bank of America Corp. 238,252 10,323,459
- -------------------------------------------------------------------------------
Commerce Bancorp, Inc. 47,100 2,599,920
- -------------------------------------------------------------------------------
SouthTrust Corp. 116,600 4,857,556
- -------------------------------------------------------------------------------
Wells Fargo & Co. 77,300 4,609,399
-----------
22,390,334
- -------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--2.7%
CIT Group, Inc. 100,600 3,761,434
- -------------------------------------------------------------------------------
Citigroup, Inc. 138,900 6,128,268
- -------------------------------------------------------------------------------
JPMorgan Chase & Co. 144,300 5,733,039
- -------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc. 28,300 2,256,076
- -------------------------------------------------------------------------------
Morgan Stanley 81,100 3,998,230
-----------
21,877,047
- -------------------------------------------------------------------------------
INSURANCE--3.1%
Genworth Financial, Inc., Cl. A 1 471,300 10,981,290
- -------------------------------------------------------------------------------
Prudential Financial, Inc. 151,100 7,107,744
- -------------------------------------------------------------------------------
UnumProvident Corp. 166,300 2,609,247
- -------------------------------------------------------------------------------
XL Capital Ltd., Cl. A 61,600 4,557,784
-----------
25,256,065
- -------------------------------------------------------------------------------
REAL ESTATE--0.8%
Host Marriott Corp. 1 471,100 6,609,533
- -------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--0.5%
Freddie Mac 66,300 4,325,412
- -------------------------------------------------------------------------------
HEALTH CARE--6.6%
- -------------------------------------------------------------------------------
BIOTECHNOLOGY--1.7%
MedImmune, Inc. 1 278,500 6,600,450
- -------------------------------------------------------------------------------
Wyeth 186,200 6,963,880
-----------
13,564,330
20| OPPENHEIMER BALANCED FUND
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.6%
Beckman Coulter, Inc. 85,200 $ 4,781,424
- -------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--1.4%
PacifiCare Health Systems, Inc. 1 108,600 3,985,620
- -------------------------------------------------------------------------------
Tenet Healthcare Corp. 1 676,900 7,303,751
-----------
11,289,371
- -------------------------------------------------------------------------------
PHARMACEUTICALS--2.9%
GlaxoSmithKline plc, ADR 87,800 3,839,494
- -------------------------------------------------------------------------------
Novartis AG 127,663 5,967,381
- -------------------------------------------------------------------------------
Pfizer, Inc. 199,140 6,093,684
- -------------------------------------------------------------------------------
Schering-Plough Corp. 245,800 4,684,948
- -------------------------------------------------------------------------------
Watson Pharmaceuticals, Inc. 1 113,900 3,355,494
-----------
23,941,001
- -------------------------------------------------------------------------------
INDUSTRIALS--5.9%
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE--2.4%
Empresa Brasileira de Aeronautica SA, ADR 142,100 3,751,440
- -------------------------------------------------------------------------------
Orbital Sciences Corp. 1 784,617 8,960,326
- -------------------------------------------------------------------------------
Raytheon Co. 170,100 6,460,398
-----------
19,172,164
- -------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--2.7%
Brink's Co. (The) 102,700 3,098,459
- -------------------------------------------------------------------------------
Cendant Corp. 679,200 14,670,720
- -------------------------------------------------------------------------------
ChoicePoint, Inc. 1 94,900 4,047,485
-----------
21,816,664
- -------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--0.8%
General Electric Co. 137,700 4,623,966
- -------------------------------------------------------------------------------
Tyco International Ltd. 71,000 2,176,860
-----------
6,800,826
- -------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--9.0%
- -------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--2.6%
Hewlett-Packard Co. 467,979 8,774,606
- -------------------------------------------------------------------------------
International Business Machines Corp. 147,100 12,612,354
-----------
21,386,960
- -------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.8%
Flextronics International Ltd. 1 485,300 6,430,225
21 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- -------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--0.3%
Net2Phone, Inc. 1 676,600 $ 2,178,652
- -------------------------------------------------------------------------------
IT SERVICES--0.3%
CSG Systems International, Inc. 1 162,300 2,501,043
- -------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--1.8%
Freescale Semiconductor, Inc., Cl. A 1 773,100 11,055,330
- -------------------------------------------------------------------------------
Intel Corp. 180,700 3,624,842
-----------
14,680,172
- -------------------------------------------------------------------------------
SOFTWARE--3.2%
Compuware Corp. 1 345,329 1,778,444
- -------------------------------------------------------------------------------
Microsoft Corp. 408,500 11,295,025
- -------------------------------------------------------------------------------
Take-Two Interactive Software, Inc. 1 408,900 13,432,365
-----------
26,505,834
- -------------------------------------------------------------------------------
MATERIALS--1.8%
- -------------------------------------------------------------------------------
CHEMICALS--0.7%
Dow Chemical Co. 54,700 2,471,346
- -------------------------------------------------------------------------------
Praxair, Inc. 82,700 3,534,598
-----------
6,005,944
- -------------------------------------------------------------------------------
METALS & MINING--0.8%
Companhia Vale do Rio Doce, Sponsored ADR 162,900 3,135,825
- -------------------------------------------------------------------------------
GrafTech International Ltd. 1 230,900 3,221,055
-----------
6,356,880
- -------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.3%
Bowater, Inc. 47,100 1,798,749
- -------------------------------------------------------------------------------
Western Forest Products, Inc. 1 56,736 416,052
-----------
2,214,801
- -------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--1.3%
- -------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.3%
IDT Corp., Cl. B 1 696,200 10,463,886
- -------------------------------------------------------------------------------
WorldCom, Inc./WorldCom Group 1 450,000 --
-----------
10,463,886
- -------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.0%
Leap Wireless International, Inc. 1 2,251 49,522
- -------------------------------------------------------------------------------
UTILITIES--1.3%
- -------------------------------------------------------------------------------
ELECTRIC UTILITIES--1.0%
AES Corp. (The) 1 534,000 5,334,660
22 | OPPENHEIMER BALANCED FUND
VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES Continued
PG&E Corp. 1 81,300 $ 2,471,520
------------
7,806,180
- -----------------------------------------------------------------------------------------------------
GAS UTILITIES--0.3%
Sempra Energy 74,100 2,681,679
------------
Total Common Stocks (Cost $326,609,001) 428,264,584
UNITS
- -----------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- -----------------------------------------------------------------------------------------------------
Sun Healthcare Group, Inc. Wts., Exp. 2/28/051 (Cost $0) 496 --
PRINCIPAL
AMOUNT
- -----------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--7.3%
- -----------------------------------------------------------------------------------------------------
Bank One Auto Securitization Trust, Automobile Receivable Certificates,
Series 2003-1, Cl. A2, 1.29%, 8/21/06 $ 981,974 980,139
- -----------------------------------------------------------------------------------------------------
BMW Vehicle Owner Trust, Automobile Loan Certificates, Series 2004-A,
Cl. A2, 1.88%, 10/25/06 2,130,000 2,125,881
- -----------------------------------------------------------------------------------------------------
Centex Home Equity Co. LLC, Home Equity Loan Asset-Backed Certificates:
Series 2003-B, Cl. AF1, 1.64%, 2/25/18 34,657 34,635
Series 2003-C, Cl. AF1, 2.14%, 7/25/18 592,718 592,123
Series 2004-A, Cl. AF1, 2.03%, 6/25/19 77,621 77,452
Series 2004-D, Cl. AF1, 2.98%, 4/25/20 2 900,000 900,000
- -----------------------------------------------------------------------------------------------------
Chase Funding Mortgage Loan Asset-Backed Certificates, Home Equity
Mtg. Obligations:
Series 2002-4, Cl. 1A3, 3.44%, 4/25/23 496,879 498,179
Series 2003-1, Cl. 1A3, 3.14%, 7/25/23 1,170,000 1,171,535
Series 2003-3, Cl. 1A1, 1.92%, 8/25/17 3 161,213 161,310
Series 2003-4, Cl. 1A1, 1.96%, 9/25/17 3 677,171 677,607
Series 2004-1, Cl. 2A1, 1.95%, 9/25/21 3 2,453,675 2,455,096
- -----------------------------------------------------------------------------------------------------
Chase Manhattan Auto Owner Trust, Automobile Loan Pass-Through
Certificates:
Series 2002-A, Cl. A4, 4.24%, 9/15/08 470,000 475,559
Series 2003-A, Cl. A2, 1.26%, 1/16/06 164,180 164,208
Series 2003-B, Cl. A2, 1.28%, 3/15/06 407,980 407,790
- -----------------------------------------------------------------------------------------------------
CIT Equipment Collateral, Equipment Receivable-Backed Nts.,
Series 2004-DFS, Cl. A2, 2.66%, 9/29/06 4 1,330,000 1,329,873
- -----------------------------------------------------------------------------------------------------
CIT Group Home Equity Loan Trust, Home Equity Loan Asset-Backed
Certificates, Series 2003-1, Cl. A2, 2.35%, 4/20/27 1,145,950 1,144,874
- -----------------------------------------------------------------------------------------------------
Citibank Credit Card Issuance Trust, Credit Card Receivable Nts.,
Series 2002-A3, Cl. A3, 4.40%, 5/15/07 1,430,000 1,449,341
- -----------------------------------------------------------------------------------------------------
CitiFinancial Mortgage Securities, Inc., Home Equity Collateralized
Mtg. Obligations:
Series 2003-2, Cl. AF1, 1.94%, 5/25/33 3 259,837 259,993
Series 2003-3, Cl. AF1, 1.96%, 8/25/33 3 568,197 568,571
23 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- --------------------------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust, Inc., Home Equity Mtg. Obligations,
Series 2004-OPT1, Cl. A1B, 2.388%, 9/1/34 $2,221,000 $2,221,000
- --------------------------------------------------------------------------------------------------
DaimlerChrysler Auto Trust, Automobile Loan Pass-Through Certificates:
Series 2003-A, Cl. A2, 1.52%, 12/8/05 1,335,817 1,335,970
Series 2003-B, Cl. A2, 1.61%, 7/10/06 2,979,027 2,976,804
Series 2004-B, Cl. A2, 2.48%, 2/8/07 2 1,500,000 1,500,000
- --------------------------------------------------------------------------------------------------
Ford Credit Auto Owner Trust, Automobile Loan Pass-Through Certificates:
Series 2003-A, Cl. A2A, 1.62%, 8/15/05 88,301 88,352
Series 2004-A, Cl. A2, 2.13%, 10/15/06 3,090,000 3,086,605
- --------------------------------------------------------------------------------------------------
Harley-Davidson Motorcycle Trust, Motorcycle Receivable Nts.:
Series 2002-2, Cl. A1, 1.91%, 4/15/07 130,229 130,229
Series 2003-3, Cl. A1, 1.50%, 1/15/08 1,392,343 1,389,040
- --------------------------------------------------------------------------------------------------
Honda Auto Receivables Owner Trust, Automobile Receivable Obligations:
Series 2003-2, Cl. A2, 1.34%, 12/21/05 527,579 527,625
Series 2003-3, Cl. A2, 1.52%, 4/21/06 1,932,445 1,930,803
Series 2003-4, Cl. A2, 1.58%, 7/17/06 2,258,582 2,255,865
- --------------------------------------------------------------------------------------------------
Household Automotive Trust, Automobile Loan Certificates,
Series 2003-2, Cl. A2, 1.56%, 12/18/06 1,062,438 1,061,180
- --------------------------------------------------------------------------------------------------
M&I Auto Loan Trust, Automobile Loan Certificates:
Series 2002-1, Cl. A3, 2.49%, 10/22/07 995,466 997,437
Series 2003-1, Cl. A2, 1.60%, 7/20/06 1,940,433 1,939,106
- --------------------------------------------------------------------------------------------------
National City Auto Receivables Trust, Automobile Receivable Obligations,
Series 2004-A, Cl. A2, 1.50%, 2/15/07 1,400,000 1,396,074
- --------------------------------------------------------------------------------------------------
Nissan Auto Lease Trust, Automobile Lease Obligations, Series 2003-A,
Cl. A2, 1.69%, 12/15/05 951,555 952,056
- --------------------------------------------------------------------------------------------------
Nissan Auto Receivables Owner Trust, Automobile Receivable Nts.:
Series 2002-A, Cl. A4, 4.28%, 10/16/06 430,449 434,320
Series 2003-B, Cl. A2, 1.20%, 11/15/05 271,672 271,783
Series 2004-A, Cl. A2, 1.40%, 7/17/06 1,580,000 1,574,718
- --------------------------------------------------------------------------------------------------
Option One Mortgage Loan Trust, Home Equity Mtg. Obligations,
Series 2004-3, Cl. A2, 1.982%, 11/25/34 3,4 920,000 920,000
- --------------------------------------------------------------------------------------------------
Toyota Auto Receivables Owner Trust, Automobile Mtg.-Backed Obligations:
Series 2002-B, Cl. A3, 3.76%, 6/15/06 248,661 249,730
Series 2003-B, Cl. A2, 1.43%, 2/15/06 1,101,454 1,101,125
- --------------------------------------------------------------------------------------------------
USAA Auto Owner Trust, Automobile Loan Asset-Backed Nts.:
Series 2002-1, Cl. A3, 2.41%, 10/16/06 444,272 445,052
Series 2003-1, Cl. A2, 1.22%, 4/17/06 341,833 341,886
Series 2004-1, Cl. A2, 1.43%, 9/15/06 3,840,000 3,828,862
Series 2004-2, Cl. A2, 2.41%, 2/15/07 1,530,000 1,530,781
- --------------------------------------------------------------------------------------------------
Volkswagen Auto Lease Trust, Automobile Lease Asset-Backed Securities,
Series 2004-A, Cl. A2, 2.47%, 1/22/07 1,560,000 1,558,781
- --------------------------------------------------------------------------------------------------
Volkswagen Auto Loan Enhanced Trust, Automobile Loan Receivable
Certificates:
Series 2003-1, Cl. A2, 1.11%, 12/20/05 1,213,978 1,213,463
Series 2003-2, Cl. A2, 1.55%, 6/20/06 1,281,947 1,280,588
24 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- ----------------------------------------------------------------------------------------------------
Wachovia Auto Owner Trust, Automobile Receivable Nts., Series 2004-B,
Cl. A2, 2.40%, 5/21/07 $ 1,110,000 $ 1,110,824
- ----------------------------------------------------------------------------------------------------
Wells Fargo Home Equity Trust, Collateralized Mtg. Obligations,
Series 2004-2, Cl. AI1B, 2.94%, 9/25/18 2,480,000 2,480,000
- ----------------------------------------------------------------------------------------------------
Whole Auto Loan Trust, Automobile Loan Receivable Certificates,
Series 2003-1, Cl. A2A, 1.40%, 4/15/06 1,800,532 1,798,738
-----------
Total Asset-Backed Securities (Cost $59,474,596) 59,402,963
- ----------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--30.4%
- ----------------------------------------------------------------------------------------------------
Bank of America Mortgage Securities, Inc., Collateralized Mtg
Obligations
Pass-Through Certificates:
Series 2004-2, Cl. 2A1, 6.50%, 7/20/32 2,788,221 2,876,225
Series 2004-8, Cl. 5A1, 6.50%, 9/25/34 2,260,000 2,331,331
Series 2004-E, Cl. 2A9, 3.712%, 6/25/34 1,658,866 1,662,656
Series 2004-G, Cl. 2A1, 2.469%, 8/25/34 1,694,925 1,691,404
- ----------------------------------------------------------------------------------------------------
CIT Equipment Collateral, Equipment Receivable-Backed Nts.,
Series 2003-EF1, Cl. A2, 1.49%, 12/20/05 454,685 454,651
- ----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
5%, 10/1/34 4 16,924,000 16,760,040
5.50%, 1/1/34 917,159 931,154
5.50%, 10/1/34 4 8,019,000 8,129,261
6.50%, 11/1/28 1,086,659 1,143,986
7%, 5/1/29-11/1/33 4,773,250 5,073,101
7%, 10/1/34 4 10,132,000 10,746,253
- ----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Collateralized Mtg. Obligations,
Pass-Through Participation Certificates, Series 151, Cl. F, 9%, 5/15/21 78,479 78,581
- ----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg. Investment
Conduit Multiclass Pass-Through Certificates:
Series 1669, Cl. G, 6.50%, 2/15/23 501,301 505,973
Series 2055, Cl. ZM, 6.50%, 5/15/28 1,107,785 1,156,883
Series 2075, Cl. D, 6.50%, 8/15/28 2,636,391 2,757,790
Series 2080, Cl. Z, 6.50%, 8/15/28 722,667 747,947
Series 2102, Cl. VA, 6%, 10/15/09 46,419 46,413
Series 2387, Cl. PD, 6%, 4/15/30 1,564,656 1,601,086
Series 2466, Cl. PD, 6.50%, 4/15/30 726,641 734,419
Series 2498, Cl. PC, 5.50%, 10/15/14 235,284 238,410
Series 2500, Cl. FD, 2.209%, 3/15/32 3 422,974 423,892
Series 2526, Cl. FE, 2.109%, 6/15/29 3 502,360 503,795
Series 2551, Cl. FD, 2.109%, 1/15/33 3 412,255 414,001
Series 2551, Cl. TA, 4.50%, 2/15/18 747,785 748,522
25 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- ---------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed Security:
Series 176, Cl. IO, (0.688)%, 6/1/26 5 $ 707,057 $ 130,488
Series 183, Cl. IO, (1.514)%, 4/1/27 5 1,159,357 219,980
Series 184, Cl. IO, 0.848%, 12/1/26 5 1,152,081 210,737
Series 192, Cl. IO, 5.662%, 2/1/28 5 328,326 57,049
Series 200, Cl. IO, 5.208%, 1/1/29 5 400,666 74,547
Series 2130, Cl. SC, 17.914%, 3/15/29 5 882,974 91,864
Series 2796, Cl. SD, 26.12%, 7/15/26 5 1,282,083 139,909
- ---------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Principal-Only Stripped Mtg.-Backed Security:
Series 176, Cl. PO, 7.039%, 6/1/26 6 286,676 253,653
Series 217, Cl. PO, 8.479%, 1/1/32 6 428,836 370,204
- ---------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Structured Pass-Through Securities,
Collateralized Mtg. Obligations, Series T-42, Cl. A2, 5.50%, 2/25/42 728 728
- ---------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
4.50%, 10/1/19 4 8,270,000 8,241,568
5%, 10/1/19-10/1/34 4 14,146,000 14,262,705
5.50%, 7/1/33-9/1/34 10,667,516 10,834,169
5.50%, 10/1/19-10/1/34 4 30,889,398 31,737,307
6%, 5/1/16 3,236,526 3,397,045
6%, 11/1/34 4 1,249,000 1,287,251
6.50%, 12/1/27-10/1/30 1,183,111 1,244,919
6.50%, 10/1/34 4 17,353,000 18,204,373
7%, 7/1/32-8/1/34 11,711,429 12,432,304
7%, 10/1/34 4 45,640,000 48,392,640
8.50%, 7/1/32 98,441 107,096
- ---------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Collateralized Mtg Obligations,
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates:
Trust 1993-87, Cl. Z, 6.50%, 6/25/23 1,981,683 2,092,433
Trust 1998-63, Cl. PG, 6%, 3/25/27 457,029 460,552
Trust 2001-50, Cl. NE, 6%, 8/25/30 877,838 881,951
Trust 2001-70, Cl. LR, 6%, 9/25/30 808,624 828,367
Trust 2001-72, Cl. NH, 6%, 4/25/30 686,601 701,773
Trust 2001-74, Cl. PD, 6%, 5/25/30 291,262 296,773
Trust 2002-50, Cl. PD, 6%, 9/25/27 941,810 947,021
Trust 2002-77, Cl. WF, 2.211%, 12/18/32 3 678,428 680,563
Trust 2002-94, Cl. MA, 4.50%, 8/25/09 1,311,755 1,318,025
Trust 2003-81, Cl. PA, 5%, 2/25/12 397,370 400,669
- ---------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Interest-Only Stripped Mtg.-Backed Security:
Trust 2002-38, Cl. SO, 29.05%, 4/25/32 5 1,592,190 113,756
Trust 2002-47, Cl. NS, 19.181%, 4/25/32 5 1,582,771 149,387
Trust 2002-51, Cl. S, 19.54%, 8/25/32 5 1,453,234 137,288
Trust 2002-77, Cl. IS, 23.023%, 12/18/32 5 2,712,620 272,309
26 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- ------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security:
Trust 222, Cl. 2, (4.11)%, 6/1/23 5 $2,278,567 $ 395,825
Trust 240, Cl. 2, (1.081)%, 9/1/23 5 3,451,096 664,496
Trust 252, Cl. 2, (5.194)%, 11/1/23 5 1,746,150 355,538
Trust 254, Cl. 2, (2.401)%, 1/1/24 5 871,983 172,994
Trust 273, Cl. 2, (0.778)%, 7/1/26 5 507,479 95,412
Trust 321, Cl. 2, (8.951)%, 3/1/32 5 4,598,026 904,384
Trust 334, Cl. 17, (47.305)%, 2/1/33 5 1,317,919 226,122
Trust 2001-81, Cl. S, 25.236%, 1/25/32 5 826,625 77,797
Trust 2002-9, Cl. MS, 20.455%, 3/25/32 5 1,093,181 105,612
Trust 2002-52, Cl. SD, 15.361%, 9/25/32 5 1,874,805 183,926
Trust 2004-54, Cl. DS, 25.553%, 11/25/30 5 1,679,852 160,473
- ------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Principal-Only Stripped Mtg.-Backed
Security, Trust 1993-184, Cl. M, 10.115%, 9/25/23 6 755,603 662,147
- ------------------------------------------------------------------------------------------------------
First Union/Lehman Brothers/Bank of America, Commercial Mtg.
Pass-Through Certificates, Series 1998-C2, Cl. A2, 6.56%, 11/18/35 980,000 1,065,578
- ------------------------------------------------------------------------------------------------------
GE Capital Commercial Mortgage Corp., Commercial Mtg. Obligations,
Series 2004-C3, Cl. A2, 4.433%, 7/10/39 960,000 977,378
- ------------------------------------------------------------------------------------------------------
GMAC Commercial Mortgage Securities, Inc., Mtg. Pass-Through
Certificates, Series 1997-C1, Cl. A3, 6.869%, 7/15/29 775,348 836,020
- ------------------------------------------------------------------------------------------------------
GS Mortgage Securities Corp. II, Commercial Mtg. Pass-Through
Certificates, Series 2004-GG2, Cl. A3, 4.602%, 8/10/38 620,000 637,429
- ------------------------------------------------------------------------------------------------------
Government National Mortgage Assn.:
3.375%, 3/20/26 56,175 56,676
7%, 4/15/26 366,860 392,585
7.50%, 5/15/27 1,711,229 1,846,338
- ------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., Interest-Only Stripped Mtg.-Backed
Security:
Series 2001-21, Cl. SB, 21.331%, 1/16/27 5 1,687,793 171,115
Series 2002-15, Cl. SM, 15.334%, 2/16/32 5 1,584,080 156,027
Series 2002-76, Cl. SY, 13.416%, 12/16/26 5 3,275,275 332,286
Series 2004-11, Cl. SM, 18.135%, 1/17/30 5 1,340,757 128,758
- ------------------------------------------------------------------------------------------------------
Mastr Alternative Loan Trust, Pass-Through Collateralized Mtg Obligations,
Series 2004-9, Cl. A3, 4.70%, 8/25/34 3,541,867 3,555,149
- ------------------------------------------------------------------------------------------------------
Nomura Asset Securities Corp., Commercial Mtg. Pass-Through Certificates,
Series 1998-D6, Cl. A1B, 6.59%, 3/15/30 1,130,000 1,238,797
- ------------------------------------------------------------------------------------------------------
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 1,582,352
- ------------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VII, Inc., Commercial Mtg.
Pass-Through Certificates:
Series 1996-B, Cl. 1, 6.213%, 4/25/26 2,3 5,872 5,421
Series 1996-C1, Cl. F, 8.402%, 1/20/28 2,3 250,000 206,563
- ------------------------------------------------------------------------------------------------------
Washington Mutual Mortgage Securities Corp., Collateralized Mtg.
Pass-Through Certificates, Series 2003-AR12, Cl. A2, 2.45%, 2/25/34 3 2,146,879 2,149,243
27 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- -----------------------------------------------------------------------------------------------------------
Wells Fargo Mortgage Backed Securities Trust, Collateralized Mtg. Obligations:
Series 2004-N, Cl. A10, 3.803%, 8/25/34 2 $ 3,007,868 $ 3,017,268
Series 2004-W, Cl. A2, 4.677%, 11/27/34 4 1,890,000 1,902,624
------------
Total Mortgage-Backed Obligations (Cost $246,464,615) 246,991,510
- -----------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--7.5%
Federal Home Loan Bank Unsec. Bonds, Series EY06, 5.25%, 8/15/06 2,476,000 2,586,675
- -----------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. Unsec. Nts.:
2.75%, 8/15/06 3,500,000 3,499,692
2.875%, 12/15/06 1,685,000 1,684,171
4.50%, 1/15/13 1,270,000 1,278,138
4.875%, 11/15/13 945,000 969,802
5.50%, 7/15/06 13,735,000 14,398,387
5.75%, 1/15/12 600,000 655,688
6.625%, 9/15/09 475,000 536,379
6.875%, 9/15/10 1,000,000 1,151,863
- -----------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Unsec. Nts.:
3.25%, 8/15/08 1,000,000 992,524
4.25%, 7/15/07 7,750,000 7,982,795
6%, 5/15/11 4,240,000 4,688,545
7.25%, 1/15/10-5/15/30 7,130,000 8,446,344
- -----------------------------------------------------------------------------------------------------------
Tennessee Valley Authority Bonds:
5.375%, 11/13/08 685,000 733,831
7.125%, 5/1/30 603,000 748,620
Series C, 4.75%, 8/1/13 395,000 403,140
Series C, 6%, 3/15/13 380,000 422,656
- -----------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
5.375%, 2/15/31 2,687,000 2,879,290
5.50%, 8/15/28 1,505,000 1,618,287
STRIPS, 3.37%, 2/15/11 7 2,019,000 1,585,426
STRIPS, 3.86%, 2/15/13 7 2,098,000 1,481,406
- -----------------------------------------------------------------------------------------------------------
U.S. Treasury Nts., 4.25%, 11/15/13-8/15/14 1,886,000 1,910,390
------------
Total U.S. Government Obligations (Cost $60,616,642) 60,654,049
- -----------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS--0.1%
- -----------------------------------------------------------------------------------------------------------
United Mexican States Nts., 7.50%, 1/14/12 (Cost $731,309) 665,000 751,118
- -----------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--13.3%
- -----------------------------------------------------------------------------------------------------------
ABN Amro Bank NV (NY Branch), 7.125% Sub. Nts., Series B, 10/15/93 500,000 571,055
- -----------------------------------------------------------------------------------------------------------
Aetna, Inc., 7.375% Sr. Unsec. Nts., 3/1/06 1,675,000 1,776,207
- -----------------------------------------------------------------------------------------------------------
Allied Waste North America, Inc., 8.875% Sr. Nts., Series B, 4/1/08 740,000 806,600
- -----------------------------------------------------------------------------------------------------------
Allstate Financial Global Funding LLC, 4.25% Nts., 9/10/08 8 365,000 372,261
- -----------------------------------------------------------------------------------------------------------
Allstate Life Global Funding II, 3.50% Nts., 7/30/07 495,000 497,408
28 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- -------------------------------------------------------------------------------------------------
American Express Centurion Bank, 4.375% Nts., 7/30/09 $ 650,000 $ 664,843
- -------------------------------------------------------------------------------------------------
American Honda Finance Corp., 3.85% Nts., 11/6/08 8 425,000 427,686
- -------------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc., 7.50% Sr. Unsec. Nts., 5/1/07 1,200,000 1,322,836
- -------------------------------------------------------------------------------------------------
AXA, 8.60% Unsec. Sub. Nts., 12/15/30 1,030,000 1,337,280
- -------------------------------------------------------------------------------------------------
Bank of America Corp.:
4.875% Sr. Unsec. Nts., 1/15/13 23,000 23,371
7.80% Jr. Unsec. Sub. Nts., 2/15/10 500,000 588,033
- -------------------------------------------------------------------------------------------------
Bankers Trust Corp., 7.375% Unsec. Sub. Nts., 5/1/08 140,000 157,495
- -------------------------------------------------------------------------------------------------
Beazer Homes USA, Inc., 8.625% Sr. Unsec. Nts., 5/15/11 770,000 852,775
- -------------------------------------------------------------------------------------------------
Boeing Capital Corp.:
5.65% Sr. Unsec. Nts., 5/15/06 127,000 132,643
6.50% Nts., 2/15/12 10 1,000,000 1,121,147
- -------------------------------------------------------------------------------------------------
British Telecommunications plc:
7.875% Nts., 12/15/05 1,070,000 1,133,689
8.125% Nts., 12/15/10 695,000 839,112
- -------------------------------------------------------------------------------------------------
Canadian National Railway Co., 4.25% Nts., 8/1/09 238,000 241,253
- -------------------------------------------------------------------------------------------------
CenterPoint Energy, Inc.:
5.875% Sr. Nts., 6/1/08 980,000 1,023,880
8.125% Unsec. Nts., Series B, 7/15/05 335,000 348,758
- -------------------------------------------------------------------------------------------------
Chesapeake Energy Corp., 7.50% Sr. Nts., 6/15/14 895,000 982,263
- -------------------------------------------------------------------------------------------------
CIGNA Corp., 7.40% Unsec. Nts., 5/15/07 2,020,000 2,213,163
- -------------------------------------------------------------------------------------------------
CIT Group, Inc., 7.75% Sr. Unsec. Unsub. Nts., 4/2/12 1,000,000 1,185,184
- -------------------------------------------------------------------------------------------------
Citigroup, Inc., 6.875% Unsec. Nts., 2/15/98 550,000 612,077
- -------------------------------------------------------------------------------------------------
Citizens Communications Co., 9.25% Sr. Nts., 5/15/11 399,000 440,895
- -------------------------------------------------------------------------------------------------
Clear Channel Communications, Inc., 4.625% Sr. Unsec. Nts., 1/15/08 1,815,000 1,849,703
- -------------------------------------------------------------------------------------------------
Coca-Cola Co. (The), 7.375% Unsec. Debs., 7/29/93 440,000 538,914
- -------------------------------------------------------------------------------------------------
ConAgra Foods, Inc., 6% Nts., 9/15/06 925,000 973,465
- -------------------------------------------------------------------------------------------------
Conectiv, Inc., 5.30% Unsec. Unsub. Nts., Series B, 6/1/05 230,000 233,289
- -------------------------------------------------------------------------------------------------
Cox Communications, Inc., 6.40% Sr. Unsec. Nts., 8/1/08 1,205,000 1,266,342
- -------------------------------------------------------------------------------------------------
CSX Corp., 6.25% Unsec. Nts., 10/15/08 780,000 846,341
- -------------------------------------------------------------------------------------------------
D.R. Horton, Inc., 9.375% Sr. Unsec. Sub. Nts., 3/15/11 710,000 796,975
- -------------------------------------------------------------------------------------------------
DaimlerChrysler North America Holding Corp., 4.75% Unsec. Nts., 1/15/08 1,525,000 1,571,755
- -------------------------------------------------------------------------------------------------
Delphi Automotive Systems Corp., 6.50% Nts., 5/1/09 685,000 723,783
- -------------------------------------------------------------------------------------------------
Deutsche Telekom International Finance BV, 8.50% Unsub. Nts., 6/15/10 1,050,000 1,259,976
- -------------------------------------------------------------------------------------------------
Dominion Resources, Inc., 8.125% Sr. Unsub. Nts., 6/15/10 725,000 860,058
- -------------------------------------------------------------------------------------------------
DTE Energy Co., 6.45% Sr. Unsub. Nts., 6/1/06 830,000 873,129
- -------------------------------------------------------------------------------------------------
Duke Capital LLC, 5.668% Nts., 8/15/14 980,000 1,001,422
- -------------------------------------------------------------------------------------------------
EOP Operating LP:
6.763% Sr. Unsec. Nts., 6/15/07 295,000 318,025
8.375% Nts., 3/15/06 560,000 601,776
29 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- ----------------------------------------------------------------------------------------------------------
Federated Department Stores, Inc., 6.625% Sr. Unsec. Nts., 9/1/08 $1,205,000 $1,322,621
- ----------------------------------------------------------------------------------------------------------
FedEx Corp., 2.65% Unsec. Nts., 4/1/07 1,875,000 1,845,446
- ----------------------------------------------------------------------------------------------------------
FirstEnergy Corp., 5.50% Sr. Unsub. Nts., Series A, 11/15/06 1,710,000 1,780,859
- ----------------------------------------------------------------------------------------------------------
Food Lion, Inc., 7.55% Nts., 4/15/07 1,110,000 1,209,432
- ----------------------------------------------------------------------------------------------------------
Ford Holdings, Inc., 9.30% Unsec. Unsub. Debs., 3/1/30 580,000 663,067
- ----------------------------------------------------------------------------------------------------------
Ford Motor Co.:
7.70% Unsec. Debs., 5/15/97 500,000 477,913
8.90% Unsec. Unsub. Debs., 1/15/32 285,000 320,676
- ----------------------------------------------------------------------------------------------------------
France Telecom SA:
8.50% Sr. Unsec. Nts., 3/1/11 690,000 827,035
9.25% Sr. Unsec. Nts., 3/1/31 3 360,000 478,706
- ----------------------------------------------------------------------------------------------------------
Franklin Resources, Inc., 3.70% Nts., 4/15/08 585,000 586,720
- ----------------------------------------------------------------------------------------------------------
Gap, Inc. (The), 6.90% Nts., 9/15/07 2 695,000 759,288
- ----------------------------------------------------------------------------------------------------------
General Mills, Inc., 3.875% Nts., 11/30/07 1,400,000 1,415,590
- ----------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 6.875% Unsec. Unsub. Nts., 8/28/12 1,980,000 2,060,568
- ----------------------------------------------------------------------------------------------------------
General Motors Corp., 8.375% Sr. Unsec. Debs., 7/15/33 550,000 585,622
- ----------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The), 7.80% Sr. Unsec. Unsub. Nts., Series B, 1/28/10 500,000 581,787
- ----------------------------------------------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The), 2.375% Nts., 6/1/06 480,000 474,936
- ----------------------------------------------------------------------------------------------------------
Hertz Corp. (The), 6.35% Nts., 6/15/10 1,810,000 1,877,576
- ----------------------------------------------------------------------------------------------------------
Hilton Hotels Corp., 7.95% Sr. Nts., 4/15/07 635,000 704,056
- ----------------------------------------------------------------------------------------------------------
Huntsman Corp./ICI Chemical Co. plc, 13.08% Sr. Unsec. Disc. Nts., 12/31/09 2,7 800,000 428,000
- ----------------------------------------------------------------------------------------------------------
Hutchison Whampoa International Ltd., 7.45% Sr. Bonds, 11/24/33 8 685,000 712,439
- ----------------------------------------------------------------------------------------------------------
IPALCO Enterprises, Inc., 8.375% Sr. Sec. Nts., 11/14/08 2,3 810,000 907,200
- ----------------------------------------------------------------------------------------------------------
iStar Financial, Inc.:
4.875% Sr. Unsec. Nts., Series B, 1/15/09 775,000 780,450
8.75% Sr. Unsec. Nts., 8/15/08 565,000 650,504
- ----------------------------------------------------------------------------------------------------------
J.C. Penney Co., Inc., 8% Nts., 3/1/10 1,640,000 1,875,750
- ----------------------------------------------------------------------------------------------------------
John Hancock Global Funding II, 7.90% Nts., 7/2/10 8 1,341,000 1,585,771
- ----------------------------------------------------------------------------------------------------------
Kaiser Aluminum & Chemical Corp., 10.875% Sr. Nts., Series B, 10/15/06 1,11 250,000 242,500
- ----------------------------------------------------------------------------------------------------------
Kinder Morgan, Inc., 6.50% Sr. Unsec. Nts., 9/1/12 810,000 892,025
- ----------------------------------------------------------------------------------------------------------
Kraft Foods, Inc., 5.25% Nts., 6/1/07 2,040,000 2,136,284
- ----------------------------------------------------------------------------------------------------------
Kroger Co. (The), 7.80% Sr. Nts., 8/15/07 1,255,000 1,398,827
- ----------------------------------------------------------------------------------------------------------
Leap Wireless International, Inc.:
4/1/27, Escrow Shares 9 600,000 24,000
4/1/27, Escrow Shares 9 300,000 9,750
- ----------------------------------------------------------------------------------------------------------
Lear Corp.:
7.96% Sr. Unsec. Nts., Series B, 5/15/05 755,000 778,672
8.11% Sr. Unsec. Nts., Series B, 5/15/09 842,000 973,120
- ----------------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 7% Nts., 2/1/08 1,165,000 1,286,630
- ----------------------------------------------------------------------------------------------------------
Lehman Brothers, Inc., 6.625% Sr. Sub. Nts., 2/15/08 185,000 202,571
30 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- -------------------------------------------------------------------------------------------------
Lennar Corp., 5.95% Sr. Unsec. Nts., 3/1/13 $ 880,000 $ 932,172
- -------------------------------------------------------------------------------------------------
Liberty Media Corp., 3.50% Nts., 9/25/06 825,000 822,053
- -------------------------------------------------------------------------------------------------
Liberty Property Trust, 5.65% Sr. Nts., 8/15/14 935,000 954,141
- -------------------------------------------------------------------------------------------------
May Department Stores Co. (The), 3.95% Nts., 7/15/07 8 121,000 122,022
- -------------------------------------------------------------------------------------------------
MBNA America Bank NA, 5.375% Nts., 1/15/08 1,390,000 1,458,581
- -------------------------------------------------------------------------------------------------
McDonnell Douglas Corp., 6.875% Unsec. Unsub. Nts., 11/1/06 228,000 245,040
- -------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 4.125% Nts., 9/10/09 1,880,000 1,887,217
- -------------------------------------------------------------------------------------------------
Morgan Stanley, 6.60% Nts., 4/1/12 760,000 848,740
- -------------------------------------------------------------------------------------------------
National City Bank, 6.20% Sub. Nts., 12/15/11 124,000 136,814
- -------------------------------------------------------------------------------------------------
Niagara Mohawk Power Corp., 5.375% Sr. Unsec. Nts., 10/1/04 515,000 515,000
- -------------------------------------------------------------------------------------------------
NiSource Finance Corp.:
3.20% Nts., 11/1/06 250,000 249,356
7.875% Sr. Unsec. Nts., 11/15/10 1,070,000 1,266,022
- -------------------------------------------------------------------------------------------------
Northrop Grumman Corp., 7.125% Sr. Nts., 2/15/11 1,125,000 1,294,829
- -------------------------------------------------------------------------------------------------
Petroleos Mexicanos, 9.50% Sr. Sub. Nts., 9/15/27 510,000 622,455
- -------------------------------------------------------------------------------------------------
PF Export Receivables Master Trust, 3.748% Sr. Nts., Series B, 6/1/13 8 605,895 594,380
- -------------------------------------------------------------------------------------------------
Prudential Holdings LLC, 8.695% Bonds, Series C, 12/18/23 8 1,215,000 1,553,318
- -------------------------------------------------------------------------------------------------
Prudential Insurance Co. of America, 8.30% Nts., 7/1/25 8 1,285,000 1,638,982
- -------------------------------------------------------------------------------------------------
PSEG Energy Holdings LLC, 7.75% Unsec. Nts., 4/16/07 810,000 868,725
- -------------------------------------------------------------------------------------------------
R&B Falcon Corp., 9.50% Sr. Unsec. Nts., 12/15/08 750,000 904,297
- -------------------------------------------------------------------------------------------------
Raytheon Co., 6.50% Unsec. Nts., 7/15/05 1,155,000 1,189,419
- -------------------------------------------------------------------------------------------------
Safeway, Inc., 2.50% Nts., 11/1/05 1,765,000 1,758,764
- -------------------------------------------------------------------------------------------------
Spieker Properties LP, 6.75% Unsec. Unsub. Nts., 1/15/08 575,000 633,578
- -------------------------------------------------------------------------------------------------
Sprint Capital Corp.:
7.125% Sr. Unsec. Nts., 1/30/06 870,000 917,673
8.75% Nts., 3/15/32 725,000 922,929
- -------------------------------------------------------------------------------------------------
Sterling Chemicals, Inc., 10% Sr. Sec. Nts., 12/19/07 2 136,379 128,878
- -------------------------------------------------------------------------------------------------
SunTrust Banks, Inc.:
4% Nts., 10/15/08 965,000 978,999
7.75% Unsec. Sub. Nts., 5/1/10 86,000 101,030
- -------------------------------------------------------------------------------------------------
TCI Communications, Inc., 9.80% Sr. Unsec. Debs., 2/1/12 1,720,000 2,196,093
- -------------------------------------------------------------------------------------------------
TECO Energy, Inc., 10.50% Sr. Unsec. Nts., 12/1/07 680,000 792,200
- -------------------------------------------------------------------------------------------------
Telefonos de Mexico SA de CV, 4.50% Nts., 11/19/08 745,000 749,052
- -------------------------------------------------------------------------------------------------
Texas Utilities Co., 6.375% Sr. Unsec. Nts., Series C, 1/1/08 737,000 801,207
- -------------------------------------------------------------------------------------------------
Time Warner Cos., Inc., 9.125% Debs., 1/15/13 695,000 871,495
- -------------------------------------------------------------------------------------------------
Time Warner Entertainment Co. LP, 10.15% Sr. Nts., 5/1/12 308,000 400,291
- -------------------------------------------------------------------------------------------------
Toll Corp., 8.25% Sr. Sub. Nts., 12/1/11 770,000 857,588
31 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- ------------------------------------------------------------------------------------------------------------------
Tyco International Group SA:
5.875% Unsec. Unsub. Nts., 11/1/04 $ 167,000 $ 167,445
6.375% Sr. Unsec. Unsub. Nts., 2/15/06 1,220,000 1,275,841
6.375% Nts., 10/15/11 1,000,000 1,107,502
6.75% Sr. Unsub. Nts., 2/15/11 515,000 580,180
- ------------------------------------------------------------------------------------------------------------------
Univision Communications, Inc.:
2.875% Sr. Unsec. Nts., 10/15/06 241,000 238,507
3.50% Sr. Unsec. Nts., 10/15/07 1,255,000 1,247,158
- ------------------------------------------------------------------------------------------------------------------
Volkswagen Credit, Inc., 1.88% Nts., 7/21/05 3,8 1,825,000 1,825,100
- ------------------------------------------------------------------------------------------------------------------
Vornado Realty LP, 5.625% Sr. Unsec. Unsub. Nts., 6/15/07 1,765,000 1,852,945
- ------------------------------------------------------------------------------------------------------------------
Waste Management, Inc.:
7% Sr. Nts., 7/15/28 290,000 321,911
7.375% Sr. Unsub. Nts., 8/1/10 650,000 751,196
- ------------------------------------------------------------------------------------------------------------------
Western Forest Products, Inc., 15% Sec. Nts., 7/28/09 2 292,000 324,120
- ------------------------------------------------------------------------------------------------------------------
Weyerhaeuser Co., 5.50% Unsec. Unsub. Nts., 3/15/05 349,000 353,623
Yum! Brands, Inc., 8.50% Sr. Unsec. Nts., 4/15/06 1,755,000 1,896,132
-------------
Total Non-Convertible Corporate Bonds and Notes (Cost $104,681,858) 108,398,258
- ------------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES--1.0%
- ------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG, COUNTS Corp. Sec. Credit Linked Nts.,
Series 2003-1, 3.318%, 1/7/05 2,3 4,250,000 4,234,275
- ------------------------------------------------------------------------------------------------------------------
UBS AG, High Grade Credit Linked Nts., 1.863%, 12/10/04 2 4,250,000 4,260,200
-------------
Total Structured Notes (Cost $8,500,000) 8,494,475
- ------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--6.5%
- ------------------------------------------------------------------------------------------------------------------
Undivided interest of 3.66% in joint repurchase agreement (Principal Amount/
Value $1,446,038,000, with a maturity value of $1,446,110,302) with UBS Warburg
LLC, 1.80%, dated 9/30/04, to be repurchased at $52,921,646 on 10/1/04,
collateralized by Federal National Mortgage Assn., 5%, 3/1/34, with
a value of $1,477,979,332 (Cost $52,919,000) 52,919,000 52,919,000
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $859,997,021) 118.7% 965,875,957
- ------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (18.7) (152,407,094)
--------------------------------
NET ASSETS 100.0% $ 813,468,863
===============================
32 | OPPENHEIMER BALANCED FUND
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Illiquid security. 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 or forward commitment to be delivered and settled after
September 30, 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 $5,728,079 or 0.70% of the Fund's net
assets as of September 30, 2004.
6. Principal-Only Strips represent the right to receive the monthly principal
payments on an underlying pool of mortgage loans. The value of these securities
generally increases as interest rates decline and prepayment rates rise. The
price of these securities is typically more volatile than that of
coupon-bearing bonds of the same maturity. Interest rates disclosed represent
current yields based upon the current cost basis and estimated timing of future
cash flows. These securities amount to $1,286,004 or 0.16% of the Fund's net
assets as of September 30, 2004.
7. Zero coupon bond reflects effective yield on the date of purchase.
8. 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 $8,831,959 or 1.09% of the Fund's net
assets as of September 30, 2004.
9. Received as the result of issuer reorganization.
10. All or a portion of the security is held in collateralized accounts to
cover initial margin requirements on open futures sales contracts with an
aggregate market value of $1,121,147. See Note 6 of Notes to Financial
Statements.
11. Issue is in default. See Note 1 of Notes to Financial Statements.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33 | OPPENHEIMER BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES September 30, 2004
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (including securities loaned of approximately $56,735,000)
(cost $859,997,021)--see accompanying statement of investments $ 965,875,957
- -------------------------------------------------------------------------------------------------------------
Cash 824,025
- -------------------------------------------------------------------------------------------------------------
Collateral for securities loaned 57,707,572
- -------------------------------------------------------------------------------------------------------------
Unrealized appreciation on swap contracts 15,132
- -------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold (including $15,571,863 sold on a when-issued basis or forward commitment) 18,509,584
Interest, dividends and principal paydowns 4,167,482
Shares of beneficial interest sold 611,077
Other 17,788
---------------
Total assets 1,047,728,617
- -------------------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 57,707,572
- -------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $173,773,843 purchased on a when-issued basis
or forward commitment) 174,706,665
Shares of beneficial interest redeemed 769,138
Distribution and service plan fees 415,300
Futures margins 209,320
Trustees' compensation 150,164
Shareholder communications 111,919
Transfer and shareholder servicing agent fees 98,320
Other 91,356
---------------
Total liabilities 234,259,754
- -------------------------------------------------------------------------------------------------------------
NET ASSETS $ 813,468,863
===============
- -------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -------------------------------------------------------------------------------------------------------------
Paid-in capital $ 673,998,923
- -------------------------------------------------------------------------------------------------------------
Accumulated net investment loss (681,095)
- -------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 33,070,783
- -------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets
and liabilities denominated in foreign currencies 107,080,252
---------------
NET ASSETS $ 813,468,863
===============
34 | OPPENHEIMER BALANCED FUND
- --------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- --------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of $651,754,451
and 47,396,334 shares of beneficial interest outstanding) $13.75
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $14.59
- --------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $84,924,465 and 6,274,530 shares of
beneficial interest outstanding) $13.53
- --------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $68,017,502 and 5,005,258 shares
of beneficial interest outstanding) $13.59
- --------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $8,772,445 and 642,462 shares
of beneficial interest outstanding) $13.65
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
35 | OPPENHEIMER BALANCED FUND
STATEMENT OF OPERATIONS For the Year Ended September 30, 2004
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INVESTMENT INCOME
- -------------------------------------------------------------------------------
Interest $ 10,331,052
- -------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $152,061) 6,013,083
- -------------------------------------------------------------------------------
Portfolio lending fees 42,187
------------
Total investment income 16,386,322
- -------------------------------------------------------------------------------
EXPENSES
- -------------------------------------------------------------------------------
Management fees 5,468,668
- -------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 1,231,729
Class B 770,099
Class C 600,128
Class N 28,414
- -------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 791,353
Class B 188,333
Class C 107,107
Class N 18,288
- -------------------------------------------------------------------------------
Shareholder communications:
Class A 106,236
Class B 34,440
Class C 13,133
Class N 1,372
- -------------------------------------------------------------------------------
Trustees' compensation 35,182
- -------------------------------------------------------------------------------
Custodian fees and expenses 21,446
- -------------------------------------------------------------------------------
Other 164,334
------------
Total expenses 9,580,262
Less reduction to custodian expenses (8,860)
Less payments and waivers of expenses (66,293)
------------
Net expenses 9,505,109
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME 6,881,213
36 | OPPENHEIMER BALANCED FUND
- ---------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
- ---------------------------------------------------------------------------------------
Net realized gain on:
Investments (including premiums on options exercised) $ 61,343,728
Closing of futures contracts 1,936,034
Closing and expiration of option contracts written 428,486
Foreign currency transactions 211,202
Swap contracts 266,706
Net increase from payment by affiliate 16,530
-------------
Net realized gain 64,202,686
- ---------------------------------------------------------------------------------------
Net change in unrealized appreciation on:
Investments 428,737
Translation of assets and liabilities denominated in foreign currencies 331,423
Futures contracts (91,453)
Option contracts (211,992)
Swap contracts (216,255)
-------------
Net change in unrealized appreciation 240,460
- ---------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 71,324,359
============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
37 | OPPENHEIMER BALANCED FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2004 2003
- ------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------
Net investment income $ 6,881,213 $ 10,168,008
- ------------------------------------------------------------------------------------------
Net realized gain (loss) 64,202,686 (25,256,881)
- ------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 240,460 137,802,225
-------------------------------
Net increase in net assets resulting from operations 71,324,359 122,713,352
- ------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (4,777,266) (9,895,590)
Class B (111,890) (549,555)
Class C (122,220) (411,935)
Class N (30,405) (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 20,788,123 (441,692)
Class B 13,846,692 (9,391)
Class C 16,261,663 7,175,471
Class N 4,986,013 2,289,286
- ------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------
Total increase 122,165,069 119,136,842
- ------------------------------------------------------------------------------------------
Beginning of period 691,303,794 572,166,952
-------------------------------
End of period (including accumulated net investment loss
of $681,095 and $129,239, respectively) $ 813,468,863 $ 691,303,794
===============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
38 | OPPENHEIMER BALANCED FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED SEPTEMBER 30, 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.55 $ 10.51 $ 12.14 $ 14.23 $ 14.06
- -------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .14 .21 .35 .43 .53
Net realized and unrealized gain (loss) 1.16 2.08 (1.29) (1.40) 1.21
------------------------------------------------------------------
Total from investment operations 1.30 2.29 (.94) (.97) 1.74
- -------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.10) (.22) (.31) (.38) (.48)
Tax return of capital distribution -- (.03) -- -- --
Distributions from net realized gain -- -- (.38) (.74) (1.09)
------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.10) (.25) (.69) (1.12) (1.57)
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.75 $ 12.55 $ 10.51 $ 12.14 $ 14.23
==================================================================
- -------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 10.37% 21.98% (8.58)% (7.27)% 13.31%
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $651,754 $575,799 $483,311 $562,281 $639,648
- -------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $631,041 $523,477 $570,796 $626,251 $644,356
- -------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 1.05% 1.78% 2.84% 3.16% 3.71%
Total expenses 1.07% 1.11% 1.15% 1.01% 1.13%
Expenses after payments and waivers
and reduction to custodian expenses 1.06% N/A 3 N/A 3 N/A 3 N/A 3
- -------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 61% 4 205% 31% 40% 33%
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. The portfolio turnover rate excludes purchase transactions and sales
transactions of To Be Announced (TBA) mortgage-related securities of
$1,069,526,653 and $1,026,457,980, respectively.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
39 | OPPENHEIMER BALANCED FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS B YEAR ENDED SEPTEMBER 30, 2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.40 $ 10.38 $ 12.01 $ 14.08 $ 13.93
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .02 .09 .25 .31 .41
Net realized and unrealized gain (loss) 1.13 2.07 (1.29) (1.36) 1.19
---------------------------------------------------------------------
Total from investment operations 1.15 2.16 (1.04) (1.05) 1.60
- ------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.02) (.11) (.21) (.28) (.36)
Tax return of capital distribution -- (.03) -- -- --
Distributions from net realized gain -- -- (.38) (.74) (1.09)
---------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.02) (.14) (.59) (1.02) (1.45)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.53 $ 12.40 $ 10.38 $ 12.01 $ 14.08
=====================================================================
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 9.26% 20.91% (9.38)% (7.96)% 12.30%
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 84,924 $ 64,944 $ 54,757 $ 63,487 $ 66,777
- ------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 77,082 $ 57,836 $ 64,702 $ 67,959 $ 66,956
- ------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 0.11% 0.81% 2.02% 2.37% 2.92%
Total expenses 2.02% 3,4 2.08% 3 1.97% 3 1.81% 3 1.94% 3
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 61% 5 205% 31% 40% 33%
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%.
5. The portfolio turnover rate excludes purchase transactions and sales
transactions of To Be Announced (TBA) mortgage-related securities of
$1,069,526,653 and $1,026,457,980, respectively.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
40 | OPPENHEIMER BALANCED FUND
CLASS C YEAR ENDED SEPTEMBER 30, 2004 2003 2002 2001 2000
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.44 $ 10.42 $ 12.06 $ 14.13 $ 13.97
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .04 .11 .24 .31 .41
Net realized and unrealized gain (loss) 1.13 2.06 (1.29) (1.37) 1.20
--------------------------------------------------------------------
Total from investment operations 1.17 2.17 (1.05) (1.06) 1.61
- -----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.02) (.12) (.21) (.27) (.36)
Tax return of capital distribution -- (.03) -- -- --
Distributions from net realized gain -- -- (.38) (.74) (1.09)
--------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.02) (.15) (.59) (1.01) (1.45)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.59 $ 12.44 $ 10.42 $ 12.06 $ 14.13
====================================================================
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 9.45% 20.98% (9.41)% (8.00)% 12.35%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 68,018 $ 47,212 $ 33,300 $ 36,171 $ 38,522
- -----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 60,095 $ 38,407 $ 37,412 $ 39,030 $ 38,597
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 0.19% 0.90% 2.03% 2.37% 2.92%
Total expenses 1.93% 3,4 1.98% 3 1.96% 3 1.81% 3 1.94% 3
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 61% 5 205% 31% 40% 33%
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%.
5. The portfolio turnover rate excludes purchase transactions and sales
transactions of To Be Announced (TBA) mortgage-related securities of
$1,069,526,653 and $1,026,457,980, respectively.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
41 | OPPENHEIMER BALANCED FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS N YEAR ENDED SEPTEMBER 30, 2004 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 .10 .20 .39 .24
Net realized and unrealized gain (loss) 1.12 2.01 (1.38) (1.48)
--------------------------------------------
Total from investment operations 1.22 2.21 (.99) (1.24)
- -----------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.06) (.17) (.28) (.30)
Tax return of capital distribution -- (.03) -- --
Distributions from net realized gain -- -- (.38) --
--------------------------------------------
Total dividends and/or distributions
to shareholders (.06) (.20) (.66) (.30)
- -----------------------------------------------------------------------------------------------
Net asset value, end of period $13.65 $12.49 $10.48 $12.13
============================================
- -----------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 9.77% 21.27% (8.94)% (9.30)%
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $8,772 $3,349 $ 798 $ 95
- -----------------------------------------------------------------------------------------------
Average net assets (in thousands) $5,701 $1,604 $ 454 $ 12
- -----------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 0.55% 1.24% 2.49% 5.81%
Total expenses 1.58% 1.76% 1.48% 1.32%
Expenses after payments and waivers
and reduction to custodian expenses 1.57% 1.62% N/A 4 N/A 4
- -----------------------------------------------------------------------------------------------
Portfolio turnover rate 61% 5 205% 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. The portfolio turnover rate excludes purchase transactions and sales
transactions of To Be Announced (TBA) mortgage-related securities of
$1,069,526,653 and $1,026,457,980, respectively.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
42 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 return consistent with the 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 due to each class having its own expenses, such as transfer and
shareholder servicing agent fees and shareholder communications, directly
attributable to that class. Class A, B, C and N have separate distribution
and/or service plans. Class B shares will automatically convert to Class A
shares six years after the date of purchase.
The following is a summary of significant accounting policies
consistently followed by the Fund.
- -------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities 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. Corporate, government and municipal debt instruments having a remaining
maturity in excess of 60 days and all mortgage-backed securities will be valued
at the mean between the "bid" and "asked" prices. 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 and domestic securities whose values have been
materially affected by what the Manager identifies as a significant event
occurring before the Fund's assets are valued but after the close of their
respective exchanges will be fair valued. Fair value is determined in good
faith using consistently applied procedures under the supervision of the Board
of Trustees. Short-term "money market type" debt securities with remaining
maturities of sixty days or less are valued at amortized cost (which
approximates market value).
43 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
STRUCTURED NOTES. The Fund invests in structured notes whose market values,
interest rates and/or redemption prices are linked to the performance of
underlying foreign currencies, interest rate spreads, stock market indices,
prices of individual securities, commodities or other financial instruments or
the occurrence of other specific events. The structured notes are often
leveraged, increasing the volatility of each note's market value relative to
the change in the underlying linked financial element or event. Fluctuations in
value of these securities are recorded as unrealized gains and losses in the
accompanying financial statements. The Fund records a realized gain or loss
when a structured note is sold or matures. As of September 30, 2004, the market
value of these securities comprised 1.0% of the Fund's net assets and resulted
in unrealized losses of $5,525.
- --------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED BASIS OR FORWARD COMMITMENT. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis or
forward commitment can take place up to ten days 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
internally designated 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 or forward commitment may increase the volatility of the Fund's net asset
value to the extent the Fund executes such transactions while remaining
substantially fully invested. The Fund may also sell securities that it
purchased on a when-issued basis or forward commitment prior to settlement of
the original purchase. As of September 30, 2004, the Fund had purchased
$173,773,843 of securities on a when-issued basis or forward commitment and
sold $15,571,863 of securities issued on a when-issued basis or forward
commitment.
In connection with its ability to purchase or sell 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 realized gain (loss) on investments or as fee income in
the case of such transactions that have an associated fee in lieu of a
difference in the forward purchase and sale price.
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 at redelivery as compared to the
securities sold to the counterparty; counterparty credit risk; and the
potential pay down speed variance between the mortgage-related pools.
44 | OPPENHEIMER BALANCED FUND
- --------------------------------------------------------------------------------
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 September 30, 2004, securities with an
aggregate market value of $242,500, representing 0.03% 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. dol- lars as of the close of The New York Stock Exchange
(the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is
open. 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. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, cur- rency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
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.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal. In the event of default by the other party to the agreement,
retention of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
45 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
NET UNREALIZED
APPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2,3 TAX PURPOSES
---------------------------------------------------------------------------
$11,511,502 $24,338,284 $1,168,546 $104,937,188
1. The Fund had $1,168,546 of straddle losses which were deferred.
2. During the fiscal year ended September 30, 2004, the Fund utilized $4,257,280
of capital loss carryforward to offset capital gains realized in that fiscal
year.
3. During the fiscal year ended September 30, 2003, the Fund did not utilize any
capital loss carryforward to offset capital gains realized in that fiscal year.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for September 30, 2004. Net assets of
the Fund were unaffected by the reclassifications.
REDUCTION TO
REDUCTION TO ACCUMULATED NET
INCREASE TO ACCUMULATED NET REALIZED GAIN
PAID-IN CAPITAL INVESTMENT INCOME ON INVESTMENTS 4
----------------------------------------------------------------
$2,838,909 $2,391,288 $447,621
4. $2,468,087, including $1,675,575 of long-term capital gain, was distributed
in connection with Fund share redemptions.
The tax character of distributions paid during the years ended September 30,
2004 and September 30, 2003 was as follows:
46 | OPPENHEIMER BALANCED FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
--------------------------------------------------------------------
Distributions paid from:
Ordinary income $5,041,781 $10,883,158
Return of capital -- 1,707,026
--------------------------------
Total $5,041,781 $12,590,184
================================
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of September 30, 2004 are noted below. The
primary difference between book and tax appreciation or depreciation of
securities and other investments, if applicable, is attributable to the tax
deferral of losses or tax realization of financial statement unrealized gain or
loss.
Federal tax cost of securities $ 860,958,324
Federal tax cost of other investments (42,618,910)
--------------
Total federal tax cost $ 818,339,414
==============
Gross unrealized appreciation $ 116,350,585
Gross unrealized depreciation (11,413,397)
--------------
Net unrealized appreciation $ 104,937,188
==============
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for the
Fund's independent trustees. Benefits are based on years of service and fees
paid to each trustee during the years of service. During the year ended
September 30, 2004, the Fund's projected benefit obligations were increased by
$13,731 and payments of $10,442 were made to retired trustees, resulting in an
accumulated liability of $128,819 as of September 30, 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.
For purposes of determining the amount owed to the Trustee under the plan,
deferred amounts are treated as though equal dollar amounts had been invested in
shares of the Fund or in other Oppenheimer funds selected by the Trustee. The
Fund purchases shares of the funds selected for deferral by the Trustee in
amounts equal to his or her deemed investment, resulting in a Fund asset equal
to the deferred compensation liability. Such assets are included as a component
of "Other" within the asset section of the Statement of Assets and Liabilities.
Deferral of trustees' fees under the plan will not affect the net assets of the
Fund, and will not materially affect the Fund's assets, liabilities or net
investment income per share. Amounts will be deferred until distributed in
accordance to the Plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income distributions, if any, are declared
and paid quarterly. Capital gain distributions, if any, are declared and paid
annually.
47 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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 U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of beneficial
interest of each class. Transactions in shares of beneficial interest were as
follows:
YEAR ENDED SEPTEMBER 30, 2004 YEAR ENDED SEPTEMBER 30, 2003
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
CLASS A
Sold 6,122,137 $ 82,783,982 4,105,517 $ 47,076,255
Dividends and/or
distributions reinvested 313,143 4,294,088 867,685 10,173,237
Acquisition-Note 11 -- -- 460,912 5,789,058
Redeemed (4,905,906) (66,289,947) (5,572,268) (63,480,242)
------------------------------------------------------------------
Net increase (decrease) 1,529,374 $ 20,788,123 (138,154) $ (441,692)
==================================================================
- ------------------------------------------------------------------------------------------------
CLASS B
Sold 2,864,209 $ 38,137,332 1,845,061 $ 21,105,571
Dividends and/or
distributions reinvested 7,693 103,111 56,269 654,993
Acquisition-Note 11 -- -- 61,992 768,077
Redeemed (1,835,055) (24,393,751) (2,000,366) (22,538,032)
------------------------------------------------------------------
Net increase (decrease) 1,036,847 $ 13,846,692 (37,044) $ (9,391)
==================================================================
- ------------------------------------------------------------------------------------------------
CLASS C
Sold 2,004,496 $ 26,837,027 1,252,468 $ 14,407,664
Dividends and/or
distributions reinvested 8,365 112,683 40,146 469,075
Acquisition-Note 11 -- -- 93,553 1,163,802
Redeemed (801,328) (10,688,047) (787,972) (8,865,070)
------------------------------------------------------------------
Net increase 1,211,533 $ 16,261,663 598,195 $ 7,175,471
==================================================================
48 | OPPENHEIMER BALANCED FUND
YEAR ENDED SEPTEMBER 30, 2004 YEAR ENDED SEPTEMBER 30, 2003
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
CLASS N
Sold 553,663 $ 7,419,779 170,483 $ 1,997,262
Dividends and/or
distributions reinvested 2,182 29,726 2,505 29,692
Acquisition-Note 11 -- -- 47,795 597,438
Redeemed (181,488) (2,463,492) (28,893) (335,106)
----------------------------------------------------------------
Net increase 374,357 $ 4,986,013 191,890 $ 2,289,286
================================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than U.S. government obligations and short-term obligations, for the year ended
September 30, 2004, were $466,372,216 and $377,036,982, respectively. There were
purchases of $58,191,211 and sales of $35,016,692 of U.S. government and
government agency obligations for the year ended September 30, 2004.
- --------------------------------------------------------------------------------
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 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 year ended September 30, 2004, the Fund paid
$1,057,674 to OFS for services to the Fund.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12B-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares. Reimbursement is made
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 all of those fees to
pay dealers, brokers, banks and other financial institutions quarterly for
providing personal services and maintenance of accounts of their customers that
hold Class A shares. Any unreimbursed expenses the Distributor incurs with
respect to Class A shares in any fiscal year cannot be recovered in subsequent
years. Fees incurred by the Fund under the Plan are detailed in the Statement of
Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class N
shares to
49 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
compensate the Distributor for its services in connection with the distribution
of those shares and servicing accounts. Under the plans, the Fund pays the
Distributor an annual asset-based sales charge of 0.75% per year on Class B and
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 September 30,
2004 for Class B, Class C and Class N shares were $2,826,206, $1,206,054 and
$110,677, respectively. Fees incurred by the Fund under the plans are detailed
in the Statement of Operations.
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption proceeds
prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the table below for the period indicated.
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
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- -------------------------------------------------------------------------------------------------------
September 30, 2004 $385,955 $205 $141,739 $8,124 $1,701
- --------------------------------------------------------------------------------
PAYMENTS AND WAIVERS OF EXPENSES. Following a review of its use of brokerage
commissions for sales that is permitted under its investment advisory agreement,
the Fund's Manager terminated that practice in July 2003. Subsequently, the
Manager paid the Fund $16,530, an amount equivalent to certain of such
commissions incurred in prior years.
OFS has voluntarily agreed to limit transfer and shareholder servicing
agent fees for all classes to 0.35% of average annual net assets per class.
During the year ended September 30, 2004, OFS waived $57,068, $6,387, $2,547 and
$291 for Class A, Class B, Class C and Class N shares, respectively. This
undertaking may be amended or withdrawn at any time.
- --------------------------------------------------------------------------------
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.
50 | OPPENHEIMER BALANCED FUND
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 September 30, 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 stocks 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 securities.
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 in the Statement of Operations as the 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.
51 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS Continued
As of September 30, 2004, the Fund had outstanding futures contracts as follows:
UNREALIZED
EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS SEPT. 30, 2004 (DEPRECIATION)
- -------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
U.S. Long Bonds 12/20/04 280 $31,421,250 $ 650,748
U.S. Treasury Nts., 10 yr 12/20/04 439 49,442,375 571,447
-----------
1,222,195
-----------
CONTRACTS TO SELL
U.S. Treasury Nts., 2 yr 12/30/04 281 59,356,859 126,634
U.S. Treasury Nts., 5 yr 12/30/04 579 64,124,250 (165,641)
-----------
(39,007)
-----------
$1,183,188
===========
- --------------------------------------------------------------------------------
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. 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.
52 | OPPENHEIMER BALANCED FUND
Written option activity for the year ended September 30, 2004 was as follows:
CALL OPTIONS
--------------------------
NUMBER OF AMOUNT OF
CONTRACTS PREMIUMS
- -------------------------------------------------------
Options outstanding as of
September 30, 2003 6,826 $1,028,981
Options closed or expired (2,929) (428,486)
Options exercised (3,897) (600,495)
----------------------
Options outstanding as of
September 30, 2004 -- $ --
======================
- --------------------------------------------------------------------------------
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 unrealized
gain (loss), 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).
As of September 30, 2004, the Fund had entered into the following total return
swap agreements:
PAID BY RECEIVED BY
NOTIONAL THE FUND AT THE FUND AT TERMINATION UNREALIZED
SWAP COUNTERPARTY AMOUNT SEPT. 30, 2004 SEPT. 30, 2004 DATES APPRECIATION
- -----------------------------------------------------------------------------------------------------
Value of
One Month total return of
LIBOR less 50 Lehman Brothers
Deutsche Bank AG $5,500,000 basis points CMBS Index 1/1/05 $15,132
Value of
total return of
Goldman Sachs One Month Lehman Brothers
Capital Markets LP 5,500,000 LIBOR BBA CMBS Index 3/31/05 --
-------
$15,132
=======
Notional amount is reported in U.S. Dollars. Index abbreviations are as follows:
CMBS Commercial Mortgage Backed Securities Markets
LIBOR London-Interbank Offered Rate
LIBOR BBA London-Interbank Offered Rate British Bankers Association
53 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9. ILLIQUID SECURITIES
As of September 30, 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 will not invest 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 September 30, 2004 was
$16,671,213, which represents 2.05% of the Fund's net assets.
- --------------------------------------------------------------------------------
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. The Fund retains a portion of
the interest earned from the collateral. The Fund also continues to receive
interest or dividends paid on the securities loaned. As of September 30, 2004,
the Fund had on loan securities valued at approximately $56,735,000. Cash of
$57,707,572 was received as collateral for the loans, and has been invested in
approved instruments.
- --------------------------------------------------------------------------------
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, 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.
54 | OPPENHEIMER BALANCED FUND
- --------------------------------------------------------------------------------
12. LITIGATION
Six complaints have been filed as putative derivative and class actions against
the Manager, OFS and the Distributor (collectively, "OppenheimerFunds"), as well
as 51 of the Oppenheimer funds (collectively, the "Funds") including this Fund,
and nine Directors/ Trustees of certain of the Funds (collectively, the
"Directors/Trustees"). The complaints allege that the Manager charged excessive
fees for distribution and other costs, improperly used assets of the Funds in
the form of directed brokerage commissions and 12b-1 fees to pay brokers to
promote sales of the Funds, and failed to properly disclose the use of Fund
assets to make those payments in violation of the Investment Company Act of 1940
and the Investment Advisers Act of 1940. The complaints further allege that by
permitting and/or participating in those actions, the Directors/Trustees
breached their fiduciary duties to Fund shareholders under the Investment
Company Act of 1940 and at common law. By order dated October 27, 2004, these
six actions, and future related actions, were consolidated by the U.S. District
Court for the Southern District of New York into a single consolidated
proceeding in contemplation of the filing of a superceding consolidated and
amended complaint.
OppenheimerFunds believes that it is premature to render any opinion as to
the likelihood of an outcome unfavorable to them, the Funds or the
Directors/Trustees and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss. However,
OppenheimerFunds, the Funds and the Directors/Trustees believe that the
allegations contained in the complaints are without merit and intend to defend
these lawsuits vigorously.
55 | OPPENHEIMER BALANCED FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER BALANCED FUND:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Balanced Fund, formerly Oppenheimer Multiple Strategies Fund,
including the statement of investments, as of September 30, 2004, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of September 30, 2004, by correspondence
with the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Balanced Fund as of September 30, 2004, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
KPMG LLP
Denver, Colorado
October 21, 2004
56 | OPPENHEIMER BALANCED FUND
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2005, if applicable, shareholders of record will receive information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2004. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Dividends, if any, paid by the Fund during the fiscal year ended September
30, 2004 which are not designated as capital gain distributions should be
multiplied by 26.39% to arrive at the amount eligible for the corporate
dividend-received deduction.
A portion, if any, of the dividends paid by the Fund during the fiscal
year ended September 30, 2004 which are not designated as capital gain
distributions are eligible for lower individual income tax rates to the extent
that the Fund has received qualified dividend income as stipulated by recent tax
legislation. $5,854,970 of the Fund's fiscal year taxable income may be eligible
for the lower individual income tax rates. In early 2005, shareholders of record
will receive information regarding the percentage of distributions that are
eligible for lower individual income tax rates.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
57 | OPPENHEIMER BALANCED FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file 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 Fund's Form N-PX
filing is available (i) without charge, upon request, by calling the Fund
toll-free at 1.800.525.7048, and (ii) on the SEC's website at www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at www.sec.gov. Those
forms may be reviewed and copied at the SEC's Public Reference Room in
Washington D.C. Information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
58 | OPPENHEIMER BALANCED FUND
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD
FUND, LENGTH OF SERVICE, AGE BY TRUSTEE; NUMBER OF PORTFOLIOS IN FUND COMPLEX CURRENTLY OVERSEEN BY TRUSTEE
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL,
TRUSTEES CO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, UNTIL HIS OR HER
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
CLAYTON K. YEUTTER, Of Counsel (since June 1993) Hogan & Hartson (a law firm); a director (since
Chairman of the Board 2002) of Danielson Holding Corp. Formerly a director of Weyerhaeuser Corp.
of Trustees (since 2003); (1999-April 2004), Caterpillar, Inc. (1993-December 2002), ConAgra Foods
Trustee (since 1993) (1993-2001), Texas Instruments (1993-2001) and FMC Corporation (1993-2001).
Age: 73 Oversees 25 portfolios in the OppenheimerFunds complex.
ROBERT G. GALLI, A trustee or director of other Oppenheimer funds. Oversees 35 portfolios in the
Trustee (since 1993) OppenheimerFunds complex.
Age: 71
PHILLIP A. GRIFFITHS, A director (since 1991) of the Institute for Advanced Study, Princeton, N.J.,
Trustee (since 1999) a director (since 2001) of GSI Lumonics, a trustee (since 1983) of Woodward
Age: 66 Academy, a Senior Advisor (since 2001) of The Andrew W. Mellon Foundation. A
member of: the National Academy of Sciences (since 1979), American Academy
of Arts and Sciences (since 1995), American Philosophical Society (since 1996)
and Council on Foreign Relations (since 2002). Formerly a director of Bankers
Trust New York Corporation (1994-1999). Oversees 25 portfolios in the
OppenheimerFunds complex.
JOEL W. MOTLEY, Director (since January 2002) Columbia Equity Financial Corp. (privately-held
Trustee (since 2002) financial adviser); Managing Director (since January 2002) Carmona Motley, Inc.
Age: 52 (privately-held financial adviser). Formerly a Managing Director of Carmona
Motley Hoffman Inc. (privately-held financial adviser) (January 1998-December
2001). Oversees 25 portfolios in the OppenheimerFunds complex.
KENNETH A. RANDALL, A director (since February 1972) of Dominion Resources, Inc. (electric utility
Trustee (since 1983) holding company); formerly a director of Prime Retail, Inc. (real estate investment
Age: 77 trust) and Dominion Energy, Inc. (electric power and oil & gas producer),
President and Chief Executive Officer of The Conference Board, Inc. (international
economic and business research) and a director of Lumbermens Mutual Casualty
Company, American Motorists Insurance Company and American Manufacturers Mutual
Insurance Company. Oversees 25 portfolios in the OppenheimerFunds complex.
EDWARD V. REGAN, President, Baruch College, CUNY; a director of RBAsset (real estate manager); a
Trustee (since 1993) director of OffitBank; formerly Trustee, Financial Accounting Foundation (FASB
Age: 74 and GASB), Senior Fellow of Jerome Levy Economics Institute, Bard College,
Chairman of Municipal Assistance Corporation for the City of New York, New
York State Comptroller and Trustee of New York State and Local Retirement
Fund. Oversees 25 investment companies in the OppenheimerFunds complex.
RUSSELL S. REYNOLDS, JR., Chairman (since 1993) of The Directorship Search Group, Inc. (corporate governance
Trustee (since 1989) consulting and executive recruiting); a Life Trustee of International House
Age: 72 (non-profit educational organization); a former trustee of The Historical Society
of the Town of Greenwich. Oversees 25 portfolios in the OppenheimerFunds
complex.
59 | OPPENHEIMER BALANCED FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
DONALD W. SPIRO,* Chairman Emeritus (since January 1991) of the Manager. Formerly a director
Vice Chairman of the (January 1969-August 1999) of the Manager. Oversees 25 portfolios in the
Board of Trustees, Trustee OppenheimerFunds complex.
(since 1985)
Age: 78
*Mr. Spiro is expected to retire as Trustee of the Board I Funds effective
October 31, 2004.
- ----------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IN THE CHART BELOW IS TWO WORLD FINANCIAL CENTER,
AND OFFICER 225 LIBERTY STREET, 11TH FLOOR, NEW YORK, NY 10281-1008. MR. MURPHY SERVES FOR
AN INDEFINITE TERM, UNTIL HIS RESIGNATION, DEATH OR REMOVAL.
JOHN V. MURPHY, Chairman, Chief Executive Officer and director (since June 2001) and President
President and Trustee (since September 2000) of the Manager; President and a director or trustee
(since 2001) of other Oppenheimer funds; President and a director (since July 2001) of
Age: 55 Oppenheimer Acquisition Corp. (the Manager's parent holding company) and
of Oppenheimer Partnership Holdings, Inc. (a holding company subsidiary of the
Manager); a director (since November 2001) of OppenheimerFunds Distributor,
Inc. (a subsidiary of the Manager); Chairman and a director (since July 2001) of
Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer
agent subsidiaries of the Manager); President and a director (since July 2001) of
OppenheimerFunds Legacy Program (a charitable trust program established by the
Manager); a director of the following investment advisory subsidiaries of the
Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management
Corporation, Trinity Investment Management Corporation and Tremont Capital
Management, Inc. (since November 2001), HarbourView Asset Management Corporation
and OFI Private Investments, Inc. (since July 2001); President (since November 1,
2001) and a director (since July 2001) of Oppenheimer Real Asset Management, Inc.;
Executive Vice President (since February 1997) of Massachusetts Mutual Life
Insurance Company (the Manager's parent company); a director (since June 1995) of
DLB Acquisition Corporation (a holding company that owns the shares of Babson
Capital Management LLC); a member of the Investment Company Institute's Board of
Governors (elected to serve from October 3, 2003 through September 30, 2006).
Formerly, Chief Operating Officer (September 2000-June 2001) of the Manager;
President and trustee (November 1999-November 2001) of MML Series Investment Fund
and MassMutual Institutional Funds (open-end investment companies); a director
(September 1999-August 2000) of C.M. Life Insurance Company; President, Chief
Executive Officer and director (September 1999-August 2000) of MML Bay State Life
Insurance Company; a director (June 1989-June 1998) of Emerald Isle Bancorp and
Hibernia Savings Bank (a wholly-owned subsidiary of Emerald Isle Bancorp). Oversees
74 portfolios as Trustee/Director and 10 portfolios as Officer in the
OppenheimerFunds complex.
- ----------------------------------------------------------------------------------------------------------------------
OFFICERS THE ADDRESS OF THE OFFICERS IN THE CHART BELOW IS AS FOLLOWS: FOR MESSRS. FERREIRA,
LEAVY AND ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW
YORK, NY 10281-1008, AND FOR MR. WIXTED AND MR. VANDEHEY, 6803 S. TUCSON WAY,
CENTENNIAL, CO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS
OR HER EARLIER RESIGNATION, DEATH OR REMOVAL.
EMMANUEL FERREIRA, Vice President of the Manager since January 2003. An officer of 4 portfolios in
Vice President and Portfolio the OppenheimerFunds complex. Formerly, Portfolio Manager at Lashire
Manager (since 2003) Investments (July 1999-December 2002), and a Senior Analyst at Mark Asset
Age: 37 Management (July 1997-June 1999).
60 | OPPENHEIMER BALANCED FUND
CHRISTOPHER LEAVY, Senior Vice President of the Manager since September 2000; an officer of 7
Vice President and Portfolio portfolios in the OppenheimerFunds complex. Formerly a portfolio manager of
Manager (since 2003) Morgan Stanley Dean Witter Investment Management (1997-September 2000).
Age: 33
ANGELO G. MANIOUDAKIS, Senior Vice President of the Manager (since April 2002), of HarbourView
Vice President and Asset Management Corporation (since April 2002 and of OFI Institutional
Portfolio Manager Asset Management, Inc. (since June 2002); an officer of 14 portfolios in the
(since 2003) OppenheimerFunds complex. Formerly Executive Director and portfolio manager
Age: 38 for Miller, Anderson & Sherrerd, a division of Morgan Stanley Investment
Management (August 1993-April 2002).
BRIAN W. WIXTED, Senior Vice President and Treasurer (since March 1999) of the Manager;
Treasurer (since 1999) Treasurer of HarbourView Asset Management Corporation, Shareholder Financial
Age: 45 Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management
Corporation, and Oppenheimer Partnership Holdings, Inc. (since March 1999),
of OFI Private Investments, Inc. (since March 2000), of OppenheimerFunds
International Ltd. and OppenheimerFunds plc (since May 2000), of OFI Institutional
Asset Management, Inc. (since November 2000), and of OppenheimerFunds Legacy
Program (a Colorado non-profit corporation) (since June 2003); Treasurer and Chief
Financial Officer (since May 2000) of OFI Trust Company (a trust company subsidiary
of the Manager); Assistant Treasurer (since March 1999) of Oppenheimer Acquisition
Corp. Formerly Assistant Treasurer of Centennial Asset Management Corporation
(March 1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June
2003); Principal and Chief Operating Officer (March 1995-March 1999) at Bankers
Trust Company-Mutual Fund Services Division. An officer of 84 portfolios in the
OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since
Secretary (since 2001) February 2002) of the Manager; General Counsel and a director (since November
Age: 56 2001) of the Distributor; General Counsel (since November 2001) of Centennial
Asset Management Corporation; Senior Vice President and General Counsel
(since November 2001) of HarbourView Asset Management Corporation;
Secretary and General Counsel (since November 2001) of Oppenheimer
Acquisition Corp.; Assistant Secretary and a director (since October 1997) of
OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President
and a director (since November 2001) of Oppenheimer Partnership Holdings,
Inc.; a director (since November 2001) of Oppenheimer Real Asset Management,
Inc.; Senior Vice President, General Counsel and a director (since November 2001)
of Shareholder Financial Services, Inc., Shareholder Services, Inc., OFI Private
Investments, Inc. and OFI Trust Company; Vice President (since November 2001)
of OppenheimerFunds Legacy Program; Senior Vice President and General
Counsel (since November 2001) of OFI Institutional Asset Management, Inc.; a
director (since June 2003) of OppenheimerFunds (Asia) Limited. Formerly Senior
Vice President (May 1985-December 2003), Acting General Counsel (November
2001-February 2002) and Associate General Counsel (May 1981-October 2001)
of the Manager; Assistant Secretary of Shareholder Services, Inc. (May 1985-
November 2001), Shareholder Financial Services, Inc. (November 1989-November
2001); and OppenheimerFunds International Ltd. (October 1997-November
2001). An officer of 84 portfolios in the OppenheimerFunds complex.
61 | OPPENHEIMER BALANCED FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer (since March 2004) of the
Vice President and Manager; Vice President (since June 1983) of OppenheimerFunds Distributor,
Chief Compliance Officer Inc., Centennial Asset Management Corporation and Shareholder Services, Inc.
(since 2004) Formerly (until February 2004) Vice President and Director of Internal Audit of
Age: 54 OppenheimerFunds, Inc. An officer of 84 portfolios in the Oppenheimer funds
complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND IS AVAILABLE WITHOUT CHARGE UPON REQUEST, BY
CALLING 1.800.525.7048.
62 | 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
(a) Audit Fees
The principal accountant for the audit of the registrant's annual
financial statements billed $43,000 in fiscal 2004 and $40,000 in
fiscal 2003.
(b) Audit-Related Fees
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees to the registrant in fiscal
2004 and $6,500 in fiscal 2003.
The principal accountant for the audit of the registrant's annual
financial statements billed $44,500 in fiscal 2004 and no such fees
in fiscal 2003 to the registrant's investment adviser or any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant.
Such fees would include, among others: due diligence related to
mergers and acquisitions, accounting consultations and audits in
connection with acquisitions, internal control reviews and
consultation concerning financial accounting and reporting
standards.
(c) Tax Fees
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees to the registrant during
the last two fiscal years.
The principal accountant for the audit of the registrant's annual
financial statements billed $6,000 in fiscal 2004 and $5,000 in
fiscal 2003 to the registrant's investment adviser or any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant.
Such fees would include, among others: tax compliance, tax planning
and tax advice. Tax compliance generally involves preparation of
original and amended tax returns,
claims for a refund and tax payment-planning services. Tax planning
and tax advice includes assistance with tax audits and appeals, tax
advice related to mergers and acquisitions and requests for rulings
or technical advice from taxing authorities.
(d) All Other Fees
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees in fiscal 2004 and $30,439
in fiscal 2003.
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees during the last two fiscal
years to the registrant's investment adviser or any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant.
Such fees would include consultations regarding the registrant's
retirement plan with respect to its directors and assistance in
translating the registrant's financial statements into a foreign
language.
(e) (1) During its regularly scheduled periodic meetings, the
registrant's audit committee will pre-approve all audit,
audit-related, tax and other services to be provided by the
principal accountants of the registrant.
The audit committee has delegated pre-approval authority to its
Chairman for any subsequent new engagements that arise between
regularly scheduled meeting dates provided that any fees such
pre-approved are presented to the audit committee at its next
regularly scheduled meeting.
Pre-approval of non-audit services is waived provided that: 1) the
aggregate amount of all such services provided constitutes no more
than five percent of the total amount of fees paid by the registrant
to it principal accountant during the fiscal year in which services
are provided 2) such services were not recognized by the registrant
at the time of engagement as non-audit services and 3) such services
are promptly brought to the attention of the audit committee of the
registrant and approved prior to the completion of the audit.
(2) 100%
(f) Not applicable as less than 50%.
(g) The principal accountant for the audit of the registrant's annual
financial statements billed $50,500 in fiscal 2004 and $41,939 in
fiscal 2003 to the registrant and the registrant's investment
adviser or any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the
registrant related to non-audit fees. Those billings did not include
any prohibited non-audit services as defined by the Securities
Exchange Act of 1934.
(h) The registrant's audit committee of the board of directors has
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser, and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-
approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation
S-X is compatible with maintaining the principal account's
independence. No such services were rendered.
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 September 30, 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)(NOT
APPLICABLE TO SEMIANNUAL REPORTS)
(B) EXHIBITS ATTACHED HERETO. (ATTACH CERTIFICATIONS AS EXHIBITS)