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: MARCH 31, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
TOP HOLDINGS AND ALLOCATIONS
- --------------------------------------------------------------------------------
TOP TEN COMMON STOCK INDUSTRIES
- --------------------------------------------------------------------------------
Software 7.1%
- --------------------------------------------------------------------------------
Media 5.0
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Aerospace & Defense 4.2
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Pharmaceuticals 3.5
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Oil & Gas 3.1
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Tobacco 2.2
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Insurance 2.1
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Computers & Peripherals 2.1
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Diversified Financial Services 1.8
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Commercial Services & Supplies 1.7
Portfolio holdings and allocations are subject to change. Percentages are as of
March 31, 2006, and are based on net assets.
TOP TEN COMMON STOCK HOLDINGS
- --------------------------------------------------------------------------------
Take-Two Interactive Software, Inc. 2.8%
- --------------------------------------------------------------------------------
Altria Group, Inc. 2.2
- --------------------------------------------------------------------------------
Microsoft Corp. 2.2
- --------------------------------------------------------------------------------
Liberty Media Corp., Cl. A 2.0
- --------------------------------------------------------------------------------
Cendant Corp. 1.7
- --------------------------------------------------------------------------------
UBS AG 1.7
- --------------------------------------------------------------------------------
Orbital Sciences Corp. 1.5
- --------------------------------------------------------------------------------
International Business Machines Corp. 1.4
- --------------------------------------------------------------------------------
Liberty Global, Inc., Series A 1.3
- --------------------------------------------------------------------------------
Liberty Global, Inc., Series C 1.3
Portfolio holdings and allocations are subject to change. Percentages are as of
March 31, 2006, and are based on net assets. For more current Fund holdings,
please visit www.oppenheimerfunds.com.
10 | OPPENHEIMER BALANCED FUND
- --------------------------------------------------------------------------------
PORTFOLIO ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Bonds and Notes 45.0%
Stocks 44.9
Cash Equivalents 10.1
Portfolio holdings and allocations are subject to change. Percentages are as of
March 31, 2006, and are based on the total market value of investments.
- --------------------------------------------------------------------------------
11 | OPPENHEIMER BALANCED FUND
NOTES
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Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
Cumulative total returns are not annualized. 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%.
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 10-year 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.
12 | OPPENHEIMER BALANCED FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
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 March 31, 2006.
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
13 | 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
(10/1/05) (3/31/06) MARCH 31, 2006
- --------------------------------------------------------------------------------
Class A Actual $1,000.00 $1,012.40 $ 5.28
- --------------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,019.70 5.30
- --------------------------------------------------------------------------------
Class B Actual 1,000.00 1,007.20 9.96
- --------------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,015.06 10.00
- --------------------------------------------------------------------------------
Class C Actual 1,000.00 1,007.60 9.61
- --------------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,015.41 9.64
- --------------------------------------------------------------------------------
Class N Actual 1,000.00 1,010.60 7.35
- --------------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,017.65 7.37
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 182/365
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended March 31, 2006 are as follows:
CLASS EXPENSE RATIOS
- --------------------------------------------------------------------------------
Class A 1.05%
- --------------------------------------------------------------------------------
Class B 1.98
- --------------------------------------------------------------------------------
Class C 1.91
- --------------------------------------------------------------------------------
Class N 1.46
14 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS March 31, 2006 / Unaudited
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--49.5%
- ---------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--5.3%
- ---------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES--0.3%
WCI Communities, Inc. 1 97,400 $ 2,709,668
- ---------------------------------------------------------------------------------------------------------------------
MEDIA--5.0%
Liberty Global, Inc., Series A 591,194 12,101,741
- ---------------------------------------------------------------------------------------------------------------------
Liberty Global, Inc., Series C 1 591,194 11,676,082
- ---------------------------------------------------------------------------------------------------------------------
Liberty Media Corp., Cl. A 1 2,290,700 18,806,647
- ---------------------------------------------------------------------------------------------------------------------
Viacom, Inc., Cl. B 1 97,950 3,800,460
----------------
46,384,930
- ---------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--4.6%
- ---------------------------------------------------------------------------------------------------------------------
BEVERAGES--1.4%
Constellation Brands, Inc., Cl. A 1 329,100 8,243,955
- ---------------------------------------------------------------------------------------------------------------------
Diageo plc, Sponsored ADR 74,200 4,706,506
----------------
12,950,461
- ---------------------------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--0.7%
Wal-Mart Stores, Inc. 144,000 6,802,560
- ---------------------------------------------------------------------------------------------------------------------
FOOD PRODUCTS--0.3%
ConAgra Foods, Inc. 109,800 2,356,308
- ---------------------------------------------------------------------------------------------------------------------
TOBACCO--2.2%
Altria Group, Inc. 293,100 20,769,066
- ---------------------------------------------------------------------------------------------------------------------
ENERGY--3.7%
- ---------------------------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.6%
Halliburton Co. 68,000 4,965,360
- ---------------------------------------------------------------------------------------------------------------------
OIL & GAS--3.1%
BP plc, ADR 70,900 4,887,846
- ---------------------------------------------------------------------------------------------------------------------
Kinder Morgan, Inc. 24,700 2,272,153
- ---------------------------------------------------------------------------------------------------------------------
LUKOIL, Sponsored ADR 75,900 6,235,185
- ---------------------------------------------------------------------------------------------------------------------
Petroleo Brasileiro SA, Preference 291,000 5,782,348
- ---------------------------------------------------------------------------------------------------------------------
Talisman Energy, Inc. 88,000 4,673,340
- ---------------------------------------------------------------------------------------------------------------------
TotalFinaElf SA, Sponsored ADR 37,500 4,939,875
----------------
28,790,747
- ---------------------------------------------------------------------------------------------------------------------
FINANCIALS--8.5%
- ---------------------------------------------------------------------------------------------------------------------
CAPITAL MARKETS--1.7%
UBS AG 142,731 15,678,349
- ---------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS--1.7%
Bank of America Corp. 52,052 2,370,448
- ---------------------------------------------------------------------------------------------------------------------
Wachovia Corp. 82,574 4,628,273
15 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS Continued
Wells Fargo & Co. 132,800 $ 8,481,936
----------------
15,480,657
- ---------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--1.8%
Bear Stearns Cos., Inc. (The) 19,200 2,663,040
- ---------------------------------------------------------------------------------------------------------------------
Capital One Financial Corp. 96,400 7,762,128
- ---------------------------------------------------------------------------------------------------------------------
Citigroup, Inc. 137,700 6,503,571
----------------
16,928,739
- ---------------------------------------------------------------------------------------------------------------------
INSURANCE--2.1%
American International Group, Inc. 44,100 2,914,569
- ---------------------------------------------------------------------------------------------------------------------
Everest Re Group Ltd. 51,500 4,808,555
- ---------------------------------------------------------------------------------------------------------------------
Genworth Financial, Inc., Cl. A 268,300 8,969,269
- ---------------------------------------------------------------------------------------------------------------------
Platinum Underwriters Holdings Ltd. 102,500 2,982,750
----------------
19,675,143
- ---------------------------------------------------------------------------------------------------------------------
REAL ESTATE--0.5%
Host Marriott Corp. 205,100 4,389,140
- ---------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--0.7%
Countrywide Financial Corp. 101,100 3,710,370
- ---------------------------------------------------------------------------------------------------------------------
Freddie Mac 53,000 3,233,000
----------------
6,943,370
- ---------------------------------------------------------------------------------------------------------------------
HEALTH CARE--6.2%
- ---------------------------------------------------------------------------------------------------------------------
BIOTECHNOLOGY--1.6%
Human Genome Sciences, Inc. 1 187,100 2,033,777
- ---------------------------------------------------------------------------------------------------------------------
Inhibitex, Inc. 1 131,700 956,142
- ---------------------------------------------------------------------------------------------------------------------
Medicines Co. (The) 1 109,300 2,248,301
- ---------------------------------------------------------------------------------------------------------------------
MedImmune, Inc. 1,2 210,200 7,689,116
- ---------------------------------------------------------------------------------------------------------------------
Myogen, Inc. 1 61,600 2,231,768
----------------
15,159,104
- ---------------------------------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.8%
Beckman Coulter, Inc. 88,400 4,823,988
- ---------------------------------------------------------------------------------------------------------------------
Cooper Cos., Inc. (The) 37,300 2,015,319
----------------
6,839,307
- ---------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--0.3%
Manor Care, Inc. 69,500 3,082,325
16 | OPPENHEIMER BALANCED FUND
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS--3.5%
GlaxoSmithKline plc, ADR 118,500 $ 6,198,735
- --------------------------------------------------------------------------------------------------------------------
MGI Pharma, Inc. 1 132,200 2,313,500
- --------------------------------------------------------------------------------------------------------------------
Pfizer, Inc. 394,140 9,821,969
- --------------------------------------------------------------------------------------------------------------------
Sanofi-Aventis SA, ADR 198,100 9,399,845
- --------------------------------------------------------------------------------------------------------------------
Schering-Plough Corp. 245,800 4,667,742
---------------
32,401,791
- --------------------------------------------------------------------------------------------------------------------
INDUSTRIALS--6.2%
- --------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--4.2%
Empresa Brasileira de Aeronautica SA, ADR 142,100 5,236,385
- --------------------------------------------------------------------------------------------------------------------
Honeywell International, Inc. 247,800 10,598,406
- --------------------------------------------------------------------------------------------------------------------
Orbital Sciences Corp. 1 907,317 14,353,755
- --------------------------------------------------------------------------------------------------------------------
United Technologies Corp. 148,100 8,585,357
---------------
38,773,903
- --------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--1.7%
Cendant Corp. 916,400 15,899,540
- --------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.3%
Gamesa Corporacion Tecnologica SA 146,700 2,821,359
- --------------------------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--11.6%
- --------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--1.3%
Cisco Systems, Inc. 1 536,600 11,628,122
- --------------------------------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--2.1%
Hutchinson Technology, Inc. 1 136,800 4,127,256
- --------------------------------------------------------------------------------------------------------------------
International Business Machines Corp. 152,700 12,593,169
- --------------------------------------------------------------------------------------------------------------------
Palm, Inc.1 123,200 2,853,312
---------------
19,573,737
- --------------------------------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.5%
Flextronics International Ltd. 1 485,300 5,022,855
- --------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--0.6%
ATI Technologies, Inc. 1,3 333,300 5,726,094
- --------------------------------------------------------------------------------------------------------------------
SOFTWARE--7.1%
Compuware Corp. 1 871,529 6,824,072
- --------------------------------------------------------------------------------------------------------------------
Microsoft Corp. 744,800 20,266,008
- --------------------------------------------------------------------------------------------------------------------
Novell, Inc. 1 837,000 6,428,160
- --------------------------------------------------------------------------------------------------------------------
Synopsys, Inc. 1 285,300 6,376,455
- --------------------------------------------------------------------------------------------------------------------
Take-Two Interactive Software, Inc. 1 1,370,500 25,573,530
---------------
65,468,225
17 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
MATERIALS--1.1%
- --------------------------------------------------------------------------------------------------------------------
CHEMICALS--0.5%
Praxair, Inc. 85,800 $ 4,731,870
- --------------------------------------------------------------------------------------------------------------------
METALS & MINING--0.6%
Companhia Vale do Rio Doce, Sponsored ADR 117,400 5,075,202
- --------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--0.8%
- --------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--0.8%
IDT Corp., Cl. B 1 696,200 7,706,934
- --------------------------------------------------------------------------------------------------------------------
WorldCom, Inc./WorldCom Group 1,4 450,000 --
---------------
7,706,934
- --------------------------------------------------------------------------------------------------------------------
UTILITIES--1.5%
- --------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--1.5%
AES Corp. (The) 1 554,200 9,454,652
- --------------------------------------------------------------------------------------------------------------------
Reliant Energy, Inc. 1 453,900 4,802,262
---------------
14,256,914
---------------
Total Common Stocks (Cost $350,780,480) 458,991,780
UNITS
- --------------------------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- --------------------------------------------------------------------------------------------------------------------
Lucent Technologies, Inc. Wts., Exp. 12/10/07 1 (Cost $0) 11,758 7,349
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--4.6%
- --------------------------------------------------------------------------------------------------------------------
Ace Securities Corp., Home Equity Loan Pass-Through Certificates,
Series 2002-HE7, Cl. A2B, 4.998%, 11/25/35 5 $ 780,000 780,481
- --------------------------------------------------------------------------------------------------------------------
Aesop Funding II LLC, Automobile Asset-Backed Certificates,
Series 2005-1A, Cl. A2, 4.836%, 4/20/08 5 550,000 550,387
- --------------------------------------------------------------------------------------------------------------------
BMW Vehicle Owner Trust, Automobile Loan Certificates,
Series 2005-A, Cl. A2, 3.66%, 12/26/07 1,099,752 1,096,746
- --------------------------------------------------------------------------------------------------------------------
Capital Auto Receivables Asset Trust, Automobile Mtg.-Backed Nts.:
Series 2004-2, Cl. A3, 3.58%, 1/15/09 1,870,000 1,831,370
Series 2005-1, Cl. A2B, 3.73%, 7/16/07 336,760 336,483
- --------------------------------------------------------------------------------------------------------------------
Capital One Prime Auto Receivables Trust, Automobile Loan Asset-Backed
Securities, Series 2005-1, Cl. A2, 4.24%, 11/15/07 2,090,000 2,085,960
- --------------------------------------------------------------------------------------------------------------------
Centex Home Equity Co. LLC, Home Equity Loan Asset-Backed Certificates:
Series 2004-D, Cl. AF1, 2.98%, 4/25/20 28,798 28,712
Series 2005-B, Cl. AF1, 4.02%, 3/26/35 203,931 202,874
Series 2005-C, Cl. AF1, 4.196%, 6/25/35 641,773 637,354
Series 2005-D, Cl. AF1, 5.04%, 10/25/35 1,374,724 1,367,204
Series 2005-D, Cl. AV2, 5.088%, 10/25/35 5 1,530,000 1,531,163
- --------------------------------------------------------------------------------------------------------------------
Chase Manhattan Auto Owner Trust, Automobile Loan Pass-Through
Certificates, Series 2005-A, Cl. A2, 3.72%, 12/15/07 1,399,233 1,393,041
18 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- --------------------------------------------------------------------------------------------------------------------
CIT Equipment Collateral, Equipment Receivable-Backed Nts.,
Series 2004-DFS, Cl. A2, 2.66%, 11/20/06 $ 132,975 $ 132,862
- --------------------------------------------------------------------------------------------------------------------
Citibank Credit Card Issuance Trust, Credit Card Receivable Nts.,
Series 2003-C4, Cl. C4, 5%, 6/10/15 270,000 258,223
- --------------------------------------------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust, Inc., CMO, Series 2005-WF2,
Cl. AF2, 4.922%, 8/25/35 5 1,859,823 1,841,714
- --------------------------------------------------------------------------------------------------------------------
Consumer Credit Reference Index Securities Program, Credit Card
Asset-Backed Certificates, Series 2002-B, Cl. FX, 10.421%, 3/22/07 6 1,720,000 1,759,049
- --------------------------------------------------------------------------------------------------------------------
Countrywide Asset-Backed Certificates, Inc., Home Equity Asset-Backed
Certificates:
Series 2002-4, Cl. A1, 5.188%, 2/25/33 5 27,360 27,429
Series 2005-7, Cl. AF1B, 4.317%, 11/25/35 5 800,766 796,105
Series 2005-16, Cl. 2AF2, 5.382%, 5/25/36 5 550,000 547,148
Series 2005-17, Cl. 1AF1, 5.018%, 5/25/36 5 1,104,649 1,105,297
Series 2005-17, Cl. 1AF2, 5.363%, 5/25/36 5 370,000 367,955
- --------------------------------------------------------------------------------------------------------------------
DaimlerChrysler Auto Trust, Automobile Loan Pass-Through Certificates:
Series 2004-C, Cl. A2, 2.62%, 6/8/07 280,123 279,980
Series 2005-A, Cl. A2, 3.17%, 9/8/07 713,072 711,765
- --------------------------------------------------------------------------------------------------------------------
Equity One ABS, Inc., Home Equity Mtg. Pass-Through Certificates,
Series 2004-3, Cl. AF2, 3.80%, 7/25/34 5 790,346 787,627
- --------------------------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan Asset-Backed Certificates, Home Equity
Receivables, Series 2005-FF10, Cl. A3, 5.028%, 11/25/35 5 2,270,000 2,271,399
- --------------------------------------------------------------------------------------------------------------------
Ford Credit Auto Owner Trust, Automobile Loan Pass-Through Certificates:
Series 2005-A, Cl. A3, 3.48%, 11/17/08 1,370,000 1,354,132
Series 2005-B, Cl. A2, 3.78%, 9/15/07 605,152 604,075
- --------------------------------------------------------------------------------------------------------------------
GS Auto Loan Trust, Automobile Loan Asset-Backed Securities,
Series 2005-1, Cl. A2, 4.32%, 5/15/08 3,811,615 3,801,650
- --------------------------------------------------------------------------------------------------------------------
Honda Auto Receivables Owner Trust, Automobile Receivable Obligations:
Series 2005-1, Cl. A2, 3.21%, 5/21/07 273,752 273,292
Series 2005-3, Cl. A2, 3.73%, 10/18/07 1,279,631 1,275,009
- --------------------------------------------------------------------------------------------------------------------
Household Home Equity Loan Trust, Home Equity Loan Pass-Through
Certificates, Series 2005-3, Cl. A1, 5.036%, 1/20/35 5 1,012,183 1,013,102
- --------------------------------------------------------------------------------------------------------------------
Lehman XS Trust, Home Equity Mtg. Pass-Through Certificates,
Series 2005-2, Cl. 2A1B, 3.63%, 8/25/35 5 1,482,954 1,480,294
- --------------------------------------------------------------------------------------------------------------------
MBNA Credit Card Master Note Trust, Credit Card Receivables,
Series 2003-C7, Cl. C7, 6.099%, 3/15/16 5 2,540,000 2,706,033
- --------------------------------------------------------------------------------------------------------------------
Onyx Acceptance Owner Trust, Automobile Receivable Obligations,
Series 2005-B, Cl. A2, 4.03%, 4/15/08 866,072 863,886
- --------------------------------------------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through Trust, Home Equity Pass-Through Certificates:
Series 2004-5, Cl. AF2, 3.735%, 11/10/34 5 500,000 494,576
Series 2005-1, Cl. AF2, 3.914%, 5/25/35 5 390,000 384,428
Series 2005-2, Cl. AF2, 4.415%, 4/25/35 5 630,000 622,411
19 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- --------------------------------------------------------------------------------------------------------------------
Residential Asset Mortgage Products, Inc., Home Equity Asset-Backed
Pass-Through Certificates, Series 2004-RS7, Cl. AI3, 4.45%, 7/25/28 $1,130,000 $ 1,123,291
- --------------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., CMO Pass-Through Certificates,
Series 2005-4XS, Cl. 3A1, 5.18%, 3/26/35 2,022,604 2,010,558
- --------------------------------------------------------------------------------------------------------------------
Volkswagen Auto Lease Trust, Automobile Lease Asset-Backed Securities,
Series 2005-A, Cl. A2, 3.52%, 4/20/07 908,845 906,652
- --------------------------------------------------------------------------------------------------------------------
Wells Fargo Home Equity Trust, Home Equity Asset-Backed Certificates,
Series 2004-2, Cl. AI1B, 2.94%, 9/25/18 5 454,290 451,578
- --------------------------------------------------------------------------------------------------------------------
WFS Financial Owner Trust, Automobile Receivable Obligations,
Series 2002-2, Cl. A4, 4.50%, 2/20/10 274,586 274,866
- --------------------------------------------------------------------------------------------------------------------
Whole Auto Loan Trust, Automobile Loan Receivable Certificates,
Series 2004-1, Cl. A2A, 2.59%, 5/15/07 290,668 290,103
---------------
Total Asset-Backed Securities (Cost $42,835,811) 42,658,264
- --------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--27.5%
- --------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY--23.1%
- --------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED--22.9%
Federal Home Loan Mortgage Corp.:
4.50%, 5/1/19 4,638,337 4,435,156
4.50%, 5/1/19 7 2,532,220 2,419,647
5%, 4/1/36 7 4,640,000 4,415,248
6%, 9/1/24 1,003,871 1,010,432
6.50%, 4/1/18-4/1/34 1,995,962 2,042,410
7%, 5/1/29-11/1/32 3,488,064 3,594,586
- --------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., CMO Gtd. Real Estate Mtg.
Investment Conduit Multiclass Pass-Through Certificates:
Series 2034, Cl. Z, 6.50%, 2/15/28 474,722 483,844
Series 2053, Cl. Z, 6.50%, 4/15/28 521,215 530,699
Series 2055, Cl. ZM, 6.50%, 5/15/28 664,062 674,473
Series 2075, Cl. D, 6.50%, 8/15/28 1,578,689 1,607,732
Series 2080, Cl. Z, 6.50%, 8/15/28 428,264 433,928
Series 2387, Cl. PD, 6%, 4/15/30 396,543 397,446
Series 2456, Cl. BD, 6%, 3/15/30 92,437 92,400
Series 2500, Cl. FD, 5.249%, 3/15/32 5 213,454 214,677
Series 2526, Cl. FE, 5.149%, 6/15/29 5 290,861 291,526
Series 2551, Cl. FD, 5.149%, 1/15/33 5 228,144 230,559
Series 2583, Cl. KA, 5.50%, 3/15/22 1,011,731 1,010,778
Series 2921, Cl. NG, 5%, 1/15/35 2,988,000 2,735,535
- --------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., CMO Pass-Through Participation
Certificates, Series 151, Cl. F, 9%, 5/15/21 45,675 45,566
- --------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed Security:
Series 176, Cl. IO, 12.094%, 6/1/26 8 409,190 91,981
Series 183, Cl. IO, 8.946%, 4/1/27 8 628,449 145,482
Series 184, Cl. IO, 14.897%, 12/1/26 8 689,183 152,220
20 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed
Security: Continued
Series 192, Cl. IO, 15.111%, 2/1/28 8 $ 193,731 $ 41,771
Series 200, Cl. IO, 13.426%, 1/1/29 8 228,207 53,350
Series 2003-118, Cl. S, 15.59%, 12/25/33 8 3,374,684 396,068
Series 2130, Cl. SC, 2.642%, 3/15/29 8 522,681 34,595
Series 2796, Cl. SD, 6.228%, 7/15/26 8 772,521 51,556
Series 2920, Cl. S, 5.764%, 1/15/35 8 4,571,828 206,154
Series 3000, Cl. SE, 9.253%, 7/15/25 8 4,305,201 141,913
- --------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Principal-Only Stripped Mtg.-Backed
Security, Series 176, Cl. PO, 4.719%, 6/1/26 9 165,906 134,151
- --------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
5%, 6/1/18-7/1/18 4,434,854 4,333,817
5%, 9/1/33-5/1/36 7 36,747,753 34,996,756
5.50%, 4/1/21-5/25/36 7 19,145,000 18,775,778
5.50%, 3/1/33-1/1/34 29,954,232 29,306,669
6%, 5/1/16-11/1/32 18,114,251 18,280,167
6%, 4/1/21 7 1,500,000 1,520,157
6.50%, 12/1/27-11/1/31 3,072,306 3,150,598
6.50%, 5/1/36 7 10,958,000 11,166,881
7%, 11/1/17-1/1/36 17,268,709 17,806,248
7%, 4/1/36 7 3,554,000 3,660,620
7.50%, 1/1/33 587,838 615,082
8.50%, 7/1/32 40,606 43,765
- --------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Grantor Trust, CMO, Trust 2002-T1,
Cl. A2, 7%, 11/25/31 1,520,701 1,558,108
- --------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Trust 1993-87, Cl. Z, 6.50%, 6/25/23 1,249,507 1,276,642
Trust 2001-50, Cl. NE, 6%, 8/25/30 234,141 235,400
Trust 2001-51, Cl. OD, 6.50%, 10/25/31 1,703,712 1,742,221
Trust 2001-70, Cl. LR, 6%, 9/25/30 296,652 297,758
Trust 2001-72, Cl. NH, 6%, 4/25/30 160,826 161,037
Trust 2001-74, Cl. PD, 6%, 5/25/30 65,688 65,628
Trust 2002-77, Cl. WF, 5.176%, 12/18/32 5 345,136 348,031
Trust 2003-17, Cl. EQ, 5.50%, 3/25/23 630,000 610,522
Trust 2003-28, Cl. KG, 5.50%, 4/25/23 1,045,000 1,023,825
Trust 2004-38, Cl. FT, 5.248%, 10/25/33 5 3,504,527 3,513,531
Trust 2004-101, Cl. BG, 5%, 1/25/20 1,633,000 1,573,693
Trust 2005-30, Cl. UG, 5%, 4/25/35 3,744,000 3,415,671
Trust 2006-24, Cl. DB, 5.50%, 4/25/26 3,460,000 3,416,112
- --------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates, Interest-Only Stripped Mtg.-Backed
Security:
Trust 2002-38, Cl. SO, 1.596%, 4/25/32 8 809,994 45,780
Trust 2002-47, Cl. NS, 3.218%, 4/25/32 8 864,008 77,441
Trust 2002-51, Cl. S, 3.364%, 8/25/32 8 793,295 69,866
Trust 2002-77, Cl. IS, 5.079%, 12/18/32 8 1,379,990 129,781
21 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security:
Trust 214, Cl. 2, 16.346%, 3/1/23 8 $ 1,268,837 $ 298,090
Trust 222, Cl. 2, 13.329%, 6/1/23 8 1,436,700 336,484
Trust 240, Cl. 2, 17.05%, 9/1/23 8 2,189,027 511,880
Trust 252, Cl. 2, 10.141%, 11/1/23 8 1,059,093 250,531
Trust 273, Cl. 2, 14.858%, 8/1/26 8 307,687 69,238
Trust 319, Cl. 2, 10.577%, 2/1/32 8 425,718 108,791
Trust 321, Cl. 2, 5.662%, 4/1/32 8 4,413,821 1,122,927
Trust 329, Cl. 2, 10.473%, 1/1/33 8 1,125,264 277,868
Trust 333, Cl. 2, 10.781%, 4/1/33 8 18,642,461 4,632,433
Trust 334, Cl. 17, 10.685%, 2/1/33 8 721,250 165,059
Trust 338, Cl. 2, 9.459%, 7/1/33 8 5,209,439 1,290,078
Trust 350, Cl. 2, 11.872%, 3/1/34 8 4,805,996 1,178,009
Trust 2001-65, Cl. S, 15.572%, 11/25/31 8 1,969,177 173,438
Trust 2001-81, Cl. S, 4.86%, 1/25/32 8 442,522 37,644
Trust 2002-9, Cl. MS, 3.95%, 3/25/32 8 593,243 53,395
Trust 2002-52, Cl. SD, 1.161%, 9/25/32 8 953,769 85,181
Trust 2002-77, Cl. SH, 8.48%, 12/18/32 8 571,078 48,153
Trust 2002-96, Cl. SK, 16.458%, 4/25/32 8 5,129,157 469,590
Trust 2003-4, Cl. S, 15.29%, 2/25/33 8 1,076,452 113,999
Trust 2004-54, Cl. DS, 1.368%, 11/25/30 8 856,657 42,573
Trust 2005-6, Cl. SE, 5.383%, 2/25/35 8 3,057,765 138,586
Trust 2005-19, Cl. SA, 4.435%, 3/25/35 8 12,030,722 583,318
Trust 2005-40, Cl. SA, 5.093%, 5/25/35 8 2,659,715 124,256
Trust 2005-71, Cl. SA, 12.685%, 8/25/25 8 2,744,217 139,403
- --------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Principal-Only Stripped Mtg.-Backed Security:
Trust 333, Cl. 1, 4.628%, 4/1/33 9 5,330,640 3,907,311
Trust 338, Cl. 1, 5.022%, 7/1/33 7,9 6,159,892 4,520,467
Trust 1993-184, Cl. M, 5.773%, 9/25/23 9 490,484 399,211
---------------
212,411,381
- --------------------------------------------------------------------------------------------------------------------
GNMA/GUARANTEED--0.2%
Government National Mortgage Assn.:
4.375%, 3/20/26 5 31,924 32,227
7%, 4/15/26 209,287 218,478
7.50%, 5/15/27 1,164,272 1,223,796
- --------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security:
Series 2001-21, Cl. SB, (0.218)%, 1/16/27 8 1,025,041 59,714
Series 2002-15, Cl. SM, (3.059)%, 2/16/32 8 968,503 53,909
Series 2002-76, Cl. SY, 0.876%, 12/16/26 8 2,039,797 121,706
Series 2004-11, Cl. SM, (3.232)%, 1/17/30 8 729,231 44,243
---------------
1,754,073
22 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
NON-AGENCY--4.4%
- --------------------------------------------------------------------------------------------------------------------
COMMERCIAL--4.0%
Banc of America Commercial Mortgage, Inc., Commercial Mtg.
Pass-Through Certificates:
Series 2004-6, Cl. A3, 4.512%, 12/10/42 $ 1,480,000 $ 1,412,698
Series 2005-2, Cl. A4, 4.783%, 7/10/43 5 1,910,000 1,844,887
Series 2005-3, Cl. A2, 4.501%, 7/10/43 1,580,000 1,525,710
- --------------------------------------------------------------------------------------------------------------------
Banc of America Funding Corp., CMO Pass-Through Certificates,
Series 2004-2, Cl. 2A1, 6.50%, 7/20/32 1,397,616 1,377,448
- --------------------------------------------------------------------------------------------------------------------
Banc of America Mortgage Securities, Inc., CMO Pass-Through Certificates:
Series 2004-8, Cl. 5A1, 6.50%, 5/25/32 1,068,820 1,079,842
Series 2005-E, Cl. 2A2, 4.978%, 6/25/35 5 267,338 267,020
- --------------------------------------------------------------------------------------------------------------------
Bear Stearns Commercial Mortgage Securities, Inc., Commercial Mtg.
Obligations, Series 2005-PWR7, Cl. A2, 4.945%, 2/11/41 750,000 729,723
- --------------------------------------------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust, Inc., CMO, Series 2006-WF1, Cl. A2B,
5.536%, 3/1/36 400,000 400,000
- --------------------------------------------------------------------------------------------------------------------
Citigroup/Deutsche Bank Commercial Mortgage Trust, Commercial Mtg.
Obligations, Series 2005-CD1, Cl. A4, 5.226%, 7/15/44 3,5 1,810,000 1,775,380
- --------------------------------------------------------------------------------------------------------------------
Countrywide Alternative Loan Trust, CMO:
Series 2004-J9, Cl. 1A1, 4.998%, 10/25/34 5 200,847 200,997
Series 2005-J3, Cl. 3A1, 6.50%, 9/25/34 1,771,067 1,785,394
- --------------------------------------------------------------------------------------------------------------------
First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through Certificates,
Series 1997-CHL1, Cl. D, 7.577%, 4/29/39 5,6 708,061 708,981
- --------------------------------------------------------------------------------------------------------------------
GE Capital Commercial Mortgage Corp., Commercial Mtg. Obligations:
Series 2004-C3, Cl. A2, 4.433%, 7/10/39 960,000 935,325
Series 2005-CA, Cl. A3, 4.578%, 6/10/48 650,000 623,383
Series 2005-C3, Cl. A2, 4.853%, 7/10/45 940,000 922,723
- --------------------------------------------------------------------------------------------------------------------
GMAC Commercial Mortgage Securities, Inc., Commercial Mtg.
Pass-Through Certificates:
Series 1997-C1, Cl. A3, 6.869%, 7/15/29 437,353 443,911
Series 2004-C3, Cl. A4, 4.547%, 12/10/41 940,000 898,853
- --------------------------------------------------------------------------------------------------------------------
Greenwich Capital Commercial Funding Corp., Commercial Mtg.
Pass-Through Certificates:
Series 2005-GG3, Cl. A2, 4.305%, 8/10/42 1,330,000 1,284,392
Series 2005-GG5, Cl. A2, 5.117%, 4/10/37 1,050,000 1,039,296
- --------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Commercial Mortgage Securities Corp., Commercial Mtg.
Pass-Through Certificates:
Series 2005-LDP2, Cl. A2, 4.575%, 7/15/42 380,000 368,233
Series 2006-CB14, Cl. A4, 5.481%, 12/12/44 1,610,000 1,598,230
Series 2006-LDP6, Cl. A4, 5.475%, 4/15/43 1,860,000 1,840,061
- --------------------------------------------------------------------------------------------------------------------
LB-UBS Commercial Mortgage Trust, Commercial Mtg. Pass-Through
Certificates, Series 2005-C5, Cl. A2, 4.885%, 9/15/30 1,120,000 1,099,642
- --------------------------------------------------------------------------------------------------------------------
Mastr Alternative Loan Trust, CMO Pass-Through Certificates:
Series 2004-6, Cl. 10A1, 6%, 7/25/34 1,851,724 1,841,080
Series 2004-9, Cl. A3, 4.70%, 8/25/34 5 3,420,909 3,395,501
23 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
COMMERCIAL Continued
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 $ 1,466,187
- --------------------------------------------------------------------------------------------------------------------
Residential Accredit Loans, Inc., Mtg. Asset-Backed Pass-Through Certificates,
Series 2003-QS1, Cl. A2, 5.75%, 1/25/33 902,857 897,549
- --------------------------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VII, Inc., Commercial Mtg.
Pass-Through Certificates, Series 1996-C1, Cl. F, 7.878%, 1/20/28 4,5 60,173 24,069
- --------------------------------------------------------------------------------------------------------------------
Wachovia Bank Commercial Mortgage Trust, Commercial Mtg. Obligations:
Series 2005-C17, Cl. A2, 4.782%, 3/15/42 2,190,000 2,142,808
Series 2005-C20, Cl. A5, 5.087%, 7/15/42 5 1,120,000 1,095,595
- --------------------------------------------------------------------------------------------------------------------
Washington Mutual Mortgage Securities Corp., CMO Pass-Through
Certificates, Series 2005-AR5, Cl. A1, 4.678%, 5/25/35 5 1,144,839 1,142,835
- --------------------------------------------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed Securities Trust, CMO, Series 2004-DD,
Cl. 2A1, 5.518%, 1/25/35 5 949,413 944,492
---------------
37,112,245
- --------------------------------------------------------------------------------------------------------------------
OTHER--0.1%
JPMorgan Chase Commercial Mortgage Securities Corp., Commercial Mtg.
Pass-Through Certificates, Series 2005-LDP4, Cl. A2, 4.79%, 10/15/42 1,360,000 1,326,282
- --------------------------------------------------------------------------------------------------------------------
RESIDENTIAL--0.3%
Countrywide Alternative Loan Trust, CMO, Series 2005-J1, Cl. 3A1, 6.50%, 8/25/32 2,763,133 2,797,672
---------------
Total Mortgage-Backed Obligations (Cost $258,293,450) 255,401,653
- --------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--4.8%
- --------------------------------------------------------------------------------------------------------------------
Fannie Mae Unsec. Nts., 3.69%, 10/5/07 10 1,245,000 1,153,603
- --------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank Unsec. Bonds:
3.125%, 11/15/06 2,600,000 2,568,888
3.50%, 11/15/07 1,020,000 995,325
- --------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. Unsec. Nts.:
3.625%, 9/15/06 3,495,000 3,473,055
4.125%, 7/12/10 3 666,000 640,785
4.375%, 11/16/07 430,000 425,332
4.625%, 2/21/08 3 850,000 843,373
5.125%, 4/18/11 720,000 719,666
6.625%, 9/15/09 235,000 246,103
- --------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Unsec. Nts.:
4%, 2/28/07 2,310,000 2,287,334
4.25%, 7/15/07 3 2,170,000 2,147,284
4.75%, 12/15/10 130,000 127,917
6%, 5/15/11 3,11 4,005,000 4,156,617
6.625%, 9/15/09 3 135,000 141,335
7.25%, 1/15/10 11 1,500,000 1,608,515
7.25%, 5/15/30 3 1,215,000 1,530,454
24 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS Continued
- --------------------------------------------------------------------------------------------------------------------
Tennessee Valley Authority Bonds:
4.65%, 6/15/35 3 $ 1,560,000 $ 1,402,226
5.375%, 11/13/08 375,000 377,911
Series A, 6.79%, 5/23/12 11,936,000 12,926,640
- --------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
5.375%, 2/15/31 3 300,000 315,891
8.875%, 8/15/17 3 465,000 621,029
- --------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
4.25%, 11/30/07 137,000 135,732
4.25%, 1/15/11-8/15/15 3 3,313,000 3,225,242
4.375%, 12/31/07-1/31/08 3 1,325,000 1,314,614
4.50%, 2/28/11 3 640,000 630,876
4.625%, 2/29/08 3 736,000 733,269
---------------
Total U.S. Government Obligations (Cost $45,931,718) 44,749,016
- --------------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--12.7%
- --------------------------------------------------------------------------------------------------------------------
ABN Amro Bank NV (NY Branch), 7.125% Sub. Nts., Series B, 10/15/93 500,000 558,567
- --------------------------------------------------------------------------------------------------------------------
Albertson's, Inc., 8% Sr. Unsec. Debs., 5/1/31 1,530,000 1,427,888
- --------------------------------------------------------------------------------------------------------------------
Allied Waste North America, Inc., 8.875% Sr. Nts., Series B, 4/1/08 840,000 886,200
- --------------------------------------------------------------------------------------------------------------------
Archer Daniels Midland Co., 5.375% Nts., 9/15/35 940,000 859,825
- --------------------------------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc., 8.125% Sr. Unsec. Nts., 5/1/12 1,255,000 1,410,862
- --------------------------------------------------------------------------------------------------------------------
Barclays Bank plc, 6.278% Perpetual Bonds 12 1,460,000 1,401,264
- --------------------------------------------------------------------------------------------------------------------
Beazer Homes USA, Inc., 6.875% Sr. Unsec. Nts., 7/15/15 3 895,000 854,725
- --------------------------------------------------------------------------------------------------------------------
Belo Corp., 8% Sr. Unsec. Unsub. Nts., 11/1/08 1,310,000 1,371,345
- --------------------------------------------------------------------------------------------------------------------
British Sky Broadcasting Group plc, 8.20% Sr. Unsec. Nts., 7/15/09 1,690,000 1,818,073
- --------------------------------------------------------------------------------------------------------------------
British Telecommunications plc, 8.875% Bonds, 12/15/30 795,000 1,019,955
- --------------------------------------------------------------------------------------------------------------------
CenterPoint Energy, Inc., 7.25% Sr. Nts., Series B, 9/1/10 1,685,000 1,779,267
- --------------------------------------------------------------------------------------------------------------------
Chancellor Media CCU, 8% Sr. Unsec. Nts., 11/1/08 875,000 919,052
- --------------------------------------------------------------------------------------------------------------------
CIT Group, Inc., 7.75% Sr. Unsec. Unsub. Nts., 4/2/12 1,610,000 1,776,754
- --------------------------------------------------------------------------------------------------------------------
Citigroup, Inc., 6.625% Unsec. Sub. Nts., 6/15/32 705,000 757,373
- --------------------------------------------------------------------------------------------------------------------
Clear Channel Communications, Inc., 6.25% Nts., 3/15/11 900,000 893,899
- --------------------------------------------------------------------------------------------------------------------
Coca-Cola Co. (The), 7.375% Unsec. Debs., 7/29/93 440,000 530,134
- --------------------------------------------------------------------------------------------------------------------
Constellation Energy Group, Inc., 7.60% Unsec. Nts., 4/1/32 1,510,000 1,732,328
- --------------------------------------------------------------------------------------------------------------------
Countrywide Financial Corp., 4.50% Nts., Series A, 6/15/10 3 1,910,000 1,831,361
- --------------------------------------------------------------------------------------------------------------------
Cox Communications, Inc., 4.625% Unsec. Nts., 1/15/10 3 1,895,000 1,818,101
- --------------------------------------------------------------------------------------------------------------------
Credit Suisse (USA), Inc., 5.25% Nts., 3/2/11 3 1,855,000 1,835,801
- --------------------------------------------------------------------------------------------------------------------
D.R. Horton, Inc.:
5.375% Sr. Unsec. Nts., 6/15/12 3 1,115,000 1,065,168
6.125% Nts., 1/15/14 780,000 766,539
- --------------------------------------------------------------------------------------------------------------------
DaimlerChrysler North America Holding Corp., 8% Nts., 6/15/10 1,610,000 1,733,492
25 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- -----------------------------------------------------------------------------------------------------------------------
Delhaize America, Inc., 9% Unsub. Debs., 4/15/31 $ 1,175,000 $ 1,364,980
- -----------------------------------------------------------------------------------------------------------------------
Dominion Resources, Inc., 8.125% Sr. Unsub. Nts., 6/15/10 1,645,000 1,787,862
- -----------------------------------------------------------------------------------------------------------------------
DTE Energy Co., 6.45% Sr. Unsub. Nts., 6/1/06 830,000 831,425
- -----------------------------------------------------------------------------------------------------------------------
EOP Operating LP, 8.10% Unsec. Nts., 8/1/10 1,670,000 1,815,300
- -----------------------------------------------------------------------------------------------------------------------
Federated Department Stores, Inc., 6.625% Sr. Unsec. Nts., 9/1/08 1,165,000 1,197,538
- -----------------------------------------------------------------------------------------------------------------------
FirstEnergy Corp.:
5.50% Sr. Unsub. Nts., Series A, 11/15/06 730,000 730,296
7.375% Sr. Unsub. Nts., Series C, 11/15/31 915,000 1,019,445
- -----------------------------------------------------------------------------------------------------------------------
Ford Motor Credit Co.:
5.80% Sr. Unsec. Nts., 1/12/09 1,100,000 1,005,204
6.625% Nts., 6/16/08 2,890,000 2,736,712
- -----------------------------------------------------------------------------------------------------------------------
France Telecom SA, 8.315% Sr. Unsec. Nts., 3/1/31 5 275,000 344,512
- -----------------------------------------------------------------------------------------------------------------------
Gap, Inc. (The):
6.90% Nts., 9/15/07 1,360,000 1,381,538
9.55% Unsub. Nts., 12/15/08 5 199,000 217,328
- -----------------------------------------------------------------------------------------------------------------------
General Mills, Inc., 3.875% Nts., 11/30/07 1,400,000 1,366,774
- -----------------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp.:
6.15% Nts., 4/5/07 2,870,000 2,819,471
8% Bonds, 11/1/31 3 1,315,000 1,246,062
- -----------------------------------------------------------------------------------------------------------------------
Goldman Sachs Capital, Inc. (The), 6.345% Sub. Bonds, 2/15/34 1,405,000 1,397,804
- -----------------------------------------------------------------------------------------------------------------------
Harrah's Operating Co., Inc., 5.625% Sr. Unsec. Bonds, 6/1/15 940,000 902,265
- -----------------------------------------------------------------------------------------------------------------------
HBOS plc, 6.413% Sub. Perpetual Bonds, Series A 6,12 1,800,000 1,718,910
- -----------------------------------------------------------------------------------------------------------------------
HCA, Inc., 7.125% Sr. Unsec. Nts., 6/1/06 865,000 871,439
- -----------------------------------------------------------------------------------------------------------------------
Hilton Hotels Corp., 8.25% Sr. Unsec. Nts., 2/15/11 3 1,075,000 1,168,809
- -----------------------------------------------------------------------------------------------------------------------
HSBC Finance Capital Trust IX, 5.911% Nts., 11/30/35 5 1,800,000 1,769,243
- -----------------------------------------------------------------------------------------------------------------------
Hyatt Equities LLC, 6.875% Nts., 6/15/07 6 690,000 699,753
- -----------------------------------------------------------------------------------------------------------------------
IPALCO Enterprises, Inc., 8.375% Sr. Sec. Nts., 11/14/08 5 810,000 850,500
- -----------------------------------------------------------------------------------------------------------------------
iStar Financial, Inc., 5.15% Sr. Unsec. Nts., 3/1/12 1,925,000 1,849,677
- -----------------------------------------------------------------------------------------------------------------------
J.C. Penney Co., Inc. (Holding Co.), 7.40% Nts., 4/1/37 1,275,000 1,381,088
- -----------------------------------------------------------------------------------------------------------------------
JPMorgan Chase & Co., 5.15% Sub. Nts., 10/1/15 1,875,000 1,797,549
- -----------------------------------------------------------------------------------------------------------------------
K. Hovnanian Enterprises, Inc., 6.50% Sr. Nts., 1/15/14 965,000 909,704
- -----------------------------------------------------------------------------------------------------------------------
Kaiser Aluminum & Chemical Corp., 10.875% Sr. Nts., Series B, 10/15/06 3,13 250,000 131,250
- -----------------------------------------------------------------------------------------------------------------------
KB Home, 5.75% Sr. Unsec. Unsub. Nts., 2/1/14 3 1,145,000 1,052,475
- -----------------------------------------------------------------------------------------------------------------------
Kinder Morgan, Inc., 6.50% Sr. Unsec. Nts., 9/1/12 985,000 1,020,362
- -----------------------------------------------------------------------------------------------------------------------
Kroger Co. (The):
5.50% Unsec. Unsub. Nts., 2/1/13 1,450,000 1,412,651
6.80% Sr. Unsec. Nts., 4/1/11 385,000 401,553
- -----------------------------------------------------------------------------------------------------------------------
Liberty Media Corp., 5.70% Sr. Unsec. Nts., 5/15/13 3 930,000 869,466
- -----------------------------------------------------------------------------------------------------------------------
Liberty Property Trust, 5.65% Sr. Nts., 8/15/14 885,000 870,846
- -----------------------------------------------------------------------------------------------------------------------
Marsh & McLennan Cos., Inc., 5.875% Sr. Unsec. Bonds, 8/1/33 1,235,000 1,122,937
26 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- -----------------------------------------------------------------------------------------------------------------------
May Department Stores Co., 7.90% Unsec. Debs., 10/15/07 $ 625,000 $ 643,779
- -----------------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 5% Sr. Unsub. Nts., Series C, 2/3/14 965,000 926,929
- -----------------------------------------------------------------------------------------------------------------------
MetLife, Inc., 5.70% Sr. Unsec. Nts., 6/15/35 935,000 884,054
- -----------------------------------------------------------------------------------------------------------------------
MGM Mirage, Inc., 6% Sr. Sec. Nts., 10/1/09 1,455,000 1,440,450
- -----------------------------------------------------------------------------------------------------------------------
MidAmerican Energy Holdings Co., 5.875% Sr. Unsec. Nts., 10/1/12 1,525,000 1,541,186
- -----------------------------------------------------------------------------------------------------------------------
Morgan Stanley, 6.60% Nts., 4/1/12 1,705,000 1,791,077
- -----------------------------------------------------------------------------------------------------------------------
National City Bank, 6.20% Sub. Nts., 12/15/11 124,000 128,384
- -----------------------------------------------------------------------------------------------------------------------
Nationwide Financial Services, Inc.:
5.90% Nts., 7/1/12 675,000 687,845
6.25% Sr. Unsec. Nts., 11/15/11 195,000 200,826
- -----------------------------------------------------------------------------------------------------------------------
NiSource Finance Corp.:
3.20% Nts., 11/1/06 250,000 246,994
7.875% Sr. Unsec. Nts., 11/15/10 1,070,000 1,161,761
- -----------------------------------------------------------------------------------------------------------------------
Park Place Entertainment Corp., 9.375% Sr. Unsec. Sub. Nts., 2/15/07 156,000 161,265
- -----------------------------------------------------------------------------------------------------------------------
Pemex Project Funding Master Trust:
5.75% Nts., 12/15/15 3,6 1,300,000 1,246,375
5.75% Unsec. Unsub. Nts., Series 12, 12/15/15 1,480,000 1,418,950
- -----------------------------------------------------------------------------------------------------------------------
Petroleum Export Ltd. Cayman SPV, 4.623% Sr. Nts., Cl. A1, 6/15/10 6 2,566,056 2,520,234
- -----------------------------------------------------------------------------------------------------------------------
PF Export Receivables Master Trust, 3.748% Sr. Nts., Series B, 6/1/13 6 517,948 484,046
- -----------------------------------------------------------------------------------------------------------------------
Popular North America, Inc., 5.20% Nts., 12/12/07 1,855,000 1,845,150
- -----------------------------------------------------------------------------------------------------------------------
Portland General Electric Co., 8.125% First Mortgage Nts., 2/1/10 6 715,000 773,733
- -----------------------------------------------------------------------------------------------------------------------
Prudential Holdings LLC, 8.695% Bonds, Series C, 12/18/23 6 1,750,000 2,134,939
- -----------------------------------------------------------------------------------------------------------------------
Prudential Insurance Co. of America, 8.30% Nts., 7/1/25 1,730,000 2,135,355
- -----------------------------------------------------------------------------------------------------------------------
PSE&G Power LLC, 6.875% Sr. Unsec. Nts., 4/15/06 915,000 915,324
- -----------------------------------------------------------------------------------------------------------------------
PSEG Funding Trust I, 5.381% Nts., 11/16/07 900,000 897,335
- -----------------------------------------------------------------------------------------------------------------------
R&B Falcon Corp., 9.50% Sr. Unsec. Nts., 12/15/08 750,000 826,633
- -----------------------------------------------------------------------------------------------------------------------
Reed Elsevier Capital, Inc., 4.625% Nts., 6/15/12 760,000 711,681
- -----------------------------------------------------------------------------------------------------------------------
Safeway, Inc., 6.50% Sr. Unsec. Nts., 3/1/11 1,735,000 1,788,884
- -----------------------------------------------------------------------------------------------------------------------
SBC Communications, Inc., 5.30% Nts., 11/15/10 1,365,000 1,348,418
- -----------------------------------------------------------------------------------------------------------------------
Simon Property Group LP, 5.375% Nts., 6/1/11 3,6 1,380,000 1,361,265
- -----------------------------------------------------------------------------------------------------------------------
Socgen Real Estate LLC, 7.64% Perpetual Bonds 6,12 75,000 77,162
- -----------------------------------------------------------------------------------------------------------------------
Sprint Capital Corp., 8.75% Nts., 3/15/32 1,100,000 1,379,299
- -----------------------------------------------------------------------------------------------------------------------
TCI Communications, Inc., 9.80% Sr. Unsec. Debs., 2/1/12 1,700,000 2,005,590
- -----------------------------------------------------------------------------------------------------------------------
Telus Corp., 8% Nts., 6/1/11 215,000 237,392
- -----------------------------------------------------------------------------------------------------------------------
Time Warner Entertainment Co. LP, 8.375% Sr. Nts., 7/15/33 1,565,000 1,806,591
- -----------------------------------------------------------------------------------------------------------------------
TXU Energy Co., 6.125% Nts., 3/15/08 1,165,000 1,174,986
- -----------------------------------------------------------------------------------------------------------------------
Tyco International Group SA:
6.125% Unsec. Unsub. Nts., 11/1/08 1,560,000 1,582,079
6.125% Unsec. Unsub. Nts., 1/15/09 212,000 214,832
27 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- -----------------------------------------------------------------------------------------------------------------------
Univision Communications, Inc., 3.50% Sr. Unsec. Nts., 10/15/07 $ 1,520,000 $ 1,471,618
- -----------------------------------------------------------------------------------------------------------------------
Verizon Global Funding Corp.:
5.85% Nts., 9/15/35 915,000 823,409
7.25% Sr. Unsec. Unsub. Nts., 12/1/10 840,000 892,813
- -----------------------------------------------------------------------------------------------------------------------
Vornado Realty LP, 5.625% Sr. Unsec. Unsub. Nts., 6/15/07 1,795,000 1,797,707
- -----------------------------------------------------------------------------------------------------------------------
Wachovia Bank NA, 5.60% Sub. Nts., 3/15/16 945,000 937,519
- -----------------------------------------------------------------------------------------------------------------------
Yum! Brands, Inc., 8.50% Sr. Unsec. Nts., 4/15/06 1,785,000 1,786,590
---------------
Total Non-Convertible Corporate Bonds and Notes (Cost $119,173,183) 117,521,160
- -----------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--9.4%
- -----------------------------------------------------------------------------------------------------------------------
Undivided interest of 4.24% in joint repurchase agreement (Principal Amount/
Value $2,051,676,000, with a maturity value of $2,052,457,347) with UBS Warburg
LLC, 4.57%, dated 3/31/06, to be repurchased at $87,080,150 on 4/3/06,
collateralized by Federal National Mortgage Assn., 5%--6%, 3/1/34--3/1/36,
with a value of $2,098,378,320 (Cost $87,047,000) 87,047,000 87,047,000
- -----------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (excluding Investments Purchased with
Cash Collateral from Securities Loaned) (Cost $904,061,642) 1,006,376,222
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED--1.7%
- -----------------------------------------------------------------------------------------------------------------------
ASSET BACKED FLOATING NOTE--0.2%
Whitehawk CDO Funding Corp., 4.98%, 6/15/06 14 2,000,000 2,000,000
- -----------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--1.4%
Undivided interest of 1.33% in joint repurchase agreement (Principal Amount/
Value $1,000,000,000, with a maturity value of $1,000,407,917) with Bank of
America NA, 4.895%, dated 3/31/06, to be repurchased at $13,311,375 on
4/3/06, collateralized by U.S. Agency Mortgages, 5.50%,
12/1/34, with a value of $1,020,000,001 14 13,305,947 13,305,947
- -----------------------------------------------------------------------------------------------------------------------
MASTER FLOATING NOTE--0.1%
Bear Stearns, 4.995%, 4/3/06 14 1,000,000 1,000,000
---------------
Total Investments Purchased with Cash Collateral from Securities Loaned
(Cost $16,305,947) 16,305,947
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $920,367,589) 110.2% 1,022,682,169
- -----------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (10.2) (95,031,659)
-------------------------------------
NET ASSETS 100.0% $ 927,650,510
=====================================
28 | OPPENHEIMER BALANCED FUND
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. A sufficient amount of liquid assets has been designated to cover outstanding
written call options, as follows:
CONTRACTS EXPIRATION EXERCISE PREMIUM VALUE
SUBJECT TO CALL DATE PRICE RECEIVED SEE NOTE 7
- ------------------------------------------------------------------------------------
MedImmune, Inc. 700 6/19/06 $40.00 $65,840 $52,500
3. Partial or fully-loaned security. See Note 10 of accompanying Notes.
4. Illiquid security. The aggregate value of illiquid securities as of March 31,
2006 was $24,069, which represents less than 0.005% of the Fund's net assets.
See Note 9 of accompanying Notes.
5. Represents the current interest rate for a variable or increasing rate
security.
6. 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 $13,484,447 or 1.45% of the Fund's net
assets as of March 31, 2006.
7. When-issued security or forward commitment to be delivered and settled after
March 31, 2006. See Note 1 of accompanying Notes.
8. 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 $14,168,454 or 1.53% of the Fund's net assets
as of March 31, 2006.
9. 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 $8,961,140 or 0.97% of the Fund's net assets as of
March 31, 2006.
10. Zero coupon bond reflects effective yield on the date of purchase.
11. All or a portion of the security is held in collateralized accounts to cover
initial margin requirements on open futures sales contracts. The aggregate
market value of such securities is $288,859. See Note 6 of accompanying Notes.
12. This bond has no contractual maturity date, is not redeemable and
contractually pays an indefinite stream of interest. Rate reported represents
the current interest rate for this variable rate security.
13. Issue is in default. Non-income producing. See Note 1 of accompanying Notes.
14. The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 10 of accompanying Notes.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | OPPENHEIMER BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES Unaudited
- --------------------------------------------------------------------------------
March 31, 2006
- ---------------------------------------------------------------------------------------------------------
ASSETS
- ---------------------------------------------------------------------------------------------------------
Investments, at value (including securities loaned of $26,524,332)
(cost $920,367,589)--see accompanying statement of investments $ 1,022,682,169
- ---------------------------------------------------------------------------------------------------------
Cash 211,789
- ---------------------------------------------------------------------------------------------------------
Unrealized appreciation on swap contracts 12,204
- ---------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold (including $54,736,501 sold on a when-issued basis
or forward commitment) 55,801,219
Interest, dividends and principal paydowns 4,265,635
Shares of beneficial interest sold 1,103,682
Other 37,827
----------------
Total assets 1,084,114,525
- ---------------------------------------------------------------------------------------------------------
LIABILITIES
- ---------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $65,840)--see accompanying
statement of investments 52,500
- ---------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 16,305,947
- ---------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $136,619,500 purchased on a when-issued basis
or forward commitment) 137,608,469
Shares of beneficial interest redeemed 1,571,676
Distribution and service plan fees 488,182
Trustees' compensation 155,075
Transfer and shareholder servicing agent fees 110,310
Shareholder communications 57,238
Futures margins 43,567
Other 71,051
---------------
Total liabilities 156,464,015
- ---------------------------------------------------------------------------------------------------------
NET ASSETS $ 927,650,510
================
- ---------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ---------------------------------------------------------------------------------------------------------
Paid-in capital $ 794,690,843
- ---------------------------------------------------------------------------------------------------------
Accumulated net investment income 4,500,410
- ---------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 26,363,525
- ---------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and
liabilities
denominated in foreign currencies 102,095,732
----------------
NET ASSETS $ 927,650,510
================
30 | OPPENHEIMER BALANCED FUND
- ----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- ----------------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of $730,228,246 and 53,183,662
shares of beneficial interest outstanding) $ 13.73
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $ 14.57
- ----------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge) and
offering price per share (based on net assets of $94,200,874 and 7,008,542 shares
of beneficial interest outstanding) $ 13.44
- ----------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge) and
offering price per share (based on net assets of $89,607,298 and 6,635,787 shares
of beneficial interest outstanding) $ 13.50
- ----------------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge) and
offering price per share (based on net assets of $13,614,092 and 1,001,227 shares
of beneficial interest outstanding) $ 13.60
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31 | OPPENHEIMER BALANCED FUND
STATEMENT OF OPERATIONS Unaudited
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2006
- ---------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ---------------------------------------------------------------------------------------------------------
Interest $ 11,173,110
- ---------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $67,116) 2,891,680
- ---------------------------------------------------------------------------------------------------------
Portfolio lending fees 42,310
----------------
Total investment income 14,107,100
- ---------------------------------------------------------------------------------------------------------
EXPENSES
- ---------------------------------------------------------------------------------------------------------
Management fees 3,169,675
- ---------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 720,906
Class B 475,231
Class C 443,282
Class N 31,103
- ---------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 449,852
Class B 109,142
Class C 78,653
Class N 14,628
- ---------------------------------------------------------------------------------------------------------
Shareholder communications:
Class A 72,889
Class B 20,496
Class C 11,627
Class N 1,249
- ---------------------------------------------------------------------------------------------------------
Trustees' compensation 15,643
- ---------------------------------------------------------------------------------------------------------
Custodian fees and expenses 1,447
- ---------------------------------------------------------------------------------------------------------
Other 57,797
----------------
Total expenses 5,673,620
- ---------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 8,433,480
32 | OPPENHEIMER BALANCED FUND
- ---------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ---------------------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments $ 29,376,579
Closing and expiration of option contracts written 96,477
Closing and expiration of futures contracts 1,477,814
Foreign currency transactions 591,437
Swap contracts (121,917)
----------------
Net realized gain 31,420,390
- ---------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (28,296,463)
Translation of assets and liabilities denominated in foreign currencies (567,364)
Futures contracts (588,471)
Option contracts (28,117)
Swap contracts 83,547
----------------
Net change in unrealized appreciation (29,396,868)
- ---------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 10,457,002
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33 | OPPENHEIMER BALANCED FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, 2006 SEPTEMBER 30,
(UNAUDITED) 2005
- ----------------------------------------------------------------------------------------------
OPERATIONS
- ----------------------------------------------------------------------------------------------
Net investment income $ 8,433,480 $ 13,213,675
- ----------------------------------------------------------------------------------------------
Net realized gain 31,420,390 59,841,198
- ----------------------------------------------------------------------------------------------
Net change in unrealized appreciation (29,396,868) 24,412,348
---------------------------------
Net increase in net assets resulting from operations 10,457,002 97,467,221
- ----------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (7,765,594) (7,922,968)
Class B (600,170) (487,362)
Class C (598,348) (462,164)
Class N (114,242) (90,860)
- ----------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (39,740,985) (33,213,932)
Class B (5,399,745) (4,435,493)
Class C (4,997,241) (3,587,318)
Class N (703,418) (466,585)
- ----------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial
interest transactions:
Class A 43,064,307 36,521,136
Class B 1,218,783 8,636,193
Class C 6,619,523 15,819,238
Class N 2,480,675 2,483,994
- ----------------------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------------------
Total increase 3,920,547 110,261,100
- ----------------------------------------------------------------------------------------------
Beginning of period 923,729,963 813,468,863
---------------------------------
End of period (including accumulated net investment income
of $4,500,410 and $5,145,284, respectively) $ 927,650,510 $ 923,729,963
=================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
34 | OPPENHEIMER BALANCED FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, 2006 SEPT. 30,
CLASS A (UNAUDITED) 2005 2004 2003 2002 2001
- --------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 14.51 $ 13.75 $ 12.55 $ 10.51 $ 12.14 $ 14.23
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .14 1 .24 1 .14 .21 .35 .43
Net realized and unrealized gain (loss) .02 1.38 1.16 2.08 (1.29) (1.40)
------------------------------------------------------------------------------------
Total from investment operations .16 1.62 1.30 2.29 (.94) (.97)
- --------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.15) (.16) (.10) (.22) (.31) (.38)
Tax return of capital distribution -- -- -- (.03) -- --
Distributions from net realized gain (.79) (.70) -- -- (.38) (.74)
------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.94) (.86) (.10) (.25) (.69) (1.12)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.73 $ 14.51 $ 13.75 $ 12.55 $ 10.51 $ 12.14
====================================================================================
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 1.24% 12.13% 10.37% 21.98% (8.58)% (7.27)%
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 730,228 $ 725,836 $ 651,754 $ 575,799 $ 483,311 $ 562,281
- --------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 722,559 $ 694,147 $ 631,041 $ 523,477 $ 570,796 $ 626,251
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 2.02% 1.69% 1.05% 1.78% 2.84% 3.16%
Total expenses 1.05% 1.05% 1.07% 1.11% 1.15% 1.01%
Expenses after payments and waivers and
reduction to custodian expenses 1.05% 1.05% 1.06% 1.11% 1.15% 1.01%
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 34% 4 73% 4 61% 4 205% 31% 40%
1. Per share amounts calculated based on the average shares outstanding during
the period.
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. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
--------------------------------------------------------------------------
Six Months Ended March 31, 2006 $ 793,940,039 $ 847,445,921
Year Ended September 30, 2005 2,097,453,846 2,135,377,175
Year Ended September 30, 2004 1,069,526,653 1,026,457,980
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
35 | OPPENHEIMER BALANCED FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, 2006 SEPT. 30,
CLASS B (UNAUDITED) 2005 2004 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 14.23 $ 13.53 $ 12.40 $ 10.38 $ 12.01 $ 14.08
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .07 1 .11 1 .02 .09 .25 .31
Net realized and unrealized gain (loss) .02 1.36 1.13 2.07 (1.29) (1.36)
-------------------------------------------------------------------------------------
Total from investment operations .09 1.47 1.15 2.16 (1.04) (1.05)
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.09) (.07) (.02) (.11) (.21) (.28)
Tax return of capital distribution -- -- -- (.03) -- --
Distributions from net realized gain (.79) (.70) -- -- (.38) (.74)
-------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.88) (.77) (.02) (.14) (.59) (1.02)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.44 $ 14.23 $ 13.53 $ 12.40 $ 10.38 $ 12.01
=====================================================================================
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 0.72% 11.17% 9.26% 20.91% (9.38)% (7.96)%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 94,201 $ 98,271 $ 84,924 $ 64,944 $ 54,757 $ 63,487
- ---------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 95,379 $ 92,677 $ 77,082 $ 57,836 $ 64,702 $ 67,959
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.10% 0.76% 0.11% 0.81% 2.02% 2.37%
Total expenses 1.98% 1.98% 4 2.02% 4,5 2.08% 4 1.97% 4 1.81% 4
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 34% 6 73% 6 61% 6 205% 31% 40%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
6. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
--------------------------------------------------------------------------
Six Months Ended March 31, 2006 $ 793,940,039 $ 847,445,921
Year Ended September 30, 2005 2,097,453,846 2,135,377,175
Year Ended September 30, 2004 1,069,526,653 1,026,457,980
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
36 | OPPENHEIMER BALANCED FUND
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, 2006 SEPT. 30,
CLASS C (UNAUDITED) 2005 2004 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 14.29 $ 13.59 $ 12.44 $ 10.42 $ 12.06 $ 14.13
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .08 1 .11 1 .04 .11 .24 .31
Net realized and unrealized gain (loss) .01 1.37 1.13 2.06 (1.29) (1.37)
-------------------------------------------------------------------------------------
Total from investment operations .09 1.48 1.17 2.17 (1.05) (1.06)
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.09) (.08) (.02) (.12) (.21) (.27)
Tax return of capital distribution -- -- -- (.03) -- --
Distributions from net realized gain (.79) (.70) -- -- (.38) (.74)
-------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.88) (.78) (.02) (.15) (.59) (1.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.50 $ 14.29 $ 13.59 $ 12.44 $ 10.42 $ 12.06
=====================================================================================
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 0.76% 11.18% 9.45% 20.98% (9.41)% (8.00)%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 89,608 $ 87,820 $ 68,018 $ 47,212 $ 33,300 $ 36,171
- ---------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 89,045 $ 78,091 $ 60,095 $ 38,407 $ 37,412 $ 39,030
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.17% 0.83% 0.19% 0.90% 2.03% 2.37%
Total expenses 1.91% 1.91% 4 1.93% 4,5 1.98% 4 1.96% 4 1.81% 4
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 34% 6 73% 6 61% 6 205% 31% 40%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
6. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
--------------------------------------------------------------------------
Six Months Ended March 31, 2006 $ 793,940,039 $ 847,445,921
Year Ended September 30, 2005 2,097,453,846 2,135,377,175
Year Ended September 30, 2004 1,069,526,653 1,026,457,980
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
37 | OPPENHEIMER BALANCED FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, 2006 SEPT. 30,
CLASS N (UNAUDITED) 2005 2004 2003 2002 2001 1
- --------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 14.38 $ 13.65 $ 12.49 $ 10.48 $ 12.13 $ 13.67
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .11 2 .17 2 .10 .20 .39 .24
Net realized and unrealized gain (loss) .02 1.38 1.12 2.01 (1.38) (1.48)
------------------------------------------------------------------------------------
Total from investment operations .13 1.55 1.22 2.21 (.99) (1.24)
- --------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.12) (.12) (.06) (.17) (.28) (.30)
Tax return of capital distribution -- -- -- (.03) -- --
Distributions from net realized gain (.79) (.70) -- -- (.38) --
------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.91) (.82) (.06) (.20) (.66) (.30)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.60 $ 14.38 $ 13.65 $ 12.49 $ 10.48 $ 12.13
====================================================================================
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 1.06% 11.66% 9.77% 21.27% (8.94)% (9.30)%
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 13,614 $ 11,803 $ 8,772 $ 3,349 $ 798 $ 95
- --------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 12,497 $ 10,278 $ 5,701 $ 1,604 $ 454 $ 12
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 1.62% 1.24% 0.55% 1.24% 2.49% 5.81%
Total expenses 1.46% 1.50% 1.58% 1.76% 1.48% 1.32%
Expenses after payments and waivers and
reduction to custodian expenses 1.46% 1.50% 1.57% 1.62% 1.48% 1.32%
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 34% 5 73% 5 61% 5 205% 31% 40%
1. For the period from March 1, 2001 (inception of offering) to September 30,
2001.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. 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.
4. Annualized for periods of less than one full year.
5. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
---------------------------------------------------------------------------
Six Months Ended March 31, 2006 $ 793,940,039 $ 847,445,921
Year Ended September 30, 2005 2,097,453,846 2,135,377,175
Year Ended September 30, 2004 1,069,526,653 1,026,457,980
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
38 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Balanced Fund (the Fund) is registered under the Investment Company
Act of 1940, as amended, as an open end management investment company. The
Fund's investment objective is to seek high total investment return consistent
with preservation of principal. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B, Class C and Class N shares. Class A
shares are sold at their offering price, which is normally net asset value plus
a front-end sales charge. Class B, Class C and Class N shares are sold without a
front-end sales charge but may be subject to a contingent deferred sales charge
(CDSC). Class N shares are sold only through retirement plans. Retirement plans
that offer Class N shares may impose charges on those accounts. All classes of
shares have identical rights and voting privileges with respect to the Fund in
general and exclusive voting rights on matters that affect that class alone.
Earnings, net assets and net asset value per share may differ 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 may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ are valued based on the closing
price provided by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the closing "bid" and "asked"
prices, and if not, at the closing bid price. Securities traded on foreign
exchanges are valued based on the last sale price on the principal exchange on
which the security is traded, as identified by the portfolio pricing service,
prior to the time when the Fund's assets are valued. In the absence of a sale,
the security is valued at the official closing price on the principal exchange.
Corporate, government and municipal debt instruments having a remaining maturity
in excess of sixty days and all mortgage-backed securities will be valued at the
mean between the "bid" and "asked" prices. Futures contracts traded on a
commodities or futures exchange will be valued at the final settlement price or
official closing price on the principal exchange as reported by such principal
exchange at its trading session ending at, or most recently prior to, the time
when the Fund's assets are valued. Securities (including restricted securities)
for which market quotations are not readily available are valued at their fair
value. Foreign and domestic securities whose
39 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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).
- --------------------------------------------------------------------------------
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 March 31, 2006, the Fund had purchased $136,619,500
of securities issued on a when-issued basis or forward commitment and sold
$54,736,501 of securities issued on a when-issued basis or forward commitment.
- --------------------------------------------------------------------------------
SECURITY CREDIT RISK. The Fund invests in high-yield securities, which may be
subject to a greater degree of credit risk, market fluctuations and loss of
income and principal, and may be more sensitive to economic conditions than
lower-yielding, higher-rated fixed-income securities. The Fund may acquire
securities in default, and is not obligated to dispose of securities whose
issuers subsequently default. As of March 31, 2006, securities with an aggregate
market value of $131,250, representing 0.01% of the Fund's net assets, were in
default.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars 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. 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, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign
40 | OPPENHEIMER BALANCED FUND
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.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. 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.
During the year ended September 30, 2005, the Fund utilized $248,875 of
capital loss carryforward to offset capital gains realized in that fiscal year.
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for the
Fund's independent trustees. Benefits are based on years of service and fees
paid to each trustee during the years of service. During the six months ended
March 31, 2006, the Fund's projected benefit obligations were increased by
$2,368 and payments of $11,154 were made to retired trustees, resulting in an
accumulated liability of $115,819 as of March 31, 2006.
41 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. At March 31, 2006, the Fund had $848 of such earnings on cash
balances available to offset future custodian fees or interest expenses incurred
during the next fiscal year.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent
42 | OPPENHEIMER BALANCED FUND
on future claims that may be made against the Fund. The risk of material loss
from such claims is considered remote.
- --------------------------------------------------------------------------------
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:
SIX MONTHS ENDED MARCH 31, 2006 YEAR ENDED SEPTEMBER 30, 2005
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------
CLASS A
Sold 3,736,161 $ 51,939,505 6,341,196 $ 89,407,865
Dividends and/or
distributions reinvested 3,209,982 43,516,913 2,700,256 37,680,524
Redeemed (3,773,325) (52,392,111) (6,426,942) (90,567,253)
-----------------------------------------------------------------
Net increase 3,172,818 $ 43,064,307 2,614,510 $ 36,521,136
=================================================================
- -----------------------------------------------------------------------------------------------
CLASS B
Sold 849,411 $ 11,563,556 2,164,968 $ 29,908,987
Dividends and/or
distributions reinvested 418,081 5,553,676 334,015 4,563,228
Redeemed (1,166,517) (15,898,449) (1,865,946) (25,836,022)
-----------------------------------------------------------------
Net increase 100,975 $ 1,218,783 633,037 $ 8,636,193
=================================================================
- -----------------------------------------------------------------------------------------------
CLASS C
Sold 984,503 $ 13,458,319 1,913,961 $ 26,621,005
Dividends and/or
distributions reinvested 381,101 5,085,413 273,835 3,758,922
Redeemed (875,633) (11,924,209) (1,047,238) (14,560,689)
-----------------------------------------------------------------
Net increase 489,971 $ 6,619,523 1,140,558 $ 15,819,238
=================================================================
- -----------------------------------------------------------------------------------------------
CLASS N
Sold 260,865 $ 3,583,495 295,550 $ 4,136,828
Dividends and/or
distributions reinvested 58,497 785,920 39,150 541,581
Redeemed (138,732) (1,888,740) (156,565) (2,194,415)
-----------------------------------------------------------------
Net increase 180,630 $ 2,480,675 178,135 $ 2,483,994
=================================================================
43 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the six months ended March 31, 2006, were as
follows:
PURCHASES SALES
-------------------------------------------------------------
Investment securities $ 259,241,035 $ 245,283,283
U.S. government and
government agency obligations 26,019,329 29,751,045
To Be Announced (TBA)
mortgage-related securities 793,940,039 847,445,921
- --------------------------------------------------------------------------------
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 six months ended March 31, 2006, the Fund paid
$653,521 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
periodically 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 periodically 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
periods. Fees incurred by the Fund under the plan are detailed in the Statement
of Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class N
shares to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% on Class B and
Class C shares and 0.25% on Class N shares. The Distributor also receives a
service fee of 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
44 | OPPENHEIMER BALANCED FUND
Distributor shall be entitled to payment from the Fund of all or a portion of
the service fee and/or asset-based sales charge in respect to shares sold prior
to the effective date of such termination. The Distributor's aggregate
uncompensated expenses under the plan at March 31, 2006 for Class B, Class C and
Class N shares were $2,744,731, $1,540,768 and $162,295, 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 following table for the period
indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
SIX MONTHS RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- ---------------------------------------------------------------------------------------------------
March 31, 2006 $ 195,215 $ 567 $ 108,940 $ 9,551 $ 1,886
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. 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. 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.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using prevailing foreign currency exchange rates.
Unrealized appreciation and depreciation on foreign currency contracts are
reported in the Statement of Assets and Liabilities as a receivable or payable
and in the Statement of Operations with the change in unrealized appreciation or
depreciation.
The Fund may realize a gain or loss upon the closing or settlement of the
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.
As of March 31, 2006, the Fund had no outstanding foreign currency
contracts.
45 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 in the Statement of Operations.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
As of March 31, 2006, the Fund had outstanding futures contracts as follows:
UNREALIZED
EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS MARCH 31, 2006 (DEPRECIATION)
- ------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
U.S. Long Bonds 6/21/06 224 $ 24,451,000 $ (728,937)
---------------
CONTRACTS TO SELL
Euro-Bundesobligation, 10 yr. 6/8/06 100 14,199,326 159,797
U.S. Treasury Nts., 2 yr. 6/30/06 363 74,000,953 145,643
U.S. Treasury Nts., 5 yr. 6/30/06 151 15,770,063 109,194
U.S. Treasury Nts., 10 yr. 6/21/06 96 10,213,500 70,131
---------------
484,765
---------------
$ (244,172)
===============
46 | OPPENHEIMER BALANCED FUND
- --------------------------------------------------------------------------------
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.
Written option activity for the six months ended March 31, 2006 was as follows:
NUMBER OF AMOUNT OF
CONTRACTS PREMIUMS
-------------------------------------------------
Options outstanding as of
September 30, 2005 786 $ 96,477
Options written 700 65,840
Options closed or expired (786) (96,477)
---------------------
Options outstanding as of
March 31, 2006 700 $ 65,840
=====================
- --------------------------------------------------------------------------------
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 unrealized gain (loss) related to the daily change
in the valuation of the notional amount of the swap, as well as the amount due
to (owed by) the Fund at termination or settlement, is combined and separately
disclosed as an asset (liability). The Fund also records any periodic payments
47 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. TOTAL RETURN SWAP CONTRACTS Continued
received from (paid to) the counterparty, including at termination, under such
contracts as realized gain (loss). Total return swaps are subject to risks (if
the counterparty fails to meet its obligations).
As of March 31, 2006, the Fund had entered into the following total return swap
agreements:
SWAP NOTIONAL TERMINATION UNREALIZED
COUNTERPARTY SWAP DESCRIPTION AMOUNT DATE APPRECIATION
- -------------------------------------------------------------------------------------------------------------------
Received or paid monthly. If the sum of
the Lehman Brothers CMBS Index Payer
Payment Amount and the Floating Rate
Payer Payment Amount is positive, the
Counterparty will pay such amount to
the Fund. If the sums are negative,
Goldman Sachs then the Fund shall pay the absolute
Group, Inc. (The) value of such amount to the Counterparty.
$5,260,000 6/1/06 $ 12,204
Abbreviations are as follows:
CMBS Commercial Mortgage Backed Securities
- --------------------------------------------------------------------------------
9. ILLIQUID SECURITIES
As of March 31, 2006, 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. Securities that are
illiquid are marked with the applicable footnote on the Statement of
Investments.
- --------------------------------------------------------------------------------
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 U.S.
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 continues to receive the
economic benefit of interest or dividends paid on the securities loaned in the
form of a substitute payment received from the borrower. As of March 31, 2006,
the Fund had on loan securities valued at $26,524,332. Collateral of $27,070,885
was received for the loans, of which $16,305,947 was received in cash and
subsequently invested in approved instruments.
48 | OPPENHEIMER BALANCED FUND
- --------------------------------------------------------------------------------
11. LITIGATION
A complaint was filed as a putative class action against the Manager and the
Transfer Agent (and other defendants) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that it is premature to render any opinion as to the
likelihood of an outcome unfavorable to them, the Funds, the Directors/Trustees
or the Officers on the appeal of the decisions of the district court, and that
no estimate can yet be made with any degree of certainty as to the amount or
range of any potential loss. However, the Manager believes that the allegations
contained in the complaints are without merit and that there are substantial
grounds to sustain the district court's rulings.
- --------------------------------------------------------------------------------
12. FUND REORGANIZATION
On December 15, 2005, the Board of Directors of Oppenheimer Disciplined
Allocation Fund ("Disciplined Allocation Fund") approved a proposal to
reorganize Disciplined Allocation Fund with and into the Fund. In a Special
Meeting held on April 20, 2006, Shareholders of Disciplined Allocation Fund
approved a Plan of Reorganization between Disciplined Allocation Fund and the
Fund, and the transactions contemplated thereby, including (a) the transfer of
substantially all the assets of Disciplined Allocation Fund to the Fund in
exchange for Class A, Class B, Class C and Class N shares of the Fund, (b) the
distribution of Class A, Class B, Class C and Class N shares of the Fund to the
Class A, Class B, Class C and Class N shareholders of Disciplined Allocation
Fund in complete liquidation of Disciplined Allocation Fund and (c) the
cancellation of the outstanding shares of Disciplined Allocation Fund.
49 | OPPENHEIMER BALANCED FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF
INVESTMENTS Unaudited
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The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (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 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 voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing 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
http://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.
50 | OPPENHEIMER BALANCED FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
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Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services by the Manager and its affiliates,
(v) the extent to which economies of scale are realized as the Fund grows and
whether fee levels reflect these economies of scale for Fund investors and (vi)
other benefits to the Manager from its relationship with the Fund. The Board was
aware that there are alternatives to retaining the Manager.
NATURE AND EXTENT OF SERVICES. The Board considered information on the
nature and extent of the services provided to the Fund and information regarding
the Manager's key personnel that provide such services. The Manager's duties
include providing the Fund with the services of the portfolio managers and the
Manager's investment team, who provide research, analysis and other advisory
services in regard to the Fund's investments; securities trading services;
oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing, and supervising
the activities of, all administrative and clerical personnel that are necessary
in order to provide effective corporate administration for the Fund; compiling
and maintaining records with respect to the Fund's operations; preparing and
filing reports required by the Securities and Exchange Commission; preparing
periodic reports regarding the operations of the Fund for its shareholders;
preparing proxy materials for shareholder meetings; and preparing the
registration statements required by Federal and state securities laws for the
sale of the Fund's shares. The Manager also provides the Fund with office space,
facilities and equipment.
QUALITY OF SERVICES. The Board also considered the quality of the services
provided and the quality of the Manager's resources that are available to the
Fund. The Board took
51 | OPPENHEIMER BALANCED FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
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account of the facts that the Manager has had over forty years of experience as
an investment adviser and that its assets under management rank it among the top
mutual fund managers in the United States. The Board evaluated the Manager's
administrative, accounting, legal and compliance services, and information the
Board has received regarding the experience and professional qualifications of
the Manager's personnel and the size and functions of its staff. In its
evaluation of the quality of the portfolio management services provided, the
Board considered the experience of Christopher Leavy, Emmanuel Ferreira, and
Angelo Manioudakis and the Manager's Value and High Grade investment teams and
analysts. The Board members also considered their experiences with the Manager
and its officers and other personnel through their service as directors or
trustees of the Fund and other funds advised by the Manager. The Board
considered information regarding the quality of services provided by affiliates
of the Manager, which it also reviews at other times during the year in
connection with the renewal of the Fund's service agreements. In light of the
foregoing, the Board concluded that the Fund benefits from the services provided
under the Agreement as a result of the Manager's experience, reputation,
personnel, operations, and resources.
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the performance of the Fund and the Manager at
each Board meeting, including comparative performance information. The Board
also reviewed information, prepared by the Manager and by the independent
consultant, comparing the Fund's historical performance to relevant market
indices and to the performance of other balanced funds advised by the Manager
and other investment advisers. The Board noted that the Fund's one-year,
three-year, five-year and ten-year performance were all better than its peer
group average.
MANAGEMENT FEES AND EXPENSES. The Board reviewed the fees paid to the
Manager and its affiliates and the other expenses borne by the Fund. The Board
also evaluated the comparability of the fees charged and the services provided
to the Fund to those of other clients or accounts advised by the Manager. The
independent consultant provided comparative data in regard to the fees and
expenses of the Fund, other balanced funds and other funds with comparable asset
levels and distribution features. The Board noted that the Fund's contractual
and actual management fees and total expenses were higher than its peer group
median and average.
ECONOMIES OF SCALE. The Board reviewed the extent to which the Manager may
realize economies of scale in managing and supporting the Fund, to what extent
those economies of scale benefit the Fund shareholders and the current level of
Fund assets in relation to the Fund's breakpoint schedule for its management
fees. The Board also noted
52 | OPPENHEIMER BALANCED FUND
the Fund's breakpoints, which are intended to share economies of scale that may
exist as the Fund grows with its shareholders.
PROFITS AND OTHER BENEFITS TO THE MANAGER. The Board considered
information regarding the Manager's costs in serving as the Fund's investment
adviser, including the costs associated with the personnel and systems necessary
to manage the Fund, and information regarding the Manager's profitability from
its relationship with the Fund. The Board considered that the Manager must be
able to pay and retain experienced professional personnel at competitive rates
to provide services to the Fund and that maintaining the financial viability of
the Manager is important in order for the Manager to continue to provide
significant services to the Fund and its shareholders. In addition to
considering the profits realized by the Manager, the Board considered
information regarding the direct and indirect benefits the Manager receives as a
result of its relationship with the Fund, including compensation paid to the
Manager's affiliates for services provided and research provided to the Manager
in connection with permissible brokerage arrangements (soft dollar
arrangements).
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and the independent Trustees. Fund counsel is independent of the
Manager within the meaning and intent of the Securities and Exchange Commission
Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
concluded that the nature, extent and quality of the services provided to the
Fund by the Manager are a benefit to the Fund and in the best interest of the
Fund's shareholders and that the amount and structure of the compensation
received by the Manager and its affiliates are reasonable in relation to the
services provided. Accordingly, the Board elected to continue the advisory
agreement for another year. In arriving at this decision, the Board did not
single out any factor or factors as being more important than others, but
considered all of the factors together. The Board judged the terms and
conditions of the advisory agreement, including the management fee, in light of
all of the surrounding circumstances.
53 | OPPENHEIMER BALANCED FUND
ITEM 2. CODE OF ETHICS.
Not applicable to semiannual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to semiannual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to semiannual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
THE FUND'S GOVERNANCE COMMITTEE PROVISIONS WITH RESPECT TO NOMINATIONS OF
DIRECTORS/TRUSTEES TO THE RESPECTIVE BOARDS
1. The Fund's Governance Committee (the "Committee") will evaluate potential
Board candidates to assess their qualifications. The Committee shall have
the authority, upon approval of the Board, to retain an executive search
firm to assist in this effort. The Committee may consider recommendations
by business and personal contacts of current Board members and by
executive search firms which the Committee may engage from time to time
and may also consider shareholder recommendations. The Committee may
consider the advice and recommendation of the Funds' investment manager
and its affiliates in making the selection.
2. The Committee shall screen candidates for Board membership. The Committee
has not established specific qualifications that it believes must be met
by a trustee nominee. In evaluating trustee nominees, the Committee
considers, among other things, an individual's
background, skills, and experience; whether the individual is an
"interested person" as defined in the Investment Company Act of 1940; and
whether the individual would be deemed an "audit committee financial
expert" within the meaning of applicable SEC rules. The Committee also
considers whether the individual's background, skills, and experience will
complement the background, skills, and experience of other nominees and
will contribute to the Board. There are no differences in the manner in
which the Committee evaluates nominees for trustees based on whether the
nominee is recommended by a shareholder.
3. The Committee may consider nominations from shareholders for the Board at
such times as the Committee meets to consider new nominees for the Board.
The Committee shall have the sole discretion to determine the candidates
to present to the Board and, in such cases where required, to
shareholders. Recommendations for trustee nominees should, at a minimum,
be accompanied by the following:
o the name, address, and business, educational, and/or other pertinent
background of the person being recommended;
o a statement concerning whether the person is an "interested person"
as defined in the Investment Company Act of 1940;
o any other information that the Funds would be required to include in
a proxy statement concerning the person if he or she was nominated;
and
o the name and address of the person submitting the recommendation
and, if that person is a shareholder, the period for which that
person held Fund shares.
The recommendation also can include any additional information which the
person submitting it believes would assist the Committee in evaluating the
recommendation.
4. Shareholders should note that a person who owns securities issued by
Massachusetts Mutual Life Insurance Company (the parent company of the
Funds' investment adviser) would be deemed an "interested person" under
the Investment Company Act of 1940. In addition, certain other
relationships with Massachusetts Mutual Life Insurance Company or its
subsidiaries, with registered broker-dealers, or with the Funds' outside
legal counsel may cause a person to be deemed an "interested person."
5. Before the Committee decides to nominate an individual as a trustee,
Committee members and other directors customarily interview the individual
in person. In addition, the individual customarily is asked to complete a
detailed questionnaire which is designed to elicit information which must
be disclosed under SEC and stock exchange rules and to determine whether
the individual is subject to any statutory disqualification from serving
as a trustee of a registered investment company.
ITEM 11. CONTROLS AND PROCEDURES.
Based on their evaluation of the registrant's disclosure controls and procedures
(as defined in rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR
270.30a-3(c)) as of March 31, 2006, the registrant's principal executive officer
and principal financial officer found the registrant's disclosure controls and
procedures to provide reasonable assurances that information required to be
disclosed by the 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.
There have been no changes in the registrant's internal controls over financial
reporting that occurred during the registrant's second fiscal quarter of the
period covered by this report that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a) (1) Not applicable to semiannual reports.
(2) Exhibits attached hereto.
(3) Not applicable.
(b) Exhibit attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Oppenheimer Balanced Fund
By: /s/ John V. Murphy
----------------------------
John V. Murphy
Principal Executive Officer
Date: May 15, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ John V. Murphy
----------------------------
John V. Murphy
Principal Executive Officer
Date: May 15, 2006
By: /s/ Brian W. Wixted
----------------------------
Brian W. Wixted
Principal Financial Officer
Date: May 15, 2006