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
Date of reporting period: 09/30/2006
ITEM 1. REPORTS TO STOCKHOLDERS.
TOP HOLDINGS AND ALLOCATIONS
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TOP TEN COMMON STOCK INDUSTRIES
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Software 8.0%
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Media 4.3
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Tobacco 3.5
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Aerospace & Defense 3.1
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Pharmaceuticals 2.5
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Biotechnology 2.1
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Oil & Gas 2.1
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Capital Markets 2.0
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Communications Equipment 1.9
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Insurance 1.8
Portfolio holdings and allocations are subject to change. Percentages are as of
September 30, 2006, and are based on net assets.
TOP TEN COMMON STOCK HOLDINGS
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Microsoft Corp. 3.0%
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Take-Two Interactive Software, Inc. 2.7
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Altria Group, Inc. 2.5
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UBS AG 2.0
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Liberty Global, Inc., Series A 1.6
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Liberty Global, Inc., Series C 1.6
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Capital One Financial Corp. 1.6
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Bank of America Corp. 1.5
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Orbital Sciences Corp. 1.5
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Siemens AG, Sponsored ADR 1.5
Portfolio holdings and allocations are subject to change. Percentages are as of
September 30, 2006, and are based on net assets. For more current Fund holdings,
please visit www.oppenheimerfunds.com.
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10 | OPPENHEIMER BALANCED FUND
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PORTFOLIO ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Stocks 43.3%
Bonds and Notes 41.1
Cash Equivalents 15.6
Portfolio holdings and allocations are subject to change. Percentages are as of
September 30, 2006, and are based on the total market value of investments.
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11 | OPPENHEIMER BALANCED FUND
FUND PERFORMANCE DISCUSSION
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HOW HAS THE FUND PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS, INC., OF
THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR ENDED SEPTEMBER 30, 2006, FOLLOWED
BY A GRAPHICAL COMPARISON OF THE FUND'S PERFORMANCE TO AN APPROPRIATE
BROAD-BASED MARKET INDEX.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. For the fiscal year ended
September 30, 2006, Oppenheimer Balanced Fund's Class A shares (without sales
charge) underperformed its primary benchmark, the S&P 500 Index, but
outperformed its secondary benchmark, the Lehman Brothers Aggregate Bond Index.
Results were driven by a few key factors. To begin, although the Fund's equity
component lagged its respective benchmark throughout the bulk of the period due
to its relatively conservative posture, this positioning largely enabled it to
rally beginning in May, when the equity markets corrected. From May through the
end of the Fund's fiscal year, the equity component significantly outperformed,
and therefore added to Fund performance over that segment of the period.
Active management of the Fund's equity component derived a mixture of
results over the period. On the positive side, our underweighted exposure to
energy stocks was a strong contributor to performance. Additionally, our
conservative positioning within the energy sector further boosted returns.
Holdings such as Exxon Mobil Corp. and BP plc, ADR, two of the market's largest
integrated energy companies, fared well for us, given each of these companies'
generally bearish outlook on energy prices. Another energy holding, Halliburton
Co., also delivered good performance over the year. Although it is technically
an energy-services company, Halliburton serves as a close equivalent to an
integrated oil company, and fared comparatively well over the period even as oil
prices declined, due to its more integrated nature. Lastly in energy, our
decision to sell shares of both Lukoil and Talisman Energy, Inc., added to Fund
returns. These names performed quite well over the review period, increasing in
value far beyond our original investment. As such, we reaped gains for the
Fund's portfolio in selling off these positions.
Finally, our decision to emphasize unregulated utilities companies within
our exposure to that sector substantially benefited Fund returns. Names like AES
Corp. (The) and Reliant Energy, Inc., delivered extremely strong performance due
to strong fundamentals and support from good performance in the bond markets,
and positively impacted the Fund's fiscal-year results.
On the negative side, select holdings within the equity component
detracted from our returns, as names like Cendant Corp. performed poorly after
divesting into three new components, an event that led to unexpectedly heavy
shareholder turnover. We have since exited the stock. Also hurting us in the
short-term was our specific strategy within the health care sector. Based on our
belief that select biotech names offered attractive valuations relative to many
major pharmaceutical company stocks, we invested in a basket, or grouping, of
select biotech names in an effort to diversify our health care holdings and
12 | OPPENHEIMER BALANCED FUND
reduce risk. When biotech as a sub-sector of health care suffered a correction
over the period, this strategy hurt us. However, we are convinced this decision
will serve us well over the long-term, particularly as the product pipeline for
these select biotech names begins to materialize over the coming months.
Finally, our position in Take-Two Interactive Software, Inc., a leading
videogame developer, underperformed on the heels of both a console transition
and some short-term political controversy surrounding the content of one of its
video games. However, because we are convinced that Take-Two possesses a solid,
creative management team capable of positioning the company extremely well for
the next product cycle, we opportunistically added to our position in this name
at what we believe to be bargain prices.
On the fixed-income side, the most significant factor supporting the
Fund's performance for the 12-month review period was our active management of
the portfolio's exposure to interest-rate risk. Over the period, we successfully
adjusted our duration, or interest-rate sensitivity, such that we were able to
not only profit from shifts in rates, but also avoid unnecessary interest-rate
risk, thereby helping to buffer the Fund from potential losses.
Another factor that added to returns was our active management of the bond
component's mortgage holdings. First, our decision to generally emphasize
higher-coupon mortgages in the first half of the review period supported
performance, given the attractive risk/reward profile these securities offered
early in the period. For the first five months of the Fund's fiscal year, these
mortgages performed well for us, and added to our overall returns. Second, we
derived positive performance from opportunistically adjusting our risk exposure
to the overall mortgage sector. Specifically, we began the fiscal year with less
mortgage risk than our benchmark, particularly in lower-coupon mortgages, as we
considered the sector overvalued at that point in time. This underweight
positioning substantially benefited the Fund's returns when, in late 2005, the
mortgage sector suffered relative to the overall government securities market.
Soon after, we perceived valuations in this sector as attractive, and proceeded
to overweight our exposure to mortgages relative to the benchmark. This
adjustment to our mortgage holdings proved very beneficial to the Fund's
relative performance when mortgage securities at large performed quite strongly
in the first two months of 2006. Finally, when we perceived that mortgages as a
whole had become richly valued, we began to trim back our overweighted exposure
to a more neutral posture.
Our holdings of agency debt securities provided a small, but consistent,
boost to performance during the reporting period. However, as the period
approached its end, we concluded that the agency sector had peaked relative to
Treasuries and trimmed our exposure to a neutral position relative to our
benchmark.
13 | OPPENHEIMER BALANCED FUND
FUND PERFORMANCE DISCUSSION
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Our exposure to corporate bonds positively impacted performance as well.
Our decision to overweight our overall exposure to the credit sector throughout
the bulk of the period helped, as did our decision to emphasize bonds issued in
the financials sector, which performed well this period. Similarly, reducing our
exposure to industrial-related credit added to returns, since these bonds lagged
the overall credit market. In general, our strategy of emphasizing shorter-term,
lower-quality (BBB-rated) investment-grade credit worked in our favor, as these
bonds exhibited relatively less volatility yet performed favorably. Finally, our
decision to significantly add to our high-yield bond holdings boosted Fund
returns. High-yield bonds in general continue to enjoy good performance thanks
to solid fundamentals, still-low default rates and good incremental yield. Our
holdings in this area performed quite well, particularly since we focused on the
highest-quality tiers of the high-yield bond market, and as such, positively
impacted Fund performance for its recent fiscal year.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each class of shares of the
Fund held until September 30, 2006. In the case of Class A, Class B and Class C
shares, performance is measured over a ten-fiscal-year period. In the case of
Class N shares, performance is measured from inception of the Class on March 1,
2001. The Fund's performance reflects the deduction of the maximum initial sales
charge on Class A shares, the applicable contingent deferred sales charge on
Class B, Class C and Class N shares, and reinvestments of all dividends and
capital gains distributions. Past performance cannot guarantee future results.
The Fund's performance is compared to the performance of the S&P 500
Index, a broad-based index of equity securities widely regarded as a general
measure of the performance of the U.S. equity securities market. The Fund's
performance is also compared to the Lehman Brothers Aggregate Bond Index, an
unmanaged index of U.S. Government Treasury and agency issues, investment grade
corporate bond issues and fixed-rate mortgage-backed securities. That index is
widely regarded as a measure of the performance of the domestic debt securities
market. Index performance reflects the reinvestment of income but does not
consider the effect of transaction costs, and none of the data in the graphs
shows the effect of taxes. The Fund's performance reflects the effects of the
Fund's business and operating expenses. While index comparisons may be useful to
provide a benchmark for the Fund's performance, it must be noted that the Fund's
investments are not limited to the investments in the index.
14 | OPPENHEIMER BALANCED FUND
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Balanced Fund (Class A)
S&P 500 Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Balanced Lehman Brothers
Fund (Class A) S&P 500 Index Aggregate Bond Index
-------------------- ------------------ --------------------
09/30/1996 $ 9,425 $ 10,000 $ 10,000
12/31/1996 $ 9,934 $ 10,833 $ 10,300
03/31/1997 $ 10,003 $ 11,124 $ 10,242
06/30/1997 $ 10,909 $ 13,064 $ 10,619
09/30/1997 $ 11,825 $ 14,043 $ 10,971
12/31/1997 $ 11,699 $ 14,446 $ 11,294
03/31/1998 $ 12,543 $ 16,459 $ 11,470
06/30/1998 $ 12,574 $ 17,006 $ 11,738
09/30/1998 $ 11,268 $ 15,318 $ 12,234
12/31/1998 $ 12,524 $ 18,577 $ 12,275
03/31/1999 $ 12,678 $ 19,502 $ 12,215
06/30/1999 $ 13,626 $ 20,874 $ 12,107
09/30/1999 $ 13,103 $ 19,574 $ 12,189
12/31/1999 $ 13,851 $ 22,484 $ 12,175
03/31/2000 $ 14,640 $ 22,999 $ 12,443
06/30/2000 $ 14,743 $ 22,388 $ 12,660
09/30/2000 $ 14,847 $ 22,171 $ 13,041
12/31/2000 $ 14,762 $ 20,438 $ 13,590
03/31/2001 $ 14,602 $ 18,016 $ 14,002
06/30/2001 $ 15,476 $ 19,070 $ 14,081
09/30/2001 $ 13,768 $ 16,272 $ 14,731
12/31/2001 $ 15,010 $ 18,011 $ 14,738
03/31/2002 $ 15,094 $ 18,060 $ 14,751
06/30/2002 $ 13,980 $ 15,642 $ 15,296
09/30/2002 $ 12,587 $ 12,941 $ 15,997
12/31/2002 $ 13,419 $ 14,032 $ 16,249
03/31/2003 $ 13,268 $ 13,590 $ 16,475
06/30/2003 $ 14,867 $ 15,681 $ 16,887
09/30/2003 $ 15,355 $ 16,096 $ 16,863
12/31/2003 $ 16,627 $ 18,054 $ 16,916
03/31/2004 $ 16,993 $ 18,360 $ 17,365
06/30/2004 $ 16,818 $ 18,675 $ 16,941
09/30/2004 $ 16,947 $ 18,326 $ 17,483
12/31/2004 $ 18,234 $ 20,017 $ 17,650
03/31/2005 $ 18,018 $ 19,587 $ 17,565
06/30/2005 $ 18,485 $ 19,855 $ 18,093
09/30/2005 $ 19,002 $ 20,571 $ 17,971
12/31/2005 $ 18,888 $ 20,999 $ 18,078
03/31/2006 $ 19,238 $ 21,883 $ 17,961
06/30/2006 $ 18,778 $ 21,568 $ 17,948
09/30/2006 $ 19,736 $ 22,788 $ 18,631
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE FUND AT
9/30/06
1-Year -2.11% 5-Year 6.20% 10-Year 7.03%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
BECAUSE CLASS B SHARES CONVERT TO CLASS A SHARES 72 MONTHS AFTER PURCHASE,
SINCE-INCEPTION RETURN FOR CLASS B SHARES USES CLASS A PERFORMANCE FOR THE
PERIOD AFTER CONVERSION. SEE PAGE 19 FOR FURTHER INFORMATION.
15 | OPPENHEIMER BALANCED FUND
FUND PERFORMANCE DISCUSSION
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CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Balanced Fund (Class B)
S&P 500 Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Balanced Lehman Brothers
Fund (Class B) S&P 500 Index Aggregate Bond Index
-------------------- ------------------ --------------------
09/30/1996 $ 10,000 $ 10,000 $ 10,000
12/31/1996 $ 10,516 $ 10,833 $ 10,300
03/31/1997 $ 10,564 $ 11,124 $ 10,242
06/30/1997 $ 11,492 $ 13,064 $ 10,619
09/30/1997 $ 12,434 $ 14,043 $ 10,971
12/31/1997 $ 12,270 $ 14,446 $ 11,294
03/31/1998 $ 13,138 $ 16,459 $ 11,470
06/30/1998 $ 13,135 $ 17,006 $ 11,738
09/30/1998 $ 11,751 $ 15,318 $ 12,234
12/31/1998 $ 13,031 $ 18,577 $ 12,275
03/31/1999 $ 13,166 $ 19,502 $ 12,215
06/30/1999 $ 14,120 $ 20,874 $ 12,107
09/30/1999 $ 13,554 $ 19,574 $ 12,189
12/31/1999 $ 14,299 $ 22,484 $ 12,175
03/31/2000 $ 15,077 $ 22,999 $ 12,443
06/30/2000 $ 15,154 $ 22,388 $ 12,660
09/30/2000 $ 15,222 $ 22,171 $ 13,041
12/31/2000 $ 15,119 $ 20,438 $ 13,590
03/31/2001 $ 14,918 $ 18,016 $ 14,002
06/30/2001 $ 15,778 $ 19,070 $ 14,081
09/30/2001 $ 14,011 $ 16,272 $ 14,731
12/31/2001 $ 15,235 $ 18,011 $ 14,738
03/31/2002 $ 15,297 $ 18,060 $ 14,751
06/30/2002 $ 14,150 $ 15,642 $ 15,296
09/30/2002 $ 12,719 $ 12,941 $ 15,997
12/31/2002 $ 13,559 $ 14,032 $ 16,249
03/31/2003 $ 13,407 $ 13,590 $ 16,475
06/30/2003 $ 15,023 $ 15,681 $ 16,887
09/30/2003 $ 15,515 $ 16,096 $ 16,863
12/31/2003 $ 16,801 $ 18,054 $ 16,916
03/31/2004 $ 17,171 $ 18,360 $ 17,365
06/30/2004 $ 16,994 $ 18,675 $ 16,941
09/30/2004 $ 17,125 $ 18,326 $ 17,483
12/31/2004 $ 18,425 $ 20,017 $ 17,650
03/31/2005 $ 18,206 $ 19,587 $ 17,565
06/30/2005 $ 18,678 $ 19,855 $ 18,093
09/30/2005 $ 19,201 $ 20,571 $ 17,971
12/31/2005 $ 19,086 $ 20,999 $ 18,078
03/31/2006 $ 19,440 $ 21,883 $ 17,961
06/30/2006 $ 18,975 $ 21,568 $ 17,948
09/30/2006 $ 19,943 $ 22,788 $ 18,631
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE FUND AT
9/30/06
1-Year -1.95% 5-Year 6.17% 10-Year 7.15%
16 | OPPENHEIMER BALANCED FUND
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Balanced Fund (Class C)
S&P 500 Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Balanced Lehman Brothers
Fund (Class C) S&P 500 Index Aggregate Bond Index
-------------------- ------------------ --------------------
09/30/1996 $ 10,000 $ 10,000 $ 10,000
12/31/1996 $ 10,521 $ 10,833 $ 10,300
03/31/1997 $ 10,568 $ 11,124 $ 10,242
06/30/1997 $ 11,501 $ 13,064 $ 10,619
09/30/1997 $ 12,442 $ 14,043 $ 10,971
12/31/1997 $ 12,287 $ 14,446 $ 11,294
03/31/1998 $ 13,145 $ 16,459 $ 11,470
06/30/1998 $ 13,150 $ 17,006 $ 11,738
09/30/1998 $ 11,767 $ 15,318 $ 12,234
12/31/1998 $ 13,043 $ 18,577 $ 12,275
03/31/1999 $ 13,178 $ 19,502 $ 12,215
06/30/1999 $ 14,139 $ 20,874 $ 12,107
09/30/1999 $ 13,564 $ 19,574 $ 12,189
12/31/1999 $ 14,307 $ 22,484 $ 12,175
03/31/2000 $ 15,094 $ 22,999 $ 12,443
06/30/2000 $ 15,161 $ 22,388 $ 12,660
09/30/2000 $ 15,238 $ 22,171 $ 13,041
12/31/2000 $ 15,125 $ 20,438 $ 13,590
03/31/2001 $ 14,935 $ 18,016 $ 14,002
06/30/2001 $ 15,794 $ 19,070 $ 14,081
09/30/2001 $ 14,019 $ 16,272 $ 14,731
12/31/2001 $ 15,252 $ 18,011 $ 14,738
03/31/2002 $ 15,314 $ 18,060 $ 14,751
06/30/2002 $ 14,158 $ 15,642 $ 15,296
09/30/2002 $ 12,711 $ 12,941 $ 15,997
12/31/2002 $ 13,521 $ 14,032 $ 16,249
03/31/2003 $ 13,346 $ 13,590 $ 16,475
06/30/2003 $ 14,926 $ 15,681 $ 16,887
09/30/2003 $ 15,377 $ 16,096 $ 16,863
12/31/2003 $ 16,625 $ 18,054 $ 16,916
03/31/2004 $ 16,947 $ 18,360 $ 17,365
06/30/2004 $ 16,746 $ 18,675 $ 16,941
09/30/2004 $ 16,829 $ 18,326 $ 17,483
12/31/2004 $ 18,073 $ 20,017 $ 17,650
03/31/2005 $ 17,812 $ 19,587 $ 17,565
06/30/2005 $ 18,231 $ 19,855 $ 18,093
09/30/2005 $ 18,711 $ 20,571 $ 17,971
12/31/2005 $ 18,563 $ 20,999 $ 18,078
03/31/2006 $ 18,853 $ 21,883 $ 17,961
06/30/2006 $ 18,369 $ 21,568 $ 17,948
09/30/2006 $ 19,266 $ 22,788 $ 18,631
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE FUND AT
9/30/06
1-Year 2.01% 5-Year 6.57% 10-Year 6.78%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
BECAUSE CLASS B SHARES CONVERT TO CLASS A SHARES 72 MONTHS AFTER PURCHASE,
SINCE-INCEPTION RETURN FOR CLASS B SHARES USES CLASS A PERFORMANCE FOR THE
PERIOD AFTER CONVERSION. SEE PAGE 19 FOR FURTHER INFORMATION.
17 | OPPENHEIMER BALANCED FUND
FUND PERFORMANCE DISCUSSION
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CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Balanced Fund (Class N)
S&P 500 Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Balanced Lehman Brothers
Fund (Class N) S&P 500 Index Aggregate Bond Index
-------------------- ------------------ --------------------
03/01/2001 $ 10,000 $ 10,000 $ 10,000
03/31/2001 $ 9,640 $ 9,367 $ 10,050
06/30/2001 $ 10,197 $ 9,915 $ 10,107
09/30/2001 $ 9,070 $ 8,460 $ 10,573
12/31/2001 $ 9,876 $ 9,364 $ 10,578
03/31/2002 $ 9,930 $ 9,390 $ 10,588
06/30/2002 $ 9,190 $ 8,132 $ 10,979
09/30/2002 $ 8,266 $ 6,728 $ 11,482
12/31/2002 $ 8,793 $ 7,295 $ 11,663
03/31/2003 $ 8,678 $ 7,065 $ 11,825
06/30/2003 $ 9,719 $ 8,153 $ 12,121
09/30/2003 $ 10,025 $ 8,368 $ 12,103
12/31/2003 $ 10,843 $ 9,387 $ 12,141
03/31/2004 $ 11,065 $ 9,545 $ 12,464
06/30/2004 $ 10,936 $ 9,710 $ 12,159
09/30/2004 $ 11,004 $ 9,528 $ 12,548
12/31/2004 $ 11,829 $ 10,407 $ 12,668
03/31/2005 $ 11,677 $ 10,184 $ 12,607
06/30/2005 $ 11,961 $ 10,323 $ 12,986
09/30/2005 $ 12,286 $ 10,695 $ 12,899
12/31/2005 $ 12,206 $ 10,918 $ 12,976
03/31/2006 $ 12,416 $ 11,377 $ 12,892
06/30/2006 $ 12,105 $ 11,213 $ 12,882
09/30/2006 $ 12,706 $ 11,848 $ 13,372
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE FUND AT
9/30/06
1-Year 2.46% 5-Year 6.97% Since Inception (3/1/01) 4.39%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
BECAUSE CLASS B SHARES CONVERT TO CLASS A SHARES 72 MONTHS AFTER PURCHASE,
SINCE-INCEPTION RETURN FOR CLASS B SHARES USES CLASS A PERFORMANCE FOR THE
PERIOD AFTER CONVERSION. SEE PAGE 19 FOR FURTHER INFORMATION.
18 | OPPENHEIMER BALANCED FUND
NOTES
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Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. The Fund's total returns shown do
not reflect the deduction of income taxes on an individual's investment. Taxes
may reduce your actual investment returns on income or gains paid by the Fund or
any gains you may realize if you sell your shares.
INVESTORS SHOULD CONSIDER THE FUND'S INVESTMENT OBJECTIVES, RISKS, AND OTHER
CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE FUND'S PROSPECTUS CONTAINS
THIS AND OTHER INFORMATION ABOUT THE FUND, AND MAY BE OBTAINED BY ASKING YOUR
FINANCIAL ADVISOR, CALLING US AT 1.800.525.7048 OR VISITING OUR WEBSITE AT
WWW.OPPENHEIMERFUNDS.COM. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
The Fund's investment strategy and focus can change over time. The mention of
specific fund holdings does not constitute a recommendation by OppenheimerFunds,
Inc.
CLASS A shares of the Fund were first publicly offered on 4/24/87. Unless
otherwise noted, Class A returns include the current maximum initial sales
charge of 5.75%. The Fund's maximum sales charge for Class A shares was lower
prior to 4/1/91, so actual performance may have been higher.
CLASS B shares of the Fund were first publicly offered on 8/29/95. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 2% (5-year). Because Class B shares convert to
Class A shares 72 months after purchase, the 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.
19 | 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 September 30, 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
20 | OPPENHEIMER BALANCED FUND
the Statement of Additional Information). Therefore, the "hypothetical" lines of
the table are useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(4/1/06) (9/30/06) SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
Class A Actual $ 1,000.00 $ 1,025.90 $ 5.45
- --------------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,019.70 5.43
- --------------------------------------------------------------------------------
Class B Actual 1,000.00 1,021.00 10.13
- --------------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,015.09 10.10
- --------------------------------------------------------------------------------
Class C Actual 1,000.00 1,021.90 9.83
- --------------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,015.39 9.80
- --------------------------------------------------------------------------------
Class N Actual 1,000.00 1,023.40 7.48
- --------------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,017.70 7.46
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 183/365
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended September 30, 2006 are as follows:
CLASS EXPENSE RATIOS
- ---------------------------
Class A 1.07%
- ---------------------------
Class B 1.99
- ---------------------------
Class C 1.93
- ---------------------------
Class N 1.47
- --------------------------------------------------------------------------------
21 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS September 30, 2006
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--50.5%
- --------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--6.5%
- --------------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--1.3%
Hilton Hotels Corp. 105,200 $ 2,929,820
- --------------------------------------------------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. 85,700 4,901,183
- --------------------------------------------------------------------------------------------------------------------
Wyndham Worldwide Corp. 1 209,460 5,858,596
----------------
13,689,599
- --------------------------------------------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--0.9%
Liberty Media Holding Corp.-Interactive, Series A 1 440,200 8,971,276
- --------------------------------------------------------------------------------------------------------------------
MEDIA--4.3%
Liberty Global, Inc., Series A 1 635,277 16,352,030
- --------------------------------------------------------------------------------------------------------------------
Liberty Global, Inc., Series C 1 644,261 16,145,181
- --------------------------------------------------------------------------------------------------------------------
Liberty Media Holding Corp.-Capital, Series A 1,2 134,920 11,275,264
----------------
43,772,475
- --------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--5.7%
- --------------------------------------------------------------------------------------------------------------------
BEVERAGES--1.1%
Constellation Brands, Inc., Cl. A 1 185,100 5,327,178
- --------------------------------------------------------------------------------------------------------------------
Diageo plc, Sponsored ADR 85,400 6,066,816
----------------
11,393,994
- --------------------------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--0.8%
Wal-Mart Stores, Inc. 165,700 8,172,324
- --------------------------------------------------------------------------------------------------------------------
FOOD PRODUCTS--0.3%
ConAgra Foods, Inc. 126,100 3,086,928
- --------------------------------------------------------------------------------------------------------------------
TOBACCO--3.5%
Altria Group, Inc. 337,600 25,843,280
- --------------------------------------------------------------------------------------------------------------------
Loews Corp./Carolina Group 176,000 9,748,640
----------------
35,591,920
- --------------------------------------------------------------------------------------------------------------------
ENERGY--2.4%
- --------------------------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.3%
Halliburton Co. 2 109,000 3,101,050
- --------------------------------------------------------------------------------------------------------------------
OIL & GAS--2.1%
BP plc, ADR 114,100 7,482,678
- --------------------------------------------------------------------------------------------------------------------
Exxon Mobil Corp. 86,300 5,790,730
- --------------------------------------------------------------------------------------------------------------------
Kinder Morgan, Inc. 29,000 3,040,650
- --------------------------------------------------------------------------------------------------------------------
Petroleo Brasileiro SA, Preference 129,000 2,405,215
- --------------------------------------------------------------------------------------------------------------------
Talisman Energy, Inc. 150,900 2,462,461
----------------
21,181,734
22 | OPPENHEIMER BALANCED FUND
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
FINANCIALS--9.3%
- --------------------------------------------------------------------------------------------------------------------
CAPITAL MARKETS--2.0%
UBS AG 331,778 $ 19,846,451
- --------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS--1.3%
Wachovia Corp. 240,562 13,423,360
- --------------------------------------------------------------------------------------------------------------------
CONSUMER FINANCE--1.6%
Capital One Financial Corp. 202,800 15,952,248
- --------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--1.5%
Bank of America Corp. 291,354 15,607,834
- --------------------------------------------------------------------------------------------------------------------
INSURANCE--1.8%
Everest Re Group Ltd. 80,100 7,812,153
- --------------------------------------------------------------------------------------------------------------------
Genworth Financial, Inc., Cl. A 141,300 4,946,913
- --------------------------------------------------------------------------------------------------------------------
Platinum Underwriters Holdings Ltd. 179,600 5,537,068
----------------
18,296,134
- --------------------------------------------------------------------------------------------------------------------
REAL ESTATE MANAGEMENT & DEVELOPMENT--0.6%
Realogy Corp. 1 261,825 5,938,191
- --------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--0.5%
Countrywide Financial Corp. 25,700 900,528
- --------------------------------------------------------------------------------------------------------------------
Freddie Mac 62,200 4,125,726
----------------
5,026,254
- --------------------------------------------------------------------------------------------------------------------
HEALTH CARE--6.0%
- --------------------------------------------------------------------------------------------------------------------
BIOTECHNOLOGY--2.1%
Amgen, Inc. 1 75,700 5,414,821
- --------------------------------------------------------------------------------------------------------------------
Human Genome Sciences, Inc. 1,2 257,500 2,971,550
- --------------------------------------------------------------------------------------------------------------------
MedImmune, Inc. 1 240,900 7,036,689
- --------------------------------------------------------------------------------------------------------------------
Myogen, Inc. 1,2 70,900 2,487,172
- --------------------------------------------------------------------------------------------------------------------
Vanda Pharmaceuticals, Inc. 1 399,800 3,714,142
----------------
21,624,374
- --------------------------------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.9%
Beckman Coulter, Inc. 88,400 5,088,304
- --------------------------------------------------------------------------------------------------------------------
Boston Scientific Corp. 1 261,100 3,861,669
----------------
8,949,973
- --------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--0.5%
WellPoint, Inc. 1 68,300 5,262,515
- --------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS--2.5%
Medicines Co. (The) 1,2 124,600 2,810,976
- --------------------------------------------------------------------------------------------------------------------
Pfizer, Inc. 452,640 12,836,870
23 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS Continued
Sanofi-Aventis SA, ADR 213,000 $ 9,472,110
----------------
25,119,956
- --------------------------------------------------------------------------------------------------------------------
INDUSTRIALS--4.8%
- --------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--3.1%
Empresa Brasileira de Aeronautica SA, ADR 2 142,100 5,580,267
- --------------------------------------------------------------------------------------------------------------------
Orbital Sciences Corp. 1 824,917 15,483,692
- --------------------------------------------------------------------------------------------------------------------
United Technologies Corp. 170,500 10,801,175
----------------
31,865,134
- --------------------------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--1.5%
Siemens AG, Sponsored ADR 175,200 15,259,920
- --------------------------------------------------------------------------------------------------------------------
ROAD & RAIL--0.2%
Avis Budget Group, Inc. 104,730 1,915,512
- --------------------------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--11.5%
- --------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--1.9%
Cisco Systems, Inc. 1 500,900 11,520,700
- --------------------------------------------------------------------------------------------------------------------
Juniper Networks, Inc. 1 295,300 5,102,784
- --------------------------------------------------------------------------------------------------------------------
QUALCOMM, Inc. 60,400 2,195,540
----------------
18,819,024
- --------------------------------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--0.8%
Hutchinson Technology, Inc. 1,2 158,200 3,326,946
- --------------------------------------------------------------------------------------------------------------------
International Business Machines Corp. 63,200 5,178,608
----------------
8,505,554
- --------------------------------------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--0.8%
eBay, Inc. 1 227,300 6,446,228
- --------------------------------------------------------------------------------------------------------------------
Yahoo!, Inc. 1 47,600 1,203,328
----------------
7,649,556
- --------------------------------------------------------------------------------------------------------------------
SOFTWARE--8.0%
Compuware Corp. 1 999,029 7,782,436
- --------------------------------------------------------------------------------------------------------------------
Microsoft Corp. 1,105,400 30,210,582
- --------------------------------------------------------------------------------------------------------------------
Novell, Inc. 1 1,049,500 6,422,940
- --------------------------------------------------------------------------------------------------------------------
Synopsys, Inc. 1 502,100 9,901,412
- --------------------------------------------------------------------------------------------------------------------
Take-Two Interactive Software, Inc. 1,2 1,911,047 27,251,530
----------------
81,568,900
24 | OPPENHEIMER BALANCED FUND
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
MATERIALS--0.8%
- --------------------------------------------------------------------------------------------------------------------
CHEMICALS--0.6%
Praxair, Inc. 102,200 $ 6,046,152
- --------------------------------------------------------------------------------------------------------------------
METALS & MINING--0.2%
Companhia Vale do Rio Doce, Sponsored ADR 136,200 2,521,062
- --------------------------------------------------------------------------------------------------------------------
Kaiser Aluminum Corp. 1 1,456 64,559
----------------
2,585,621
- --------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--1.5%
- --------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.1%
IDT Corp., Cl. B 1,2 777,500 11,211,550
- --------------------------------------------------------------------------------------------------------------------
WorldCom, Inc./WorldCom Group 1,3 450,000 --
----------------
11,211,550
- --------------------------------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.4%
Sprint Nextel Corp. 228,100 3,911,915
- --------------------------------------------------------------------------------------------------------------------
UTILITIES--2.0%
- --------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.6%
Reliant Energy, Inc. 1 521,400 6,418,434
- --------------------------------------------------------------------------------------------------------------------
ENERGY TRADERS--1.4%
AES Corp. (The) 1 675,700 13,777,523
----------------
Total Common Stocks (Cost $427,365,952) 513,543,385
UNITS
- --------------------------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- --------------------------------------------------------------------------------------------------------------------
Lucent Technologies, Inc. Wts., Exp. 12/10/07 1 (Cost $0) 11,758 2,234
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--4.4%
- --------------------------------------------------------------------------------------------------------------------
Ace Securities Corp., Home Equity Loan Pass-Through Certificates,
Series 2005-HE7, Cl. A2B, 5.51%, 11/25/35 4 $ 890,000 890,954
- --------------------------------------------------------------------------------------------------------------------
Aesop Funding II LLC, Automobile Asset-Backed Certificates,
Series 2005-1A, Cl. A2, 5.39%, 4/20/08 4 630,000 630,482
- --------------------------------------------------------------------------------------------------------------------
Argent Securities Trust 2004-W8, Asset-Backed Pass-Through Certificates,
Series 2004-W8, Cl. A2, 5.81%, 5/25/34 4 3,180,000 3,194,287
- --------------------------------------------------------------------------------------------------------------------
Argent Securities Trust 2006-W5, Asset-Backed Pass-Through Certificates,
Series 2006-W5, Cl. A2B, 5.43%, 5/26/36 4 1,250,000 1,250,783
- --------------------------------------------------------------------------------------------------------------------
BMW Vehicle Owner Trust 2005-A, Automobile Asset-Backed Securities,
Series 2005-A, Cl. A2, 3.66%, 12/26/07 95,241 95,211
- --------------------------------------------------------------------------------------------------------------------
Capital Auto Receivables Asset Trust 2004-2, Automobile Asset-Backed
Securities, Series 2004-2, Cl. A3, 3.58%, 1/15/09 2,140,000 2,109,928
25 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- --------------------------------------------------------------------------------------------------------------------
Capital One Prime Auto Receivables Trust, Automobile Loan Asset-Backed
Securities, Series 2005-1, Cl. A2, 4.24%, 11/15/07 $ 507,697 $ 507,730
- --------------------------------------------------------------------------------------------------------------------
Centex Home Equity Loan Trust 2005-C, Asset-Backed Certificates,
Series 2005-C, Cl. AF1, 4.196%, 6/25/35 141,221 140,792
- --------------------------------------------------------------------------------------------------------------------
Centex Home Equity Loan Trust 2005-D, Asset-Backed Certificates:
Series 2005-D, Cl. AF1, 5.04%, 10/25/35 686,623 683,775
Series 2005-D, Cl. AV2, 5.60%, 10/25/35 4 1,750,000 1,751,920
- --------------------------------------------------------------------------------------------------------------------
Centex Home Equity Loan Trust 2006-A, Asset-Backed Certificates,
Series 2006-A, Cl. AV2, 5.43%, 5/16/36 4 1,570,000 1,570,983
- --------------------------------------------------------------------------------------------------------------------
Chase Manhattan Auto Owner Trust, Automobile Loan Pass-Through
Certificates, Series 2005-A, Cl. A2, 3.72%, 12/15/07 379,136 378,818
- --------------------------------------------------------------------------------------------------------------------
Citibank Credit Card Issuance Trust, Credit Card Receivable Nts.,
Series 2003-C4, Cl. C4, 5%, 6/10/15 310,000 301,707
- --------------------------------------------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust, Inc., Asset-Backed Pass-Through
Certificates, Series 2005-WF2, Cl. AF2, 4.922%, 8/25/35 4 1,441,714 1,428,956
- --------------------------------------------------------------------------------------------------------------------
Consumer Credit Reference Index Securities Program, Credit Card
Asset-Backed Certificates, Series 2002-B, Cl. FX, 10.421%, 3/22/07 5 1,970,000 1,999,900
- --------------------------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2002-4, Asset-Backed Certificates,
Series 2002-4, Cl. A1, 5.70% 2/25/33 4 31,485 31,519
- --------------------------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-16, Asset-Backed Certificates,
Series 2005-16, Cl. 2AF2, 5.382%, 5/25/36 4 630,000 629,024
- --------------------------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-17, Asset-Backed Certificates:
Series 2005-17, Cl. 1AF1, 5.53%, 5/25/36 4 942,294 943,436
Series 2005-17, Cl. 1AF2, 5.363%, 5/25/36 4 420,000 419,236
- --------------------------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-7, Asset-Backed Certificates,
Series 2005-7, Cl. AF1B, 4.317%, 11/25/35 4 129,362 128,985
- --------------------------------------------------------------------------------------------------------------------
DaimlerChrysler Auto Trust, Automobile Loan Pass-Through Certificates,
Series 2005-B, Cl. A2, 3.75%, 12/8/07 9,021 9,024
- --------------------------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust 2006-FF5, Mtg. Pass-Through
Certificates, Series 2006-FF5, Cl. 2A1, 5.38%, 5/15/36 4 832,425 833,004
- --------------------------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust 2006-FF9, Mtg. Pass-Through
Certificates, Series 2006-FF9, Cl. 2A2, 5.434%, 7/7/36 4 620,000 620,388
- --------------------------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust 2005-FF10, Mtg. Pass-Through
Certificates, Series 2005-FF10, Cl. A3, 5.54%, 11/25/35 4 2,600,000 2,602,767
- --------------------------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust 2006-FF10, Mtg. Pass-Through
Certificates, Series 2006-FF10, Cl. A3, 5.414%, 7/25/36 4 1,230,000 1,230,769
- --------------------------------------------------------------------------------------------------------------------
Ford Credit Auto Owner Trust, Automobile Loan Pass-Through
Certificates, Series 2005-A, Cl. A3, 3.48%, 11/17/08 1,158,422 1,149,907
- --------------------------------------------------------------------------------------------------------------------
GS Auto Loan Trust, Automobile Loan Asset-Backed Securities,
Series 2005-1, Cl. A2, 4.32%, 5/15/08 1,778,177 1,775,687
- --------------------------------------------------------------------------------------------------------------------
Honda Auto Receivables Owner Trust, Automobile Receivable
Obligations, Series 2005-3, Cl. A2, 3.73%, 10/18/07 3 418,046 417,643
26 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- --------------------------------------------------------------------------------------------------------------------
Household Home Equity Loan Trust, Home Equity Loan Pass-Through
Certificates, Series 2005-3, Cl. A1, 5.59%, 1/20/35 4 $ 926,990 $ 928,434
- --------------------------------------------------------------------------------------------------------------------
Lehman XS Trust, Mtg. Pass-Through Certificates,
Series 2005-2, Cl. 2A1B, 5.18%, 8/25/35 4 1,231,729 1,228,338
- --------------------------------------------------------------------------------------------------------------------
Litigation Settlement Monetized Fee Trust, Asset-Backed Certificates,
Series 2001-1A, Cl. A1, 8.33%, 4/25/31 3 517,467 528,209
- --------------------------------------------------------------------------------------------------------------------
MBNA Credit Card Master Note Trust, Credit Card Receivables,
Series 2003-C7, Cl. C7, 6.68%, 3/15/16 4 2,900,000 3,082,519
- --------------------------------------------------------------------------------------------------------------------
Morgan Stanley ABS Capital I, Mtg. Pass-Through Certificates,
Series 2005-WMC6, Cl. A2B, 5.59%, 7/25/35 4 790,000 791,816
- --------------------------------------------------------------------------------------------------------------------
Onyx Acceptance Owner Trust, Automobile Receivable Obligations,
Series 2005-B, Cl. A2, 4.03%, 4/15/08 128,956 128,972
- --------------------------------------------------------------------------------------------------------------------
Option One Mortgage Loan Trust, Asset-Backed Certificates,
Series 2006-2, Cl. 2A2, 5.43%, 7/1/36 4 2,060,000 2,061,289
- --------------------------------------------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through Trust 2004-5, Mtg. Pass-Through
Certificates, Series 2004-5, Cl. AF2, 3.735%, 11/10/34 4 299,798 298,379
- --------------------------------------------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through Trust 2005-1, Mtg. Pass-Through
Certificates, Series 2005-1, Cl. AF2, 3.914%, 5/25/35 4 408,590 405,938
- --------------------------------------------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through Trust 2005-2, Mtg. Pass-Through
Certificates, Series 2005-2, Cl. AF2, 4.415%, 4/25/35 4 720,000 713,432
- --------------------------------------------------------------------------------------------------------------------
RAMP Series 2004-RS7 Trust, Mtg. Asset-Backed Pass-Through Certificates,
Series 2004-RS7, Cl. AI32 4.45%, 7/25/28 1,228,817 1,218,482
- --------------------------------------------------------------------------------------------------------------------
RAMP Series 2006-RS4 Trust, Mtg. Asset-Backed Pass-Through Certificates,
Series 2006-RS4, Cl. A1, 5.41%, 7/25/36 4 761,858 762,336
- --------------------------------------------------------------------------------------------------------------------
RASC Series 2006-KS7 Trust, Home Equity Mtg. Asset-Backed Pass-Through
Certificates, Series 2006-KS7, Cl. A2, 5.428%, 9/25/36 4 1,500,000 1,499,721
- --------------------------------------------------------------------------------------------------------------------
Structured Asset Investment Loan Trust, Mtg. Pass-Through Certificates,
Series 2006-2, Cl. A1, 5.39%, 4/25/36 4 872,108 872,709
- --------------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Mtg. Pass-Through Certificates,
Series 2005-4XS, Cl. 3A1, 5.18%, 3/26/35 1,687,754 1,682,420
- --------------------------------------------------------------------------------------------------------------------
Wells Fargo Home Equity Asset-Backed Securities 2006-2 Trust,
Home Equity Asset-Backed Certificates, Series 2006-2, Cl. A2, 5.424%, 7/25/36 4 1,230,000 1,230,769
----------------
Total Asset-Backed Securities (Cost $45,213,713) 45,161,378
- --------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--25.7%
- --------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY--21.7%
- --------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED--21.5%
Federal Home Loan Mortgage Corp.:
4.50%, 5/1/18-5/1/19 7,633,017 7,370,923
5%, 8/1/33 539,491 520,778
5%, 10/1/36 6 5,190,000 4,992,131
6%, 4/1/17-9/1/24 1,645,095 1,667,676
27 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal Home Loan Mortgage Corp.: Continued
6.50%, 4/1/18-4/1/34 $ 5,721,196 $ 5,850,121
7%, 5/1/29-11/1/32 3,640,652 3,750,930
8%, 4/1/16 63,881 67,572
9%, 8/1/22-5/1/25 18,824 20,168
- --------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., CMO Gtd. Multiclass Mtg.
Participation Certificates, Series 3153, Cl. FJ, 5.71%, 5/15/36 4 782,505 784,774
- --------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., CMO Gtd. Real Estate Mtg.
Investment Conduit Multiclass Pass-Through Certificates:
Series 2034, Cl. Z, 6.50%, 2/15/28 482,410 495,475
Series 2053, Cl. Z, 6.50%, 4/15/28 525,290 539,733
Series 2055, Cl. ZM, 6.50%, 5/15/28 679,696 693,790
Series 2075, Cl. D, 6.50%, 8/15/28 1,622,125 1,666,826
Series 2080, Cl. Z, 6.50%, 8/15/28 437,397 447,074
Series 2387, Cl. PD, 6%, 4/15/30 316,290 316,670
Series 2500, Cl. FD, 5.83%, 3/15/32 4 213,640 215,868
Series 2526, Cl. FE, 5.73%, 6/15/29 4 295,755 297,013
Series 2551, Cl. FD, 5.73%, 1/15/33 4 232,657 235,199
Series 2583, Cl. KA, 5.50%, 3/15/22 636,701 636,069
- --------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., CMO Pass-Through Participation
Certificates, Series 151, Cl. F, 9%, 5/15/21 42,128 42,043
- --------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Interest-Only Stripped
Mtg.-Backed Security:
Series 176, Cl. IO, 13.464%, 6/1/26 7 418,070 93,214
Series 183, Cl. IO, 10.551%, 4/1/27 7 645,744 140,311
Series 184, Cl. IO, 15.866%, 12/1/26 7 696,743 155,617
Series 192, Cl. IO, 14.14%, 2/1/28 7 197,479 42,099
Series 200, Cl. IO, 13.356%, 1/1/29 7 238,567 52,227
Series 2003-118, Cl. S, 10.052%, 12/25/33 7 3,568,947 392,574
Series 2130, Cl. SC, (1.251)%, 3/15/29 7 531,843 33,139
Series 2005-87, Cl. SG, 10.772%, 10/25/35 7 6,016,414 348,382
Series 2796, Cl. SD, 1.434%, 7/15/26 7 771,719 51,806
Series 2920, Cl. S, (0.444)%, 1/15/35 7 4,526,052 218,035
Series 3000, Cl. SE, (3.763)%, 7/15/25 7 4,491,949 171,759
- --------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Principal-Only Stripped
Mtg.-Backed Security, Series 176, Cl. PO, 4.463%, 6/1/26 8 177,613 145,841
- --------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
4.50%, 10/1/21 6 3,378,000 3,259,770
5%, 1/1/18-3/1/34 18,947,781 18,452,188
5%, 10/1/21-10/1/36 6 24,040,000 23,297,010
5.50%, 2/1/33-11/1/34 27,758,573 27,433,354
5.50%, 10/1/21-10/1/36 6 21,728,000 21,496,308
6%, 9/1/32-11/1/32 6,749,121 6,802,509
6%, 10/1/21-10/1/36 6 14,783,000 14,996,895
6.50%, 6/1/17-11/1/31 12,974,357 13,288,221
6.50%, 10/1/36 6 7,232,000 7,365,344
28 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn.: Continued
7%, 11/1/17-1/1/35 $ 5,648,617 $ 5,825,931
7.50%, 1/1/08-1/1/33 575,858 597,716
8.50%, 7/1/32 30,496 32,839
- --------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Grantor Trust, CMO,
Trust 2002-T1, Cl. A2, 7%, 11/25/31 1,499,793 1,545,607
- --------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg.
Investment Conduit Pass-Through Certificates:
Trust 1992-15, Cl. KZ, 7%, 2/25/22 105,894 107,340
Trust 1993-87, Cl. Z, 6.50%, 6/25/23 1,273,539 1,313,298
Trust 1993-215, Cl. ZQ, 6.50%, 11/25/23 1,594,576 1,629,527
Trust 1996-35, Cl. Z, 7%, 7/25/26 225,637 231,146
Trust 2001-50, Cl. NE, 6%, 8/25/30 169,258 169,643
Trust 2001-51, Cl. OD, 6.50%, 10/25/31 1,779,068 1,815,858
Trust 2001-70, Cl. LR, 6%, 9/25/30 254,993 255,468
Trust 2001-72, Cl. NH, 6%, 4/25/30 102,331 102,285
Trust 2001-74, Cl. PD, 6%, 5/25/30 42,678 42,589
Trust 2002-77, Cl. WF, 5.73%, 12/18/32 4 347,147 350,068
Trust 2003-17, Cl. EQ, 5.50%, 3/25/23 630,000 621,647
Trust 2003-28, Cl. KG, 5.50%, 4/25/23 1,045,000 1,036,217
Trust 2003-84, Cl. PW, 3%, 6/25/22 1,560,000 1,526,899
Trust 2004-101, Cl. BG, 5%, 1/25/20 1,869,000 1,827,197
Trust 2005-71, Cl. DB, 4.50%, 8/25/25 160,000 148,459
Trust 2006-24, Cl. DB, 5.50%, 4/25/26 4,010,000 4,015,446
Trust 2006-44, Cl. OA, 5.50%, 12/25/26 3,100,000 3,110,612
Trust 2006-50, Cl. KS, 4.657%, 6/25/36 4 1,573,678 1,534,266
Trust 2006-50, Cl. SA, 4.657%, 6/25/36 4 518,545 501,803
Trust 2006-50, Cl. SK, 5.657%, 6/25/36 4 1,462,179 1,433,294
Trust 2006-57, Cl. PA, 5.50%, 8/25/27 4,346,287 4,354,975
Trust 2006-64, Cl. MD, 5.50%, 7/25/36 5,101,000 4,972,974
- --------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg.
InvestmentConduit Pass-Through Certificates, Interest-Only
Stripped Mtg.-Backed Security:
Trust 1993-223, Cl. PM, 2.119%, 10/25/23 7 43,278 3,425
Trust 2002-38, Cl. SO, (3.594)%, 4/25/32 7 780,141 46,195
Trust 2002-47, Cl. NS, 0.436%, 4/25/32 7 877,529 69,907
Trust 2002-51, Cl. S, 0.555%, 8/25/32 7 805,768 63,104
Trust 2002-77, Cl. IS, 1.525%, 12/18/32 7 1,329,129 106,060
- --------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Interest-Only Stripped
Mtg.-Backed Security:
Trust 214, Cl. 2, 16.174%, 3/1/23 7 1,123,096 257,639
Trust 222, Cl. 2, 13.516%, 6/1/23 7 1,473,792 319,072
Trust 240, Cl. 2, 17.455%, 9/1/23 7 2,280,081 507,461
Trust 247, Cl. 2, 13.069%, 10/1/23 7 299,960 71,683
Trust 252, Cl. 2, 10.294%, 11/1/23 7 1,080,269 266,394
Trust 273, Cl. 2, 14.097%, 8/1/26 7 311,079 68,222
29 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn., Interest-Only
Stripped Mtg.-Backed Security: Continued
Trust 319, Cl. 2, 11.481%, 2/1/32 7 $ 434,784 $ 100,076
Trust 321, Cl. 2, 6.841%, 4/1/32 7 4,468,387 1,029,870
Trust 329, Cl. 2, 10.123%, 1/1/33 7 1,140,724 273,885
Trust 331, Cl. 9, 8.306%, 2/1/33 7 151,622 37,023
Trust 334, Cl. 17, 16.449%, 2/1/33 7 726,109 161,169
Trust 340, Cl. 2, 8.005%, 9/1/33 7 354,585 86,883
Trust 344, Cl. 2, 7.655%, 12/1/33 7 1,539,307 356,420
Trust 362, Cl. 12, 4.14%, 8/1/35 7 6,165,391 1,325,703
Trust 362, Cl. 13, 4.145%, 8/1/35 7 3,420,821 760,330
Trust 2001-65, Cl. S, 9.137%, 11/25/31 7 2,044,537 190,952
Trust 2001-81, Cl. S, 2.652%, 1/25/32 7 450,764 33,966
Trust 2002-9, Cl. MS, 1.205%, 3/25/32 7 606,540 48,611
Trust 2002-52, Cl. SD, (1.823)%, 9/25/32 7 960,932 77,986
Trust 2002-77, Cl. SH, 2.822%, 12/18/32 7 578,838 55,240
Trust 2002-96, Cl. SK, 10.441%, 4/25/32 7 5,328,322 542,692
Trust 2003-4, Cl. S, 9.973%, 2/25/33 7 1,120,387 127,342
Trust 2003-33, Cl. SP, 13.034%, 5/25/33 7 2,058,865 240,991
Trust 2003-46, Cl. IH, 6.656%, 6/25/33 7 7,339,219 1,551,875
Trust 2004-54, Cl. DS, (4.485)%, 11/25/30 7 856,863 46,896
Trust 2005-6, Cl. SE, (2.001)%, 2/25/35 7 3,081,300 155,855
Trust 2005-19, Cl. SA, (2.712)%, 3/25/35 7 11,934,843 608,573
Trust 2005-40, Cl. SA, (2.74)%, 5/25/35 7 2,598,876 131,269
Trust 2005-71, Cl. SA, 3.357%, 8/25/25 7 2,851,363 162,961
Trust 2006-33, Cl. SP, 13.721%, 5/25/36 7 6,365,296 496,405
- --------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Principal-Only Stripped
Mtg.-Backed Security:
Trust 340, Cl. 1, 5.181%, 9/1/33 8 354,585 256,933
Trust 1993-184, Cl. M, 5.65%, 9/25/23 8 510,564 413,423
----------------
219,003,031
- --------------------------------------------------------------------------------------------------------------------
GNMA/GUARANTEED--0.2%
Government National Mortgage Assn.:
5.375%, 3/20/26 4 27,384 27,602
7%, 4/15/09-4/15/26 278,173 286,989
7.50%, 3/15/09-5/15/27 977,891 1,019,217
8%, 5/15/17 41,857 44,143
8.50%, 8/15/17-12/15/17 25,164 26,835
- --------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., Interest-Only Stripped
Mtg.-Backed Security:
Series 2001-21, Cl. SB, (5.732)%, 1/16/27 7 1,087,504 70,467
Series 2002-15, Cl. SM, (9.288)%, 2/16/32 7 834,694 51,340
Series 2002-76, Cl. SY, (5)%, 12/16/26 7 2,042,659 142,678
Series 2004-11, Cl. SM, (8.513)%, 1/17/30 7 712,991 45,856
----------------
1,715,127
30 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
NON-AGENCY--4.0%
- --------------------------------------------------------------------------------------------------------------------
COMMERCIAL--3.6%
Banc of America Commercial Mortgage, Inc., Commercial Mtg.
Pass-Through Certificates, Series 2005-3, Cl. A2, 4.501%, 7/10/43 $ 1,810,000 $ 1,771,018
- --------------------------------------------------------------------------------------------------------------------
Banc of America Funding Corp., CMO Pass-Through Certificates,
Series 2004-2, Cl. 2A1, 6.50%, 7/20/32 1,367,400 1,390,618
- --------------------------------------------------------------------------------------------------------------------
Banc of America Mortgage Securities, Inc., CMO Pass-Through Certificates:
Series 2004-8, Cl. 5A1, 6.50%, 5/25/32 1,123,644 1,133,125
Series 2005-E, Cl. 2A2, 4.975%, 6/25/35 4 159,627 159,435
- --------------------------------------------------------------------------------------------------------------------
ChaseFlex Trust 2006-2, Multi-Class Mtg. Pass-Through Certificates,
Series 2006-2, Cl. A1B, 5.43%, 8/25/08 4 1,256,128 1,257,388
- --------------------------------------------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust 2006-WF1, Asset-Backed Pass-Through
Certificates, Series 2006-WF1, Cl. A2B, 5.536%, 3/1/36 460,000 459,485
- --------------------------------------------------------------------------------------------------------------------
Deutsche Alt-A Securities, Inc. Mortgage Loan Trust, CMO, Series 2006-AB2,
Cl. A7, 5.961%, 6/25/36 2,497,685 2,495,539
- --------------------------------------------------------------------------------------------------------------------
Deutsche Alt-B Securities, Inc. Mortgage Loan Trust, CMO, Series 2006-AB3,
Cl. A7, 6.36%, 4/25/08 806,318 809,012
- --------------------------------------------------------------------------------------------------------------------
GE Capital Commercial Mortgage Corp., Commercial Mtg. Obligations:
Series 2004-C3, Cl. A2, 4.433%, 7/10/39 960,000 944,665
Series 2005-C3, Cl. A2, 4.853%, 7/10/45 1,080,000 1,070,028
- --------------------------------------------------------------------------------------------------------------------
GMAC Commercial Mortgage Securities, Inc., Commercial Mtg.
Pass-Through Certificates, Series 1997-C1, Cl. A3, 6.869%, 7/15/29 381,366 384,233
- --------------------------------------------------------------------------------------------------------------------
Greenwich Capital Commercial Funding Corp., Commercial Mtg.
Pass-Through Certificates:
Series 2005-G G3, Cl. A2, 4.305%, 8/10/42 1,520,000 1,485,918
Series 2005-G G5, Cl. A2, 5.117%, 4/10/37 1,200,000 1,198,741
- --------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Commercial Mortgage Securities Corp.,
Commercial Mtg. Pass-Through Certificates:
Series 2005-LDP2, Cl. A2, 4.575%, 7/15/42 440,000 431,634
Series 2005-LDP4, Cl. A2, 4.79%, 10/15/42 1,560,000 1,538,860
- --------------------------------------------------------------------------------------------------------------------
LB-UBS Commercial Mortgage Trust, Commercial Mtg. Pass-Through
Certificates, Series 2005-C5, Cl. A2, 4.885%, 9/15/30 1,280,000 1,271,140
- --------------------------------------------------------------------------------------------------------------------
Mastr Alternative Loan Trust, CMO Pass-Through Certificates:
Series 2004-6, Cl. 10A1, 6%, 7/25/34 1,845,193 1,835,734
Series 2004-9, Cl. A3, 4.70%, 8/25/34 4 2,439,905 2,424,642
- --------------------------------------------------------------------------------------------------------------------
Prudential Mortgage Capital Co. II LLC, Commercial Mtg. Pass-Through
Certificates, Series PRU-HTG 2000-C1, Cl. A2, 7.306%, 10/6/15 1,554,000 1,669,612
- --------------------------------------------------------------------------------------------------------------------
RALI Series 2003-QS1 Trust, Mtg. Asset-Backed Pass-Through Certificates,
Series 2003-QS1, Cl. A2, 5.75%, 1/25/33 914,881 913,113
- --------------------------------------------------------------------------------------------------------------------
RALI Series 2006-QS5 Trust, Mtg. Asset-Backed Pass-Through Certificates,
Series 2006-QS5, Cl. 2A2, 6%, 4/25/08 2,975,216 2,973,212
- --------------------------------------------------------------------------------------------------------------------
RALI Series 2006-QS13 Trust, Mtg. Asset-Backed Pass-Through Certificates,
Series 2006-QS13, Cl. 1A8, 6%, 9/25/36 2,630,000 2,631,233
31 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
COMMERCIAL Continued
Residential Asset Securitization Trust 2006-A9CB, CMO Pass-Through
Certificates, Series 2006-A9CB, Cl. A5, 6%, 9/25/36 $ 2,692,060 $ 2,689,326
- --------------------------------------------------------------------------------------------------------------------
Wachovia Bank Commercial Mortgage Trust, Commercial Mtg. Obligations,
Series 2005-C17, Cl. A2, 4.782%, 3/15/42 2,490,000 2,462,768
- --------------------------------------------------------------------------------------------------------------------
WAMU Mortgage Pass-Through Certificates Series 2005-AR5 Trust,
Series 2005-AR5, Cl. A1, 4.673%, 5/25/35 4 766,289 764,159
- --------------------------------------------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed Securities 2004-DD Trust, CMO Mtg.
Pass-Through Certificates, Series 2004-DD, Cl. 2A1, 4.509%, 1/25/35 4 169,219 168,689
----------------
36,333,327
- --------------------------------------------------------------------------------------------------------------------
RESIDENTIAL--0.4%
Countrywide Alternative Loan Trust, CMO:
Series 2005-J1, Cl. 3A1, 6.50%, 8/25/32 2,864,304 2,894,738
Series 2005-J3, Cl. 3A1, 6.50%, 9/25/34 1,543,383 1,576,108
----------------
4,470,846
----------------
Total Mortgage-Backed Obligations (Cost $262,212,193) 261,522,331
- --------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--3.0%
- --------------------------------------------------------------------------------------------------------------------
Fannie Mae Unsec. Nts., 3.69%, 10/5/07 9 1,245,000 1,182,362
- --------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank Unsec. Bonds:
3.125%, 11/15/06 2,600,000 2,593,172
3.50%, 11/15/07 2 1,160,000 1,140,230
- --------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. Unsec. Nts.:
4.125%, 7/12/10 2 786,000 765,492
5.25%, 7/18/11 845,000 857,762
6.625%, 9/15/09 475,000 496,925
- --------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Unsec. Nts.:
4%, 2/28/07 2,630,000 2,616,340
4.25%, 7/15/07 2 2,555,000 2,536,558
4.75%, 12/15/10 2 130,000 129,370
6%, 5/15/11 10 4,605,000 4,815,476
6.625%, 9/15/09 135,000 141,377
7.25%, 1/15/10 10 2,250,000 2,409,935
- --------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
4.50%, 2/15/36 2 2,995,000 2,870,755
8.875%, 8/15/17 2 790,000 1,067,550
STRIPS, 4.96%, 2/15/16 9 171,000 110,551
- --------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
4.625%, 8/31/11 2 4,419,000 4,425,218
4.875%, 8/15/16 2 365,000 372,015
5.125%, 6/30/11-5/15/16 2 1,988,000 2,043,082
----------------
Total U.S. Government Obligations (Cost $30,656,194) 30,574,170
32 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--14.8%
- --------------------------------------------------------------------------------------------------------------------
ABN Amro Bank NV (NY Branch), 7.125% Sub. Nts., Series B, 10/15/93 $ 500,000 $ 565,610
- --------------------------------------------------------------------------------------------------------------------
Ahold Finance USA, Inc., 6.25% Sr. Unsec. Unsub. Nts., 5/1/09 1,880,000 1,908,200
- --------------------------------------------------------------------------------------------------------------------
Albertson's, Inc., 8% Sr. Unsec. Debs., 5/1/31 2 1,645,000 1,607,351
- --------------------------------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc., 8.125% Sr. Unsec. Nts., 5/1/12 1,435,000 1,617,038
- --------------------------------------------------------------------------------------------------------------------
BAE Systems Holdings, Inc., 5.20% Nts., 8/15/15 5 2,115,000 2,027,151
- --------------------------------------------------------------------------------------------------------------------
Barclays Bank plc, 6.278% Perpetual Bonds 11 2,780,000 2,652,787
- --------------------------------------------------------------------------------------------------------------------
Beazer Homes USA, Inc., 6.875% Sr. Unsec. Nts., 7/15/15 2 1,025,000 932,750
- --------------------------------------------------------------------------------------------------------------------
British Sky Broadcasting Group plc, 8.20% Sr. Unsec. Nts., 7/15/09 1,255,000 1,345,379
- --------------------------------------------------------------------------------------------------------------------
Caesars Entertainment, Inc., 7.50% Sr. Unsec. Nts., 9/1/09 2,220,000 2,321,998
- --------------------------------------------------------------------------------------------------------------------
Cardinal Health, Inc., 5.80% Nts., 10/15/16 5 1,585,000 1,582,575
- --------------------------------------------------------------------------------------------------------------------
CenterPoint Energy, Inc., 7.25% Sr. Nts., Series B, 9/1/10 1,925,000 2,036,773
- --------------------------------------------------------------------------------------------------------------------
Centex Corp., 4.875% Sr. Unsec. Nts., 8/15/08 1,235,000 1,221,753
- --------------------------------------------------------------------------------------------------------------------
Chancellor Media CCU, 8% Sr. Unsec. Nts., 11/1/08 995,000 1,040,866
- --------------------------------------------------------------------------------------------------------------------
CIT Group, Inc., 5.40% Sr. Nts., 3/7/13 2,010,000 2,002,786
- --------------------------------------------------------------------------------------------------------------------
Citigroup, Inc., 6.125% Sub. Nts., 8/25/36 820,000 846,296
- --------------------------------------------------------------------------------------------------------------------
Clear Channel Communications, Inc., 6.25% Nts., 3/15/11 1,425,000 1,430,737
- --------------------------------------------------------------------------------------------------------------------
Coca-Cola Co. (The), 7.375% Unsec. Debs., 7/29/93 440,000 548,779
- --------------------------------------------------------------------------------------------------------------------
Comcast Corp., 6.45% Unsec. Nts., 3/15/37 2,380,000 2,389,065
- --------------------------------------------------------------------------------------------------------------------
Cox Communications, Inc., 4.625% Unsec. Nts., 1/15/10 3,060,000 2,978,717
- --------------------------------------------------------------------------------------------------------------------
D.R. Horton, Inc.:
5.375% Sr. Unsec. Nts., 6/15/12 2 1,265,000 1,209,536
6.125% Nts., 1/15/14 2 895,000 874,610
- --------------------------------------------------------------------------------------------------------------------
DaimlerChrysler North America Holding Corp., 7.30% Nts., 1/15/12 1,955,000 2,080,202
- --------------------------------------------------------------------------------------------------------------------
Delhaize America, Inc., 9% Unsub. Debs., 4/15/31 1,235,000 1,452,840
- --------------------------------------------------------------------------------------------------------------------
Dominion Resources, Inc., 8.125% Sr. Unsub. Nts., 6/15/10 1,740,000 1,895,323
- --------------------------------------------------------------------------------------------------------------------
Eastman Kodak Co., 3.625% Nts., Series A, 5/15/08 244,000 235,450
- --------------------------------------------------------------------------------------------------------------------
EchoStar DBS Corp., 5.75% Sr. Unsec. Nts., 10/1/08 2 1,225,000 1,217,344
- --------------------------------------------------------------------------------------------------------------------
El Paso Corp.:
6.50% Sr. Unsec. Nts., 6/1/08 2 390,000 392,438
7.625% Sr. Unsec. Nts., 9/1/08 2,3 1,460,000 1,501,975
- --------------------------------------------------------------------------------------------------------------------
Enterprise Products Operating LP, 7.50% Sr. Unsec. Unsub. Nts., 2/1/11 1,885,000 2,012,111
- --------------------------------------------------------------------------------------------------------------------
EOP Operating LP, 8.10% Unsec. Nts., 8/1/10 1,900,000 2,064,871
- --------------------------------------------------------------------------------------------------------------------
Federated Department Stores, Inc., 6.625% Sr. Unsec. Nts., 9/1/08 1,335,000 1,362,083
- --------------------------------------------------------------------------------------------------------------------
FirstEnergy Corp., 7.375% Sr. Unsub. Nts., Series C, 11/15/31 1,790,000 2,075,865
- --------------------------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 9.75% Sr. Unsec. Nts., 9/15/10 2,5 3,780,000 3,905,916
- --------------------------------------------------------------------------------------------------------------------
Gap, Inc. (The):
6.90% Nts., 9/15/07 1,495,000 1,510,156
9.393% Unsub. Nts., 12/15/08 4 228,000 246,002
- --------------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 8% Bonds, 11/1/31 2 1,670,000 1,750,948
33 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------------------------------------------
Goldman Sachs Capital, Inc. (The), 6.345% Sub. Bonds, 2/15/34 $ 2,680,000 $ 2,671,518
- --------------------------------------------------------------------------------------------------------------------
HBOS plc, 6.413% Sub. Perpetual Bonds, Series A 5,11 2,700,000 2,614,289
- --------------------------------------------------------------------------------------------------------------------
HCA, Inc., 8.75% Sr. Nts., 9/1/10 2 2,015,000 2,040,188
- --------------------------------------------------------------------------------------------------------------------
Hilton Hotels Corp., 8.25% Sr. Unsec. Nts., 2/15/11 1,465,000 1,585,863
- --------------------------------------------------------------------------------------------------------------------
HSBC Finance Capital Trust IX, 5.911% Nts., 11/30/35 4 2,000,000 2,003,036
- --------------------------------------------------------------------------------------------------------------------
Hyatt Equities LLC, 6.875% Nts., 6/15/07 5 1,955,000 1,968,267
- --------------------------------------------------------------------------------------------------------------------
Hyundai Motor Manufacturing Alabama LLC, 5.30% Sr. Unsec. Nts., 12/19/08 5 1,140,000 1,130,815
- --------------------------------------------------------------------------------------------------------------------
IPALCO Enterprises, Inc., 8.375% Sr. Sec. Nts., 11/14/08 4 920,000 949,900
- --------------------------------------------------------------------------------------------------------------------
iStar Financial, Inc., 5.15% Sr. Unsec. Nts., 3/1/12 2,195,000 2,143,951
- --------------------------------------------------------------------------------------------------------------------
JPMorgan Chase & Co., 5.15% Sub. Nts., 10/1/15 2,000,000 1,954,308
- --------------------------------------------------------------------------------------------------------------------
K. Hovnanian Enterprises, Inc., 6.50% Sr. Nts., 1/15/14 2 1,735,000 1,596,200
- --------------------------------------------------------------------------------------------------------------------
KB Home, 5.75% Sr. Unsec. Unsub. Nts., 2/1/14 2 1,310,000 1,193,569
- --------------------------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners LP, 7.30% Sr. Unsec. Nts., 8/15/33 1,810,000 1,969,418
- --------------------------------------------------------------------------------------------------------------------
Kroger Co. (The), 5.50% Unsec. Unsub. Nts., 2/1/13 2,075,000 2,048,139
- --------------------------------------------------------------------------------------------------------------------
Lennar Corp., 7.625% Sr. Unsec. Nts., 3/1/09 1,845,000 1,929,130
- --------------------------------------------------------------------------------------------------------------------
Liberty Media Corp.:
5.70% Sr. Unsec. Nts., 5/15/13 1,070,000 1,015,024
7.875% Sr. Nts., 7/15/09 2 610,000 641,667
- --------------------------------------------------------------------------------------------------------------------
Limited Brands, Inc., 6.125% Sr. Unsec. Nts., 12/1/12 2,035,000 2,062,326
- --------------------------------------------------------------------------------------------------------------------
Marsh & McLennan Cos., Inc.:
5.875% Sr. Unsec. Bonds, 8/1/33 1,300,000 1,193,494
7.125% Sr. Unsec. Nts., 6/15/09 1,170,000 1,215,793
- --------------------------------------------------------------------------------------------------------------------
May Department Stores Co., 7.90% Unsec. Debs., 10/15/07 715,000 727,631
- --------------------------------------------------------------------------------------------------------------------
MBIA, Inc., 5.70% Sr. Unsec. Unsub. Nts., 12/1/34 1,585,000 1,531,725
- --------------------------------------------------------------------------------------------------------------------
MeadWestvaco Corp., 6.85% Unsec. Unsub. Nts., 4/1/12 2 1,925,000 2,012,930
- --------------------------------------------------------------------------------------------------------------------
MGM Mirage, Inc., 6% Sr. Sec. Nts., 10/1/09 1,985,000 1,970,113
- --------------------------------------------------------------------------------------------------------------------
Mission Energy Holding Co., 13.50% Sr. Sec. Nts., 7/15/08 1,755,000 1,967,794
- --------------------------------------------------------------------------------------------------------------------
Morgan Stanley, 4.75% Sub. Nts., 4/1/14 2,090,000 1,990,625
- --------------------------------------------------------------------------------------------------------------------
NiSource Finance Corp., 7.875% Sr. Unsec. Nts., 11/15/10 2,740,000 2,958,293
- --------------------------------------------------------------------------------------------------------------------
Pemex Project Funding Master Trust, 7.875% Unsec. Unsub. Nts., 2/1/09 2,865,000 3,006,818
- --------------------------------------------------------------------------------------------------------------------
Petroleum Export Ltd. Cayman SPV, 4.623% Sr. Nts., Cl. A1, 6/15/10 5 2,593,333 2,558,627
- --------------------------------------------------------------------------------------------------------------------
PF Export Receivables Master Trust, 3.748% Sr. Nts., Series B, 6/1/13 5 546,270 514,562
- --------------------------------------------------------------------------------------------------------------------
Popular North America, Inc., 4.70% Nts., 6/30/09 2,540,000 2,492,266
- --------------------------------------------------------------------------------------------------------------------
Prudential Holdings LLC, 8.695% Bonds, Series C, 12/18/23 5 1,885,000 2,329,270
- --------------------------------------------------------------------------------------------------------------------
Prudential Insurance Co. of America, 8.30% Nts., 7/1/25 1,990,000 2,502,972
- --------------------------------------------------------------------------------------------------------------------
PSEG Funding Trust I, 5.381% Nts., 11/16/07 1,030,000 1,028,687
- --------------------------------------------------------------------------------------------------------------------
Pulte Homes, Inc., 4.875% Nts., 7/15/09 2 2,005,000 1,970,678
- --------------------------------------------------------------------------------------------------------------------
Qwest Corp., 5.625% Unsec. Nts., 11/15/08 245,000 244,388
34 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------------------------------------------
R&B Falcon Corp., 9.50% Sr. Unsec. Nts., 12/15/08 $ 750,000 $ 814,988
- --------------------------------------------------------------------------------------------------------------------
Reed Elsevier Capital, Inc., 4.625% Nts., 6/15/12 865,000 827,469
- --------------------------------------------------------------------------------------------------------------------
Reynolds American, Inc., 6.50% Sr. Sec. Nts., 6/1/07 5 1,249,000 1,258,537
- --------------------------------------------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd., 7% Sr. Unsec. Unsub. Nts., 10/15/07 550,000 558,212
- --------------------------------------------------------------------------------------------------------------------
Safeway, Inc., 6.50% Sr. Unsec. Nts., 3/1/11 2,010,000 2,076,700
- --------------------------------------------------------------------------------------------------------------------
Telecom Italia Capital SA, 4% Unsec. Nts., 11/15/08 2,045,000 1,984,703
- --------------------------------------------------------------------------------------------------------------------
Telefonos de Mexico SA de CV, 4.50% Nts., 11/19/08 2,060,000 2,029,436
- --------------------------------------------------------------------------------------------------------------------
Telus Corp., 8% Nts., 6/1/11 895,000 987,528
- --------------------------------------------------------------------------------------------------------------------
Time Warner Entertainment Co. LP, 8.375% Sr. Nts., 7/15/33 2 1,615,000 1,910,329
- --------------------------------------------------------------------------------------------------------------------
Tribune Co., 5.50% Nts., Series E, 10/6/08 1,110,000 1,102,684
- --------------------------------------------------------------------------------------------------------------------
TXU Energy Co., 6.125% Nts., 3/15/08 1,330,000 1,341,471
- --------------------------------------------------------------------------------------------------------------------
Tyson Foods, Inc., 7.25% Sr. Unsec. Nts., 10/1/06 2,300,000 2,300,000
- --------------------------------------------------------------------------------------------------------------------
United States Steel Corp., 10.75% Sr. Nts., 8/1/08 370,000 401,913
- --------------------------------------------------------------------------------------------------------------------
Univision Communications, Inc.:
3.50% Sr. Unsec. Nts., 10/15/07 1,270,000 1,235,616
3.875% Sr. Unsec. Nts., 10/15/08 590,000 560,971
- --------------------------------------------------------------------------------------------------------------------
Verizon Global Funding Corp., 7.25% Sr. Unsec. Unsub. Nts., 12/1/10 960,000 1,030,651
- --------------------------------------------------------------------------------------------------------------------
Vornado Realty LP, 5.625% Sr. Unsec. Unsub. Nts., 6/15/07 2,055,000 2,053,352
- --------------------------------------------------------------------------------------------------------------------
Westar Energy, Inc., 7.125% Sr. Unsec. Nts., 8/1/09 1,515,000 1,582,928
- --------------------------------------------------------------------------------------------------------------------
Williams Cos., Inc., Credit Linked Certificate Trust (The), 6.75% Nts., 4/15/09 5 1,955,000 1,974,550
- --------------------------------------------------------------------------------------------------------------------
Xerox Corp., 9.75% Sr. Unsec. Nts., 1/15/09 1,840,000 2,001,000
- --------------------------------------------------------------------------------------------------------------------
Yum! Brands, Inc., 7.70% Sr. Nts., 7/1/12 1,345,000 1,474,299
----------------
Total Non-Convertible Corporate Bonds and Notes (Cost $149,389,552) 150,085,892
- --------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--9.4%
- --------------------------------------------------------------------------------------------------------------------
Undivided interest of 6.49% in joint repurchase agreement (Principal Amount/
Value $1,469,294,000, with a maturity value of $1,469,936,816) with UBS Warburg
LLC, 5.25%, dated 9/29/06, to be repurchased at $95,359,702 on 10/2/06,
collateralized by Federal National Mortgage Assn., 5%,
2/1/36, with a value of $1,502,659,342 (Cost $95,318,000) 95,318,000 95,318,000
- --------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (excluding Investments Purchased with
Cash Collateral) (Cost $1,010,155,604) 1,096,207,390
- --------------------------------------------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED--8.8% 12
- --------------------------------------------------------------------------------------------------------------------
ASSET BACKED FLOATING NOTE--0.2%
Whitehawk CDO Funding Corp., 5.44%, 12/15/06 2,000,000 2,000,000
35 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--8.6%
Undivided interest of 0.95% in joint repurchase agreement (Principal Amount/
Value $3,950,000,000, with a maturity value of $3,951,787,375) with Nomura
Securities, 5.43%, dated 9/29/06, to be repurchased at $37,490,219 on
10/2/06, collateralized by U.S. Agency Mortgages, 0.00%-22.12%,
3/15/14-6/25/43, with a value of $4,029,000,000 $ 37,473,262 $ 37,473,262
- --------------------------------------------------------------------------------------------------------------------
Undivided interest of 1% in joint repurchase agreement (Principal Amount/
Value $2,500,000,000 with a maturity value of $2,501,131,250) with ING
Financial Markets LLC, 5.43%, dated 9/29/06, to be repurchased at
$25,011,313 on 10/2/06, collateralized by U.S. Agency Mortgages,
0.00%-7%, 9/1/18-8/1/36, with a value of $2,550,003,623 25,000,000 25,000,000
- --------------------------------------------------------------------------------------------------------------------
Undivided interest of 10% in joint repurchase agreement (Principal Amount/
Value $250,000,000, with a maturity value of $250,112,500) with Cantor
Fitzgerald & Co., 5.40%, dated 9/29/06, to be repurchased at
$25,011,250 on 10/2/06, collateralized by U.S. Agency
Mortgages, 0.0001%-6.50%, 8/1/12-9/1/36, with
a value of $255,002,127 25,000,000 25,000,000
----------------
87,473,262
----------------
Total Investments Purchased with Cash Collateral from Securities Loaned
(Cost $89,473,262) 89,473,262
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $1,099,628,866) 116.6% 1,185,680,652
- --------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (16.6) (169,206,543)
--------------------------------
NET ASSETS 100.0% $ 1,016,474,109
================================
36 | OPPENHEIMER BALANCED FUND
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Partial or fully-loaned security. See Note 11 of accompanying Notes.
3. Illiquid security. The aggregate value of illiquid securities as of September
30, 2006 was $2,447,827, which represents 0.24% of the Fund's net assets. See
Note 10 of accompanying Notes.
4. Represents the current interest rate for a variable or increasing rate
security.
5. 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 $23,864,459 or 2.35% of the Fund's net
assets as of September 30, 2006.
6. When-issued security or forward commitment to be delivered and settled after
September 30, 2006. See Note 1 of accompanying Notes.
7. 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 $12,391,639 or 1.22% of the Fund's net assets
as of September 30, 2006.
8. 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 $816,197 or 0.08% of the Fund's net assets as of
September 30, 2006.
9. Zero coupon bond reflects effective yield on the date of purchase.
10. 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 $1,489,719. See Note 6 of accompanying Notes.
11. 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.
12. The security/securities have 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 11 of
accompanying Notes.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
37 | OPPENHEIMER BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES September 30, 2006
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------------------------------------
Investments, at value (cost $1,099,628,866)--see accompanying statement of investments $ 1,185,680,652
- ------------------------------------------------------------------------------------------------------------
Unrealized appreciation on swap contracts 137,794
- ------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 8,493,669
Interest, dividends and principal paydowns 4,563,933
Shares of beneficial interest sold 1,045,920
Futures margins 55,193
Other 41,844
-----------------
Total assets 1,200,019,005
- ------------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------------
Bank overdraft 236,891
- ------------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 89,473,262
- ------------------------------------------------------------------------------------------------------------
Unrealized depreciation on swap contracts 82,713
- ------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $75,149,339 purchased on a when-issued basis
or forward commitment) 89,545,735
Shares of beneficial interest redeemed 3,182,644
Distribution and service plan fees 554,061
Trustees' compensation 166,721
Transfer and shareholder servicing agent fees 138,448
Shareholder communications 83,125
Other 81,296
-----------------
Total liabilities 183,544,896
- ------------------------------------------------------------------------------------------------------------
NET ASSETS $ 1,016,474,109
=================
- ------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ------------------------------------------------------------------------------------------------------------
Paid-in capital $ 869,353,893
- ------------------------------------------------------------------------------------------------------------
Accumulated net investment income 6,230,268
- ------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 54,651,047
- ------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets
and liabilities denominated in foreign currencies 86,238,901
-----------------
NET ASSETS $ 1,016,474,109
=================
38 | OPPENHEIMER BALANCED FUND
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- ------------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of $810,738,254 and
58,162,367 shares of beneficial interest outstanding) $13.94
Maximum offering price per share (net asset value plus sales charge of 5.75% of
offering price) $14.79
- ------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $98,021,445
and 7,185,989 shares of beneficial interest outstanding) $13.64
- ------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $92,781,538
and 6,769,545 shares of beneficial interest outstanding) $13.71
- ------------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $14,932,872
and 1,081,998 shares of beneficial interest outstanding) $13.80
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
39 | OPPENHEIMER BALANCED FUND
STATEMENT OF OPERATIONS For the Year Ended September 30, 2006
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------------
Interest $ 24,238,538
- ------------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $205,287) 6,247,156
- ------------------------------------------------------------------------------------------------------------
Portfolio lending fees 210,181
- ------------------------------------------------------------------------------------------------------------
Other income 37,373
-----------------
Total investment income 30,733,248
- ------------------------------------------------------------------------------------------------------------
EXPENSES
- ------------------------------------------------------------------------------------------------------------
Management fees 6,551,281
- ------------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 1,546,642
Class B 958,842
Class C 904,171
Class N 67,000
- ------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 971,045
Class B 224,727
Class C 171,345
Class N 32,719
- ------------------------------------------------------------------------------------------------------------
Shareholder communications:
Class A 179,696
Class B 48,213
Class C 29,217
Class N 3,197
- ------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 19,584
- ------------------------------------------------------------------------------------------------------------
Trustees' compensation 14,460
- ------------------------------------------------------------------------------------------------------------
Other 135,728
-----------------
Total expenses 11,857,867
Less reduction to custodian expenses (8,697)
-----------------
Net expenses 11,849,170
- ------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 18,884,078
40 | OPPENHEIMER BALANCED FUND
- ------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ------------------------------------------------------------------------------------------------------------
Net realized gain on:
Investments $ 66,702,303
Closing and expiration of option contracts written 171,911
Closing and expiration of futures contracts 1,569,827
Foreign currency transactions 908,096
Swap contracts 12,831
-----------------
Net realized gain 69,364,968
- ------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (52,593,617)
Translation of assets and liabilities denominated in foreign currencies (444,188)
Futures contracts (214,055)
Option contracts (41,457)
Swap contracts 126,054
-----------------
Net change in unrealized appreciation (53,167,263)
- ------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 35,081,783
=================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
41 | OPPENHEIMER BALANCED FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2006 2005
- ------------------------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------------------------
Net investment income $ 18,884,078 $ 13,213,675
- ------------------------------------------------------------------------------------------------------------
Net realized gain 69,364,968 59,841,198
- ------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (53,167,263) 24,412,348
------------------------------------
Net increase in net assets resulting from operations 35,081,783 97,467,221
- ------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (16,011,740) (7,922,968)
Class B (1,186,200) (487,362)
Class C (1,173,973) (462,164)
Class N (238,509) (90,860)
- ------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (39,741,174) (33,213,932)
Class B (5,399,948) (4,435,493)
Class C (4,997,038) (3,587,318)
Class N (703,418) (466,585)
- ------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest
transactions:
Class A 111,393,954 36,521,136
Class B 3,678,115 8,636,193
Class C 8,465,336 15,819,238
Class N 3,576,958 2,483,994
- ------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------
Total increase 92,744,146 110,261,100
- ------------------------------------------------------------------------------------------------------------
Beginning of period 923,729,963 813,468,863
------------------------------------
End of period (including accumulated net investment income
of $6,230,268 and $5,145,284, respectively) $ 1,016,474,109 $ 923,729,963
====================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
42 | OPPENHEIMER BALANCED FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED SEPTEMBER 30, 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 14.51 $ 13.75 $ 12.55 $ 10.51 $ 12.14
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .30 1 .24 1 .14 .21 .35
Net realized and unrealized gain (loss) .21 1.38 1.16 2.08 (1.29)
--------------------------------------------------------------------------
Total from investment operations .51 1.62 1.30 2.29 (.94)
- ------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.29) (.16) (.10) (.22) (.31)
Tax return of capital distribution -- -- -- (.03) --
Distributions from net realized gain (.79) (.70) -- -- (.38)
--------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (1.08) (.86) (.10) (.25) (.69)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.94 $ 14.51 $ 13.75 $ 12.55 $ 10.51
==========================================================================
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 3.86% 12.13% 10.37% 21.98% (8.58)%
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 810,738 $ 725,836 $ 651,754 $ 575,799 $ 483,311
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 752,163 $ 694,147 $ 631,041 $ 523,477 $ 570,796
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 2.16% 1.69% 1.05% 1.78% 2.84%
Total expenses 1.06% 1.05% 1.07% 1.11% 1.15%
Expenses after payments and
waivers and reduction to custodian expenses 1.06% 1.05% 1.06% 1.11% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 84% 4 73% 4 61% 4 205% 31%
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
- ------------------------------------------------------------------------------
Year Ended September 30, 2006 $1,329,963,782 $1,377,730,782
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.
43 | OPPENHEIMER BALANCED FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS B YEAR ENDED SEPTEMBER 30, 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 14.23 $ 13.53 $ 12.40 $ 10.38 $ 12.01
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .17 1 .11 1 .02 .09 .25
Net realized and unrealized gain (loss) .20 1.36 1.13 2.07 (1.29)
---------------------------------------------------------------------------
Total from investment operations .37 1.47 1.15 2.16 (1.04)
- -------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.17) (.07) (.02) (.11) (.21)
Tax return of capital distribution -- -- -- (.03) --
Distributions from net realized gain (.79) (.70) -- -- (.38)
---------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.96) (.77) (.02) (.14) (.59)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.64 $ 14.23 $ 13.53 $ 12.40 $ 10.38
===========================================================================
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 2.84% 11.17% 9.26% 20.91% (9.38)%
- ------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 98,021 $ 98,271 $ 84,924 $ 64,944 $ 54,757
- -------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 95,979 $ 92,677 $ 77,082 $ 57,836 $ 64,702
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.24% 0.76% 0.11% 0.81% 2.02%
Total expenses 1.99% 4 1.98% 4 2.02% 4,5 2.08% 4 1.97% 4
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 84% 6 73% 6 61% 6 205% 31%
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
- ------------------------------------------------------------------------------
Year Ended September 30, 2006 $1,329,963,782 $1,377,730,782
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.
44 | OPPENHEIMER BALANCED FUND
CLASS C YEAR ENDED SEPTEMBER 30, 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 14.29 $ 13.59 $ 12.44 $ 10.42 $ 12.06
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .18 1 .11 1 .04 .11 .24
Net realized and unrealized gain (loss) .21 1.37 1.13 2.06 (1.29)
--------------------------------------------------------------------------
Total from investment operations .39 1.48 1.17 2.17 (1.05)
- ------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.18) (.08) (.02) (.12) (.21)
Tax return of capital distribution -- -- -- (.03) --
Distributions from net realized gain (.79) (.70) -- -- (.38)
--------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.97) (.78) (.02) (.15) (.59)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.71 $ 14.29 $ 13.59 $ 12.44 $ 10.42
==========================================================================
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 2.97% 11.18% 9.45% 20.98% (9.41)%
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 92,782 $ 87,820 $ 68,018 $ 47,212 $ 33,300
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 90,567 $ 78,091 $ 60,095 $ 38,407 $ 37,412
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.30% 0.83% 0.19% 0.90% 2.03%
Total expenses 1.93% 1.91% 1.93% 1.98% 1.96%
Expenses after payments and waivers
and reduction to custodian expenses 1.92% 1.91% 1.93% 1.98% 1.96%
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 84% 4 73% 4 61% 4 205% 31%
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
- ------------------------------------------------------------------------------
Year Ended September 30, 2006 $1,329,963,782 $1,377,730,782
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.
45 | OPPENHEIMER BALANCED FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS N YEAR ENDED SEPTEMBER 30, 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 14.38 $ 13.65 $ 12.49 $ 10.48 $ 12.13
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .24 1 .17 1 .10 .20 .39
Net realized and unrealized gain (loss) .21 1.38 1.12 2.01 (1.38)
--------------------------------------------------------------------------
Total from investment operations .45 1.55 1.22 2.21 (.99)
- ------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.24) (.12) (.06) (.17) (.28)
Tax return of capital distribution -- -- -- (.03) --
Distributions from net realized gain (.79) (.70) -- -- (.38)
--------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (1.03) (.82) (.06) (.20) (.66)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.80 $ 14.38 $ 13.65 $ 12.49 $ 10.48
==========================================================================
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 3.42% 11.66% 9.77% 21.27% (8.94)%
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 14,933 $ 11,803 $ 8,772 $ 3,349 $ 798
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 13,425 $ 10,278 $ 5,701 $ 1,604 $ 454
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.76% 1.24% 0.55% 1.24% 2.49%
Total expenses 1.47% 1.50% 1.58% 1.76% 1.48%
Expenses after payments and waivers
and reduction to custodian expenses 1.47% 1.50% 1.57% 1.62% 1.48%
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 84% 4 73% 4 61% 4 205% 31%
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
- ------------------------------------------------------------------------------
Year Ended September 30, 2006 $1,329,963,782 $1,377,730,782
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.
46 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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(R) 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
exch-ange 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 ex-change 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
values have been materially affected by what the Manager identifies as a
significant event
47 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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 September 30, 2006, the Fund had purchased
$75,149,339 of securities issued on a when-issued basis or forward commitment.
In connection with its ability to purchase or sell securities on a
when-issued basis, the Fund may enter into forward roll transactions with
respect to mortgage-related securities. Forward roll transactions require the
sale of securities for delivery in the current month, and a simultaneous
agreement with the same counterparty to repurchase similar (same type, coupon
and maturity) but not identical securities on a specified future date. The Fund
records the incremental difference between the forward purchase and sale of each
forward roll as realized gain (loss) on investments or as fee income in the case
of such transactions that have an associated fee in lieu of a difference in the
forward purchase and sale price.
Risks of entering into forward roll transactions include the potential
inability of the counterparty to meet the terms of the agreement; the potential
of the Fund to receive inferior securities at redelivery as compared to the
securities sold to the counterparty; counterparty credit risk; and the potential
pay down speed variance between the mortgage-related pools.
- --------------------------------------------------------------------------------
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
48 | OPPENHEIMER BALANCED FUND
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 withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually re-ceived 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.
- --------------------------------------------------------------------------------
INVESTMENTS WITH OFF BALANCE SHEET RISK. The Fund enters into financial
instrument transactions (such as swaps, futures and other derivatives) that may
have off-balance sheet market risk. Off-balance sheet market risk exists when
the maximum potential loss on a particular financial instrument is greater than
the value of such financial instrument, as reflected in the Fund's Statement of
Assets and Liabilities.
- --------------------------------------------------------------------------------
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.
49 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
NET UNREALIZED
APPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2,3,4 TAX PURPOSES
--------------------------------------------------------------------------
$6,406,054 $56,362,805 $884,542 $85,397,193
1. The Fund had $156,550 of post-October foreign currency losses which were
deferred.
2. The Fund had $727,992 of straddle losses which were deferred.
3. During the fiscal year ended September 30, 2006, the Fund utilized $2,115,654
of capital loss carryforward to offset capital gains realized in that fiscal
year.
4. During the fiscal year ended September 30, 2005, the Fund utilized $248,875
of capital loss carryforward to offset capital gains realized in that fiscal
year.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for September 30, 2006. Net assets of
the Fund were unaffected by the reclassifications.
INCREASE TO REDUCTION TO
ACCUMULATED ACCUMULATED NET
INCREASE TO NET INVESTMENT REALIZED GAIN
PAID-IN CAPITAL INCOME ON INVESTMENTS 5
--------------------------------------------------------------------------
$8,845,539 $811,328 $9,656,867
5. $6,799,234, all of which was long-term capital gain, was distributed in
connection with Fund share redemptions.
The tax character of distributions paid during the years ended September 30,
2006 and September 30, 2005 was as follows:
YEAR ENDED YEAR ENDED
SEPT. 30, 2006 SEPT. 30, 2005
--------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 27,772,855 $ 20,732,822
Long-term capital gain 41,679,145 29,933,860
----------------------------------
Total $ 69,452,000 $ 50,666,682
==================================
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income
50 | OPPENHEIMER BALANCED FUND
tax purposes as of September 30, 2006 are noted below. The primary difference
between book and tax appreciation or depreciation of securities and other
investments, if applicable, is attributable to the tax deferral of losses or tax
realization of financial statement unrealized gain or loss.
Federal tax cost of securities $1,100,215,289
Federal tax cost of other investments (102,684,682)
--------------
Total federal tax cost $ 997,530,607
==============
Gross unrealized appreciation $ 110,837,661
Gross unrealized depreciation (25,440,468)
--------------
Net unrealized appreciation $ 85,397,193
==============
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for the
Fund's independent trustees. Benefits are based on years of service and fees
paid to each trustee during the years of service. During the year ended
September 30, 2006, the Fund's projected benefit obligations were decreased by
$787, resulting in an accumulated liability of $123,818 as of September 30,
2006.
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
51 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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.
Such interest expense and other custodian fees may be paid with these earnings.
- --------------------------------------------------------------------------------
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 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:
YEAR ENDED SEPTEMBER 30, 2006 YEAR ENDED SEPTEMBER 30, 2005
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------
CLASS A
Sold 6,707,218 $ 92,313,989 6,341,196 $ 89,407,865
Dividends and/or
distributions reinvested 3,764,837 51,001,543 2,700,256 37,680,524
Acquisition-Note 14 7,679,053 105,279,820 -- --
Redeemed (9,999,585) (137,201,398) (6,426,942) (90,567,253)
--------------------------------------------------------------
Net increase 8,151,523 $ 111,393,954 2,614,510 $ 36,521,136
==============================================================
- ---------------------------------------------------------------------------------------------
CLASS B
Sold 1,486,495 $ 20,023,127 2,164,968 $ 29,908,987
Dividends and/or
distributions reinvested 459,149 6,095,358 334,015 4,563,228
Acquisition-Note 14 852,361 11,421,633 -- --
Redeemed (2,519,583) (33,862,003) (1,865,946) (25,836,022)
--------------------------------------------------------------
Net increase 278,422 $ 3,678,115 633,037 $ 8,636,193
==============================================================
52 | OPPENHEIMER BALANCED FUND
YEAR ENDED SEPTEMBER 30, 2006 YEAR ENDED SEPTEMBER 30, 2005
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------
CLASS C
Sold 1,733,303 $ 23,444,138 1,913,961 $ 26,621,005
Dividends and/or
distributions reinvested 420,150 5,602,992 273,835 3,758,922
Acquisition-Note 14 622,399 8,383,715 -- --
Redeemed (2,152,123) (28,965,509) (1,047,238) (14,560,689)
--------------------------------------------------------------
Net increase 623,729 $ 8,465,336 1,140,558 $ 15,819,238
==============================================================
- ---------------------------------------------------------------------------------------------
CLASS N
Sold 394,439 $ 5,367,295 295,550 $ 4,136,828
Dividends and/or
distributions reinvested 67,430 905,224 39,150 541,581
Acquisition-Note 14 134,474 1,824,806 -- --
Redeemed (334,942) (4,520,367) (156,565) (2,194,415)
--------------------------------------------------------------
Net increase 261,401 $ 3,576,958 178,135 $ 2,483,994
==============================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended September 30, 2006, were as
follows:
PURCHASES SALES
- ----------------------------------------------------------------------
Investment securities $ 666,663,552 $ 594,918,151
U.S. government and government
agency obligations 76,282,041 94,099,652
To Be Announced (TBA)
mortgage-related securities 1,329,963,782 1,377,730,782
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
average annual rate as shown in the following table:
FEE SCHEDULE
---------------------------------------------
Up to $200 million of net assets 0.75%
Next $200 million of net assets 0.72
Next $200 million of net assets 0.69
Next $200 million of net assets 0.66
Next $700 million of net assets 0.60
Over $1.5 billion of net assets 0.58
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended September 30, 2006, the Fund paid
$1,372,944 to OFS for services to the Fund.
53 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
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
Distributor shall be entitled to payment from the Fund of all or a portion of
the service fee and/or asset-based sales charge in respect to shares sold prior
to the effective date of such termination. The Distributor's aggregate
uncompensated expenses under the plan at September 30, 2006 for Class B, Class C
and Class N shares were $2,646,317, $1,605,654 and $172,056, 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
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- --------------------------------------------------------------------------------------------------
September 30, 2006 $347,378 $11,568 $220,052 $20,088 $4,077
54 | OPPENHEIMER BALANCED FUND
- --------------------------------------------------------------------------------
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 September 30, 2006, the Fund had no outstanding foreign currency
contracts.
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a negotiated price on a stipulated future
date. Futures contracts are traded on a commodity exchange. The Fund may buy and
sell futures contracts that relate to broadly based securities indices
(financial futures) or debt securities (interest rate futures) in order to gain
exposure to or protection from changes in market value of stocks and bonds or
interest rates. The Fund may also buy or write put or call options on these
futures contracts.
The Fund generally sells futures contracts as a hedge against increases in
interest rates and decreases in market value of portfolio securities. The Fund
may also purchase futures contracts to gain exposure to market changes as it may
be more efficient or cost effective than actually buying securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund recognizes a realized gain or loss when the contract is
closed or has expired.
55 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS Continued
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 at 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 September 30, 2006, the Fund had outstanding futures contracts as follows:
UNREALIZED
EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS SEPT. 30, 2006 (DEPRECIATION)
- ------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
U.S. Long Bonds 12/19/06 272 $ 30,574,500 $ 564,930
---------------
CONTRACTS TO SELL
Euro-Bundesobligation, 10 yr. 12/7/06 111 16,623,046 (110,551)
U.S. Treasury Nts., 2 yr. 12/29/06 493 100,818,500 (219,990)
U.S. Treasury Nts., 5 yr. 12/29/06 147 15,510,797 (105,415)
U.S. Treasury Nts., 10 yr. 12/19/06 4 432,250 1,270
---------------
(434,686)
---------------
$ 130,244
===============
- --------------------------------------------------------------------------------
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 or put options are noted
in the Statement of Investments where applicable. Contracts subject to call or
put, expiration date, exercise price, premium received and market value are
detailed in a note to the
56 | OPPENHEIMER BALANCED FUND
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 [or commodity]
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 [or commodity]
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 year ended September 30, 2006 was as follows:
CALL OPTIONS
-----------------------------
NUMBER OF AMOUNT OF
CONTRACTS PREMIUMS
- ------------------------------------------------------------------
Options outstanding as of
September 30, 2005 786 $ 96,477
Options written 802 75,434
Options closed or expired (1,588) (171,911)
-----------------------------
Options outstanding as of
September 30, 2006 -- $ --
=============================
- --------------------------------------------------------------------------------
8. TOTAL RETURN SWAP CONTRACTS
A total return swap is an agreement under which a set of future cash flows is
exchanged between two counterparties. One cash flow stream will typically be
based on a reference interest rate or index and the other on the total return of
a reference asset such as a security, a basket of securities, or an index. The
total return includes appreciation or depreciation on the reference asset, plus
any interest or dividend payments. Payments under the swap are based on an
agreed upon principal amount but since this principal amount is not exchanged,
it represents neither an asset nor a liability to either counterparty, and is
referred to as notional. Total return swaps are marked to market daily using
different sources, including quotations from counterparties, pricing services,
brokers or market makers. The unrealized appreciation (depreciation) related to
the change in the valuation of the notional amount of the swap is combined with
the amount due to (owed by) the Fund at termination or settlement and disclosed
separately on the Statement of Assets and Liabilities. The net change in this
amount is included on the Statement of Operations. The Fund also records any
periodic payments received from (paid to) the counterparty, including at
termination, under such contracts as realized gain (loss) on the Statement of
Operations. The primary risks associated with total return swaps are credit
risks (if the counterparty fails to meet its obligations) and market risk (if
there is no liquid market for the agreement or unfavorable changes occur in the
reference asset).
57 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. TOTAL RETURN SWAP CONTRACTS Continued
As of September 30, 2006, the Fund had entered into the following total return
swap agreements:
SWAP NOTIONAL PAID BY RECEIVED BY TERMINATION UNREALIZED
COUNTERPARTY AMOUNT THE FUND THE FUND DATES APPRECIATION
- ------------------------------------------------------------------------------------------------------------------
Lehman Brothers
If negative, CMBS Index Spread
the absolute value plus Total Return
of the Total Return Amount value
Amount for a given for a given
Deutsche Bank AG $ 3,880,000 Index Period. Index Period. 12/1/06 $ 2,859
- ------------------------------------------------------------------------------------------------------------------
If positive,
If negative, receive the Spread
the absolute value on the Lehman
of the Lehman Brothers CMBS
Brothers CMBS AAA 8.5+ Index
AAA 8.5+ Spread Return
Lehman Brothers Index Spread Amount, and
Special Financing, Inc. 4,300,000 Return Amount. Carry Amount. 12/1/06 3,111
-------------
$ 5,970
=============
Abbreviation is as follows:
CMBS Commercial Mortgage Backed Securities
- --------------------------------------------------------------------------------
9. CREDIT DEFAULT SWAP CONTRACTS
Credit default swaps are designed to transfer the credit exposure of fixed
income products between counterparties. The Fund may enter into credit default
swaps, both directly ("unfunded swaps") and indirectly in the form of a swap
embedded within a structured note ("funded swaps"), to protect against the risk
that a security will default. Unfunded and funded credit default swaps may be on
a single security, or a basket of securities. The Fund may take a short position
(purchaser of credit protection) or a long position (seller of credit
protection) in the credit default swap. Risks of credit default swaps include,
but are not limited to, the cost of paying for credit protection if there are no
credit events, pricing transparency when assessing the cost of a credit default
swap, counterparty risk, and the need to fund the delivery obligation (either
cash or defaulted bonds depending on whether the Fund is long or short the swap,
respectively).
The Fund would take a short position in a credit default swap (the
"unfunded swap") against a long portfolio position to decrease exposure to
specific high yield issuers. As a purchaser of credit protection under a swap
contract, the Fund pays a periodic interest fee on the notional amount to the
counterparty. This interest fee is accrued daily as a component of unrealized
appreciation (depreciation) and is recorded as realized loss upon payment. Upon
occurrence of a specific credit event with respect to the underlying referenced
debt obligation, the Fund is obligated to deliver that security to the
counterparty in exchange for receipt of the notional amount from the
counterparty. The difference
58 | OPPENHEIMER BALANCED FUND
between the value of the security delivered and the notional amount received is
recorded as realized gain and is included on the Statement of Operations. Credit
default swaps are marked to market daily using different sources, including
quotations from counterparties, pricing services, brokers or market makers. The
unrealized appreciation (depreciation) related to the change in the valuation of
the notional amount of the swap is combined with the amount due to (owed by) the
Fund at termination or settlement and disclosed separately on the Statement of
Assets and Liabilities. The net change in this amount is included on the
Statement of Operations.
Information regarding such credit default swaps as of September 30, 2006 is as
follows:
ANNUAL
NOTIONAL AMOUNT INTEREST
REFERENCED RECEIVED BY THE RATE PAID UNREALIZED
DEBT FUND UPON CREDIT BY THE TERMINATION APPRECIATION
COUNTERPARTY OBLIGATION EVENT FUND DATES (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
CDX.NA.IG.7 $ 3,600,000 0.400% 12/20/11 $ (729)
Weyerhaeuser Co. 1,990,000 0.580 9/20/11 (1,140)
- ----------------------------------------------------------------------------------------------------------------
Morgan Stanley
Capital Services, Inc.:
Arrow Electronics, Inc. 1,990,000 0.790 9/20/11 (18,841)
Arrow Electronics, Inc. 1,000,000 0.770 9/20/11 (8,583)
Belo Corp. 1,190,000 0.650 6/20/11 6,650
Belo Corp. 655,000 0.670 6/20/11 3,109
Belo Corp. 1,325,000 0.675 6/20/11 6,011
Ford Motor Co. 990,000 5.300 12/20/08 (7,990)
Ford Motor Co. 2,090,000 5.400 12/20/08 (21,652)
General Motors Corp. 1,035,000 4.000 12/20/08 (2,909)
General Motors Corp. 1,005,000 3.950 12/20/08 (1,734)
---------------
$ (47,808)
===============
The Fund would take a long position in the credit default swap note (the "funded
swap") to increase the exposure to specific high yield corporate issuers. As a
seller of credit protection under a swap contract, the Fund receives a periodic
interest fee on the notional amount from the counterparty. This interest fee is
accrued daily as a component of unrealized appreciation (depreciation) and is
recorded as realized gain upon receipt. Upon occurrence of a specific credit
event with respect to the underlying referenced debt obligation, the Fund
receives that security from the counterparty in exchange for payment of the
notional amount to the counterparty. The difference between the value of the
security received and the notional amount paid is recorded as realized loss and
is included on the Statement of Operations. Credit default swaps are marked to
market daily using different sources, including quotations from counterparties,
pricing services, brokers or market makers. The unrealized appreciation
(depreciation) related to the change in the valuation of the notional amount of
the swap is combined with the amount due to (owed by) the
59 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9. CREDIT DEFAULT SWAP CONTRACTS Continued
Fund at termination or settlement and disclosed separately on the Statement of
Assets and Liabilities. The net change in this amount is included on the
Statement of Operations.
Information regarding such credit default swaps as of September 30, 2006 is as
follows:
ANNUAL
NOTIONAL AMOUNT INTEREST RATE
REFERENCED PAID BY THE RECEIVED UNREALIZED
DEBT FUND UPON CREDIT BY THE TERMINATION APPRECIATION
COUNTERPARTY OBLIGATION EVENT FUND DATES (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
Abitibi-Consolidated
Co. of Canada 1,600,000 1.52% 9/20/07 $ 5,263
Allied Waste North
America, Inc. 630,000 2.00 9/20/09 5,008
Allied Waste North
America, Inc. 990,000 2.00 9/20/09 7,870
Bombardier, Inc. 500,000 0.90 9/20/07 48
Eastman Kodak Co. 1,395,000 1.00 12/20/08 117
General Motors
Acceptance Corp. 510,000 2.30 6/20/07 4,207
General Motors Corp. 630,000 6.40 12/20/06 7,182
General Motors Corp. 380,000 6.40 12/20/06 4,307
- --------------------------------------------------------------------------------------------------------------------
Morgan Stanley
Capital Services, Inc.:
ArvinMeritor, Inc. 555,000 1.05 9/20/07 (3,494)
ArvinMeritor, Inc. 460,000 1.10 9/20/07 (2,690)
ArvinMeritor, Inc. 40,000 1.20 9/20/07 (207)
Bombardier, Inc. 560,000 1.00 9/20/07 672
Bombardier, Inc. 555,000 1.05 9/20/07 1,083
Ford Motor Co. 990,000 7.05 12/20/16 14,121
Ford Motor Co. 2,090,000 7.15 12/20/16 40,841
General Motors
Acceptance Corp. 1,290,000 3.15 6/20/07 21,631
General Motors Corp. 1,035,000 5.80 12/20/16 2,884
General Motors Corp. 1,005,000 5.75 12/20/16 22
Hyundai Motor
Manufacturing
Alabama LLC 865,000 0.40 6/20/07 798
J.C. Penney Corp., Inc. 1,990,000 0.61 6/20/13 (12,744)
---------------
$ 96,919
===============
- --------------------------------------------------------------------------------
10. ILLIQUID SECURITIES
As of September 30, 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
60 | OPPENHEIMER BALANCED FUND
securities. Securities that are illiquid are marked with the applicable footnote
on the Statement of Investments.
- --------------------------------------------------------------------------------
11. 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
securities, letters of credit 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 each day. If the Fund is
undercollateralized at the close of business due to an increase in market value
of securities on loan, additional collateral is requested from the borrowing
counterparty and is delivered to the Fund on the next business day. Cash
collateral may be invested in approved investments and the Fund bears the risk
of any loss in value of these investments. The Fund retains a portion of the
interest earned from the collateral. 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. 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 September 30, 2006, the
Fund had on loan securities valued at $92,494,428, which are included in the
Statement of Assets and Liabilities as "Investments, at value" and, when
applicable, as "Receivable for Investments sold." Collateral of $94,428,646 was
received for the loans, of which $89,473,262 was received in cash and
subsequently invested in approved investments or held as cash.
- --------------------------------------------------------------------------------
12. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Fund's tax returns to determine whether it
is "more-likely-than-not" that tax positions taken in the Fund's tax return will
be ultimately sustained. A tax liability and expense must be recorded in respect
of any tax position that, in Management's judgment, will not be fully realized.
FIN 48 is effective for fiscal years beginning after December 15, 2006. As of
September 30, 2006, the Manager is evaluating the implications of FIN 48. Its
impact in the Fund's financial statements has not yet been determined.
In September 2006, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 157, FAIR VALUE
MEASUREMENTS. This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and expands
disclosures about fair value measurements. SFAS No. 157 applies to fair value
measurements already required or permitted by existing standards.
61 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12. RECENT ACCOUNTING PRONOUNCEMENTS Continued
SFAS No. 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007 and interim periods within those fiscal years.
As of September 30, 2006, the Manager does not believe the adoption of SFAS No.
157 will materially impact the financial statement amounts; however, additional
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the measurements on changes in net assets for the
period.
- --------------------------------------------------------------------------------
13. LITIGATION
A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds including the Fund) 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 the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, 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.
- --------------------------------------------------------------------------------
14. ACQUISITION OF OPPENHEIMER DISCIPLINED ALLOCATION FUND
On May 11, 2006, the Fund acquired all of the net assets of Oppenheimer
Disciplined Allocation Fund, pursuant to an Agreement and Plan of Reorganization
approved by the Oppenheimer Disciplined Allocation Fund shareholders on April
20, 2006. The Fund issued (at an exchange ratio of 1.082920 for Class A,
1.125484 for Class B, 1.087721 for Class C and 1.090241 for Class N of the Fund)
to one share of Oppenheimer Disciplined Allocation Fund 7,679,053; 852,361;
622,399 and 134,474 shares of beneficial interest for Class A, Class B, Class C
and Class N, respectively, valued at $105,279,820, $11,421,633, $8,383,715 and
$1,824,806 in exchange for the net assets, resulting in combined Class A net
assets of
62 | OPPENHEIMER BALANCED FUND
$811,983,024, Class B net assets of $101,954,869, Class C net assets of
$95,423,574 and Class N net assets of $14,874,615 on May 11, 2006. The net
assets acquired included net unrealized appreciation of $7,913,564 and an unused
capital loss carryforward of $2,329,209 potential utilization subject to tax
limitations. The exchange qualified as a tax-free reorganization for federal
income tax purposes.
63 | OPPENHEIMER BALANCED FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER BALANCED FUND:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Balanced Fund, including the statement of investments, as of
September 30, 2006, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the five-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of September 30, 2006, by correspondence
with the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Balanced Fund as of September 30, 2006, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with U.S.
generally accepted accounting principles.
KPMG LLP
Denver, Colorado
November 15, 2006
64 | OPPENHEIMER BALANCED FUND
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2007, if applicable, shareholders of record will receive information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2006. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Capital gain distributions of $0.6500 per share were paid to Class A,
Class B, Class C and Class N shareholders, respectively, on December 14, 2005.
Whether received in stock or in cash, the capital gain distribution should be
treated by shareholders as a gain from the sale of the capital assets held for
more than one year (long-term capital gains).
Dividends, if any, paid by the Fund during the fiscal year ended September
30, 2006 which are not designated as capital gain distributions should be
multiplied by 21.81% to arrive at the amount eligible for the corporate
dividend-received deduction.
A portion, if any, of the dividends paid by the Fund during the fiscal
year ended September 30, 2006 which are not designated as capital gain
distributions are eligible for lower individual income tax rates to the extent
that the Fund has received qualified dividend income as stipulated by recent tax
legislation. $6,341,143 of the Fund's fiscal year taxable income may be eligible
for the lower individual income tax rates. In early 2007, shareholders of record
will receive information regarding the percentage of distributions that are
eligible for lower individual income tax rates.
Recent tax legislation allows a regulated investment company to designate
distributions not designated as capital gain distributions, as either interest
related dividends or short-term capital gain dividends, both of which are exempt
from the U.S. withholding tax applicable to non U.S. taxpayers. For the fiscal
year ended September 30, 2006, $15,840,371 or 85.12% of the ordinary
distributions paid by the Fund qualifies as an interest related dividend.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
65 | OPPENHEIMER BALANCED FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file 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.
66 | OPPENHEIMER BALANCED FUND
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER
FUND, LENGTH OF SERVICE, AGE TRUSTEESHIPS/DIRECTORSHIPS HELD; NUMBER OF PORTFOLIOS IN THE FUND
COMPLEX CURRENTLY OVERSEEN
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY,
TRUSTEES CENTENNIAL, COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE
TERM, OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
CLAYTON K. YEUTTER, Director of American Commercial Lines (barge company) (since January
Chairman of the Board 2005); Attorney at Hogan & Hartson (law firm) (since June 1993);
of Trustees (since 2003), Director of Covanta Holding Corp. (waste-to-energy company) (since
Trustee (since 1993) 2002); Director of Weyerhaeuser Corp. (1999-April 2004); Director of
Age: 75 Caterpillar, Inc. (1993-December 2002); Director of ConAgra Foods
(1993-2001); Director of Texas Instruments (1993-2001); Director of
FMC Corporation (1993-2001). Oversees 45 portfolios in the
OppenheimerFunds complex.
MATTHEW P. FINK, Trustee of the Committee for Economic Development (policy research
Trustee (since 2005) foundation) (since 2005); Director of ICI Education Foundation
Age: 65 (education foundation) (October 1991-August 2006); President of the
Investment Company Institute (trade association) (October 1991-June
2004); Director of ICI Mutual Insurance Company (insurance company)
(October 1991-June 2004). Oversees 45 portfolios in the
OppenheimerFunds complex.
ROBERT G. GALLI, A director or trustee of other Oppenheimer funds. Oversees 55
Trustee (since 1993) portfolios in the OppenheimerFunds complex.
Age: 73
PHILLIP A. GRIFFITHS, Distinguished Presidential Fellow for International Affairs (since
Trustee (since 1999) 2002) and Member (since 1979) of the National Academy of Sciences;
Age: 68 Council on Foreign Relations (since 2002); Director of GSI Lumonics
Inc. (precision medical equipment supplier) (since 2001); Senior
Advisor of The Andrew W. Mellon Foundation (since 2001); Chair of
Science Initiative Group (since 1999); Member of the American
Philosophical Society (since 1996); Trustee of Woodward Academy (since
1983); Foreign Associate of Third World Academy of Sciences; Director
of the Institute for Advanced Study (1991-2004); Director of Bankers
Trust New York Corporation (1994-1999); Provost at Duke University
(1983-1991). Oversees 45 portfolios in the OppenheimerFunds complex.
MARY F. MILLER, Trustee of the American Symphony Orchestra (not-for-profit) (since
Trustee (since 2004) October 1998); and Senior Vice President and General Auditor of
Age: 64 American Express Company (financial services company) (July
1998-February 2003). Oversees 45 portfolios in the OppenheimerFunds
complex.
JOEL W. MOTLEY, Director of Columbia Equity Financial Corp. (privately-held financial
Trustee (since 2002) adviser) (since 2002); Managing Director of Carmona Motley, Inc.
Age: 54 (privately-held financial adviser) (since January 2002); Managing
Director of Carmona Motley Hoffman Inc. (privately-held financial
adviser) (January 1998-December 2001); Member of the Finance and
Budget Committee of the Council on Foreign Relations, the Investment
Committee of the Episcopal Church of America, the Investment Committee
and Board of Human Rights Watch and the Investment Committee of
Historic Hudson Valley. Oversees 45 portfolios in the OppenheimerFunds
complex.
KENNETH A. RANDALL, Director of Dominion Resources, Inc. (electric utility holding
Trustee (since 1983) company) (February 1972-October 2005); Former Director of Prime
Age: 79 Retail, Inc. (real estate investment trust), Dominion Energy Inc.
(electric power and oil & gas producer), Lumberman's Mutual Casualty
Company, American Motorists Insurance Company and American
Manufacturers Mutual Insurance Company; Former President and Chief
Executive
67 | OPPENHEIMER BALANCED FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
KENNETH A. RANDALL, Officer of The Conference Board, Inc. (international economic and
Continued business research). Oversees 45 portfolios in the OppenheimerFunds
complex.
RUSSELL S. REYNOLDS, JR., Chairman of The Directorship Search Group, Inc. (corporate governance
Trustee (since 1989) consulting and executive recruiting) (since 1993); Life Trustee of
Age: 74 International House (non-profit educational organization); Founder,
Chairman and Chief Executive Officer of Russell Reynolds Associates,
Inc. (1969-1993); Banker at J.P. Morgan & Co. (1958-1966); 1st Lt.
Strategic Air Command, U.S. Air Force (1954-1958). Oversees 45
portfolios in the OppenheimerFunds complex.
JOSEPH M. WIKLER, Director of the following medical device companies: Medintec (since
Trustee (since 2005) 1992) and Cathco (since 1996); Director of Lakes Environmental
Age: 65 Association (since 1996); Member of the Investment Committee of the
Associated Jewish Charities of Baltimore (since 1994); Director of
Fortis/Hartford mutual funds (1994-December 2001). Oversees 45
portfolios in the OppenheimerFunds complex.
PETER I. WOLD, President of Wold Oil Properties, Inc. (oil and gas exploration and
Trustee (since 2005) production company) (since 1994); Vice President, Secretary and
Age: 58 Treasurer of Wold Trona Company, Inc. (soda ash processing and
production) (since 1996); Vice President of Wold Talc Company, Inc.
(talc mining) (since 1999); Managing Member of Hole-in-the-Wall Ranch
(cattle ranching) (since 1979); Director and Chairman of the Denver
Branch of the Federal Reserve Bank of Kansas City (1993-1999); and
Director of PacifiCorp. (electric utility) (1995-1999). Oversees 45
portfolios in the OppenheimerFunds complex.
BRIAN F. WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since
Trustee (since 2005) September 1995); Director of Special Value Opportunities Fund, LLC
Age: 63 (registered investment company) (since September 2004); Member of
Zurich Financial Investment Advisory Board (insurance) (since October
2004); Board of Governing Trustees of The Jackson Laboratory
(non-profit) (since August 1990); Trustee of the Institute for
Advanced Study (non-profit educational institute) (since May 1992);
Special Limited Partner of Odyssey Investment Partners, LLC (private
equity investment) (January 1999-September 2004); Trustee of Research
Foundation of AIMR (2000-2002) (investment research, non-profit);
Governor, Jerome Levy Economics Institute of Bard College (August
1990-September 2001) (economics research); Director of Ray &
Berendtson, Inc. (May 2000-April 2002) (executive search firm).
Oversees 55 portfolios in the OppenheimerFunds complex.
- ---------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY
AND OFFICER STREET, 11TH FLOOR, NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES
AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION,
RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN ANNUAL TERM, OR
UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN
INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC.
AND ITS AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and
Trustee, President and President (since September 2000) of the Manager; President and a
Principal Executive Officer director or trustee of other Oppenheimer funds; President and Director
(since 2001) of Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent holding
Age: 57 company) and of Oppenheimer Partnership Holdings, Inc. (holding
company subsidiary of the Manager) (since July 2001); Director of
OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since
November 2001); Chairman and Director of Shareholder Services, Inc.
and of Shareholder Financial Services, Inc. (transfer agent
subsidiaries of the Manager) (since July 2001); President and Director
of OppenheimerFunds Legacy Program (charitable trust program
established by the Manager) (since July 2001);
68 | OPPENHEIMER BALANCED FUND
JOHN V. MURPHY, Director of the following investment advisory subsidiaries of the
Continued Manager: OFI Institutional Asset Management, Inc., Centennial Asset
Management Corporation, Trinity Investment Management Corporation and
Tremont Capital Management, Inc. (since November 2001), HarbourView
Asset Management Corporation and OFI Private Investments, Inc. (since
July 2001); President (since November 1, 2001) and Director (since
July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice
President of Massachusetts Mutual Life Insurance Company (OAC's parent
company) (since February 1997); Director of DLB Acquisition
Corporation (holding company parent of Babson Capital Management LLC)
(since June 1995); Member of the Investment Company Institute's Board
of Governors (since October 3, 2003); Chief Operating Officer of the
Manager (September 2000-June 2001); President and Trustee of MML
Series Investment Fund and MassMutual Select Funds (open-end
investment companies) (November 1999-November 2001); Director of C.M.
Life Insurance Company (September 1999-August 2000); President, Chief
Executive Officer and Director of MML Bay State Life Insurance Company
(September 1999-August 2000); Director of Emerald Isle Bancorp and
Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle
Bancorp) (June 1989-June 1998). Oversees 92 portfolios in the
OppenheimerFunds complex.
- ---------------------------------------------------------------------------------------------------------
OTHER OFFICERS THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR
OF THE FUND MESSRS. LEAVY, FERREIRA, ZACK, GILLESPIE AND MS. BLOOMBERG, TWO WORLD
FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008,
FOR MESSRS. VANDEHEY, WIXTED, PETERSEN, SZILAGYI AND MS. IVES, 6803 S.
TUCSON WAY, CENTENNIAL, COLORADO 80112-3924; FOR MESSRS. MANIOUDAKIS,
BOMFIM, CAAN, GORD AND SWANEY, 470 ATLANTIC AVENUE, 11TH FLOOR,
BOSTON, MA 02210. EACH OFFICER SERVES FOR AN ANNUAL TERM OR UNTIL HIS
OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
CHRISTOPHER LEAVY, Senior Vice President of the Manager (since September 2000); portfolio
Vice President and Portfolio manager of Morgan Stanley Dean Witter Investment Management
Manager (since 2003) (1997-September 2000). An officer of 7 portfolios in the
Age: 35 OppenheimerFunds complex.
EMMANUEL FERREIRA, Vice President of the Manager (since January 2003); Portfolio Manager
Vice President and Portfolio at Lashire Investments (July 1999-December 2002). An officer of 3
Manager (since 2003) portfolios in the OppenheimerFunds complex.
Age: 39
ANGELO G. MANIOUDAKIS, Senior Vice President of the Manager (since April 2002), of
Vice President and Portfolio HarbourView Asset Management Corporation (since April, 2002 and of OFI
Manager (since 2002) Institutional Asset Management, Inc. (since June 2002); Executive
Age: 40 Director and portfolio manager for Miller, Anderson & Sherrerd, a
division of Morgan Stanley Investment Management (August 1993-April
2002). An officer of 15 portfolios in the OppenheimerFunds complex.
ANTULIO N. BOMFIM, Vice President of the Manager (since October 2003); Senior Economist
Vice President and Portfolio at the Board of Governors of the Federal Reserve System from June 1992
Manager (since 2006) to October 2003. A portfolio manager of 12 portfolios in the
Age: 39 OppenheimerFunds complex.
GEOFFREY CAAN, Vice President and Portfolio Manager of the Manager (since August
Vice President and Portfolio 2003); Vice President of ABN AMRO NA, Inc. (June 2002-August 2003);
Manager (since 2006) Vice President of Zurich Scudder Investments (January 1999-June 2002).
Age: 37 A portfolio manager of 12 portfolios in the OppenheimerFunds complex.
69 | OPPENHEIMER BALANCED FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
BENJAMIN J. GORD, Vice President of the Manager (since April 2002), of HarbourView Asset
Vice President and Portfolio Management Corporation (since April 2002) and of OFI Institutional
Manager (since 2006) Asset Management, Inc. (as of June 2002); Executive Director and
Age: 44 senior fixed income analyst at Miller Anderson & Sherrerd, a division
of Morgan Stanley Investment Management (April 1992-March 2002). A
portfolio manager of 12 portfolios in the OppenheimerFunds complex.
THOMAS SWANEY, Vice President of the Manager (since April 2006); senior analyst, high
Vice President and Portfolio grade investment team (June 2002-March 2006); senior fixed income
Manager (since 2006) analyst at Miller Anderson & Sherrerd, a division of Morgan Stanley
Age: 33 Investment Management (May 1998-May 2002). A portfolio manager of 12
portfolios in the OppenheimerFunds complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager
Vice President and (since March 2004); Vice President of OppenheimerFunds Distributor,
Chief Compliance Officer Inc., Centennial Asset Management Corporation and Shareholder
(since 2004) Services, Inc. (since June 1983). Former Vice President and Director
Age: 56 of Internal Audit of the Manager (1997-February 2004). An officer of
92 portfolios in the OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999);
Treasurer and Treasurer of the following: HarbourView Asset Management Corporation,
Principal Financial and Shareholder Financial Services, Inc., Shareholder Services, Inc.,
Accounting Officer Oppenheimer Real Asset Management Corporation, and Oppenheimer
(since 1999) Partnership Holdings, Inc. (since March 1999), OFI Private
Age: 47 Investments, Inc. (since March 2000), OppenheimerFunds International
Ltd. (since May 2000), OppenheimerFunds plc (since May 2000), OFI
Institutional Asset Management, Inc. (since November 2000), and
OppenheimerFunds Legacy Program (charitable trust program established
by the Manager) (since June 2003); Treasurer and Chief Financial
Officer of OFI Trust Company (trust company subsidiary of the Manager)
(since May 2000); Assistant Treasurer of the following: OAC (since
March 1999), Centennial Asset Management Corporation (March
1999-October 2003) and OppenheimerFunds Legacy Program (April
2000-June 2003); Principal and Chief Operating Officer of Bankers
Trust Company-Mutual Fund Services Division (March 1995-March 1999).
An officer of 92 portfolios in the OppenheimerFunds complex.
BRIAN S. PETERSEN, Assistant Vice President of the Manager (since August 2002);
Assistant Treasurer Manager/Financial Product Accounting of the Manager (November
(since 2004) 1998-July 2002). An officer of 92 portfolios in the OppenheimerFunds
Age: 36 complex.
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of
Assistant Treasurer Financial Reporting and Compliance of First Data Corporation (April
(since 2005) 2003-July 2004); Manager of Compliance of Berger Financial Group LLC
Age: 36 (May 2001-March 2003); Director of Mutual Fund Operations at American
Data Services, Inc. (September 2000-May 2001). An officer of 92
portfolios in the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel
Secretary (since 2001) (since March 2002) of the Manager; General Counsel and Director of the
Age: 58 Distributor (since December 2001); General Counsel of Centennial Asset
Management Corporation (since December 2001); Senior Vice President
and General Counsel of Harbour-View Asset Management Corporation
(since December 2001); Secretary and General Counsel of OAC (since
November 2001); Assistant Secretary (since September 1997) and
Director (since November 2001) of OppenheimerFunds International Ltd.
and OppenheimerFunds plc; Vice President and Director of Oppenheimer
Partnership Holdings, Inc. (since December 2002); Director of
Oppenheimer Real Asset Management, Inc. (since November 2001); Senior
Vice President, General Counsel and Director of Shareholder Financial
Services, Inc. and
70 | OPPENHEIMER BALANCED FUND
ROBERT G. ZACK, Shareholder Services, Inc. (since December 2001); Senior Vice
Continued President, General Counsel and Director of OFI Private Investments,
Inc. and OFI Trust Company (since November 2001); Vice President of
OppenheimerFunds Legacy Program (since June 2003); Senior Vice
President and General Counsel of OFI Institutional Asset Management,
Inc. (since November 2001); Director of OppenheimerFunds (Asia)
Limited (since December 2003); Senior Vice President (May
1985-December 2003), Acting General Counsel (November 2001-February
2002) and Associate General Counsel (May 1981-October 2001) of the
Manager; Assistant Secretary of the following: Shareholder Services,
Inc. (May 1985-November 2001), Shareholder Financial Services, Inc.
(November 1989-November 2001), and OppenheimerFunds International Ltd.
(September 1997-November 2001). An officer of 92 portfolios in the
OppenheimerFunds complex.
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004);
Assistant Secretary First Vice President (April 2001-April 2004), Associate General
(since 2004) Counsel (December 2000-April 2004), Corporate Vice President (May
Age: 38 1999-April 2001) and Assistant General Counsel (May 1999-December
2000) of UBS Financial Services Inc. (formerly, PaineWebber
Incorporated). An officer of 92 portfolios in the OppenheimerFunds
complex.
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant
Assistant Secretary Secretary (since October 2003) of the Manager; Vice President (since
(since 2001) 1999) and Assistant Secretary (since October 2003) of the Distributor;
Age: 41 Assistant Secretary of Centennial Asset Management Corporation (since
October 2003); Vice President and Assistant Secretary of Shareholder
Services, Inc. (since 1999); Assistant Secretary of OppenheimerFunds
Legacy Program and Shareholder Financial Services, Inc. (since
December 2001); Assistant Counsel of the Manager (August 1994-October
2003). An officer of 92 portfolios in the OppenheimerFunds complex.
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since
Assistant Secretary September 2004); First Vice President (2000-September 2004), Director
(since 2004) (2000-September 2004) and Vice President (1998-2000) of Merrill Lynch
Age: 42 Investment Management. An officer of 92 portfolios in the
OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE UPON
REQUEST, BY CALLING 1.800.525.7048.
71 | OPPENHEIMER BALANCED FUND
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees of the registrant has determined that the registrant does
not have an audit committee financial expert serving on its Audit Committee. In
this regard, no member of the Audit Committee was identified as having all of
the technical attributes identified in Instruction 2(b) to Item 3 of Form N-CSR
to qualify as an "audit committee
financial expert," whether through the type of specialized education or
experience described in that Instruction. The Board has concluded that while the
members of the Audit Committee collectively have the necessary attributes and
experience required to serve effectively as an Audit Committee, no single member
possesses all of the required technical attributes through the particular
methods of education or experience set forth in the Instructions to be
designated as an audit committee financial expert.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The principal accountant for the audit of the registrant's annual financial
statements billed $45,000 in fiscal 2006 and $45,000 in fiscal 2005.
(b) Audit-Related Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees during the last two fiscal years.
The principal accountant for the audit of the registrant's annual financial
statements billed $169,654 in fiscal 2006 and $156,805 in fiscal 2005 to the
registrant's investment adviser or any entity controlling, controlled by, or
under common control with the adviser that provides ongoing services to the
registrant.
Such services include: Internal control reviews
(c) Tax Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees during to the registrant during the last two
fiscal years.
The principal accountant for the audit of the registrant's annual financial
statements billed $1,536 in fiscal 2006 and $5,000 in fiscal 2005 to the
registrant's investment adviser or any entity controlling, controlled by, or
under common control with the adviser that provides ongoing services to the
registrant.
Such services include: preparation of form 5500.
(d) All Other Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees in during to the registrant during the last two
fiscal years.
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees during the last two fiscal years to the
registrant's investment adviser
or any entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant.
(e) (1) During its regularly scheduled periodic meetings, the registrant's
audit committee will pre-approve all audit, audit-related, tax and other
services to be provided by the principal accountants of the registrant.
The audit committee has delegated pre-approval authority to its Chairman
for any subsequent new engagements that arise between regularly scheduled
meeting dates provided that any fees such pre-approved are presented to
the audit committee at its next regularly scheduled meeting.
Under applicable laws, pre-approval of non-audit services maybe waived
provided that: 1) the aggregate amount of all such services provided
constitutes no more than five percent of the total amount of fees paid by
the registrant to it principal accountant during the fiscal year in which
services are provided 2) such services were not recognized by the
registrant at the time of engagement as non-audit services and 3) such
services are promptly brought to the attention of the audit committee of
the registrant and approved prior to the completion of the audit.
(2) 100%
(f) Not applicable as less than 50%.
(g) The principal accountant for the audit of the registrant's annual
financial statements billed $155,336 in fiscal 2006 and $161,805 in fiscal
2005 to the registrant and the registrant's investment adviser or any
entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant related to
non-audit fees. Those billings did not include any prohibited non-audit
services as defined by the Securities Exchange Act of 1934.
(h) No such services were rendered.
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 08/31/2006, 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) Exhibit attached hereto.
(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: 11/15/2006
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: 11/15/2006
By: /s/ Brian W. Wixted
----------------------------
Brian W. Wixted
Principal Financial Officer
Date: 11/15/2006