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
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Oppenheimer Balanced Fund
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(Exact name of registrant as specified in charter)
6803 South Tucson Way, Centennial, Colorado 80112-3924
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(Address of principal executive offices) (Zip code)
Robert G. Zack, Esq.
OppenheimerFunds, Inc.
Two World Financial Center, New York, New York 10281-1008
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(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 768-3200
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Date of fiscal year end: September 30
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Date of reporting period: 09/30/2007
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ITEM 1. REPORTS TO STOCKHOLDERS.
TOP HOLDINGS AND ALLOCATIONS
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TOP TEN COMMON STOCK INDUSTRIES
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Software 7.5%
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Media 4.7
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Aerospace & Defense 3.8
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Tobacco 3.5
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Oil, Gas & Consumable Fuels 3.0
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Insurance 2.3
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Capital Markets 2.3
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Pharmaceuticals 2.0
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Food & Staples Retailing 1.8
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Internet Software & Services 1.7
Portfolio holdings and allocations are subject to change. Percentages are as of
September 30, 2007, and are based on net assets.
TOP TEN COMMON STOCK HOLDINGS
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Take-Two Interactive Software, Inc. 3.0%
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Microsoft Corp. 2.5
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Liberty Global, Inc., Series A 2.4
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Liberty Global, Inc., Series C 2.3
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Altria Group, Inc. 2.1
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United Technologies Corp. 1.9
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UBS AG 1.8
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Costco Wholesale Corp. 1.8
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Exxon Mobil Corp. 1.6
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Wachovia Corp. 1.5
Portfolio holdings and allocations are subject to change. Percentages are as of
September 30, 2007, and are based on net assets.
For up-to-date Top 10 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 47.6%
Bonds and Notes 45.6
Cash Equivalents 6.8
Portfolio holdings and allocations are subject to change. Percentages are as of
September 30, 2007, 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, 2007, 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, 2007, several factors contributed to Oppenheimer Balanced Fund's competitive
total return and its favorable ranking among its peers.
To begin, the equity component furnished a strong contribution to the
Fund's overall returns for the recent fiscal year, posting a solid margin of
excess returns over the S&P 500 Index and generating alpha, or outperformance,
over the equity benchmark in eight of the 10 industry sectors represented in the
Fund's holdings.
For example, incisive stock selection in information-technology (IT)
stocks enabled us to post a solid margin of outperformance over the benchmark in
this area of the market. Names like Take-Two Interactive Software, Inc.,
Synopsys, Inc. and eBay, Inc. performed strongly and added to Fund returns.
Take-Two Interactive Software, our largest contributor to returns in the IT
space, performed well over the period. Synopsys, a software design company
serving the semiconductor industry, posted solid gains thanks to its strong
positioning in the marketplace and expanding profit margins. Finally, eBay,
which had undergone some challenges in regard to serving its core customer base,
rallied nicely after implementing efficiency improvements that have begun to
reap results.
Stock selection again added value in the Fund's consumer discretionary
stocks, particularly through Liberty Global, Inc., which was the equity
component's strongest performer for the period. Since this is the Fund's largest
equity holding, we enjoyed a boost to Fund returns from this name. Liberty
Global's stock has continued to benefit from strong operational performance via
its global cable operations and its favorable competitive positioning.
Similarly, we derived excess returns from effective stock selection within the
consumer staples sector. Our decision to hold two tobacco-company names, Loews
Corp./Carolina Group and Altria Group, Inc. further bolstered Fund performance.
We believe these names offer sound and promising fundamentals at currently
favorable valuations, and as past legal difficulties continue to be resolved,
these stocks have performed well for us.
The equity component's industrials stocks also added to Fund returns.
Siemens AG provided the most significant outperformance from within this sector,
a result of the successful return-oriented management practices this company has
implemented over recent months. Next, our decision to own shares in Boeing Co.,
the U.S. aerospace leader, added
12 | OPPENHEIMER BALANCED FUND
to returns, as this company has benefited from both its favorable positioning at
an advantageous point in the business cycle and its ability to generate steady
revenue growth.
The only mild detractors to performance of the equity component included
our underweighted exposure to energy stocks, which have enjoyed a prolonged
rally due to persistently high oil and gas prices. While our lower-than-market
allocation to this sector cost us some marginal performance this period, we
continue to believe valuations in this sector remain inflated due to artificial,
external factors unrelated to core fundamentals. As such, and by virtue of our
overall defensive structuring of the Fund's equity holdings, we intend to remain
cautious on this sector until valuations become more aligned with actual
fundamentals. The other small detractor to performance came from the equity
component's health care holdings, where two pharmaceutical names--Human Genome
Sciences, Inc. and Novartis AG--lagged. Fortunately, the impact these two stocks
exerted on overall Fund performance was negligible.
On the positive side, we more than adequately offset the marginal
underperformance arising from our underweight in energy stocks through our
overweighted exposure in materials stocks. In particular, our decision to own
Companhia Vale do Rio Doce, or CVRD, the world's number one iron-ore miner,
substantially added to the Fund's performance. The stock of this highly
diversified mining company appreciated abundantly over the review period due to
a number of factors working in its favor, including steady and strong expansion
through its acquisition of a key railway line in South America, as well as
robust global demand for raw materials. Overall, we are pleased that while our
individual stock selection strongly added to relative returns, we also derived
alpha through our broader-based allocation decisions, such as the balance we
engaged by emphasizing materials stocks while remaining cautiously positioned in
energy names.
In the bond component, prudent management of our duration, or exposure to
interest-rate risk, was a key contributor to performance for the period. We
began the 12-month review period with less interest-rate sensitivity, or with a
shorter duration, than the benchmark, based on our belief at that time that the
markets held an overly pessimistic view of longer-term U.S. economic
fundamentals and future growth. By January, positive economic data began to
contradict investors' expectations, and as the markets' overall outlook
adjusted, yields began rising. In this context, our shorter duration positioning
worked in the Fund's favor, boosting our relative returns quite significantly.
As the fiscal year progressed, we continued to adjust the degree of our
short duration according to prevailing conditions and our proprietary models. By
June, we had moved to a
13 | OPPENHEIMER BALANCED FUND
FUND PERFORMANCE DISCUSSION
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neutral duration versus the benchmark, since at that time, we believed
longer-term forecasts as implied by the yield curve had transitioned to more
closely align with actual fundamentals. Then, in July, troubles in the sub-prime
mortgage market prompted a wave of volatility, and investor confidence
shattered. Yields fell markedly, and once again, we were convinced that the
markets were assuming an overly negative long-term outlook for interest rates.
In light of that analysis, we resumed our short duration positioning versus the
benchmark. While this decision cost us some marginal performance when rates
continued to fall through the end of the period, the positive impact our overall
interest-rate strategy made to the Fund's performance for the period more than
made up for those losses.
Another benefit to returns emanating from the bond component was active
management of our exposure to mortgage-backed securities (MBS). First, strategic
adjustments in our overall allocation to MBS relative to the benchmark benefited
performance results. Prior to the recent troubles in the sub-prime mortgage
market, spread products, or non-Treasury securities, had been posting varying
degrees of outperformance over like-duration Treasuries, and our general
overweight in MBS aided returns, particularly during the first half of the
period. After the first quarter 2007, our decision to slightly underweight our
exposure to the mortgage sector benefited relative returns, since soon after
many areas of the mortgage-securities market suffered by association when
trouble in the sub-prime sector emerged. Our decision to maintain an emphasis on
higher-coupon residential MBS added to returns. Higher-coupon MBS typically hold
greater sensitivity to prepayments than the overall mortgage market. Since
expectations of prepayments as well as the actual level of prepayments slowed
over the period, these types of MBS performed well for us.
Finally, our decision to underweight our exposure to agency debentures made
a small but definitive contribution to performance, since agencies
underperformed like-duration Treasuries throughout most of the review period.
Detracting from the bond component's performance was the pronounced flight
to quality that investors engaged in during the final weeks of the period. Our
overweight exposure to both MBS and commercial mortgage-backed securities (CMBS)
relative to Treasuries hurt us slightly at that time as investors shunned these
sectors in favor of Treasuries. On the positive side, this event represented
only a concentrated and limited portion of the overall review period. Moreover,
because the bond portion of the Fund entered the period of market turmoil from a
position of strength in terms of relative performance, the impact of this
detracting factor proved to be minimal.
14 | OPPENHEIMER BALANCED FUND
While our general underweight to the credit sector helped us this period,
our emphasis on financial-services bonds diminished the Fund's returns, as this
area of the market struggled as turbulence in the sub-prime mortgage arena
unfolded. Similarly, our allocation to high-yield credit detracted from
performance in the final weeks of the period. On the positive side, both our
overweighted presence and credit selection in the natural gas pipeline industry
benefited Fund returns.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each class of shares of the
Fund held until September 30, 2007. 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.
15 | OPPENHEIMER BALANCED FUND
FUND PERFORMANCE DISCUSSION
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CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Balanced Fund (Class A)
S&P 500 Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Balanced Lehman Brothers
Fund (Class A) S&P 500 Index Aggregate Bond Index
09/30/1997 $ 9,425 $10,000 $10,000
12/31/1997 $ 9,325 $10,287 $10,294
03/31/1998 $ 9,997 $11,721 $10,455
06/30/1998 $10,022 $12,110 $10,699
09/30/1998 $ 8,981 $10,908 $11,151
12/31/1998 $ 9,982 $13,229 $11,189
03/31/1999 $10,105 $13,888 $11,133
06/30/1999 $10,861 $14,865 $11,035
09/30/1999 $10,444 $13,939 $11,110
12/31/1999 $11,040 $16,012 $11,097
03/31/2000 $11,669 $16,378 $11,342
06/30/2000 $11,751 $15,943 $11,539
09/30/2000 $11,834 $15,789 $11,887
12/31/2000 $11,766 $14,554 $12,387
03/31/2001 $11,639 $12,830 $12,763
06/30/2001 $12,335 $13,580 $12,835
09/30/2001 $10,974 $11,588 $13,427
12/31/2001 $11,964 $12,826 $13,433
03/31/2002 $12,031 $12,861 $13,445
06/30/2002 $11,143 $11,139 $13,942
09/30/2002 $10,033 $ 9,216 $14,581
12/31/2002 $10,695 $ 9,992 $14,810
03/31/2003 $10,576 $ 9,678 $15,016
06/30/2003 $11,850 $11,167 $15,392
09/30/2003 $12,238 $11,462 $15,370
12/31/2003 $13,253 $12,857 $15,418
03/31/2004 $13,544 $13,074 $15,828
06/30/2004 $13,405 $13,299 $15,441
09/30/2004 $13,508 $13,051 $15,935
12/31/2004 $14,534 $14,255 $16,087
03/31/2005 $14,361 $13,949 $16,010
06/30/2005 $14,733 $14,140 $16,492
09/30/2005 $15,146 $14,649 $16,380
12/31/2005 $15,055 $14,954 $16,478
03/31/2006 $15,334 $15,583 $16,371
06/30/2006 $14,967 $15,359 $16,359
09/30/2006 $15,730 $16,228 $16,982
12/31/2006 $16,614 $17,314 $17,192
03/31/2007 $16,969 $17,426 $17,450
06/30/2007 $17,520 $18,519 $17,360
09/30/2007 $17,613 $18,894 $17,854
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE FUND AT
9/30/07
1-Year 5.53% 5-Year 10.60% 10-Year 5.82%
16 | OPPENHEIMER BALANCED FUND
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Balanced Fund (Class B)
S&P 500 Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Balanced Lehman Brothers
Fund (Class B) S&P 500 Index Aggregate Bond Index
09/30/1997 $10,000 $10,000 $10,000
12/31/1997 $ 9,868 $10,287 $10,294
03/31/1998 $10,567 $11,721 $10,455
06/30/1998 $10,564 $12,110 $10,699
09/30/1998 $ 9,451 $10,908 $11,151
12/31/1998 $10,480 $13,229 $11,189
03/31/1999 $10,589 $13,888 $11,133
06/30/1999 $11,356 $14,865 $11,035
09/30/1999 $10,901 $13,939 $11,110
12/31/1999 $11,500 $16,012 $11,097
03/31/2000 $12,126 $16,378 $11,342
06/30/2000 $12,188 $15,943 $11,539
09/30/2000 $12,242 $15,789 $11,887
12/31/2000 $12,159 $14,554 $12,387
03/31/2001 $11,997 $12,830 $12,763
06/30/2001 $12,690 $13,580 $12,835
09/30/2001 $11,268 $11,588 $13,427
12/31/2001 $12,253 $12,826 $13,433
03/31/2002 $12,303 $12,861 $13,445
06/30/2002 $11,380 $11,139 $13,942
09/30/2002 $10,212 $ 9,216 $14,581
12/31/2002 $10,860 $ 9,992 $14,810
03/31/2003 $10,717 $ 9,678 $15,016
06/30/2003 $11,977 $11,167 $15,392
09/30/2003 $12,353 $11,462 $15,370
12/31/2003 $13,377 $12,857 $15,418
03/31/2004 $13,671 $13,074 $15,828
06/30/2004 $13,530 $13,299 $15,441
09/30/2004 $13,634 $13,051 $15,935
12/31/2004 $14,670 $14,255 $16,087
03/31/2005 $14,495 $13,949 $16,010
06/30/2005 $14,871 $14,140 $16,492
09/30/2005 $15,288 $14,649 $16,380
12/31/2005 $15,195 $14,954 $16,478
03/31/2006 $15,477 $15,583 $16,371
06/30/2006 $15,107 $15,359 $16,359
09/30/2006 $15,878 $16,228 $16,982
12/31/2006 $16,770 $17,314 $17,192
03/31/2007 $17,127 $17,426 $17,450
06/30/2007 $17,684 $18,519 $17,360
09/30/2007 $17,777 $18,894 $17,854
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE FUND AT
9/30/07
1-Year 5.99% 5-Year 10.62% 10-Year 5.92%
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, THE
10-YEAR RETURN FOR CLASS B SHARES USES CLASS A PERFORMANCE FOR THE PERIOD AFTER
CONVERSION. SEE PAGE 20 FOR FURTHER INFORMATION.
17 | OPPENHEIMER BALANCED FUND
FUND PERFORMANCE DISCUSSION
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CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Balanced Fund (Class C)
S&P 500 Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Balanced Lehman Brothers
Fund (Class C) S&P 500 Index Aggregate Bond Index
09/30/1997 $10,000 $10,000 $10,000
12/31/1997 $ 9,875 $10,287 $10,294
03/31/1998 $10,565 $11,721 $10,455
06/30/1998 $10,569 $12,110 $10,699
09/30/1998 $ 9,457 $10,908 $11,151
12/31/1998 $10,483 $13,229 $11,189
03/31/1999 $10,591 $13,888 $11,133
06/30/1999 $11,364 $14,865 $11,035
09/30/1999 $10,902 $13,939 $11,110
12/31/1999 $11,499 $16,012 $11,097
03/31/2000 $12,131 $16,378 $11,342
06/30/2000 $12,185 $15,943 $11,539
09/30/2000 $12,247 $15,789 $11,887
12/31/2000 $12,156 $14,554 $12,387
03/31/2001 $12,004 $12,830 $12,763
06/30/2001 $12,694 $13,580 $12,835
09/30/2001 $11,267 $11,588 $13,427
12/31/2001 $12,258 $12,826 $13,433
03/31/2002 $12,308 $12,861 $13,445
06/30/2002 $11,379 $11,139 $13,942
09/30/2002 $10,216 $ 9,216 $14,581
12/31/2002 $10,867 $ 9,992 $14,810
03/31/2003 $10,727 $ 9,678 $15,016
06/30/2003 $11,996 $11,167 $15,392
09/30/2003 $12,359 $11,462 $15,370
12/31/2003 $13,362 $12,857 $15,418
03/31/2004 $13,620 $13,074 $15,828
06/30/2004 $13,459 $13,299 $15,441
09/30/2004 $13,526 $13,051 $15,935
12/31/2004 $14,526 $14,255 $16,087
03/31/2005 $14,316 $13,949 $16,010
06/30/2005 $14,652 $14,140 $16,492
09/30/2005 $15,038 $14,649 $16,380
12/31/2005 $14,920 $14,954 $16,478
03/31/2006 $15,152 $15,583 $16,371
06/30/2006 $14,764 $15,359 $16,359
09/30/2006 $15,484 $16,228 $16,982
12/31/2006 $16,315 $17,314 $17,192
03/31/2007 $16,630 $17,426 $17,450
06/30/2007 $17,133 $18,519 $17,360
09/30/2007 $17,189 $18,894 $17,854
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE FUND AT
9/30/07
1-Year 10.00% 5-Year 10.97% 10-Year 5.57%
18 | OPPENHEIMER BALANCED FUND
CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Balanced Fund (Class N)
S&P 500 Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Balanced 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
12/31/2006 $13,404 $12,641 $13,538
03/31/2007 $13,682 $12,722 $13,741
06/30/2007 $14,106 $13,520 $13,670
09/30/2007 $14,177 $13,795 $14,059
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE FUND AT
9/30/07
1-Year 10.57% 5-Year 11.39% Since Inception (3/1/01) 5.45%
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, THE
10-YEAR RETURN FOR CLASS B SHARES USES CLASS A PERFORMANCE FOR THE PERIOD AFTER
CONVERSION. SEE PAGE 20 FOR FURTHER INFORMATION.
19 | 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%.
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.
20 | 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, 2007.
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
21 | OPPENHEIMER BALANCED FUND
FUND EXPENSES Continued
- --------------------------------------------------------------------------------
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
(4/1/07) (9/30/07) SEPTEMBER 30, 2007
- --------------------------------------------------------------------------------
Class A Actual $ 1,000.00 $ 1,037.90 $ 5.33
- --------------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,019.85 5.28
- --------------------------------------------------------------------------------
Class B Actual 1,000.00 1,033.30 9.88
- --------------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,015.39 9.80
- --------------------------------------------------------------------------------
Class C Actual 1,000.00 1,033.60 9.63
- --------------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,015.64 9.54
- --------------------------------------------------------------------------------
Class N Actual 1,000.00 1,036.10 7.43
- --------------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,017.80 7.36
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,
excluding indirect expenses from affiliated fund, based on the 6-month period
ended September 30, 2007 are as follows:
CLASS EXPENSE RATIOS
- -----------------------------
Class A 1.04%
- -----------------------------
Class B 1.93
- -----------------------------
Class C 1.88
- -----------------------------
Class N 1.45
The expense ratios reflect reduction to custodian expenses and voluntary waivers
or reimbursements by the Fund's Manager that can be terminated at any time,
without advance notice. The "Financial Highlights" tables in the Fund's
financial statements, included in this report, also show the gross expense
ratios, without such waivers or reimbursements and reduction to custodian
expenses, if applicable.
- --------------------------------------------------------------------------------
22 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS September 30, 2007
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMON STOCKS--48.0%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--5.8%
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--0.6%
Liberty Media Holding Corp.-Interactive,
Series A 1 368,700 $ 7,082,727
- --------------------------------------------------------------------------------
MEDIA--4.7%
Liberty Global, Inc., Series A 1 635,277 26,059,063
- --------------------------------------------------------------------------------
Liberty Global, Inc., Series C 1 644,261 24,907,130
----------------
50,966,193
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--0.5%
Office Depot, Inc. 1 240,900 4,967,358
- --------------------------------------------------------------------------------
CONSUMER STAPLES--5.6%
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--1.8%
Costco Wholesale Corp. 311,500 19,116,755
- --------------------------------------------------------------------------------
FOOD PRODUCTS--0.3%
ConAgra Foods, Inc. 126,100 3,294,993
- --------------------------------------------------------------------------------
TOBACCO--3.5%
Altria Group, Inc. 320,300 22,270,459
- --------------------------------------------------------------------------------
Loews Corp./Carolina Group 185,800 15,278,334
----------------
37,548,793
- --------------------------------------------------------------------------------
ENERGY--3.0%
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS--3.0%
BP plc, ADR 87,800 6,088,930
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 190,200 17,604,912
- --------------------------------------------------------------------------------
Petroleo Brasileiro SA, ADR 55,800 4,212,900
- --------------------------------------------------------------------------------
Petroleo Brasileiro SA, Preference 129,000 4,176,841
----------------
32,083,583
- --------------------------------------------------------------------------------
FINANCIALS--7.8%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--2.3%
E*TRADE Financial Corp. 1 365,500 4,773,430
- --------------------------------------------------------------------------------
UBS AG 358,040 19,251,281
----------------
24,024,711
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--1.5%
Wachovia Corp. 325,462 16,321,919
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--1.2%
Bank of America Corp. 111,854 5,622,901
- --------------------------------------------------------------------------------
Citigroup, Inc. 162,800 7,597,876
----------------
13,220,777
23 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
INSURANCE--2.3%
AMBAC Financial Group, Inc. 75,000 $ 4,718,250
- --------------------------------------------------------------------------------
Everest Re Group Ltd. 77,400 8,532,576
- --------------------------------------------------------------------------------
National Financial Partners Corp. 99,100 5,250,318
- --------------------------------------------------------------------------------
Platinum Underwriters Holdings Ltd. 173,800 6,249,848
----------------
24,750,992
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--0.5%
Freddie Mac 89,000 5,251,890
- --------------------------------------------------------------------------------
HEALTH CARE--5.6%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--1.5%
deCODE genetics, Inc. 1 340,500 1,181,535
- --------------------------------------------------------------------------------
Human Genome Sciences, Inc. 1 464,000 4,774,560
- --------------------------------------------------------------------------------
Orexigen Therapeutics, Inc. 1 315,880 4,172,775
- --------------------------------------------------------------------------------
Vanda Pharmaceuticals, Inc. 1 457,200 6,359,652
----------------
16,488,522
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.8%
Beckman Coulter, Inc. 68,000 5,015,680
- --------------------------------------------------------------------------------
Boston Scientific Corp. 1 261,100 3,642,345
----------------
8,658,025
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--1.3%
Medco Health Solutions, Inc. 1 38,500 3,480,015
- --------------------------------------------------------------------------------
Skilled Healthcare Group, Inc., Cl. A 1 170,100 2,679,075
- --------------------------------------------------------------------------------
WellPoint, Inc. 1 98,400 7,765,728
----------------
13,924,818
- --------------------------------------------------------------------------------
PHARMACEUTICALS--2.0%
Abbott Laboratories 102,900 5,517,498
- --------------------------------------------------------------------------------
Medicines Co. (The) 1 336,000 5,984,160
- --------------------------------------------------------------------------------
Novartis AG, ADR 184,900 10,162,104
----------------
21,663,762
- --------------------------------------------------------------------------------
INDUSTRIALS--5.6%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--3.8%
Boeing Co. 102,500 10,761,475
- --------------------------------------------------------------------------------
Orbital Sciences Corp. 1 134,717 2,996,106
- --------------------------------------------------------------------------------
Spirit Aerosystems Holdings, Inc., Cl. A 1 164,570 6,408,356
- --------------------------------------------------------------------------------
United Technologies Corp. 254,500 20,482,160
----------------
40,648,097
24 | OPPENHEIMER BALANCED FUND
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.2%
Sinomem Technology Ltd. 1 1,794,000 $ 1,600,304
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--1.2%
Siemens AG, Sponsored ADR 94,400 12,956,400
- --------------------------------------------------------------------------------
MACHINERY--0.4%
Navistar International Corp. 1 76,600 4,726,220
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--11.8%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--1.1%
Cisco Systems, Inc. 1 288,000 9,535,680
- --------------------------------------------------------------------------------
QUALCOMM, Inc. 60,400 2,552,504
----------------
12,088,184
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--0.7%
International Business Machines Corp. 63,200 7,444,960
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--1.7%
eBay, Inc. 1 227,300 8,869,246
- --------------------------------------------------------------------------------
Google, Inc., Cl. A 1 6,000 3,403,620
- --------------------------------------------------------------------------------
Yahoo!, Inc. 1 209,300 5,617,612
----------------
17,890,478
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--0.8%
Texas Instruments, Inc. 245,900 8,997,481
- --------------------------------------------------------------------------------
SOFTWARE--7.5%
Microsoft Corp. 911,400 26,849,844
- --------------------------------------------------------------------------------
Novell, Inc. 1 1,049,500 8,018,180
- --------------------------------------------------------------------------------
Synopsys, Inc. 1 502,100 13,596,868
- --------------------------------------------------------------------------------
Take-Two Interactive Software, Inc. 1 1,911,047 32,640,683
----------------
81,105,575
- --------------------------------------------------------------------------------
MATERIALS--2.0%
- --------------------------------------------------------------------------------
CHEMICALS--0.3%
Lubrizol Corp. (The) 47,900 3,116,374
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--0.4%
Texas Industries, Inc. 27,300 2,143,050
- --------------------------------------------------------------------------------
Vulcan Materials Co. 29,900 2,665,585
----------------
4,808,635
- --------------------------------------------------------------------------------
METALS & MINING--1.3%
Carpenter Technology Corp. 44,500 5,785,445
- --------------------------------------------------------------------------------
Companhia Vale do Rio Doce, Sponsored ADR 272,400 7,749,780
----------------
13,535,225
25 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------------
UTILITIES--0.8%
- --------------------------------------------------------------------------------------------------------------------------
ENERGY TRADERS--0.8%
AES Corp. (The) 1 272,400 $ 5,458,896
- --------------------------------------------------------------------------------------------------------------------------
Dynegy, Inc., Cl. A 1 321,400 2,969,736
------------
8,428,632
------------
Total Common Stocks (Cost $391,317,055) 516,712,383
UNITS
- --------------------------------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- --------------------------------------------------------------------------------------------------------------------------
Lucent Technologies, Inc. Wts., Exp. 12/10/07 1 (Cost $0) 11,758 123
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--3.2%
- --------------------------------------------------------------------------------------------------------------------------
Ace Securities Corp. Home Equity Loan Trust, Asset-Backed Pass-Through
Certificates, Series 2005-HE7, Cl. A2B, 5.311%, 11/25/35 2 $ 890,000 884,683
- --------------------------------------------------------------------------------------------------------------------------
Aesop Funding II LLC, Automobile Asset-Backed Certificates, Series 2005-1A,
Cl. A2, 5.556%, 4/20/08 2,3 630,000 629,626
- --------------------------------------------------------------------------------------------------------------------------
Argent Securities Trust 2004-W8, Asset-Backed Pass-Through Certificates,
Series 2004-W8, Cl. A2, 5.611%, 5/25/34 2 1,500,534 1,481,857
- --------------------------------------------------------------------------------------------------------------------------
Argent Securities Trust 2006-W5, Asset-Backed Pass-Through Certificates,
Series 2006-W5, Cl. A2B, 5.231%, 5/26/36 2 1,250,000 1,238,399
- --------------------------------------------------------------------------------------------------------------------------
Capital One Prime Auto Receivables Trust, Automobile Asset-Backed
Certificates, Series 2005-1, Cl. A4, 5.773%, 4/15/11 2 4,970,000 4,944,672
- --------------------------------------------------------------------------------------------------------------------------
Centex Home Equity Loan Trust 2005-D, Asset-Backed Certificates,
Series 2005-D, Cl. AV2, 5.401%, 10/25/35 2 644,198 642,457
- --------------------------------------------------------------------------------------------------------------------------
Centex Home Equity Loan Trust 2006-A, Asset-Backed Certificates,
Series 2006-A, Cl. AV2, 5.231%, 5/16/36 2 1,570,000 1,558,885
- --------------------------------------------------------------------------------------------------------------------------
Citibank Credit Card Issuance Trust, Credit Card Receivable Nts.,
Series 2003-C4, Cl. C4, 5%, 6/10/15 310,000 292,063
- --------------------------------------------------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust, Inc. 2005-WF2, Asset-Backed Pass-Through
Certificates, Series 2005-WF2, Cl. AF2, 4.922%, 8/25/35 2 213,316 212,851
- --------------------------------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2002-4, Asset-Backed Certificates,
Series 2002-4, Cl. A1, 5.871%, 2/25/33 2 31,485 29,846
- --------------------------------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-11, Asset-Backed Certificates,
Series 2005-11, Cl. AF2, 4.657%, 2/25/36 650,000 644,223
- --------------------------------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-16, Asset-Backed Certificates,
Series 2005-16, Cl. 2AF2, 5.382%, 5/25/36 2 1,700,000 1,681,243
- --------------------------------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-17, Asset-Backed Certificates:
Series 2005-17, Cl. 1AF1, 5.331%, 5/25/36 2 251,151 250,748
Series 2005-17, Cl. 1AF2, 5.363%, 5/25/36 2 420,000 415,884
- --------------------------------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2006-25, Asset-Backed Certificates,
Series 2006-25, Cl. 2A2, 5.251%, 12/25/29 2 920,000 900,533
26 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- --------------------------------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust 2005-FF10, Mtg. Pass-Through
Certificates, Series 2005-FF10, Cl. A3, 5.341%, 11/25/35 2 $ 2,600,000 $ 2,563,165
- --------------------------------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust 2006-FF10, Mtg. Pass-Through
Certificates, Series 2006-FF10, Cl. A3, 5.221%, 7/25/36 2 1,230,000 1,207,194
- --------------------------------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust 2006-FF5, Mtg. Pass-Through
Certificates, Series 2006-FF5, Cl. 2A1, 5.181%, 5/15/36 2 344,451 342,934
- --------------------------------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust 2006-FF9, Mtg. Pass-Through
Certificates, Series 2006-FF9, Cl. 2A2, 5.241%, 7/7/36 2 620,000 606,439
- --------------------------------------------------------------------------------------------------------------------------
Ford Credit Auto Owner Trust, Automobile Loan Pass-Through
Certificates, Series 2005-A, Cl. A3, 3.48%, 11/17/08 60,734 60,695
- --------------------------------------------------------------------------------------------------------------------------
Honda Auto Receivables Owner Trust, Automobile Receivable Obligations,
Series 2005-2, Cl. A4, 4.15%, 10/15/10 920,000 912,698
- --------------------------------------------------------------------------------------------------------------------------
Household Home Equity Loan Trust, Home Equity Loan Pass-Through Certificates:
Series 2005-3, Cl. A1, 5.798%, 1/20/35 2 649,052 633,615
Series 2006-4, Cl. A2V, 5.606%, 3/20/36 2,4 340,000 335,360
- --------------------------------------------------------------------------------------------------------------------------
Lehman XS Trust, Mtg. Pass-Through Certificates, Series 2005-2, Cl. 2A1B,
5.18%, 8/25/35 2 581,336 581,377
- --------------------------------------------------------------------------------------------------------------------------
Litigation Settlement Monetized Fee Trust, Asset-Backed Certificates,
Series 2001-1A, Cl. A1, 8.33%, 4/25/31 4 403,622 401,681
- --------------------------------------------------------------------------------------------------------------------------
MBNA Credit Card Master Note Trust, Credit Card Receivables,
Series 2003-C7, Cl. C7, 7.103%, 3/15/16 2 2,900,000 2,870,288
- --------------------------------------------------------------------------------------------------------------------------
Option One Mortgage Loan Trust, Asset-Backed Certificates, Series 2006-2,
Cl. 2A2, 5.231%, 7/1/36 2 2,060,000 2,031,492
- --------------------------------------------------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through Trust 2005-2, Mtg. Pass-Through
Certificates, Series 2005-2, Cl. AF2, 4.415%, 4/25/35 2 98,391 98,041
- --------------------------------------------------------------------------------------------------------------------------
RAMP Series 2004-RS7 Trust, Mtg. Asset-Backed Pass-Through Certificates,
Series 2004-RS7, Cl. AI32, 4.45%, 7/25/28 170,406 169,653
- --------------------------------------------------------------------------------------------------------------------------
RAMP Series 2006-RS4 Trust, Mtg. Asset-Backed Pass-Through Certificates,
Series 2006-RS4, Cl. A1, 5.211%, 7/25/36 2 374,869 373,537
- --------------------------------------------------------------------------------------------------------------------------
RASC Series 2006-KS7 Trust, Home Equity Mtg. Asset-Backed Pass-Through
Certificates, Series 2006-KS7, Cl. A2, 5.231%, 9/25/36 2 1,500,000 1,474,440
- --------------------------------------------------------------------------------------------------------------------------
Specialty Underwriting & Residential Finance Trust, Home Equity
Asset-Backed Obligations, Series 2005-BC3, Cl. A2B, 5.381%, 6/25/36 2 1,155,979 1,152,215
- --------------------------------------------------------------------------------------------------------------------------
Structured Asset Investment Loan Trust, Mtg. Pass-Through Certificates:
Series 2006-2, Cl. A1, 5.191%, 4/25/36 2 257,074 256,312
Series 2006-BNC3, Cl. A2, 5.171%, 9/25/36 2 1,026,727 1,018,479
- --------------------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Mtg. Pass-Through Certificates,
Series 2005-4XS, Cl. 3A1, 5.18%, 3/26/35 481,976 482,741
- --------------------------------------------------------------------------------------------------------------------------
Wells Fargo Home Equity Asset-Backed Securities 2006-2 Trust, Home
Equity Asset-Backed Certificates, Series 2006-2, Cl. A2, 5.42%,7/25/36 2 1,230,000 1,215,641
------------
Total Asset-Backed Securities (Cost $35,056,677) 34,595,967
27 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--33.2%
- --------------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY--22.2%
- --------------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED--22.1%
Federal Home Loan Mortgage Corp.:
4.50%, 5/15/18-5/15/19 $ 6,616,731 $ 6,382,068
5%, 8/15/33-12/15/34 2,231,065 2,135,941
6%, 4/15/17-3/15/33 1,950,252 1,966,849
6.50%, 4/15/18-4/15/34 4,374,656 4,493,452
7%, 5/15/29-11/15/32 2,825,377 2,935,573
8%, 4/15/16 47,160 49,857
9%, 8/15/22-5/15/25 13,951 15,002
- --------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., CMO Gtd. Real Estate Mtg. Investment
Conduit Multiclass Pass-Through Certificates:
Series 151, Cl. F, 9%, 5/15/21 31,477 31,434
Series 2006-11, Cl. PS, 5.752%, 3/25/36 2 705,804 733,862
Series 2034, Cl. Z, 6.50%, 2/15/28 400,514 412,633
Series 2043, Cl. ZP, 6.50%, 4/15/28 1,143,540 1,176,907
Series 2053, Cl. Z, 6.50%, 4/15/28 423,384 437,288
Series 2055, Cl. ZM, 6.50%, 5/15/28 560,596 575,125
Series 2075, Cl. D, 6.50%, 8/15/28 1,377,715 1,422,427
Series 2080, Cl. Z, 6.50%, 8/15/28 854,328 881,896
Series 2387, Cl. PD, 6%, 4/15/30 15,399 15,368
Series 2427, Cl. ZM, 6.50%, 3/15/32 1,494,857 1,546,024
Series 2500, Cl. FD, 6.253%, 3/15/32 2 168,462 169,710
Series 2526, Cl. FE, 6.153%, 6/15/29 2 249,131 250,316
Series 2551, Cl. FD, 6.153%, 1/15/33 2 192,271 192,982
Series 2592, Cl. F, 6.503%, 12/15/32 2 3,780,473 3,831,183
Series 3025, Cl. SJ, 3.658%, 8/15/35 2 153,954 159,736
- --------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed
Security:
Series 176, Cl. IO, 7.32%, 6/1/26 5 333,338 82,942
Series 183, Cl. IO, 5.03%, 4/1/27 5 527,100 130,647
Series 184, Cl. IO, 10.63%, 12/1/26 5 573,190 146,150
Series 192, Cl. IO, 11.48%, 2/1/28 5 164,192 42,111
Series 200, Cl. IO, 10.52%, 1/1/29 5 197,909 51,604
Series 2003-118, Cl. S, 8.04%, 12/25/33 5 3,115,275 413,016
Series 2005-87, Cl. SE, (1)%, 10/25/35 5 5,382,489 237,755
Series 2005-87, Cl. SG, 6.71%, 10/25/35 5 5,039,487 322,840
Series 2130, Cl. SC, (5.20)%, 3/15/29 5 426,697 34,076
Series 216, Cl. IO, 11.77%, 12/1/31 5 376,907 94,182
Series 224, Cl. IO, 7.36%, 3/1/33 5 1,168,618 294,582
Series 243, Cl. 6, 9.32%, 12/15/32 5 725,312 183,612
Series 2796, Cl. SD, (6.08)%, 7/15/26 5 634,478 50,817
Series 2802, Cl. AS, (3.83)%, 4/15/33 5 1,155,870 67,899
Series 2920, Cl. S, (10.25)%, 1/15/35 5 3,583,730 186,263
Series 3000, Cl. SE, (11.22)%, 7/15/25 5 3,758,455 156,823
Series 3110, Cl. SL, 8.70%, 2/15/26 5 615,862 24,786
28 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal Home Loan Mortgage Corp., Principal-Only Stripped Mtg.-Backed
Security:
Series 176, Cl. PO, 5.53%, 6/1/26 6 $ 141,615 $ 111,682
Series 192, Cl. PO, 6.73%, 2/1/28 6 164,192 126,266
- --------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
4.50%, 5/25/18-8/25/20 19,948,272 19,254,392
5%, 12/25/17-9/25/35 49,091,948 47,667,646
5.50%, 10/25/19-11/25/34 43,995,438 43,270,008
5.50%, 10/1/21-10/1/36 7 5,941,000 5,836,250
6%, 9/25/19-11/25/33 21,264,094 21,430,927
6%, 10/1/21-10/1/36 7 5,261,995 5,310,979
6.50%, 6/25/17-11/25/31 10,748,743 11,047,202
7%, 11/25/17-1/25/35 4,292,274 4,462,358
7.50%, 1/25/08-1/25/33 450,893 473,068
8.50%, 7/25/32 21,207 22,803
- --------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Grantor Trust, CMO, Trust 2002-T1, Cl. A2,
7%, 11/25/31 1,225,198 1,271,388
- --------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Trust 1992-15, Cl. KZ, 7%, 2/25/22 64,126 64,933
Trust 1993-215, Cl. ZQ, 6.50%, 11/25/23 1,338,364 1,370,064
Trust 1993-87, Cl. Z, 6.50%, 6/25/23 1,049,308 1,090,039
Trust 1996-35, Cl. Z, 7%, 7/25/26 193,522 201,015
Trust 1998-61, Cl. PL, 6%, 11/25/28 648,181 659,439
Trust 2001-44, Cl. QC, 6%, 9/25/16 1,945,510 1,998,337
Trust 2001-50, Cl. NE, 6%, 8/25/30 33,627 33,455
Trust 2001-51, Cl. OD, 6.50%, 10/25/31 1,482,367 1,517,724
Trust 2001-70, Cl. LR, 6%, 9/25/30 135,397 135,775
Trust 2001-82, Cl. ZA, 6.50%, 1/25/32 592,729 608,599
Trust 2003-130, Cl. CS, 3.838%, 12/25/33 2 1,017,063 939,147
Trust 2003-17, Cl. EQ, 5.50%, 3/25/23 1,138,000 1,106,706
Trust 2003-28, Cl. KG, 5.50%, 4/25/23 1,045,000 1,021,517
Trust 2003-84, Cl. PW, 3%, 6/25/22 673,334 667,561
Trust 2004-101, Cl. BG, 5%, 1/25/20 1,869,000 1,830,479
Trust 2005-59, Cl. NQ, 4.047%, 5/25/35 2 760,581 710,225
Trust 2005-71, Cl. DB, 4.50%, 8/25/25 160,000 146,388
Trust 2006-24, Cl. DB, 5.50%, 4/25/26 4,010,000 3,963,616
Trust 2006-44, Cl. OA, 5.50%, 12/25/26 2,817,282 2,830,246
Trust 2006-46, Cl. SW, 5.385%, 6/25/36 2 554,876 570,557
Trust 2006-50, Cl. KS, 5.385%, 6/25/36 2 1,375,615 1,342,747
Trust 2006-50, Cl. SA, 5.385%, 6/25/36 2 447,968 438,962
Trust 2006-50, Cl. SK, 5.385%, 6/25/36 2 1,248,962 1,253,798
Trust 2006-57, Cl. PA, 5.50%, 8/25/27 3,435,689 3,450,343
Trust 2006-64, Cl. MD, 5.50%, 7/25/36 5,101,000 4,940,021
- --------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed
Security:
Trust 1993-223, Cl. PM, 11.86%, 10/25/23 5 27,953 1,539
Trust 2001-65, Cl. S, 6.48%, 11/25/31 5 1,719,061 191,877
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 2001-81, Cl. S, 0.44%, 1/25/32 5 $ 367,158 $ 39,131
Trust 2002-38, Cl. IO, (5.99)%, 4/25/32 5 603,974 38,866
Trust 2002-47, Cl. NS, (0.20)%, 4/25/32 5 726,234 70,215
Trust 2002-51, Cl. S, (0.08)%, 8/25/32 5 666,845 65,032
Trust 2002-52, Cl. SD, (3.28)%, 9/25/32 5 743,940 72,043
Trust 2002-77, Cl. IS, (0.19)%, 12/18/32 5 1,028,992 102,123
Trust 2002-77, Cl. SH, 1.28%, 12/18/32 5 484,281 48,590
Trust 2002-9, Cl. MS, 0.67%, 3/25/32 5 504,681 48,925
Trust 2002-96, Cl. SK, 8.08%, 4/25/32 5 4,587,970 458,971
Trust 2003-33, Cl. SP, 9.36%, 5/25/33 5 1,772,535 225,835
Trust 2003-4, Cl. S, 7.36%, 2/25/33 5 944,058 111,341
Trust 2003-46, Cl. IH, 6.96%, 6/25/33 5 6,287,758 1,260,931
Trust 2004-54, Cl. DS, (7.66)%, 11/25/30 5 695,537 45,477
Trust 2005-19, Cl. SA, (4.86)%, 3/25/35 5 9,436,175 530,673
Trust 2005-40, Cl. SA, (5.33)%, 5/25/35 5 2,016,753 106,959
Trust 2005-6, Cl. SE, (3.44)%, 2/25/35 5 2,539,032 126,458
Trust 2005-71, Cl. SA, (2.22)%, 8/25/25 5 2,369,298 154,973
Trust 2006-33, Cl. SP, 10.75%, 5/25/36 5 5,593,832 466,248
Trust 214, Cl. 2, 18%, 3/1/23 5 909,730 214,034
Trust 222, Cl. 2, 14.26%, 6/1/23 5 1,214,302 286,610
Trust 240, Cl. 2, 19.20%, 9/1/23 5 1,919,499 515,644
Trust 247, Cl. 2, 12.63%, 10/1/23 5 240,757 62,675
Trust 252, Cl. 2, 12.85%, 11/1/23 5 896,331 241,288
Trust 273, Cl. 2, 14.05%, 8/1/26 5 254,491 64,477
Trust 319, Cl. 2, 12.22%, 2/1/32 5 361,768 90,394
Trust 321, Cl. 2, 7.45%, 4/1/32 5 3,697,992 934,802
Trust 331, Cl. 9, 9.06%, 2/1/33 5 122,159 29,069
Trust 334, Cl. 17, 22.65%, 2/1/33 5 593,409 148,807
Trust 339, Cl. 7, 7.91%, 7/1/33 5 2,632,432 608,285
Trust 342, Cl. 2, 11.49%, 9/1/33 5 449,675 114,998
Trust 344, Cl. 2, 8.94%, 12/1/33 5 7,025,291 1,798,670
Trust 345, Cl. 9, 8.72%, 1/1/34 5 1,603,801 373,769
Trust 362, Cl. 12, 6.81%, 8/1/35 5 5,238,994 1,199,535
Trust 362, Cl. 13, 6.83%, 8/1/35 5 2,908,608 668,772
- ---------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Principal-Only Stripped Mtg.-Backed
Security, Trust 1993-184, Cl. M, 5.48%, 9/25/23 6 436,815 373,590
-------------
237,404,026
- --------------------------------------------------------------------------------------------------------------------------
GNMA/GUARANTEED--0.1%
Government National Mortgage Assn.:
6.375%, 4/8/26 2 22,127 22,372
7%, 4/29/09-4/29/26 213,961 224,002
7.50%, 3/29/09-5/29/27 804,067 844,125
8%, 5/30/17 31,228 33,005
8.50%, 8/15/17-12/29/17 19,873 21,257
30 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------------
GNMA/GUARANTEED Continued
Government National Mortgage Assn., Interest-Only Stripped Mtg.-Backed
Security:
Series 2001-21, Cl. SB, (2.38)%, 1/16/27 5 $ 875,146 $ 70,282
Series 2002-15, Cl. SM, (4.60)%, 2/16/32 5 722,213 57,547
Series 2002-76, Cl. SY, (7.29)%, 12/16/26 5 1,721,020 122,687
Series 2004-11, Cl. SM, (6.20)%, 1/17/30 5 578,692 42,460
------------
1,437,737
- --------------------------------------------------------------------------------------------------------------------------
NON-AGENCY--11.0%
- --------------------------------------------------------------------------------------------------------------------------
COMMERCIAL--4.8%
Banc of America Commercial Mortgage, Inc., Commercial Mtg. Pass-Through
Certificates, Series 2005-3, Cl. A2, 4.501%, 7/10/43 1,810,000 1,785,637
- --------------------------------------------------------------------------------------------------------------------------
Banc of America Funding Corp., CMO Pass-Through Certificates,
Series 2004-2, Cl. 2A1, 6.50%, 7/20/32 1,125,767 1,142,466
- --------------------------------------------------------------------------------------------------------------------------
Banc of America Mortgage Securities, Inc., CMO Pass-Through Certificates,
Series 2004-8, Cl. 5A1, 6.50%, 5/25/32 931,947 940,597
- --------------------------------------------------------------------------------------------------------------------------
ChaseFlex Trust 2006-2, Multiclass Mtg. Pass-Through Certificates,
Series 2006-2, Cl. A1B, 5.231%, 8/25/08 2 555,757 555,201
- --------------------------------------------------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust, Inc. 2006-WF1, Asset-Backed Pass-Through
Certificates, Series 2006-WF1, Cl. A2B, 5.536%, 3/1/36 460,000 459,092
- --------------------------------------------------------------------------------------------------------------------------
Citigroup/Deutsche Bank Commercial Mortgage Trust, Commercial Mtg.
Obligations, Series 2007-CD4, Cl. A2B, 5.205%, 12/11/49 4 2,150,000 2,142,653
- --------------------------------------------------------------------------------------------------------------------------
CitiMortgage Alternative Loan Trust 2006-A5, Mtg. Pass-Through
Certificates, Series 2006-A5, Cl. 1A1, 5.531%, 10/25/36 2 3,056,907 3,030,970
- --------------------------------------------------------------------------------------------------------------------------
Deutsche Alt-A Securities Mortgage Loan Trust, Mtg. Pass-Through Certificates:
Series 2006-AB2, Cl. A7, 5.961%, 6/25/36 1,028,159 1,028,504
Series 2006-AB4, Cl. A1A, 6.005%, 10/25/36 2,090,760 2,084,180
Series 2006-AB3, Cl. A7, 6.36%, 4/25/08 303,416 303,851
- --------------------------------------------------------------------------------------------------------------------------
First Horizon Alternative Mortgage Securities Trust, Mtg. Pass-Through
Certificates, Series 2007-FA2, Cl. 1A1, 5.50%, 4/25/37 1,072,727 1,071,080
- --------------------------------------------------------------------------------------------------------------------------
First Union National Bank/Lehman Brothers/Bank of America Commercial
Mtg. Trust, Pass-Through Certificates, Series 1998-C2, Cl. A2, 6.56%, 11/18/35 634,046 635,210
- --------------------------------------------------------------------------------------------------------------------------
GE Capital Commercial Mortgage Corp., Commercial Mtg. Obligations:
Series 2004-C3, Cl. A2, 4.433%, 7/10/39 960,000 951,200
Series 2005-C3, Cl. A2, 4.853%, 7/10/45 1,080,000 1,075,281
- --------------------------------------------------------------------------------------------------------------------------
Greenwich Capital Commercial Funding Corp., Commercial Mtg.
Pass-Through Certificates:
Series 2005-GG3, Cl. A2, 4.305%, 8/10/42 1,520,000 1,498,548
Series 2005-GG5, Cl. A2, 5.117%, 4/10/37 1,200,000 1,202,956
Series 2007-GG9, Cl. A2, 5.381%, 3/10/39 4 4,440,000 4,453,631
- --------------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Commercial Mortgage Securities Corp., Commercial Mtg.
Pass-Through Certificates:
Series 2005-LDP2, Cl. A2, 4.575%, 7/15/42 440,000 434,821
31 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL Continued
JPMorgan Chase Commercial Mortgage Securities Corp., Commercial Mtg.
Pass-Through Certificates: Continued
Series 2005-LDP4, Cl. A2, 4.79%, 10/15/42 $ 1,560,000 $ 1,549,119
Series 2007-LDPX, Cl. A2S, 5.305%, 1/15/49 410,000 409,255
Series 2006-CB14, Cl. A4, 5.481%, 12/12/44 2,270,000 2,269,299
Series 2007-LD12, Cl. A2, 5.827%, 2/15/51 1,020,000 1,038,842
- ------------------------------------------------------------------------------------------------------------------------------------
LB-UBS Commercial Mortgage Trust, Commercial Mtg. Pass-Through
Certificates:
Series 2005-C5, Cl. A2, 4.885%, 9/15/30 1,280,000 1,277,039
Series 2007-C1, Cl. A2, 5.318%, 1/15/12 1,780,000 1,783,327
- ------------------------------------------------------------------------------------------------------------------------------------
Mastr Alternative Loan Trust, CMO Pass-Through Certificates:
Series 2004-9, Cl. A3, 4.70%, 8/25/34 2 319,820 318,827
Series 2004-6, Cl. 10A1, 6%, 7/25/34 1,448,908 1,452,213
- ------------------------------------------------------------------------------------------------------------------------------------
Nomura Asset Securities Corp., Commercial Mtg. Pass-Through Certificates,
Series 1998-D6, Cl. A1B, 6.59%, 3/15/30 2,000,979 2,008,559
- ------------------------------------------------------------------------------------------------------------------------------------
Prudential Mortgage Capital Co. II LLC, Commercial Mtg. Pass-Through
Certificates, Series PRU-HTG 2000-C1, Cl. A2, 7.306%, 10/6/15 4 1,554,000 1,665,876
- ------------------------------------------------------------------------------------------------------------------------------------
RALI Series 2003-QS1 Trust, Mtg. Asset-Backed Pass-Through Certificates,
Series 2003-QS1, Cl. A2, 5.75%, 1/25/33 686,681 689,531
- ------------------------------------------------------------------------------------------------------------------------------------
RALI Series 2007-QS6 Trust, Mtg. Asset-Backed Pass-Through Certificates,
Series 2007-QS6, Cl. A114, 5.75%, 4/25/37 1,467,537 1,471,505
- ------------------------------------------------------------------------------------------------------------------------------------
Residential Asset Securitization Trust 2006-A9CB, CMO Pass-Through
Certificates, Series 2006-A9CB, Cl. A5, 6%, 9/25/36 2,008,976 2,010,900
- ------------------------------------------------------------------------------------------------------------------------------------
Wachovia Bank Commercial Mortgage Trust 2005-C17, Commercial Mtg.
Pass-Through Certificates, Series 2005-C17, Cl. A2, 4.782%, 3/15/42 2,490,000 2,476,620
- ------------------------------------------------------------------------------------------------------------------------------------
Wachovia Bank Commercial Mortgage Trust 2006-C29, Commercial Mtg.
Pass-Through Certificates, Series 2006-C29, Cl. A2, 5.272%, 11/15/48 492,000 492,326
- ------------------------------------------------------------------------------------------------------------------------------------
WAMU, Mtg. Pass-Through Certificates:
Series 2003-AR9, Cl. 2A, 4.048%, 9/25/33 2 1,471,827 1,456,860
Series 2006-AR8, Cl. 2A1, 6.134%, 8/25/36 2 4,357,890 4,390,100
---------------
51,556,076
- ------------------------------------------------------------------------------------------------------------------------------------
MANUFACTURED HOUSING--0.7%
Wells Fargo Mortgage-Backed Securities 2006-AR12 Trust, Mtg.
Pass-Through Certificates, Series 2006-AR12, Cl. 2A1, 6.10%, 9/25/36 2 3,373,568 3,416,350
- ------------------------------------------------------------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed Securities 2006-AR2 Trust, Mtg. Pass-Through
Certificates, Series 2006-AR2, Cl. 2A5, 5.095%, 3/25/36 2 3,941,725 3,909,567
---------------
7,325,917
- ------------------------------------------------------------------------------------------------------------------------------------
MULTIFAMILY--3.7%
Banc of America Mortgage Securities, Inc., CMO Pass-Through Certificates:
Series 2003-E, Cl. 2A2, 4.35%, 6/25/33 2 2,500,972 2,524,813
Series 2005-F, Cl. 2A3, 4.718%, 7/25/35 2 2,818,808 2,790,971
32 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MULTIFAMILY Continued
Bear Stearns ARM Trust 2006-4, Mtg. Pass-Through Certificates,
Series 2006-4, Cl. 2A1, 5.81%, 10/25/36 2 $ 1,555,769 $ 1,566,340
- ------------------------------------------------------------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust, Inc. 2006-AR5, Mtg. Pass-Through
Certificates, Series 2006-AR5, Cl. 1A3A, 5.903%, 7/25/36 2 1,159,298 1,176,806
- ------------------------------------------------------------------------------------------------------------------------------------
Countrywide Alternative Loan Trust, CMO:
Series 2008-85CB, Cl. 2A3, 5.50%, 2/25/36 1,730,000 1,691,864
Series 2004-28CB, Cl. 2A4, 5.75%, 1/25/35 2,325,000 2,178,913
- ------------------------------------------------------------------------------------------------------------------------------------
Countrywide Home Loans Servicing LP, Mtg. Pass-Through Certificates,
Series 2007-HY1, Cl. 1A1, 5.702%, 4/25/37 2 2,814,579 2,814,831
- ------------------------------------------------------------------------------------------------------------------------------------
Countrywide Home Loans, CMO:
Series 2003-46, Cl. 1A2, 4.129%, 1/19/34 2 2,056,510 2,064,137
Series 2005-HYB1, Cl. 5A1, 5.001%, 3/25/35 2 2,636,007 2,584,111
- ------------------------------------------------------------------------------------------------------------------------------------
GMAC Mortgage Corp. Loan Trust, Mtg. Pass-Through Certificates:
Series 2005-AR4, Cl. 2A1, 5.295%, 7/19/35 2 3,205,344 3,208,433
Series 2004-J4, Cl. A7, 5.50%, 9/25/34 1,600,000 1,513,407
- ------------------------------------------------------------------------------------------------------------------------------------
GSR Mortgage Loan Trust 2005-AR7, Mtg. Pass-Through Certificates,
Series 2005-AR7, Cl. 3A1, 5.161%, 11/25/35 2 4,535,266 4,523,216
- ------------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors Trust 2007-2, Mtg. Pass-Through
Certificates, Series 2007-2, Cl. 2A1, 6.009%, 6/25/37 2,7 3,796,578 3,871,263
- ------------------------------------------------------------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed Securities 2004-AA Trust, Mtg. Pass-Through
Certificates, Series 2004-AA, Cl. 2A, 4.995%, 12/25/34 2 923,723 915,575
- ------------------------------------------------------------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed Securities 2004-S Trust, Mtg. Pass-Through
Certificates, Series 2004-S, Cl. A1, 3.539%, 9/25/34 2 769,636 755,666
- ------------------------------------------------------------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed Securities 2005-AR2 Trust, Mtg. Pass-Through
Certificates, Series 2005-AR2, Cl. 2A2, 4.545%, 3/25/35 2 574,961 569,001
- ------------------------------------------------------------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed Securities 2005-AR4, Trust, Mtg. Pass-Through
Certificates, Series 2005-AR4, Cl. 2A2, 4.524%, 4/25/35 2 949,896 940,008
- ------------------------------------------------------------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed Securities 2006-AR10 Trust, Mtg. Pass-Through
Certificates:
Series 2006-AR10, Cl. 4A1, 5.56%, 7/25/36 2 1,877,133 1,868,658
Series 2006-AR10, Cl. 2A1, 5.645%, 7/25/36 2 1,434,136 1,432,363
- ------------------------------------------------------------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed Securities 2006-AR2 Trust, Mtg. Pass-Through
Certificates, Series 2006-AR2. Cl. 2A6, 5.091%, 3/25/36 2 758,658 754,674
- ------------------------------------------------------------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed Securities 2006-AR6 Trust, Mtg. Pass-Through
Certificates, Series 2006-AR6, Cl. 3A1, 5.094%, 3/25/36 2 853,089 850,722
---------------
40,595,772
- ------------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL--1.8%
Countrywide Alternative Loan Trust, CMO:
Series 2005-J1, Cl. 3A1, 6.50%, 8/25/32 2,117,030 2,142,460
Series 2005-J3, Cl. 3A1, 6.50%, 9/25/34 1,233,074 1,255,883
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Mortgage Loan Trust 2006-AR, Mtg. Pass-Through
Certificates, Series 2006-AR, Cl. 5A3, 5.424%, 6/25/36 2 1,070,000 1,059,713
33 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL Continued
RALI Series 2006-QS13 Trust, Mtg. Asset-Backed Pass-Through Certificates,
Series 2006-QS13, Cl. 1A8, 6%, 9/25/36 $ 1,413,514 $ 1,414,671
- ------------------------------------------------------------------------------------------------------------------------------------
RALI Series 2006-QS5 Trust, Mtg. Asset-Backed Pass-Through Certificates,
Series 2006-QS5, Cl. 2A2, 6%, 4/25/08 1,265,822 1,266,140
- ------------------------------------------------------------------------------------------------------------------------------------
WAMU, Mtg. Pass-Through Certificates:
Series 2007-HY6, Cl. 2A1, 5.704%, 6/25/37 2 2,649,331 2,627,185
Series 2006-AR12, Cl. 2A1, 5.75%, 10/25/36 2 4,159,184 4,140,336
- ------------------------------------------------------------------------------------------------------------------------------------
Washington Mutual Mortgage Loan Trust, Mtg. Pass-Through Certificates,
2007-A, Cl. 1A8, 6%, 2/25/37 4,017,591 4,063,363
- ------------------------------------------------------------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed Securities 2003-6 Trust, Mtg. Pass-Through
Certificates, Series 2003-6, Cl. 1A1, 5%, 6/25/18 1,602,773 1,562,520
---------------
19,532,271
---------------
Total Mortgage-Backed Obligations (Cost $356,199,588) 357,851,799
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--0.3%
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank Unsec. Bonds, 3.50%, 11/15/07 8 1,160,000 1,157,928
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 4.75%, 2/15/37 1,362,000 1,344,656
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts., 4.75%, 8/15/17 425,000 430,777
---------------
Total U.S. Government Obligations (Cost $2,922,673) 2,933,361
- ------------------------------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--9.2%
- ------------------------------------------------------------------------------------------------------------------------------------
ABN Amro Bank NV (NY Branch), 7.125% Sub. Nts., Series B, 10/15/93 500,000 546,609
- ------------------------------------------------------------------------------------------------------------------------------------
Albertson's, Inc., 8% Sr. Unsec. Debs., 5/1/31 1,715,000 1,749,542
- ------------------------------------------------------------------------------------------------------------------------------------
Barclays Bank plc, 6.278% Perpetual Bonds 9 4,660,000 4,100,614
- ------------------------------------------------------------------------------------------------------------------------------------
Belo Corp., 8% Sr. Unsec. Unsub. Nts., 11/1/08 3,005,000 3,079,404
- ------------------------------------------------------------------------------------------------------------------------------------
Buckeye Partners LP, 4.625% Sr. Nts., 7/15/13 2,355,000 2,215,765
- ------------------------------------------------------------------------------------------------------------------------------------
Caesars Entertainment, Inc., 7.50% Sr. Unsec. Nts., 9/1/09 4 2,240,000 2,297,012
- ------------------------------------------------------------------------------------------------------------------------------------
Capmark Financial Group, Inc., 5.875% Nts., 5/10/12 3 1,160,000 1,057,473
- ------------------------------------------------------------------------------------------------------------------------------------
Centex Corp., 5.80% Sr. Unsec. Nts., 9/15/09 1,395,000 1,373,426
- ------------------------------------------------------------------------------------------------------------------------------------
Chancellor Media CCU, 8% Sr. Unsec. Nts., 11/1/08 1,530,000 1,554,950
- ------------------------------------------------------------------------------------------------------------------------------------
CIT Group Funding Co. of Canada, 4.65% Sr. Unsec. Nts., 7/1/10 1,320,000 1,268,775
- ------------------------------------------------------------------------------------------------------------------------------------
Clear Channel Communications, Inc., 6.25% Nts., 3/15/11 1,425,000 1,306,969
- ------------------------------------------------------------------------------------------------------------------------------------
Coca-Cola Co. (The), 7.375% Unsec. Debs., 7/29/93 440,000 521,637
- ------------------------------------------------------------------------------------------------------------------------------------
Cox Enterprises, Inc., 4.375% Nts., 5/1/08 3 2,115,000 2,102,132
- ------------------------------------------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 7.25% Sr. Unsec. Nts., 7/15/08 1,695,000 1,703,475
- ------------------------------------------------------------------------------------------------------------------------------------
D.R. Horton, Inc.:
6.125% Nts., 1/15/14 895,000 796,806
8% Sr. Nts., 2/1/09 785,000 779,536
34 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Delhaize America, Inc., 9% Unsub. Debs., 4/15/31 $ 1,187,000 $ 1,420,133
- ------------------------------------------------------------------------------------------------------------------------------------
Dillard's, Inc., 6.625% Unsec. Nts., 11/15/08 535,000 527,644
- ------------------------------------------------------------------------------------------------------------------------------------
Eastman Kodak Co., 3.625% Nts., Series A, 5/15/08 4 244,000 237,900
- ------------------------------------------------------------------------------------------------------------------------------------
EchoStar DBS Corp., 5.75% Sr. Unsec. Nts., 10/1/08 2,530,000 2,536,325
- ------------------------------------------------------------------------------------------------------------------------------------
El Paso Corp., 6.50% Sr. Unsec. Nts., 6/1/08 390,000 392,737
- ------------------------------------------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 9.75% Sr. Unsec. Nts., 9/15/10 3,920,000 4,000,646
- ------------------------------------------------------------------------------------------------------------------------------------
Gap, Inc. (The), 9.80% Unsub. Nts., 12/15/08 2 228,000 240,878
- ------------------------------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 8% Bonds, 11/1/31 1,670,000 1,642,716
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Capital, Inc. (The), 6.345% Sub. Bonds, 2/15/34 3,665,000 3,425,408
- ------------------------------------------------------------------------------------------------------------------------------------
HBOS plc, 6.413% Sub. Perpetual Bonds, Series A 3,9 4,600,000 4,084,933
- ------------------------------------------------------------------------------------------------------------------------------------
HSBC Finance Capital Trust IX, 5.911% Nts., 11/30/35 2 3,200,000 3,041,786
- ------------------------------------------------------------------------------------------------------------------------------------
Hyundai Motor Manufacturing Alabama LLC, 5.30% Sr. Unsec. Nts., 12/19/08 3 1,140,000 1,138,556
- ------------------------------------------------------------------------------------------------------------------------------------
IPALCO Enterprises, Inc., 8.375% Sr. Sec. Nts., 11/14/08 2,4 920,000 943,000
- ------------------------------------------------------------------------------------------------------------------------------------
Kaneb Pipe Line Operating Partnership LP, 5.875% Sr. Unsec. Nts., 6/1/13 1,630,000 1,640,709
- ------------------------------------------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners LP, 7.30% Sr. Unsec. Nts., 8/15/33 1,275,000 1,339,946
- ------------------------------------------------------------------------------------------------------------------------------------
Lennar Corp., 7.625% Sr. Unsec. Nts., 3/1/09 1,915,000 1,971,958
- ------------------------------------------------------------------------------------------------------------------------------------
Liberty Media Corp., 7.875% Sr. Nts., 7/15/09 610,000 630,801
- ------------------------------------------------------------------------------------------------------------------------------------
Liberty Media LLC, 7.75% Sr. Nts., 7/15/09 1,835,000 1,881,352
- ------------------------------------------------------------------------------------------------------------------------------------
MBIA, Inc., 5.70% Sr. Unsec. Unsub. Nts., 12/1/34 1,100,000 894,628
- ------------------------------------------------------------------------------------------------------------------------------------
MetLife, Inc., 6.40% Jr. Unsec. Sub. Bonds, 12/15/36 2 3,430,000 3,272,278
- ------------------------------------------------------------------------------------------------------------------------------------
MGM Mirage, Inc., 6% Sr. Sec. Nts., 10/1/09 2,585,000 2,578,538
- ------------------------------------------------------------------------------------------------------------------------------------
Monongahela Power Co., 7.36% Unsec. Nts., Series A, 1/15/10 2,035,000 2,152,761
- ------------------------------------------------------------------------------------------------------------------------------------
NCR Corp., 7.125% Sr. Unsec. Unsub. Nts., 6/15/09 1,695,000 1,752,650
- ------------------------------------------------------------------------------------------------------------------------------------
Nextel Communications, Inc., 7.375% Sr. Nts., Series D, 8/1/15 1,565,000 1,591,724
- ------------------------------------------------------------------------------------------------------------------------------------
PF Export Receivables Master Trust, 3.748% Sr. Nts., Series B, 6/1/13 3 475,276 455,539
- ------------------------------------------------------------------------------------------------------------------------------------
Popular North America, Inc., 4.70% Nts., 6/30/09 2,540,000 2,529,792
- ------------------------------------------------------------------------------------------------------------------------------------
Prudential Holdings LLC, 8.695% Bonds, Series C, 12/18/23 3 2,520,000 3,100,880
- ------------------------------------------------------------------------------------------------------------------------------------
Prudential Insurance Co. of America, 8.30% Nts., 7/1/25 3 2,140,000 2,629,236
- ------------------------------------------------------------------------------------------------------------------------------------
PSEG Funding Trust I, 5.381% Nts., 11/16/07 1,320,000 1,318,109
- ------------------------------------------------------------------------------------------------------------------------------------
Pulte Homes, Inc., 4.875% Nts., 7/15/09 885,000 826,409
- ------------------------------------------------------------------------------------------------------------------------------------
Qwest Corp., 5.625% Unsec. Nts., 11/15/08 245,000 245,919
- ------------------------------------------------------------------------------------------------------------------------------------
R&B Falcon Corp., 9.50% Sr. Unsec. Nts., 12/15/08 750,000 787,544
- ------------------------------------------------------------------------------------------------------------------------------------
Rogers Wireless, Inc., 9.625% Sr. Sec. Nts., 5/1/11 1,905,000 2,147,120
- ------------------------------------------------------------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd., 7% Sr. Unsec. Unsub. Nts., 10/15/07 4 550,000 550,000
- ------------------------------------------------------------------------------------------------------------------------------------
SLM Corp., 4% Nts., 1/15/09 1,765,000 1,701,299
- ------------------------------------------------------------------------------------------------------------------------------------
Standard Pacific Corp., 5.125% Sr. Unsec. Unsub. Nts., 4/1/09 930,000 790,500
- ------------------------------------------------------------------------------------------------------------------------------------
TEPPCO Partners LP, 6.125% Nts., 2/1/13 930,000 937,843
35 | OPPENHEIMER BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Tribune Co., 5.50% Nts., Series E, 10/6/08 4 $ 1,485,000 $ 1,403,325
- ------------------------------------------------------------------------------------------------------------------------------------
TXU Energy Co. LLC:
6.125% Nts., 3/15/08 1,330,000 1,339,055
6.194% Sr. Nts., 9/16/08 2,3 1,865,000 1,868,240
- ------------------------------------------------------------------------------------------------------------------------------------
Univision Communications, Inc.:
3.50% Sr. Unsec. Nts., 10/15/07 1,270,000 1,263,650
3.875% Sr. Unsec. Nts., 10/15/08 590,000 575,250
- ------------------------------------------------------------------------------------------------------------------------------------
Valero Logistics Operations LP, 6.05% Nts., 3/15/13 435,000 437,128
- ------------------------------------------------------------------------------------------------------------------------------------
Westar Energy, Inc., 7.125% Sr. Unsec. Nts., 8/1/09 1,950,000 1,994,302
- ------------------------------------------------------------------------------------------------------------------------------------
Williams Cos., Inc. (The) Credit Linked Certificate Trust, 6.75% Nts., 4/15/09 4 2,385,000 2,408,850
---------------
Total Non-Convertible Corporate Bonds and Notes (Cost $100,172,158) 99,104,122
SHARES
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS IN AFFILIATED COMPANIES--6.9%
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E, 5.37% 10,11
(Cost $73,733,633) 73,733,633 73,733,633
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $959,401,784) 100.8% 1,084,931,388
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (0.8) (8,272,305)
-----------------------------
NET ASSETS 100.0% $1,076,659,083
=============================
36 | OPPENHEIMER BALANCED FUND
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Represents the current interest rate for a variable or increasing rate
security.
3. 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 $17,066,615 or 1.59% of the Fund's net
assets as of September 30, 2007.
4. Illiquid security. The aggregate value of illiquid securities as of September
30, 2007 was $16,839,288, which represents 1.56% of the Fund's net assets. See
Note 11 of accompanying Notes.
5. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows. These securities amount to $14,331,117 or 1.33% of the Fund's net assets
as of September 30, 2007.
6. Principal-Only Strips represent the right to receive the monthly principal
payments on an underlying pool of mortgage loans. The value of these securities
generally increases as interest rates decline and prepayment rates rise. The
price of these securities is typically more volatile than that of coupon-bearing
bonds of the same maturity. Interest rates disclosed represent current yields
based upon the current cost basis and estimated timing of future cash flows.
These securities amount to $611,538 or 0.06% of the Fund's net assets as of
September 30, 2007.
7. When-issued security or forward commitment to be delivered and settled after
September 30, 2007. See Note 1 of accompanying Notes.
8. All or a portion of the security is held in collateralized accounts to cover
initial margin requirements on open futures contracts. The aggregate market
value of such securities is $369,339. See Note 6 of accompanying Notes.
9. 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.
10. Rate shown is the 7-day yield as of September 30, 2007.
11. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended September 30, 2007, by virtue of the Fund owning at
least 5% of the voting securities of the issuer or as a result of the Fund and
the issuer having the same investment advisor. Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES SHARES
SEPTEMBER 30, GROSS GROSS SEPTEMBER 30,
2006 ADDITIONS REDUCTIONS 2007
- --------------------------------------------------------------------------------------------
Oppenheimer Institutional Money
Market Fund, Cl. E -- 548,558,274 474,824,641 73,733,633
VALUE DIVIDEND
SEE NOTE 1 INCOME
- --------------------------------------------------------------------------------------------
Oppenheimer Institutional Money
Market Fund, Cl. E $73,733,633 $4,765,793
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
37 | OPPENHEIMER BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES September 30, 2007
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $885,668,151) $ 1,011,197,755
Affiliated companies (cost $73,733,633) 73,733,633
----------------
1,084,931,388
- -------------------------------------------------------------------------------------------------------------
Cash 3,765,868
- -------------------------------------------------------------------------------------------------------------
Swaps, at value (net premiums paid $128,529) 2,445,076
- -------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold (including $6,244,323 sold on a when-issued basis or forward commitment) 18,434,655
Interest, dividends and principal paydowns 4,442,535
Shares of beneficial interest sold 722,528
Futures margins 51,926
Other 64,600
----------------
Total assets 1,114,858,576
- -------------------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------------------
Swaps, at value (net premiums paid $188,418) 2,155,237
- -------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $21,300,035 purchased on a when-issued basis
or forward commitment) 33,487,668
Shares of beneficial interest redeemed 1,311,529
Distribution and service plan fees 590,673
Trustees' compensation 193,283
Transfer and shareholder servicing agent fees 129,036
Shareholder communications 110,552
Other 221,515
----------------
Total liabilities 38,199,493
- -------------------------------------------------------------------------------------------------------------
NET ASSETS $ 1,076,659,083
================
- -------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -------------------------------------------------------------------------------------------------------------
Paid-in capital $ 903,411,784
- -------------------------------------------------------------------------------------------------------------
Accumulated net investment income 6,772,727
- -------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 41,256,476
- -------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and liabilities
denominated in foreign currencies 125,218,096
----------------
NET ASSETS $ 1,076,659,083
================
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 $865,895,026
and 60,457,347 shares of beneficial interest outstanding) $ 14.32
Maximum offering price per share (net asset value plus sales charge of 5.75%
of offering price) $ 15.19
- ------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $90,878,671 and 6,495,545 shares
of beneficial interest outstanding) $ 13.99
- ------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $101,644,777 and 7,229,012 shares
of beneficial interest outstanding) $ 14.06
- ------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $18,240,609 and 1,287,637 shares
of beneficial interest outstanding) $ 14.17
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
39 | OPPENHEIMER BALANCED FUND
STATEMENT OF OPERATIONS For the Year Ended September 30, 2007
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
INVESTMENT INCOME
- -----------------------------------------------------------------------------------------
Interest $ 24,640,719
- -----------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $133,670) 6,608,708
Affiliated companies 4,765,793
- -----------------------------------------------------------------------------------------
Portfolio lending fees 240,564
- -----------------------------------------------------------------------------------------
Other income 36,647
--------------
Total investment income 36,292,431
- -----------------------------------------------------------------------------------------
EXPENSES
- -----------------------------------------------------------------------------------------
Management fees 7,210,624
- -----------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 1,815,172
Class B 948,835
Class C 974,017
Class N 90,084
- -----------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 1,030,115
Class B 204,766
Class C 176,346
Class N 44,064
- -----------------------------------------------------------------------------------------
Shareholder communications:
Class A 160,522
Class B 38,179
Class C 23,055
Class N 2,827
- -----------------------------------------------------------------------------------------
Trustees' compensation 60,901
- -----------------------------------------------------------------------------------------
Custodian fees and expenses 11,616
- -----------------------------------------------------------------------------------------
Other 89,951
--------------
Total expenses 12,881,074
Less reduction to custodian expenses (1,686)
Less waivers and reimbursements of expenses (90,250)
--------------
Net expenses 12,789,138
- -----------------------------------------------------------------------------------------
NET INVESTMENT INCOME 23,503,293
40 | OPPENHEIMER BALANCED FUND
- -----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- -----------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments from unaffiliated companies $ 54,901,480
Closing and expiration of option contracts written 305,031
Closing and expiration of futures contracts (391,223)
Foreign currency transactions 113,669
Swap contracts 135,071
Increase from payment by affiliate 95,461
--------------
Net realized gain 55,159,489
- -----------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments 38,440,304
Translation of assets and liabilities denominated in foreign currencies 1,047,132
Futures contracts (426,052)
Swap contracts (82,189)
--------------
Net change in unrealized appreciation 38,979,195
- -----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 117,641,977
==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
41 | OPPENHEIMER BALANCED FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2007 2006
- -------------------------------------------------------------------------------------------------------------------
OPERATIONS
- -------------------------------------------------------------------------------------------------------------------
Net investment income $ 23,503,293 $ 18,884,078
- -------------------------------------------------------------------------------------------------------------------
Net realized gain 55,159,489 69,364,968
- -------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 38,979,195 (53,167,263)
--------------------------------
Net increase in net assets resulting from operations 117,641,977 35,081,783
- -------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (20,079,749) (16,011,740)
Class B (1,423,760) (1,186,200)
Class C (1,532,394) (1,173,973)
Class N (362,666) (238,509)
--------------------------------
(23,398,569) (18,610,422)
- -------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (51,176,462) (39,741,174)
Class B (6,078,031) (5,399,948)
Class C (5,885,017) (4,997,038)
Class N (1,116,454) (703,418)
--------------------------------
(64,255,964) (50,841,578)
- -------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A 30,877,600 111,393,954
Class B (9,669,827) 3,678,115
Class C 6,173,205 8,465,336
Class N 2,816,552 3,576,958
--------------------------------
30,197,530 127,114,363
- -------------------------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
Total increase 60,184,974 92,744,146
- -------------------------------------------------------------------------------------------------------------------
Beginning of period 1,016,474,109 923,729,963
--------------------------------
End of period (including accumulated net investment income of
$6,772,727 and $6,230,268, respectively) $1,076,659,083 $1,016,474,109
================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
42 | OPPENHEIMER BALANCED FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED SEPTEMBER 30, 2007 2006 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.94 $ 14.51 $ 13.75 $ 12.55 $ 10.51
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .34 1 .30 1 .24 1 .14 .21
Net realized and unrealized gain 1.27 .21 1.38 1.16 2.08
------------------------------------------------------------------
Total from investment operations 1.61 .51 1.62 1.30 2.29
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.34) (.29) (.16) (.10) (.22)
Tax return of capital distribution -- -- -- -- (.03)
Distributions from net realized gain (.89) (.79) (.70) -- --
------------------------------------------------------------------
Total dividends and/or distributions to shareholders (1.23) (1.08) (.86) (.10) (.25)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 14.32 $ 13.94 $ 14.51 $ 13.75 $ 12.55
==================================================================
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 11.96% 3.86% 12.13% 10.37% 21.98%
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 865,895 $ 810,738 $ 725,836 $ 651,754 $ 575,799
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 851,017 $ 752,163 $ 694,147 $ 631,041 $ 523,477
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 2.38% 2.16% 1.69% 1.05% 1.78%
Total expenses 1.05% 4 1.06% 1.05% 1.07% 1.11%
Expenses after payments, waivers and/or reimbursements
and reduction to custodian expenses 1.04% 1.06% 1.05% 1.06% 1.11%
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 74% 5 84% 5 73% 5 61% 5 205%
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 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 less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended September 30, 2007 1.06%
5. The portfolio turnover rate excludes purchase and sale transactions of To Be
Announced (TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
--------------------------------------------------------------------------
Year Ended September 30, 2007 $ 814,618,659 $ 879,472,606
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, 2007 2006 2005 2004 2003
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.64 $ 14.23 $ 13.53 $ 12.40 $ 10.38
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .20 1 .17 1 .11 1 .02 .09
Net realized and unrealized gain 1.25 .20 1.36 1.13 2.07
------------------------------------------------------------------
Total from investment operations 1.45 .37 1.47 1.15 2.16
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.21) (.17) (.07) (.02) (.11)
Tax return of capital distribution -- -- -- -- (.03)
Distributions from net realized gain (.89) (.79) (.70) -- --
------------------------------------------------------------------
Total dividends and/or distributions to shareholders (1.10) (.96) (.77) (.02) (.14)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.99 $ 13.64 $ 14.23 $ 13.53 $ 12.40
==================================================================
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 10.99% 2.84% 11.17% 9.26% 20.91%
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 90,879 $ 98,021 $ 98,271 $ 84,924 $ 64,944
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 95,241 $ 95,979 $ 92,677 $ 77,082 $ 57,836
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.48% 1.24% 0.76% 0.11% 0.81%
Total expenses 1.95% 4 1.99% 1.98% 2.02% 2.08%
Expenses after payments, waivers and/or reimbursements
and reduction to custodian expenses 1.94% 1.99% 1.98% 2.02% 2.08%
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 74% 5 84% 5 73% 5 61% 5 205%
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 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 less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended September 30, 2007 1.96%
5. The portfolio turnover rate excludes purchase and sale transactions of To Be
Announced (TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
--------------------------------------------------------------------------
Year Ended September 30, 2007 $ 814,618,659 $ 879,472,606
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, 2007 2006 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.71 $ 14.29 $ 13.59 $ 12.44 $ 10.42
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .21 1 .18 1 .11 1 .04 .11
Net realized and unrealized gain 1.25 .21 1.37 1.13 2.06
------------------------------------------------------------------
Total from investment operations 1.46 .39 1.48 1.17 2.17
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.22) (.18) (.08) (.02) (.12)
Tax return of capital distribution -- -- -- -- (.03)
Distributions from net realized gain (.89) (.79) (.70) -- --
------------------------------------------------------------------
Total dividends and/or distributions to shareholders (1.11) (.97) (.78) (.02) (.15)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 14.06 $ 13.71 $ 14.29 $ 13.59 $ 12.44
==================================================================
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 11.00% 2.97% 11.18% 9.45% 20.98%
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 101,645 $ 92,782 $ 87,820 $ 68,018 $ 47,212
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 97,640 $ 90,567 $ 78,091 $ 60,095 $ 38,407
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.53% 1.30% 0.83% 0.19% 0.90%
Total expenses 1.90% 4 1.93% 1.91% 1.93% 1.98%
Expenses after payments, waivers and/or reimbursements
and reduction to custodian expenses 1.89% 1.92% 1.91% 1.93% 1.98%
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 74% 5 84% 5 73% 5 61% 5 205%
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 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 less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended September 30, 2007 1.91%
5. The portfolio turnover rate excludes purchase and sale transactions of To Be
Announced (TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
--------------------------------------------------------------------------
Year Ended September 30, 2007 $ 814,618,659 $ 879,472,606
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, 2007 2006 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.80 $ 14.38 $ 13.65 $ 12.49 $ 10.48
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .28 1 .24 1 .17 1 .10 .20
Net realized and unrealized gain 1.26 .21 1.38 1.12 2.01
------------------------------------------------------------------
Total from investment operations 1.54 .45 1.55 1.22 2.21
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.28) (.24) (.12) (.06) (.17)
Tax return of capital distribution -- -- -- -- (.03)
Distributions from net realized gain (.89) (.79) (.70) -- --
------------------------------------------------------------------
Total dividends and/or distributions to shareholders (1.17) (1.03) (.82) (.06) (.20)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 14.17 $ 13.80 $ 14.38 $ 13.65 $ 12.49
==================================================================
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 11.57% 3.42% 11.66% 9.77% 21.27%
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 18,240 $ 14,933 $ 11,803 $ 8,772 $ 3,349
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 18,038 $ 13,425 $ 10,278 $ 5,701 $ 1,604
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.98% 1.76% 1.24% 0.55% 1.24%
Total expenses 1.45% 4 1.47% 1.50% 1.58% 1.76%
Expenses after payments, waivers and/or reimbursements
and reduction to custodian expenses 1.44% 1.47% 1.50% 1.57% 1.62%
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 74% 5 84% 5 73% 5 61% 5 205%
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 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 less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended September 30, 2007 1.46%
5. The portfolio turnover rate excludes purchase and sale transactions of To Be
Announced (TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
--------------------------------------------------------------------------
Year Ended September 30, 2007 $ 814,618,659 $ 879,472,606
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
exchange on which the security is traded, as identified by the portfolio pricing
service, prior to the time when the Fund's assets are valued. In the absence of
a sale, the security is valued at the official closing price on the principal
exchange. Corporate, government and municipal debt instruments having a
remaining maturity in excess of sixty days and all mortgage-backed securities
will be valued at the mean between the "bid" and "asked" prices. Futures
contracts traded on a commodities or futures exchange will be valued at the
final settlement price or official closing price on the principal exchange as
reported by such principal exchange at its trading session ending at, or most
recently prior to, the time when the Fund's assets are valued. Options are
valued daily based upon the last sale price on the principal exchange on which
the option is traded. Securities (including restricted securities) for which
market quotations are not readily available are valued at their fair value.
Foreign and domestic securities whose values
47 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
have been materially affected by what the Manager identifies as a significant
event occurring before the Fund's assets are valued but after the close of their
respective exchanges will be fair valued. Fair value is determined in good faith
using consistently applied procedures under the supervision of the Board of
Trustees. Investments in open-end registered investment companies (including
affiliated funds) are valued at that fund's net asset value. 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 take place generally at least 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, 2007, the Fund had purchased
$21,300,035 of securities issued on a when-issued basis or forward commitment
and sold $6,244,323 of securities issued on a when-issued basis or forward
commitment.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of the New
York Stock Exchange (the "Exchange"), normally 4:00 P.M. Eastern time, on each
day the Exchange is open for business. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
48 | OPPENHEIMER BALANCED FUND
- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Fund is permitted
to invest daily available cash balances in an affiliated money market fund. The
Fund may invest the available cash in Class E shares of Oppenheimer
Institutional Money Market Fund ("IMMF") which seeks current income and
stability of principal. IMMF is a registered open-end management investment
company, regulated as a money market fund under the Investment Company Act of
1940, as amended. The Manager is also the investment advisor of IMMF. The Fund's
investment in IMMF is included in the Statement of Investments, if applicable.
As a shareholder, the Fund is subject to its proportional share of IMMF's Class
E expenses, including its management fee. The Manager will waive fees and/or
reimburse Fund expenses in an amount equal to the indirect management fees
incurred through the Fund's investment in IMMF.
- --------------------------------------------------------------------------------
INVESTMENTS WITH OFF BALANCE SHEET RISK. The Fund enters into financial
instrument transactions (such as swaps, futures, options 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.
The tax components of capital shown in the following table 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
---------------------------------------------------------------------------
$14,684,429 $34,694,479 $467,065 $124,522,976
1. The Fund had $165 of post-October foreign currency losses which were
deferred.
2. The Fund had $466,900 of straddle losses which were deferred.
3. During the fiscal year ended September 30, 2007, the Fund utilized $213,555
of capital loss carryforward to offset capital gains realized in that fiscal
year.
4. 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.
49 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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, 2007. 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
----------------------------------------------------
$3,860,361 $437,735 $4,298,096
5. $3,575,463, including $2,911,829 of long-term capital gain, was distributed
in connection with Fund share redemptions.
The tax character of distributions paid during the years ended September 30,
2007 and September 30, 2006 was as follows:
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2007 SEPTEMBER 30, 2006
------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 23,398,579 $ 27,772,855
Long-term capital gain 64,255,954 41,679,145
---------------------------------------
Total $ 87,654,533 $ 69,452,000
=======================================
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of September 30, 2007 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 $ 960,279,927
Federal tax cost of other investments (74,214,518)
------------------
Total federal tax cost $ 886,065,409
==================
Gross unrealized appreciation $ 146,308,039
Gross unrealized depreciation (21,785,063)
------------------
Net unrealized appreciation $ 124,522,976
==================
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan (the
"Plan") for the Fund's independent trustees. Benefits are based on years of
service and fees paid to each trustee during their period of service. The Plan
was frozen with respect to adding
50 | OPPENHEIMER BALANCED FUND
new participants effective December 31, 2006 (the "Freeze Date") and existing
Plan Participants as of the Freeze Date will continue to receive accrued
benefits under the Plan. Active independent trustees as of the Freeze Date have
each elected a distribution method with respect to their benefits under the
Plan. During the year ended September 30, 2007, the Fund's projected benefit
obligations were increased by $36,943 and payments of $35,125 were made to
retired trustees, resulting in an accumulated liability of $125,636 as of
September 30, 2007.
The Board of Trustees has adopted a compensation deferral 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 compensation deferral plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income distributions, if any, are declared
and paid quarterly. Capital gain distributions, if any, are declared and paid
annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
51 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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, 2007 YEAR ENDED SEPTEMBER 30, 2006
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------
CLASS A
Sold 6,131,500 $ 86,517,298 6,707,218 $ 92,313,989
Dividends and/or
distributions reinvested 4,745,903 65,665,433 3,764,837 51,001,543
Acquisition-Note 14 -- -- 7,679,053 105,279,820
Redeemed (8,582,423) (121,305,131) (9,999,585) (137,201,398)
--------------------------------------------------------------
Net increase 2,294,980 $ 30,877,600 8,151,523 $111,393,954
==============================================================
- -----------------------------------------------------------------------------------------------
CLASS B
Sold 1,194,731 $ 16,478,946 1,486,495 $ 20,023,127
Dividends and/or
distributions reinvested 519,741 7,027,431 459,149 6,095,358
Acquisition-Note 14 -- -- 852,361 11,421,633
Redeemed (2,404,916) (33,176,204) (2,519,583) (33,862,003)
--------------------------------------------------------------
Net increase (decrease) (690,444) $ (9,669,827) 278,422 $ 3,678,115
==============================================================
- -----------------------------------------------------------------------------------------------
CLASS C
Sold 1,379,987 $ 19,118,489 1,733,303 $ 23,444,138
Dividends and/or
distributions reinvested 494,376 6,720,594 420,150 5,602,992
Acquisition-Note 14 -- -- 622,399 8,383,715
Redeemed (1,414,896) (19,665,878) (2,152,123) (28,965,509)
--------------------------------------------------------------
Net increase 459,467 $ 6,173,205 623,729 $ 8,465,336
==============================================================
52 | OPPENHEIMER BALANCED FUND
YEAR ENDED SEPTEMBER 30, 2007 YEAR ENDED SEPTEMBER 30, 2006
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------
CLASS N
Sold 544,228 $ 7,636,814 394,439 $ 5,367,295
Dividends and/or
distributions reinvested 101,356 1,387,392 67,430 905,224
Acquisition-Note 14 -- -- 134,474 1,824,806
Redeemed (439,945) (6,207,654) (334,942) (4,520,367)
--------------------------------------------------------------
Net increase 205,639 $ 2,816,552 261,401 $ 3,576,958
==============================================================
- --------------------------------------------------------------------------------
3.PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and investments in IMMF, for the year ended
September 30, 2007, were as follows:
PURCHASES SALES
-----------------------------------------------------------------------
Investment securities $528,432,255 $ 573,555,487
U.S. government and
government agency obligations 146,352,780 174,601,917
To Be Announced (TBA)
mortgage-related securities 814,618,659 879,472,606
- --------------------------------------------------------------------------------
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
annual rate of average net assets as shown in the following table:
FEE SCHEDULE
---------------------------------
Up to $200 million 0.75%
Next $200 million 0.72
Next $200 million 0.69
Next $200 million 0.66
Next $700 million 0.60
Over $1.5 billion 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, 2007, the Fund paid
$1,464,703 to OFS for services to the Fund.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares. Reimbursement is made
periodically at an annual rate of up to 0.25% of the average annual net assets
of Class A shares of the Fund. The Distributor currently uses all of those fees
to pay dealers, brokers, banks and other financial institutions periodically for
providing personal services and maintenance
53 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
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 determines its
uncompensated expenses under the plan at calendar quarter ends. The
Distributor's aggregate uncompensated expenses under the plan at September 30,
2007 for Class B, Class C and Class N shares were $2,873,405, $2,003,922 and
$227,118, 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, 2007 $380,279 $8,702 $184,174 $11,743 $1,354
- ------------------------------------------------------------------------------------------------------
PAYMENTS, 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.
The Manager will waive fees and/or reimburse Fund expenses in an amount
equal to the indirect management fees incurred through the Fund's investment in
IMMF. During the year ended September 30, 2007, the Manager waived $90,250 for
IMMF management fees.
The Distributor paid the Fund $2,270 in restitution as part of a settlement
with respect to an investigation of certain agreements between the Distributor
and various financial
54 | OPPENHEIMER BALANCED FUND
intermediaries that had selling agreements with the Distributor. The payment
increased the Fund's total returns by less than 0.01%.
During the six months ended September 30, 2007, the Manager voluntarily
reimbursed the Fund $93,191 for certain transactions. The payment increased the
Fund's total returns by less than 0.01%.
- --------------------------------------------------------------------------------
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, 2007, 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, 2007, the Fund had outstanding futures contracts as follows:
UNREALIZED
EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS SEPTEMBER 30, 2007 (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
U.S. Long Bonds 12/19/07 492 $ 54,781,125 $ 161,050
U.S. Treasury Nts., 5 yr. 12/31/07 111 11,880,469 66,382
--------------
227,432
--------------
CONTRACTS TO SELL
U.S. Treasury Nts., 2 yr. 12/31/07 512 106,008,000 (422,365)
U.S. Treasury Nts., 10 yr. 12/19/07 323 35,297,844 (100,875)
--------------
(523,240)
--------------
$ (295,808)
==============
- --------------------------------------------------------------------------------
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,
56 | OPPENHEIMER BALANCED FUND
exercise price, premium received and market value are detailed in a note to the
Statement of Investments. Options written are reported as a liability in the
Statement of Assets and Liabilities. Realized gains and losses are reported in
the Statement of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur
a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. The Fund also has the additional risk of not
being able to enter into a closing transaction if a liquid secondary market does
not exist. Written option activity for the year ended September 30, 2007 was as
follows:
CALL OPTIONS
--------------------------
NUMBER OF AMOUNT OF
CONTRACTS PREMIUMS
-------------------------------------------------------------
Options outstanding as of
September 30, 2006 -- $ --
Options written 956 355,641
Options closed or expired (956) (355,641)
--------------------------
Options outstanding as of
September 30, 2007 -- $ --
==========================
- --------------------------------------------------------------------------------
8. CREDIT DEFAULT SWAP CONTRACTS
A credit default swap is a bilateral contract that enables an investor to buy or
sell protection against a defined-issuer credit event. The Fund may enter into
credit default swaps to hedge an existing position or to obtain exposure to a
security or market by purchasing or selling credit protection. The Fund may
enter into credit default swaps on a single security, or a basket of securities.
In a credit default swap contract, the purchaser of the contract will pay a
periodic interest fee, similar to an insurance premium, on the notional amount
of the swap contract to the counterparty (the seller of the contract). If there
is a credit event (for example, bankruptcy or a failure to timely pay interest
or principal), the purchaser will exercise the contract and will receive a
payment from the seller of the contract equal to the notional value of the
credit default swap contract less the value of the underlying security.
The periodic interest fees are accrued daily as a component of unrealized
appreciation (depreciation) and are recorded as realized gain (loss) upon
payment. In the event that the credit default swap is exercised due to a credit
event, the difference between the value of the underlying security and the
notional amount is recorded as realized gain (loss) and is included on the
Statement of Operations.
Credit default swaps are marked to market daily using primarily quotations
from counterparties and brokers. The value of the contracts is separately
disclosed on the Statement of Assets and Liabilities. The unrealized
appreciation (depreciation) related to the change in the valuation of the
notional amount of the swap is combined with the accrued interest due to (owed
by) the Fund at termination or settlement. The net change in this amount during
the period is included on the Statement of Operations.
57 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. CREDIT DEFAULT SWAP CONTRACTS Continued
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, adverse
pricing when purchasing bonds to satisfy its delivery obligation, and the need
to fund the delivery obligation (either cash or defaulted securities depending
on whether the Fund is the purchaser or seller of the credit default swap
contract, respectively).
Information regarding such credit default swaps as of September 30, 2007 is as
follows:
BUY/SELL NOTIONAL PREMIUM
CREDIT AMOUNT PAY/RECEIVE TERMINATION PAID/
COUNTERPARTY REFERENCE ENTITY PROTECTION (000S) FIXED RATE DATES (RECEIVED) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Barclays Bank plc:
Beazer Homes USA, Inc. Sell $ 545 2.1000% 6/20/08 $ -- $ (39,494)
Capmark Financial
Group, Inc. Sell 1,020 1.0000 6/20/12 -- (88,841)
Countrywide Home
Loans, Inc. Sell 1,360 0.7500 9/20/08 -- (53,476)
Lear Corp. Sell 1,730 1.0000 6/20/08 -- 4,649
Lehman Brothers
Holdings, Inc. Sell 2,205 0.4900 9/20/10 -- (15,465)
Merrill Lynch & Co., Inc. Sell 4,195 0.6800 9/20/08 -- 14,210
Toys "R" Us, Inc. Sell 1,085 1.4500 9/20/08 -- (13,709)
- ------------------------------------------------------------------------------------------------------------------------------------
Credit Suisse
International:
ArvinMeritor, Inc. Sell 1,755 1.5500 9/20/08 -- 2,367
Belo Corp. Buy 3,255 0.9000 6/20/13 -- 51,505
CDX.NA.HY.8 Index Sell 5,050 2.7500 6/20/12 28,441 (107,423)
CDX.NA.HY.8 Index Sell 1,820 2.7500 6/20/12 14,699 (38,715)
CDX.NA.HY.8 Index Buy 1,820 2.7500 6/20/14 26,251 82,063
CDX.NA.HY.8 Index Sell 940 2.7500 6/20/12 (75,193) (19,995)
CDX.NA.HY.8-V1 Index Buy 5,050 2.7500 6/20/14 91,496 227,703
Freescale Semiconductor, Inc. Sell 1,075 0.7500 3/20/08 -- (6,693)
Freescale Semiconductor, Inc. Sell 1,010 0.6000 3/20/08 -- (7,039)
Intelsat Ltd. Sell 1,135 3.4500 9/20/08 -- 1,630
Quebecor World, Inc. Sell 1,120 2.6000 9/20/08 -- 9,304
Rite Aid Corp. Sell 1,700 0.8750 6/20/08 -- (19,434)
Saks, Inc. Sell 1,785 2.0000 9/20/08 -- 15,107
The Goodyear Tire &
Rubber Co. Sell 1,690 1.5500 9/20/08 -- 17,253
Univision
Communications, Inc. Sell 495 0.7500 3/20/08 -- (1,211)
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
ABX.HE.AA.06-2 Index Sell 470 0.1700 5/25/46 (56,396) (49,363)
Allied Waste North
America, Inc. Sell 990 2.0000 9/20/09 -- 7,239
Allied Waste North
America, Inc. Sell 630 2.0000 9/20/09 -- 4,607
CDX.NA.HY.8 Index Sell 935 2.7500 6/20/12 (81,150) (20,236)
CDX.NA.HY.8 Index Sell 935 2.7500 6/20/12 (56,606) (20,236)
CDX.NA.HY.8 Index Sell 870 2.7500 6/20/12 (59,885) (18,829)
CDX.NA.HY.8 Index Sell 455 2.7500 6/20/12 (36,612) (9,848)
CDX.NA.HY.8 Index Sell 5,050 2.7500 6/20/12 24,128 (109,298)
CDX.NA.HY.8 Index Buy 5,050 2.7500 6/20/14 98,966 235,783
CDX.NA.HY.8 Index Sell 5,030 2.7500 6/20/12 31,857 (108,865)
CDX.NA.HY.8 Index Buy 5,030 2.7500 6/20/14 84,462 234,850
CDX.NA.HY.8 Index Sell 4,990 2.7500 6/20/12 35,103 (107,999)
58 | OPPENHEIMER BALANCED FUND
BUY/SELL NOTIONAL PREMIUM
CREDIT AMOUNT PAY/RECEIVE TERMINATION PAID/
COUNTERPARTY REFERENCE ENTITY PROTECTION (000S) FIXED RATE DATES (RECEIVED) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
Continued
CDX.NA.HY.8 Index Buy $ 4,990 2.7500% 6/20/14 $ 77,172 $ 232,982
CDX.NA.HY.8 Index Sell 2,995 2.7500 6/20/12 27,704 (64,821)
CDX.NA.HY.8 Index Buy 2,995 2.7500 6/20/14 39,684 139,836
Centex Corp. Sell 280 1.5500 9/20/09 -- (8,911)
Countrywide Home
Loans, Inc. Sell 885 3.2500 9/20/08 -- (14,418)
Dillard's, Inc. Sell 450 0.7500 9/20/08 -- (4,741)
Dow Jones CDX.NA.IG.7 Index Buy 3,600 0.4000 12/20/11 370 20,959
Eastman Kodak Co. Sell 1,395 1.0000 12/20/08 -- 13,811
Georgia-Pacific Corp. Sell 1,690 1.7500 9/20/08 -- 19,292
Intelsat Ltd. Sell 455 2.8500 9/20/08 -- 2,039
Lehman Brothers
Holdings, Inc. Sell 2,035 1.4100 9/20/08 -- 11,854
Levi Strauss & Co. Sell 990 1.0000 9/20/08 -- 2,401
Levi Strauss & Co. Sell 740 0.9000 9/20/08 -- 1,062
MBIA, Inc. Sell 1,100 0.5200 9/20/08 -- (11,396)
MBIA, Inc. Sell 1,100 0.6000 9/20/08 -- (10,576)
Owens-Illinois, Inc. Sell 940 1.2500 9/20/08 -- 5,514
Tenet Healthcare Corp. Sell 1,725 1.6000 3/20/09 -- (69,824)
The Bear Stearns Cos., Inc. Sell 4,180 2.3500 9/20/08 -- 54,405
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs
Capital Markets LP:
ABX.HE.AA.06-2 Index Sell 165 0.1700 5/25/46 (13,595) (16,498)
Capmark Financial Group, Inc. Sell 1,065 0.9500 6/20/12 -- (103,545)
Dole Food Co., Inc. Sell 1,695 3.8800 9/20/08 -- 3,727
First Data Corp. Sell 1,080 1.1500 9/20/08 -- (14,941)
K. Hovnanian Enterprises, Inc. Sell 645 6.7500 9/20/08 -- (18,079)
Pulte Homes, Inc. Sell 1,605 2.7500 9/20/09 -- (52,639)
Quebecor World, Inc. Sell 515 3.0000 9/20/08 -- 4,818
Sara Lee Corp. Buy 1,385 0.4190 9/20/12 -- (8,357)
Smurfit-Stone Container
Enterprises, Inc. Sell 1,685 1.4500 9/20/08 -- 7,447
Standard Pacific Corp. Sell 845 6.6250 9/20/08 -- (54,930)
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs
International:
Amkor Technology, Inc. Sell 160 2.6500 9/20/08 -- 1,585
Citi Group, Inc. Sell 1,285 1.2500 9/20/08 -- (13,415)
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Special Financing, Inc.:
D.R. Horton, Inc. Sell 1,630 4.2000 12/20/08 -- (948)
Morgan Stanley Sell 4,235 0.6400 9/20/08 -- 12,595
Nortel Networks Corp. Sell 270 1.8500 9/20/08 -- 385
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley
Capital Services, Inc.:
ABX.HE.AA.06-2 Index Sell 320 0.1700 5/25/46 (31,998) (34,865)
ABX.HE.AA.06-2 Index Sell 165 0.1700 5/25/46 (13,182) (17,977)
Beazer Homes USA, Inc. Sell 1,165 2.1500 6/20/08 -- (136,229)
CDX.NA.HY.8 Index Sell 4,965 2.7500 6/20/12 40,306 (101,461)
CDX.NA.HY.8 Index Buy 4,965 2.7500 6/20/14 71,406 208,008
CDX.NA.HY.8 Index Sell 4,860 2.7500 6/20/12 44,955 (99,315)
CDX.NA.HY.8 Index Buy 4,860 2.7500 6/20/14 64,395 203,609
CDX.NA.HY.8 Index Sell 915 2.7500 6/20/12 (59,831) (18,698)
Countrywide Home Loans,
Inc. Sell 870 0.7500 9/20/08 -- (30,605)
Countrywide Home Loans,
Inc. Sell 3,180 0.4200 6/20/09 -- (179,100)
59 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. CREDIT DEFAULT SWAP CONTRACTS Continued
BUY/SELL NOTIONAL PREMIUM
CREDIT AMOUNT PAY/RECEIVE TERMINATION PAID/
COUNTERPARTY REFERENCE ENTITY PROTECTION (000S) FIXED RATE DATES (RECEIVED) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley
Capital Services, Inc.:
Continued
El Paso Corp. Sell $ 2,090 0.5200% 3/20/10 $ -- $ (19,934)
First Data Corp. Sell 675 1.3500 9/20/08 -- (5,775)
Ford Motor Co. Sell 2,090 7.1500 12/20/16 -- 122,781
Ford Motor Co. Sell 990 7.0500 12/20/16 -- 53,083
General Motors Corp. Sell 1,035 5.8000 12/20/16 -- 47,368
General Motors Corp. Buy 1,035 4.0000 12/20/08 -- (6,712)
General Motors Corp. Sell 1,005 5.7500 12/20/16 -- 43,257
General Motors Corp. Buy 1,005 3.9500 12/20/08 -- (5,919)
Harrah's Operating Co., Inc. Sell 905 2.2000 9/20/08 -- 4,715
Inco Ltd. Buy 1,065 0.6300 3/20/17 -- (6,101)
Inco Ltd. Buy 1,055 0.7000 3/20/17 -- (11,520)
J.C. Penney Co., Inc. Sell 1,050 1.0700 12/20/17 -- (3,167)
K. Hovnanian Enterprises, Inc. Sell 525 1.8500 6/20/08 -- (25,927)
K. Hovnanian
Enterprises, Inc. Sell 525 1.8500 6/20/08 -- (25,927)
Kohl's Corp. Buy 1,575 0.6600 12/20/17 -- (29)
Lennar Corp. Sell 1,190 2.9000 12/20/08 -- (9,606)
Residential Capital LLC Sell 2,560 6.1200 9/20/08 -- (130,165)
Sara Lee Corp. Buy 1,775 0.4180 9/20/12 -- (15,727)
The Kroger Co. Buy 2,075 0.4775 6/20/12 -- (16,875)
Toys "R" Us, Inc. Sell 655 2.5500 9/20/08 -- (4,304)
Tribune Co. Sell 1,015 1.0000 6/20/08 -- (45,441)
Vale Overseas Ltd. Sell 1,065 1.1000 3/20/17 -- 4,361
Vale Overseas Ltd. Sell 1,055 1.1700 3/20/17 -- 9,593
-----------------------
$ 316,947 $ (135,830)
=======================
- --------------------------------------------------------------------------------
9.INTEREST RATE SWAP CONTRACTS
An interest rate swap is an agreement under which a set of future cash flows is
exchanged between two counterparties. Interest rate swaps involve the exchange
of rights to receive or commitments to pay interest. One cash flow stream will
typically be a floating rate payment based upon a specified index while the
other is typically a fixed rate. 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 counter-party, and is
referred to as notional. Interest rate swaps are marked to market daily using
primarily quotations from counterparties, and brokers. The value of the
contracts is separately disclosed on the Statement of Assets and Liabilities.
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. The net change in this amount
during the period 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.
60 | OPPENHEIMER BALANCED FUND
Swap agreements entail both interest rate risk and credit risk. There is a
risk, based on movements of interest rates in the future, the payments made by
the Fund under a swap agreement will be greater than the payments it received.
Credit risk arises from the possibility that the counterparty will default. If
the counterparty defaults, the Fund's loss will consist of the net amount of
contractual interest payments that the Fund has not yet received. The Manager
will monitor the creditworthiness of counterparties to the Fund's interest rate
swap transactions on an ongoing basis.
As of September 30, 2007, the Fund had entered into the following interest rate
swap agreements:
SWAP NOTIONAL PAID BY RECEIVED BY TERMINATION
COUNTERPARTY AMOUNT THE FUND THE FUND DATES VALUE
- --------------------------------------------------------------------------------------------
Credit Suisse Three-Month
International $ 4,640,000 USD BBA LIBOR 5.428% 8/7/17 $ 83,102
- --------------------------------------------------------------------------------------------
Three-Month
Deutsche Bank AG 3,920,000 USD BBA LIBOR 5.445 8/8/17 73,798
----------
$ 156,900
==========
Index abbreviation is as follows:
BBA LIBOR British Bankers' Association London-Interbank Offered Rate
- --------------------------------------------------------------------------------
10. 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 counter-party, and is
referred to as notional. Total return swaps are marked to market daily using
primarily quotations from counterparties and brokers. The value of the contracts
is separately disclosed on the Statement of Assets and Liabilities. 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. The net change in this amount during the
period 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).
61 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10. TOTAL RETURN SWAP CONTRACTS Continued
As of September 30, 2007, the Fund had entered into the following total return
swap agreements:
SWAP NOTIONAL PAID BY RECEIVED BY TERMINATION
COUNTERPARTY AMOUNT THE FUND THE FUND DATES VALUE
- ------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
If positive, the
If negative, the Total Return of the
absolute value of the Lehman Brothers
Lehman Brothers U.S. U.S. CMBS AAA 8.5+
CMBS AAA 8.5+ Index plus 27.5
$ 5,600,000 Index basis points 11/1/07 $ 38,621
If positive, the
If negative, the Total Return of the
absolute value of the Lehman Brothers
Lehman Brothers U.S. U.S. CMBS AAA 8.5+
CMBS AAA 8.5+ Index minus 45
4,570,000 Index basis points 2/1/08 28,756
If positive, the
If negative, the Total Return of the
absolute value of the Lehman Brothers
Lehman Brothers U.S. U.S. CMBS AAA 8.5+
CMBS AAA 8.5+ Index plus 60
13,320,000 Index basis points 2/1/08 95,470
If positive, the
If negative, the Total Return of the
absolute value of the Lehman Brothers
Lehman Brothers U.S. U.S. CMBS AAA 8.5+
CMBS AAA 8.5+ Index plus 25
1,220,000 Index basis points 2/1/08 8,388
- ------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Special Financing, Inc.:
If positive, the
If negative, the Total Return of the
absolute value of the Lehman Brothers
Lehman Brothers U.S. U.S. CMBS AAA 8.5+
CMBS AAA 8.5+ Index plus 32.5
4,700,000 Index basis points 11/1/07 31,926
If negative, the If positive, the
absolute value of the Total Return of the
Lehman Brothers U.S. Lehman Brothers
CMBS AAA 8.5+ U.S. CMBS AAA 8.5+
5,650,0000 Index Index 2/1/08 (36,855)
If positive, the
If negative, the Total Return of the
absolute value of the Lehman Brothers
Lehman Brothers U.S. U.S. CMBS AAA 8.5+
CMBS AAA 8.5+ Index plus 60
4,843,000 Index basis points 2/1/08 33,072
62 | OPPENHEIMER BALANCED FUND
SWAP NOTIONAL PAID BY RECEIVED BY TERMINATION
COUNTERPARTY AMOUNT THE FUND THE FUND DATES VALUE
- ------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Special Financing, Inc.:
Continued
If positive, the
If negative, the Total Return of the
absolute value of the Lehman Brothers
Lehman Brothers U.S. U.S. CMBS AAA 8.5+
CMBS AAA 8.5+ Index minus 25
$ 2,970,000 Index basis points 3/1/08 $ 18,941
- ------------------------------------------------------------------------------------------------------------------
If positive, the
If negative, the Total Return of the
absolute value of the Lehman Brothers
Morgan Stanley Lehman Brothers U.S. U.S. CMBS AAA 8.5+
Capital Services, CMBS AAA 8.5+ Index plus 110
Inc. 1,000,0000 Index basis points 1/31/08 7,486
- ------------------------------------------------------------------------------------------------------------------
If positive, the
If negative, the Total Return of the
absolute value of the Lehman Brothers
Lehman Brothers U.S. U.S. CMBS AAA 8.5+
CMBS AAA 8.5+ Index plus 60
UBS AG 6,054,000 Index basis points 2/1/08 42,964
----------
$ 268,769
==========
Abbreviation is as follows:
CMBS Commercial Mortgage Backed Securities
- --------------------------------------------------------------------------------
11. ILLIQUID SECURITIES
As of September 30, 2007, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund will not invest more than 10% of its net assets (determined at the time of
purchase and reviewed periodically) in illiquid securities. Securities that are
illiquid are marked with the applicable footnote on the Statement of
Investments.
- --------------------------------------------------------------------------------
12. 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,
63 | OPPENHEIMER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12. SECURITIES LENDING Continued
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, 2007, the
Fund had no securities on loan.
- --------------------------------------------------------------------------------
13. RECENT ACCOUNTING PRONOUNCEMENT
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, 2007, the Manager has evaluated the implications of FIN 48 and
does not currently anticipate a material impact to the Fund's financial
statements. The Manager will continue to monitor the Fund's tax positions
prospectively for potential future impacts.
In September 2006, ("FASB") 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. 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, 2007, 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.
- --------------------------------------------------------------------------------
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 $811,983,024, Class B net assets of $101,954,869, Class C net assets
of
64 | OPPENHEIMER BALANCED FUND
$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.
65 | 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, 2007, 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, 2007, 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, 2007, 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 16, 2007
66 | OPPENHEIMER BALANCED FUND
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2008, if applicable, shareholders of record will receive information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2007. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Capital gain distributions of $0.8889 per share were paid to Class A,
Class B, Class C and Class N shareholders, respectively, on December 13, 2006.
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, 2007 which are not designated as capital gain distributions should be
multiplied by 13.84% 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, 2007 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. $6,116,418 of the Fund's fiscal year taxable income may be eligible
for the lower individual income tax rates. In early 2008, 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, 2007, $15,970,937 or 68.26% of the ordinary
distributions paid by the Fund qualifies as an interest related dividend and
$8,570,848 or 100% of the short-term capital gain distribution paid by the Fund
qualifies as a short-term capital gain 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.
67 | 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.
68 | OPPENHEIMER BALANCED FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services by the Manager and its affiliates,
(v) the extent to which economies of scale are realized as the Fund grows and
whether fee levels reflect these economies of scale for Fund investors and (vi)
other benefits to the Manager from its relationship with the Fund. The Board was
aware that there are alternatives to retaining the Manager.
NATURE AND EXTENT OF SERVICES. The Board considered information about the
nature and extent of the services provided to the Fund and information regarding
the Manager's key personnel who provide such services. The Manager's duties
include providing the Fund with the services of the portfolio managers and the
Manager's investment team, who provide research, analysis and other advisory
services in regard to the Fund's investments; securities trading services;
oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel who are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
69 | OPPENHEIMER BALANCED FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
QUALITY OF SERVICES. The Board also considered the quality of the services
provided and the quality of the Manager's resources that are available to the
Fund. The Board took account of the fact that the Manager has had over forty
years of experience as an investment adviser and that its assets under
management rank it among the top mutual fund managers in the United States. The
Board evaluated the Manager's administrative, accounting, legal and compliance
services, and information the Board has received regarding the experience and
professional qualifications of the Manager's personnel and the size and
functions of its staff. In its evaluation of the quality of the portfolio
management services provided, the Board considered the experience of Emmanuel
Ferreira and Angelo Manioudakis, the portfolio managers for the Fund, and the
Manager's Value and Core Plus investment team and analysts. The Board members
also considered their experiences with the Manager and its officers and other
personnel through their service on the Boards of the Fund and other funds
advised by the Manager. The Board considered information regarding the quality
of services provided by affiliates of the Manager, which its members have become
knowledgeable about in connection with the renewal of the Fund's service
agreements. In light of the foregoing, the Board concluded that the Fund
benefits from the services provided under the Agreement and from the Manager's
experience, reputation, personnel, operations, and resources.
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the investment performance of the Fund and the
Manager at each regular quarterly Board meeting, including comparative
performance information. The Board also reviewed information, prepared by the
Manager and by the independent consultant, comparing the Fund's historical
performance to relevant market indices and to the performance of other retail
front-end load and no-load mixed-asset target allocation moderate funds advised
by other investment advisers. The Board noted that the Fund's three-year,
five-year and ten-year performance were better than its peer group median.
However, its one-year performance was below its peer group median.
MANAGEMENT FEES AND EXPENSES. The Board reviewed the fees paid to the
Manager and its affiliates and the other expenses borne by the Fund. The Board
also considered the comparability of the fees charged and the services provided
to the Fund to the fees and services for other clients or accounts advised by
the Manager. The independent consultant provided comparative data in regard to
the fees and expenses of the Fund, other mixed-asset target allocation moderate
funds and other funds with comparable asset levels and distribution features.
The Board noted that the Fund's contractual and actual management fees and total
expenses were higher than its peer group median.
70 | OPPENHEIMER BALANCED FUND
ECONOMIES OF SCALE. The Board reviewed the extent to which the Manager may
realize economies of scale in managing and supporting the Fund, the extent to
which those economies of scale benefit the Fund's shareholders and the current
level of Fund assets in relation to the Fund's breakpoint schedule for its
management fees. The Board also noted the Fund's breakpoints, which are intended
to share economies of scale that may exist as the Fund grows with its
shareholders.
BENEFITS TO THE MANAGER. The Board considered information regarding the
Manager's costs in serving as the Fund's investment adviser, including the costs
associated with the personnel and systems necessary to manage the Fund, and
information regarding the Manager's profitability from its relationship with the
Fund. The Board considered that the Manager must be able to pay and retain
experienced professional personnel at competitive rates to provide services to
the Fund and that maintaining the financial viability of the Manager is
important in order for the Manager to continue to provide significant services
to the Fund and its shareholders. In addition to considering the profits
realized by the Manager, the Board considered information regarding the direct
and indirect benefits the Manager receives as a result of its relationship with
the Fund, including compensation paid to the Manager's affiliates for services
provided and research provided to the Manager in connection with permissible
brokerage arrangements (soft dollar arrangements).
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and the independent Trustees. Fund counsel is independent of the
Manager within the meaning and intent of the Securities and Exchange Commission
Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
concluded that the nature, extent and quality of the services provided to the
Fund by the Manager are a benefit to the Fund and in the best interest of the
Fund's shareholders and that the amount and structure of the compensation
received by the Manager and its affiliates are reasonable in relation to the
services provided. Accordingly, the Board elected to continue the Agreement for
another year. In arriving at this decision, the Board did not single out any
factor or factors as being more important than others, but considered all of the
factors together. The Board judged the terms and conditions of the Agreement,
including the management fee, in light of all of the surrounding circumstances.
71 | OPPENHEIMER BALANCED FUND
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS
FUND, LENGTH OF SERVICE, AGE HELD; NUMBER OF PORTFOLIOS IN THE FUND COMPLEX CURRENTLY OVERSEEN
INDEPENDENT THE ADDRESS OF EACH DIRECTOR IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL,
TRUSTEES COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
BRIAN F. WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since September 1995);
Chairman of the Board Director of Special Value Opportunities Fund, LLC (registered investment com-
of Trustees (since 2007), pany) (since September 2004); Member of Zurich Financial Services Investment
Trustee (since 2005) Advisory Board (insurance) (since October 2004); Chairman (since August 2007)
Age: 64 and Trustee (since August 1991) of the Board of Governing Trustees of The
Jackson Laboratory (non-profit); 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
64 portfolios in the OppenheimerFunds complex.
DAVID K. DOWNES, President, Chief Executive Officer and Board Member of CRAFund Advisors, Inc.
Trustee (since 2007) (investment management company) (since January 2004); President of The
Age: 67 Community Reinvestment Act Qualified Investment Fund (investment management
company) (since January 2004); Independent Chairman of the Board of
Trustees of Quaker Investment Trust (registered investment company) (since
January 2004); Director of Internet Capital Group (information technology com-
pany) (since October 2003); Chief Operating Officer and Chief Financial Officer
of Lincoln National Investment Companies, Inc. (subsidiary of Lincoln National
Corporation, a publicly traded company) and Delaware Investments U.S., Inc.
(investment management subsidiary of Lincoln National Corporation) (1993-
2003); President, Chief Executive Officer and Trustee of Delaware Investment
Family of Funds (1993-2003); President and Board Member of Lincoln National
Convertible Securities Funds, Inc. and the Lincoln National Income Funds, TDC
(1993-2003); Chairman and Chief Executive Officer of Retirement Financial
Services, Inc. (registered transfer agent and investment adviser and subsidiary of
Delaware Investments U.S., Inc.) (1993-2003); President and Chief Executive
Officer of Delaware Service Company, Inc. (1995-2003); Chief Administrative
Officer, Chief Financial Officer, Vice Chairman and Director of Equitable Capital
Management Corporation (investment subsidiary of Equitable Life Assurance
Society) (1985-1992); Corporate Controller of Merrill Lynch & Company (finan-
cial services holding company) (1977-1985); held the following positions at the
Colonial Penn Group, Inc. (insurance company): Corporate Budget Director
(1974-1977), Assistant Treasurer (1972-1974) and Director of Corporate Taxes
(1969-1972); held the following positions at Price Waterhouse & Company
(financial services firm): Tax Manager (1967-1969), Tax Senior (1965-1967) and
Staff Accountant (1963-1965); United States Marine Corps (1957-1959). Oversees
64 portfolios in the OppenheimerFunds complex.
MATTHEW P. FINK, Trustee of the Committee for Economic Development (policy research foundation)
Trustee (since 2005) (since 2005); Director of ICI Education Foundation (education foundation)
Age: 66 (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 54 portfolios
in the OppenheimerFunds complex.
72 | OPPENHEIMER BALANCED FUND
ROBERT G. GALLI, A director or trustee of other Oppenheimer funds. Oversees 64 portfolios in the
Trustee (since 1993) OppenheimerFunds complex.
Age: 74
PHILLIP A. GRIFFITHS, Distinguished Presidential Fellow for International Affairs (since 2002) and
Trustee (since 1999) Member (since 1979) of the National Academy of Sciences; Council on Foreign
Age: 69 Relations (since 2002); Director of GSI Lumonics Inc. (precision medical equip-
ment 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 54 portfolios in the OppenheimerFunds complex.
MARY F. MILLER, Trustee of the American Symphony Orchestra (not-for-profit) (since October
Trustee (since 2004) 1998); and Senior Vice President and General Auditor of American Express
Age: 65 Company (financial services company) (July 1998-February 2003). Oversees 54
portfolios in the OppenheimerFunds complex.
JOEL W. MOTLEY, Managing Director of Public Capital Advisors, LLC (privately-held financial advi-
Trustee (since 2002) sor) (since January 2006); Director of Columbia Equity Financial Corp.
Age: 55 (privately-held financial advisor) (since 2002); Managing Director of Carmona
Motley, Inc. (privately-held financial advisor) (since January 2002); Managing
Director of Carmona Motley Hoffman Inc. (privately-held financial advisor)
(January 1998-December 2001); Member of the Finance and Budget Committee
of the Council on Foreign Relations, Member of the Investment Committee of
the Episcopal Church of America, Member of the Investment Committee and
Board of Human Rights Watch and the Investment Committee of Historic
Hudson Valley. Oversees 54 portfolios in the OppenheimerFunds complex.
RUSSELL S. REYNOLDS, JR., Chairman of RSR Partners (formerly "The Directorship Search Group, Inc.") (cor-
Trustee (since 1989) porate governance consulting and executive recruiting) (since 1993); Life Trustee
Age: 75 of International House (non-profit educational organization); Former Trustee of
The Historical Society of the Town of Greenwich; Former Director of Greenwich
Hospital Association. Oversees 54 portfolios in the OppenheimerFunds complex.
JOSEPH M. WIKLER, Director of the following medical device companies: Medintec (since 1992) and
Trustee (since 2005) Cathco (since 1996); Director of Lakes Environmental Association (environmental
Age: 66 protection organization) (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); Director of C-TASC (a pri-
vately held bio-statistics company) (since May 2007). Oversees 54 portfolios in
the OppenheimerFunds complex.
PETER I. WOLD, President of Wold Oil Properties, Inc. (oil and gas exploration and production
Trustee (since 2005) company) (since 1994); Vice President of American Talc Company, Inc. (talc min-
Age: 59 ing and milling) (since 1999); Managing Member of Hole-in-the-Wall Ranch
(cattle ranching) (since 1979); Vice President, Secretary and Treasurer of Wold
Trona Company, Inc. (soda ash processing and production) (1996-2006); 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 54
portfolios in the OppenheimerFunds complex.
73 | OPPENHEIMER BALANCED FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH
AND OFFICER FLOOR, NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEF-
INITE 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 of the Manager (since June
Trustee, President and 2001); President of the Manager (September 2000-March 2007); President and
Principal Executive Officer director or trustee of other Oppenheimer funds; President and Director of
(since 2001) Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent holding com-
Age: 58 pany) and of Oppenheimer Partnership Holdings, Inc. (holding company
subsidiary of the Manager) (since July 2001); Director of OppenheimerFunds
Distributor, Inc. (subsidiary of the Manager) (November 2001-December 2006);
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); Director of the following
investment advisory subsidiaries of the Manager: OFI Institutional Asset
Management, Inc., Centennial Asset Management Corporation, Trinity
Investment Management Corporation and Tremont Capital Management, Inc.
(since November 2001), HarbourView Asset Management Corporation and OFI
Private Investments, Inc. (since July 2001); President (since November 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); Chairman (since October 2007) and Member of the
Investment Company Institute's Board of Governors (since October 2003); Chief
Operating Officer of the Manager (September 2000-June 2001). Oversees 102
portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. FERREIRA,
OF THE FUND 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, MASSACHUSETTS 02210. EACH OFFICER SERVES FOR AN ANNUAL TERM OR UNTIL HIS OR
HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
EMMANUEL FERREIRA, Vice President of the Manager since January 2003; Portfolio Manager at Lashire
Vice President and Portfolio Investments (July 1999-December 2002). An officer of 3 portfolios in the
Manager (since 2003) OppenheimerFunds complex.
Age: 40
ANGELO G. MANIOUDAKIS, Senior Vice President of the Manager (since April 2002), of HarbourView Asset
Vice President and Portfolio Management Corporation (since April 2002) and of OFI Institutional Asset
Manager (since 2002) Management, Inc. (since June 2002); Executive Director and portfolio manager
Age: 41 for Miller, Anderson & Sherrerd, a division of Morgan Stanley Investment
Management (August 1993-April 2002). An officer of 15 portfolios in the
OppenheimerFunds complex.
74 | OPPENHEIMER BALANCED FUND
ANTULIO N. BOMFIM, Vice President of the Manager (since October 2003); Senior Economist at the
Vice President and Portfolio Board of Governors of the Federal Reserve System from June 1992 to October
Manager (since 2006) 2003. A portfolio manager of 12 portfolios in the OppenheimerFunds complex.
Age: 40
GEOFFREY CAAN, Vice President and Portfolio Manager of the Manager (since August 2003); Vice
Vice President and Portfolio President of ABN AMRO NA, Inc. (June 2002-August 2003); Vice President of
Manager (since 2006) Zurich Scudder Investments (January 1999-June 2002). A portfolio manager of
Age: 38 12 portfolios in the OppenheimerFunds complex.
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 Asset
Manager (since 2006) Management, Inc. (as of June 2002); Executive Director and senior fixed income
Age: 45 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 grade
Vice President and Portfolio investment team (June 2002-March 2006); senior fixed income analyst at Miller
Manager (since 2006) Anderson & Sherrerd, a division of Morgan Stanley Investment Management
Age: 35 (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 (since March
Vice President and Chief 2004); Chief Compliance Officer of the Manager, OppenheimerFunds Distributor,
Compliance Officer Inc., Centennial Asset Management and Shareholder Services, Inc. (since March
(since 2004) 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset
Age: 57 Management Corporation and Shareholder Services, Inc. (since June 1983).
Former Vice President and Director of Internal Audit of the Manager (1997-
February 2004). An officer of 102 portfolios in the OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of
Treasurer and Principal the following: HarbourView Asset Management Corporation, Shareholder Financial
Financial & Accounting Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management, Inc.
Officer (since 1999) and Oppenheimer Partnership Holdings, Inc. (since March 1999), OFI Private
Age: 48 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 102 portfolios in the OppenheimerFunds complex.
BRIAN S. PETERSEN, Vice President of the Manager (since February 2007); Assistant Vice President of
Assistant Treasurer the Manager (August 2002-February 2007); Manager/Financial Product Accounting
(since 2004) of the Manager (November 1998-July 2002). An officer of 102 portfolios in the
Age: 37 OppenheimerFunds complex.
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Financial
Assistant Treasurer Reporting and Compliance of First Data Corporation (April 2003-July 2004);
(since 2005) Manager of Compliance of Berger Financial Group LLC (May 2001-March 2003);
Age: 37 Director of Mutual Fund Operations at American Data Services, Inc. (September
2000-May 2001). An officer of 102 portfolios in the OppenheimerFunds complex.
75 | OPPENHEIMER BALANCED FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March
Secretary (since 2001) 2002) of the Manager; General Counsel and Director of the Distributor (since
Age: 59 December 2001); General Counsel of Centennial Asset Management Corporation
(since December 2001); Senior Vice President and General Counsel of HarbourView
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 Shareholder
Services, Inc. (since December 2001); Senior Vice 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 102 portfolios in
the OppenheimerFunds complex.
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First
Assistant Secretary Vice President (April 2001-April 2004), Associate General Counsel (December
(since 2004) 2000-April 2004), Corporate Vice President (May 1999-April 2001) and Assistant
Age: 39 General Counsel (May 1999-December 2000) of UBS Financial Services Inc. (for-
merly, PaineWebber Incorporated). An officer of 102 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 (2000-
(since 2004) September 2004) and Vice President (1998-2000) of Merrill Lynch Investment
Age: 43 Management. An officer of 102 portfolios in the OppenheimerFunds complex.
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since
Assistant Secretary October 2003) of the Manager; Vice President (since 1999) and Assistant Secretary
(since 2001) (since October 2003) of the Distributor; Assistant Secretary of Centennial Asset
Age: 42 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 102 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.
76 | 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 David Downes, a
member of the Board's Audit Committee, is an audit committee financial expert
and that Mr. Downes is "independent" for purposes of this Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The principal accountant for the audit of the registrant's annual financial
statements billed $44,000 in fiscal 2007 and $45,000 in fiscal 2006.
(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 $233,640 in fiscal 2007 and $183,800 in fiscal 2006 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 and professional services
relating to FAS 123R.
(c) Tax Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees to the registrant during the last two fiscal
years.
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees in fiscal 2007 and $1,536 in fiscal 2006 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 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 $233,640 in fiscal 2007 and $185,336 in fiscal
2006 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 09/30/2007, 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: 11/14/2007
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: 11/14/2007
By: /s/ Brian W. Wixted
---------------------------
Brian W. Wixted
Principal Financial Officer
Date: 11/14/2007