N-CSR 1 ra0205_9439vef.txt RA0205_9439VEF 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 811-3346 Oppenheimer Disciplined Allocation Fund (Exact name of registrant as specified in charter) 6803 South Tucson Way, Centennial, Colorado 80112-3924 (Address of principal executive offices) (Zip code) Robert G. Zack, Esq. OppenheimerFunds, Inc. Two World Financial Center, New York, New York 10281-1008 -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (303) 768-3200 -------------- Date of fiscal year end: October 31 Date of reporting period: November 1, 2002 - October 31, 2003 ITEM 1. REPORTS TO STOCKHOLDERS. FUND PERFORMANCE DISCUSSION How has the Fund performed? Below is a discussion by OppenheimerFunds, Inc., of the Fund's performance during its fiscal year ended October 31, 2003, followed by a graphical comparison of the Fund's performance to appropriate broad-based market indices. Management's Discussion of Fund Performance. The Fund's total return was 14.17% during the 12 months that ended October 31, 2003 (Class A shares at net asset value). By comparison, the Standard & Poor's 500 Index returned 20.79% and the Merrill Lynch Government/Corporate Master Index returned 5.85% during the same time frame. Strong relative performance from the Fund's bond portfolio was overshadowed by weaker results from its growth investments. In particular, our focus on high-quality growth names hurt performance at a time when more speculative growth stocks were more likely to outperform. To provide shareholders with portfolio diversification, Oppenheimer Disciplined Allocation Fund consists of a mix of stock and bond investments. During the period we sought to keep the Fund's asset allocation relatively close to that of our peer group, and to add performance through strong stock selection. As of October 31, 2003, approximately 57.3% of the Fund's assets invested in stocks, compared to 39.5% in bonds. Roughly half of the equity portfolio was managed according to a value-investing style, while the other half was managed using a growth style. Our value-investing management strategy remained consistent throughout the reporting period, as it does in all types of market conditions. While the stocks we select for the Fund may well be influenced by what is happening in the economy and stock market, we believe we serve our shareholders best by evaluating stocks in a variety of sectors and choosing those that we believe offer the best value within each category. In other words, we primarily look to evaluate energy stocks against other energy stocks, technology stocks against other technology stocks, and so on. Recent investments in the stocks of companies that provide satellite-television services provide one example of how we applied this strategy during the period. As we assessed value opportunities in the consumer-discretionary sector, and specifically the media industry, we became convinced that companies that provide satellite television services would continue to grow faster than other media companies. We also anticipated an increase in these companies' free cash flow (cash flow after expenses). Finally, we believed that many stocks of companies that provide satellite television services offered compelling value compared to other consumer-discretionary stocks. Based on this analysis, we bought shares of companies that provide satellite television services such as EchoStar Communication Corp., Cl. A and General Motors--Class H stock (also called Hughes Electronics which owns DirecTV). This decision proved to be 6 | OPPENHEIMER DISCIPLINED ALLOCATION FUND a successful one for the Fund. Both stocks performed very well during the past year and contributed to the portfolio's strong performance. As the period went on, however, we eliminated our position in General Motors--Class H stock. Another strong consumer-discretionary performer for the Fund was OfficeMax, Inc. one of the nation's leading office-supply retailers. A takeover bid from Boise Cascade boosted OfficeMax's stock price. In the financial sector, the Fund benefited from owning Chubb Corp., a large property- and casualty-insurance holding company. Chubb Corp. saw its profit margins improve during the period, thanks to a more favorable pricing environment for insurance companies and the firm's ability to keep expenses under control. Our growth-investing strategy continued to focus on revenue growth, as opposed to earnings growth. While accelerating earnings is a desirable trait, we believe that growth in sales provides investors with a better picture of how sustainable earnings are. For example, earnings can be increased through more efficient operations, layoffs, or mergers, but these approaches are not endlessly repeatable. In our view, revenue growth is the key for a company to realize lasting earnings growth over time. Consistent with this revenue-oriented focus, during the past 12 months we favored growth stocks with strong fundamentals. For instance, we overweighted the health care sector, which provided steady but unspectacular results as the economy was struggling. By contrast, we maintained a relatively modest weighting in the more-speculative technology sector. This positioning contributed to the Fund's results during the first part of the period. But as the period went on and the stock market gained ground, being overweighted in health care and underweighted in technology, while still adding to overall returns, hurt the Fund's relative performance in an environment in which investors preferred high-risk names with significant growth potential. Not all of the Fund's health care stocks were relative disappointments, however; biotechnology companies Genentech, Inc. and Gilead Sciences, Inc. both made major positive contributions to results. In managing the Fund's bond portfolio, we looked especially to corporate bonds. After the accounting and governance scandals of the past several years, many companies sought to strengthen their balance sheets. These efforts helped the corporate bond market, as investors became more confident in the ability of issuers to pay the interest on their bonds. In this area of the market, we focused on high-quality corporate bonds but also maintained a small allocation to the high-yield market, both of which helped performance during the period. 7 | OPPENHEIMER DISCIPLINED ALLOCATION FUND FUND PERFORMANCE DISCUSSION We also emphasized high-coupon mortgage-backed debt securities. Because of fears of prepayments, mortgage-backed debt securities with high interest rates were priced more cheaply than their low-rate counterparts. Although we were mindful of the risks, we believed these fears may have been overdone. We also knew these bonds would become more valuable if rates were to rise from their lows. For much of the period, this type of debt security performed relatively poorly because interest rates continued to fall. Beginning in June, however, rates reversed course, and the Fund's high-coupon mortgage-backed debt securities recovered its losses and added to performance. 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 October 31, 2003. In the case of Class A shares, performance is measured over a 10-year period. In the case of Class B, performance is measured from inception of the class on October 2, 1995. In the case of Class C, performance is measured from inception of the class on May 1, 1996. 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. The Fund's performance is compared to the performance of the Standard & Poor's (S&P) 500 Index, a broad-based index of equity securities widely regarded as a general measure of the performance of the U.S. equity securities market. The Fund's performance is also compared to Merrill Lynch Corporate/Government Master Index, a broad-based index of U.S. Treasury and government agency securities, corporate and Yankee bonds regarded as a general measurement of the performance of the domestic debt securities market. Index performance reflects the reinvestment of dividends but does not consider the effect of capital gains or transaction costs, and none of the data in the graphs shows the effect of taxes. The Fund's performance reflects the effects of Fund 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 securities in the indices. 8 | OPPENHEIMER DISCIPLINED ALLOCATION FUND Class A Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: Oppenheimer Disciplined Allocation Fund (Class A) S&P 500 Index Merrill Lynch Corporate/Government Master Index [LINE CHART] Value of Investment S&P 500 Index Merrill Lynch Corporate Date In Fund Reinvested Monthly Gov't Master Index 12/31/1993 $9,425 $10,000 $10,000 03/31/1994 9,185 9,621 9,706 06/30/1994 9,028 9,662 9,590 09/30/1994 9,281 10,133 9,632 12/31/1994 9,226 10,131 9,673 03/31/1995 9,789 11,117 10,145 06/30/1995 10,430 12,176 10,801 09/30/1995 10,909 13,143 11,000 12/31/1995 11,436 13,934 11,510 03/31/1996 11,628 14,682 11,256 06/30/1996 11,707 15,340 11,303 09/30/1996 11,933 15,814 11,499 10/31/1996 1 12,153 16,250 11,763 01/31/1997 12,818 18,201 11,867 04/30/1997 12,854 18,641 11,933 07/31/1997 14,571 22,303 12,552 10/31/1997 14,441 21,466 12,818 01/31/1998 14,719 23,097 13,200 04/30/1998 15,716 26,295 13,275 07/31/1998 15,296 26,609 13,575 10/31/1998 15,296 26,191 14,140 01/31/1999 16,523 30,606 14,353 04/30/1999 16,579 32,035 14,126 07/31/1999 16,299 31,985 13,890 10/31/1999 15,697 32,913 14,035 01/31/2000 15,401 33,771 13,954 04/30/2000 16,270 35,278 14,266 07/31/2000 16,381 34,852 14,679 10/31/2000 16,996 34,913 15,047 01/31/2001 17,188 33,467 15,856 04/30/2001 16,190 30,704 15,977 07/31/2001 16,200 29,861 16,553 10/31/2001 15,276 26,224 17,360 01/31/2002 15,595 28,067 17,042 04/30/2002 15,472 26,830 17,168 07/31/2002 14,237 22,809 17,723 10/31/2002 14,381 22,265 18,327 01/31/2003 14,293 21,610 18,787 04/30/2003 14,832 23,260 19,283 07/31/2003 15,823 25,235 18,945 10/31/2003 16,418 26,893 19,400 Average Annual Total Returns of Class A Shares of the Fund at 10/31/03 2 1-Year 7.60% 5-Year 0.23% 10-Year 5.08% Class B Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: Oppenheimer Disciplined Allocation Fund (Class B) S&P 500 Index Merrill Lynch Corporate/Government Master Index [LINE CHART] Value of Investment S&P 500 Index Merrill Lynch Corporate Date In Fund Reinvested Monthly Gov't Master Index 10/02/1995 $10,000 $10,000 $10,000 12/31/1995 10,493 10,602 10,463 03/31/1996 10,647 11,170 10,232 06/30/1996 10,697 11,671 10,275 09/30/1996 10,880 12,032 10,453 10/31/1996 1 11,072 12,364 10,693 01/31/1997 11,651 13,848 10,788 04/30/1997 11,664 14,183 10,848 07/31/1997 13,198 16,969 11,411 10/31/1997 13,060 16,332 11,652 01/31/1998 13,283 17,573 11,999 04/30/1998 14,159 20,007 12,068 07/31/1998 13,749 20,245 12,341 10/31/1998 13,726 19,928 12,854 01/31/1999 14,805 23,286 13,048 04/30/1999 14,821 24,374 12,841 07/31/1999 14,546 24,335 12,627 10/31/1999 13,978 25,041 12,758 01/31/2000 13,687 25,694 12,685 04/30/2000 14,437 26,841 12,968 07/31/2000 14,507 26,517 13,344 10/31/2000 15,023 26,563 13,678 01/31/2001 15,171 25,463 14,414 04/30/2001 14,259 23,360 14,524 07/31/2001 14,239 22,719 15,047 10/31/2001 13,407 19,952 15,781 01/31/2002 13,686 21,354 15,492 04/30/2002 13,579 20,413 15,606 07/31/2002 12,495 17,354 16,111 10/31/2002 12,621 16,940 16,660 01/31/2003 12,544 16,442 17,079 04/30/2003 13,017 17,697 17,529 07/31/2003 13,887 19,200 17,222 10/31/2003 14,409 20,461 17,635 Average Annual Total Returns of Class B Shares of the Fund at 10/31/03 2 1-Year 8.21% 5-Year 0.30% Since Inception 4.62% 1. The Fund changed its fiscal year end from 12/31 to 10/31. 2. See Notes on page 11 for further details. The performance information for both indices in the graphs begins on 12/31/93 for Class A, 9/30/95 for Class B, 4/30/96 for Class C and 2/28/01 for Class N. Past performance cannot guarantee future results. Graphs are not drawn to same scale. 9 | OPPENHEIMER DISCIPLINED ALLOCATION FUND FUND PERFORMANCE DISCUSSION Class C Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: Oppenheimer Disciplined Allocation Fund (Class C) S&P 500 Index Merrill Lynch Corporate/Government Master Index [LINE CHART] Value of Investment S&P 500 Index Merrill Lynch Corporate Date In Fund Reinvested Monthly Gov't Master Index 05/01/1996 $10,000 $10,000 $10,000 06/30/1996 10,062 10,297 10,113 09/30/1996 10,225 10,615 10,288 10/31/1996 1 10,408 10,908 10,524 01/31/1997 10,955 12,217 10,618 04/30/1997 10,965 12,512 10,677 07/31/1997 12,406 14,971 11,231 10/31/1997 12,274 14,409 11,469 01/31/1998 12,489 15,503 11,810 04/30/1998 13,304 17,650 11,878 07/31/1998 12,921 17,861 12,146 10/31/1998 12,901 17,581 12,651 01/31/1999 13,912 20,544 12,842 04/30/1999 13,927 21,503 12,639 07/31/1999 13,664 21,469 12,428 10/31/1999 13,138 22,092 12,557 01/31/2000 12,858 22,668 12,485 04/30/2000 13,561 23,679 12,764 07/31/2000 13,628 23,394 13,134 10/31/2000 14,115 23,435 13,463 01/31/2001 14,248 22,464 14,187 04/30/2001 13,400 20,609 14,295 07/31/2001 13,373 20,043 14,810 10/31/2001 12,596 17,602 15,533 01/31/2002 12,835 18,839 15,248 04/30/2002 12,704 18,009 15,360 07/31/2002 11,666 15,310 15,857 10/31/2002 11,760 14,945 16,397 01/31/2003 11,658 14,505 16,809 04/30/2003 12,073 15,613 17,253 07/31/2003 12,856 16,939 16,951 10/31/2003 13,310 18,051 17,357 Average Annual Total Returns of Class C Shares of the Fund at 10/31/03 2 1-Year 12.18% 5-Year 0.63% Since Inception 3.89% Class N Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: Oppenheimer Disciplined Allocation Fund (Class N) S&P 500 Index Merrill Lynch Corporate/Government Master Index [LINE CHART] Value of Investment S&P 500 Index Merrill Lynch Corporate Date In Fund Reinvested Monthly Gov't Master Index 03/01/2001 10,000 10,000 10,000 04/30/2001 9,793 10,094 9,968 07/31/2001 9,785 9,817 10,328 10/31/2001 9,210 8,621 10,831 01/31/2002 9,399 9,227 10,633 04/30/2002 9,317 8,821 10,711 07/31/2002 8,570 7,499 11,058 10/31/2002 8,642 7,320 11,435 01/31/2003 8,581 7,104 11,722 04/30/2003 8,897 7,647 12,031 07/31/2003 9,484 8,296 11,820 10/31/2003 9,835 8,841 12,104 Average Annual Total Returns of Class N Shares of the Fund at 10/31/03 2 1-Year 12.81% Since Inception -0.62% 1. The Fund changed its fiscal year end from 12/31 to 10/31. 2. See Notes on page 11 for further details. The performance information for both indices in the graphs begins on 12/31/93 for Class A, 9/30/95 for Class B, 4/30/96 for Class C and 2/28/01 for Class N. Past performance cannot guarantee future results. Graphs are not drawn to same scale. 10 | OPPENHEIMER DISCIPLINED ALLOCATION FUND NOTES In reviewing performance please remember that past performance cannot guarantee future results. 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 the original cost. Because of ongoing market volatility, the Fund's performance may be subject to substantial fluctuations, and current performance may be more or less than the results shown. For updates on the Fund's performance, visit our website at www.oppenheimerfunds.com. 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. For more complete information about the Fund, including charges, expenses and risks, please refer to the prospectus. To obtain a copy, call your financial advisor, call OppenheimerFunds Distributor, Inc. at 1.800.CALL OPP (1.800.225.5677) or visit the OppenheimerFunds website at www.oppenheimerfunds.com. Read the prospectus carefully before you invest or send money. Class A shares of the Fund were first publicly offered on 9/16/85. 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 10/2/95. Unless otherwise noted, Class B returns include the applicable contingent deferred sales charge of 5% (1-year) and 2% (5-year). Because Class B shares convert to Class A shares 72 months after purchase, the "since inception" return for Class B uses Class A performance for the period after conversion. Class B shares are subject to an annual 0.75% asset-based sales charge. Class C shares of the Fund were first publicly offered on 5/1/96. Unless otherwise noted, Class C returns include the contingent deferred sales charge of 1% for the one-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 one-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. 11 | OPPENHEIMER DISCIPLINED ALLOCATION FUND STATEMENT OF INVESTMENTS October 31, 2003 Market Value Shares See Note 1 -------------------------------------------------------------------------------- Common Stocks--65.8% -------------------------------------------------------------------------------- Consumer Discretionary--10.1% -------------------------------------------------------------------------------- Automobiles--0.2% Harley-Davidson, Inc. 5,500 $ 260,755 -------------------------------------------------------------------------------- Hotels, Restaurants & Leisure--0.8% McDonald's Corp. 38,700 967,887 -------------------------------------------------------------------------------- Internet & Catalog Retail--1.8% Amazon.com, Inc. 1 5,000 272,100 -------------------------------------------------------------------------------- eBay, Inc. 1 3,000 167,820 -------------------------------------------------------------------------------- InterActiveCorp 1 45,000 1,651,950 ------------- 2,091,870 -------------------------------------------------------------------------------- Media--4.6% EchoStar Communications Corp., Cl. A 1 50,600 1,938,992 -------------------------------------------------------------------------------- Liberty Media Corp., Cl. A 1 232,300 2,343,907 -------------------------------------------------------------------------------- UGC Europe, Inc. 1 800 53,600 -------------------------------------------------------------------------------- UnitedGlobalCom, Inc., Cl. A 1 29,600 209,568 -------------------------------------------------------------------------------- Univision Communications, Inc., Cl. A 1 27,000 916,650 ------------- 5,462,717 -------------------------------------------------------------------------------- Multiline Retail--0.5% Target Corp. 16,000 635,840 -------------------------------------------------------------------------------- Specialty Retail--1.8% Bed Bath & Beyond, Inc. 1 23,126 976,842 -------------------------------------------------------------------------------- Gap, Inc. (The) 11,000 209,880 -------------------------------------------------------------------------------- OfficeMax, Inc. 1 100,700 964,706 ------------- 2,151,428 -------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods--0.4% Nike, Inc., Cl. B 7,700 492,030 -------------------------------------------------------------------------------- Consumer Staples--4.3% -------------------------------------------------------------------------------- Beverages--0.4% Constellation Brands, Inc., Cl. A 1 17,200 539,564 -------------------------------------------------------------------------------- Food & Staples Retailing--2.1% Costco Wholesale Corp. 1 40,100 1,418,337 -------------------------------------------------------------------------------- Wal-Mart Stores, Inc. 18,600 1,096,470 ------------- 2,514,807 -------------------------------------------------------------------------------- Personal Products--0.4% Avon Products, Inc. 6,200 421,352 -------------------------------------------------------------------------------- Tobacco--1.4% Altria Group, Inc. 36,600 1,701,900 12 | OPPENHEIMER DISCIPLINED ALLOCATION FUND Market Value Shares See Note 1 -------------------------------------------------------------------------------- Energy--2.7% -------------------------------------------------------------------------------- Energy Equipment & Services--0.5% Halliburton Co. 20,400 $ 487,152 -------------------------------------------------------------------------------- Talisman Energy, Inc. 2,100 102,480 ------------- 589,632 -------------------------------------------------------------------------------- Oil & Gas--2.2% BP plc, ADR 54,200 2,296,996 -------------------------------------------------------------------------------- Pioneer Natural Resources Co. 1 4,400 116,380 -------------------------------------------------------------------------------- Spinnaker Exploration Co. 1 5,000 127,950 -------------------------------------------------------------------------------- Westport Resources Corp. 1 4,000 95,760 ------------- 2,637,086 -------------------------------------------------------------------------------- Financials--14.0% -------------------------------------------------------------------------------- Capital Markets--0.7% Bank of New York Co., Inc. (The) 27,300 851,487 -------------------------------------------------------------------------------- Commercial Banks--2.5% SunTrust Banks, Inc. 21,000 1,408,470 -------------------------------------------------------------------------------- Wachovia Corp. 20,200 926,574 -------------------------------------------------------------------------------- Wells Fargo & Co. 12,800 720,896 ------------- 3,055,940 -------------------------------------------------------------------------------- Diversified Financial Services--5.5% Citigroup, Inc. 45,277 2,146,130 -------------------------------------------------------------------------------- Franklin Resources, Inc. 14,900 706,558 -------------------------------------------------------------------------------- Merrill Lynch & Co., Inc. 7,600 449,920 -------------------------------------------------------------------------------- Morgan Stanley 34,900 1,914,963 -------------------------------------------------------------------------------- SLM Corp. 32,180 1,260,169 ------------- 6,477,740 -------------------------------------------------------------------------------- Insurance--5.0% American International Group, Inc. 15,200 924,616 -------------------------------------------------------------------------------- Chubb Corp. 23,000 1,536,630 -------------------------------------------------------------------------------- MBIA, Inc. 9,400 560,334 -------------------------------------------------------------------------------- Platinum Underwriters Holdings Ltd. 29,400 844,956 -------------------------------------------------------------------------------- Prudential Financial, Inc. 35,700 1,379,448 -------------------------------------------------------------------------------- Travelers Property Casualty Corp., Cl. B 28,344 463,991 -------------------------------------------------------------------------------- XL Capital Ltd., Cl. A 3,300 229,350 ------------- 5,939,325 -------------------------------------------------------------------------------- Thrifts & Mortgage Finance--0.3% Radian Group, Inc. 8,000 423,200 13 | OPPENHEIMER DISCIPLINED ALLOCATION FUND STATEMENT OF INVESTMENTS Continued Market Value Shares See Note 1 -------------------------------------------------------------------------------- Health Care--11.0% -------------------------------------------------------------------------------- Biotechnology--5.0% Amgen, Inc. 1 34,000 $ 2,099,840 -------------------------------------------------------------------------------- Genentech, Inc. 1 23,200 1,901,704 -------------------------------------------------------------------------------- Gilead Sciences, Inc. 1 33,200 1,812,056 -------------------------------------------------------------------------------- Medimmune, Inc. 1 4,600 122,636 ------------- 5,936,236 -------------------------------------------------------------------------------- Health Care Equipment & Supplies--2.7% Boston Scientific Corp. 1 11,300 765,236 -------------------------------------------------------------------------------- Medtronic, Inc. 15,800 720,006 -------------------------------------------------------------------------------- Stryker Corp. 10,400 843,544 -------------------------------------------------------------------------------- Varian Medical Systems, Inc. 1 14,900 952,706 ------------- 3,281,492 -------------------------------------------------------------------------------- Health Care Providers & Services--1.1% Aetna, Inc. 18,800 1,079,308 -------------------------------------------------------------------------------- Service Corp. International 1 37,000 179,450 ------------- 1,258,758 -------------------------------------------------------------------------------- Pharmaceuticals--2.2% Eli Lilly & Co. 7,200 479,664 -------------------------------------------------------------------------------- Mylan Laboratories, Inc. 23,550 568,733 -------------------------------------------------------------------------------- Schering-Plough Corp. 44,800 684,096 -------------------------------------------------------------------------------- Teva Pharmaceutical Industries Ltd., Sponsored ADR 16,100 915,929 ------------- 2,648,422 -------------------------------------------------------------------------------- Industrials--6.3% -------------------------------------------------------------------------------- Aerospace & Defense--2.5% Boeing Co. 22,700 873,723 -------------------------------------------------------------------------------- Raytheon Co. 81,300 2,152,824 ------------- 3,026,547 -------------------------------------------------------------------------------- Commercial Services & Supplies--2.5% Cendant Corp. 1 124,300 2,539,449 -------------------------------------------------------------------------------- ChoicePoint, Inc. 1 13,100 459,024 ------------- 2,998,473 -------------------------------------------------------------------------------- Industrial Conglomerates--0.9% General Electric Co. 7,000 203,070 -------------------------------------------------------------------------------- Tyco International Ltd. 44,500 929,160 ------------- 1,132,230 -------------------------------------------------------------------------------- Road & Rail--0.4% CNF Transportation, Inc. 12,200 427,244 14 | OPPENHEIMER DISCIPLINED ALLOCATION FUND Market Value Shares See Note 1 -------------------------------------------------------------------------------- Information Technology--11.7% -------------------------------------------------------------------------------- Communications Equipment--1.3% Cisco Systems, Inc. 1 5,000 $ 104,900 -------------------------------------------------------------------------------- Geotek Communications, Inc., Series B, Escrow Shares 1,3,9 100 -- -------------------------------------------------------------------------------- QUALCOMM, Inc. 17,300 821,750 -------------------------------------------------------------------------------- Scientific-Atlanta, Inc. 20,400 603,840 ------------- 1,530,490 -------------------------------------------------------------------------------- Computers & Peripherals--3.2% Dell, Inc. 1 53,500 1,932,420 -------------------------------------------------------------------------------- EMC Corp. 1 36,600 506,544 -------------------------------------------------------------------------------- Hewlett-Packard Co. 64,800 1,445,688 ------------- 3,884,652 -------------------------------------------------------------------------------- Electronic Equipment & Instruments--0.9% California Amplifier, Inc. 1 24 238 -------------------------------------------------------------------------------- Flextronics International Ltd. 1 48,200 674,800 -------------------------------------------------------------------------------- Thermo Electron Corp. 1 19,000 417,620 ------------- 1,092,658 -------------------------------------------------------------------------------- Internet Software & Services--1.3% Yahoo!, Inc. 1 34,600 1,512,020 -------------------------------------------------------------------------------- Semiconductors & Semiconductor Equipment--0.9% Intel Corp. 19,300 637,865 -------------------------------------------------------------------------------- National Semiconductor Corp. 1 4,700 190,961 -------------------------------------------------------------------------------- Texas Instruments, Inc. 8,000 231,360 ------------- 1,060,186 -------------------------------------------------------------------------------- Software--4.1% Microsoft Corp. 63,300 1,655,295 -------------------------------------------------------------------------------- Oracle Corp. 1 75,400 901,784 -------------------------------------------------------------------------------- Symantec Corp. 1 25,700 1,712,905 -------------------------------------------------------------------------------- Veritas Software Corp. 1 17,700 639,855 ------------- 4,909,839 -------------------------------------------------------------------------------- Materials--1.8% -------------------------------------------------------------------------------- Chemicals--1.0% Dow Chemical Co. 32,500 1,224,925 -------------------------------------------------------------------------------- Containers & Packaging--0.2% Smurfit-Stone Container Corp. 1 14,900 230,950 -------------------------------------------------------------------------------- Paper & Forest Products--0.6% Sappi Ltd., Sponsored ADR 54,600 698,880 -------------------------------------------------------------------------------- Telecommunication Services--1.8% -------------------------------------------------------------------------------- Diversified Telecommunication Services--0.5% IDT Corp., Cl. B 1 33,200 634,784 15 | OPPENHEIMER DISCIPLINED ALLOCATION FUND STATEMENT OF INVESTMENTS Continued Market Value Shares See Note 1 -------------------------------------------------------------------------------- Wireless Telecommunication Services--1.3% AT&T Corp. 49,900 $ 927,641 -------------------------------------------------------------------------------- Price Communications Corp. 1 1,355 17,032 -------------------------------------------------------------------------------- Vodafone Group plc, Sponsored ADR 28,900 611,235 ------------- 1,555,908 -------------------------------------------------------------------------------- Utilities--2.1% -------------------------------------------------------------------------------- Electric Utilities--1.7% AES Corp. (The) 1 115,200 1,008,000 -------------------------------------------------------------------------------- Dominion Resources, Inc. 10,300 634,480 -------------------------------------------------------------------------------- PG&E Corp. 1 19,500 476,775 ------------- 2,119,255 -------------------------------------------------------------------------------- Multi-Utilities & Unregulated Power--0.4% Equitable Resources, Inc. 11,100 457,320 ------------- Total Common Stocks (Cost $67,475,956) 78,835,829 -------------------------------------------------------------------------------- Other Securities--1.3% Nasdaq-100 Unit Investment Trust 1 (Cost $1,098,130) 43,400 1,526,812 Units -------------------------------------------------------------------------------- Rights, Warrants and Certificates--0.0% Concentric Network Corp. Wts., Exp. 12/15/07 1,3 100 -- -------------------------------------------------------------------------------- Microcell Telecommunications, Inc., Cl. A Wts., Exp. 5/1/05 1 21 22 -------------------------------------------------------------------------------- Microcell Telecommunications, Inc., Cl. B Wts., Exp. 5/1/08 1 35 57 ------------- Total Rights, Warrants and Certificates (Cost $4,293) 79 Principal Amount -------------------------------------------------------------------------------- Asset-Backed Securities--9.3% Bank One Auto Securitization Trust, Automobile Receivables, Series 2003-1, Cl A2, 1.29%, 8/21/06 $ 240,000 239,391 -------------------------------------------------------------------------------- BMW Vehicle Owner Trust, Automobile Loan Certificates, Series 2003-A, Cl. A2, 1.45%, 11/25/05 410,000 410,405 -------------------------------------------------------------------------------- Capital Auto Receivables Asset Trust, Automobile Mtg.-Backed Nts., Series 2002-4, Cl. A2B, 1.74%, 1/17/05 221,200 221,599 -------------------------------------------------------------------------------- Caterpillar Financial Asset Trust, Equipment Loan Pass-Through Certificates, Series 2003-A, Cl. A2, 1.25%, 10/25/05 170,000 169,975 -------------------------------------------------------------------------------- Centex Home Equity Co. LLC, Home Equity Loan Asset-Backed Certificates: Series 2003-B, Cl. AF1, 1.64%, 2/25/18 87,777 87,718 Series 2003-C, Cl. AF1, 2.14%, 7/25/18 3 276,202 276,839 -------------------------------------------------------------------------------- Chase Funding Mortgage Loan Asset-Backed Certificates, Home Equity Mtg. Obligations: Series 2003-3, Cl. 1A1, 1.20%, 8/25/17 4 137,652 137,646 Series 2003-4, Cl. 1A1, 1.24%, 9/25/17 3,4 290,573 290,597 16 | OPPENHEIMER DISCIPLINED ALLOCATION FUND Principal Market Value Amount See Note 1 -------------------------------------------------------------------------------- Asset-Backed Securities Continued Chase Manhattan Auto Owner Trust, Automobile Loan Pass-Through Certificates: Series 2003-A, Cl. A2, 1.26%, 1/16/06 $110,000 $ 109,948 Series 2003-B, Cl. A2, 1.287%, 3/15/06 140,000 139,893 -------------------------------------------------------------------------------- CitiFinancial Mortgage Securities, Inc., Home Equity Collateralized Mtg. Obligations: Series 2002-1, Cl. AF1, 2.474%, 9/25/32 98,839 99,165 Series 2003-2, Cl. AF1, 1.22%, 5/25/33 4 152,427 152,407 Series 2003-3, Cl. AF1, 1.24%, 8/25/33 3,4 221,244 221,242 -------------------------------------------------------------------------------- DaimlerChrysler Auto Trust, Automobile Loan Pass-Through Certificates: Series 2002-B, Cl. A2, 2.20%, 4/6/05 118,962 119,234 Series 2003-A, Cl. A2, 1.52%, 12/8/05 3 410,000 410,415 -------------------------------------------------------------------------------- Ford Credit Auto Owner Trust, Automobile Installment Sales, Series 2003-A, Cl. A2A, 1.62%, 8/15/05 200,819 201,156 -------------------------------------------------------------------------------- Ford Credit Auto Owner Trust, Automobile Loan Certificates, Series 2002-D, Cl. A2A, 2.10%, 3/15/05 267,878 268,673 -------------------------------------------------------------------------------- Harley-Davidson Motorcycle Trust, Motorcycle Receivable Nts.: Series 2002-2, Cl. A1, 1.91%, 4/16/07 251,497 252,333 Series 2003-3, Cl. A1, 1.50%, 1/15/08 398,648 399,049 -------------------------------------------------------------------------------- Honda Auto Receivables Owner Trust, Automobile Receivables Obligations: Series 2002-3, Cl. A2, 2.26%, 12/18/04 123,706 123,947 Series 2002-4, Cl. A2, 1.66%, 6/15/05 790,937 792,321 Series 2003-3, Cl. A2, 1.52%, 4/21/06 3 460,000 460,359 Series 2003-4, Cl. A2, 1.52%, 7/17/06 410,000 409,872 -------------------------------------------------------------------------------- Household Automotive Trust, Automobile Loan Certificates, Series 2002-2, Cl. A2, 2.15%, 12/19/05 121,302 121,595 -------------------------------------------------------------------------------- Litigation Settlement Monetized Fee Trust, Asset-Backed Certificates, Series 2001-1A, Cl. A1, 8.33%, 4/25/31 3 784,885 756,679 -------------------------------------------------------------------------------- M&I Auto Loan Trust, Automobile Loan Certificates, Series 2002-1, Cl. A2, 1.95%, 7/20/05 56,229 56,312 -------------------------------------------------------------------------------- MMCA Auto Lease Trust, Auto Retail Installment Contracts, Series 2002-A, Cl. A2, 1.29%, 5/16/05 4,5 147,021 147,136 -------------------------------------------------------------------------------- Nissan Auto Lease Trust, Auto Lease Obligations: Series 2002-A, Cl. A2, 1.86%, 11/15/04 5 219,753 220,019 Series 2003-A, Cl. A2, 1.69%, 12/15/05 270,000 270,035 -------------------------------------------------------------------------------- Nissan Auto Receivables Owner Trust, Automobile Receivable Nts.: Series 2002-C, Cl. A2, 1.94%, 9/15/04 78,797 78,867 Series 2003-B, Cl. A2, 1.20%, 11/15/05 420,000 419,660 -------------------------------------------------------------------------------- Salomon Smith Barney Auto Loan Trust, Asset-Backed Auto Loan Obligations, Series 2002-1, Cl. A2, 1.83%, 9/15/05 171,322 171,702 -------------------------------------------------------------------------------- Toyota Auto Receivables Owner Trust, Automobile Mtg.-Backed Obligations: Series 2002-B, Cl. A3, 3.76%, 6/15/06 128,387 130,195 Series 2003-A, Cl. A2, 1.28%, 8/15/05 470,000 470,113 Series 2003-B, Cl. A2, 1.43%, 2/15/06 3 310,000 309,860 -------------------------------------------------------------------------------- USAA Auto Owner Trust, Automobile Loan Asset-Backed Nts.: Series 2002-1, Cl. A2, 1.95%, 3/15/05 19,981 20,001 Series 2002-1, Cl. A3, 2.41%, 10/16/06 190,000 191,432 Series 2003-1, Cl. A2, 1.22%, 4/17/06 250,000 249,797 17 | OPPENHEIMER DISCIPLINED ALLOCATION FUND STATEMENT OF INVESTMENTS Continued Principal Market Value Amount See Note 1 -------------------------------------------------------------------------------- Asset-Backed Securities Continued Volkswagen Auto Lease Trust, Automobile Lease Asset-Backed Securities, Series 2002-A, Cl. A2, 1.77%, 2/20/05 $ 270,120 $ 270,652 -------------------------------------------------------------------------------- Volkswagen Auto Loan Enhanced Trust, Automobile Loan Receivables: Series 2003-1, Cl. A2, 1.11%, 12/20/05 176,000 175,710 Series 2003-2, Cl. A2, 1.55%, 6/20/06 240,000 239,888 -------------------------------------------------------------------------------- Whole Auto Loan Trust, Automobile Loan Receivables: Series 2002-1, Cl. A2, 1.88%, 6/15/05 411,849 413,028 Series 2003-1, Cl. A2A, 1.40%, 4/15/06 440,000 439,916 ------------ Total Asset-Backed Securities (Cost $11,168,113) 11,146,781 -------------------------------------------------------------------------------- Mortgage-Backed Obligations--20.3% CIT Equipment Collateral, Equipment Receivable-Backed Nts., Series 2003-EF1, Cl. A2, 1.49%, 12/20/05 3 120,000 119,850 -------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp.: 5%, 11/1/33 2 622,000 612,281 7%, 9/1/33 279,793 294,427 8%, 4/1/16 200,019 216,285 9%, 8/1/22-5/1/25 54,776 61,064 -------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates: Series 2500, Cl. FD, 1.62%, 3/15/32 4 117,021 117,409 Series 2526, Cl. FE, 1.52%, 6/15/29 4 121,867 121,643 Series 2551, Cl. FD, 1.52%, 1/15/33 4 106,771 107,223 -------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., Structured Pass-Through Securities, Collateralized Mtg. Obligations: Series H003, Cl. A2, 1.88%, 1/15/07 32,453 32,467 Series T-42, Cl. A2, 5.50%, 2/25/42 60,719 61,868 -------------------------------------------------------------------------------- Federal National Mortgage Assn.: 5%, 11/1/33 2 799,000 788,263 5.50%, 11/14/33 2 2,964,000 2,991,788 6.50%, 3/1/26 99,062 103,261 6.50%, 11/25/33 2 8,249,000 8,571,222 7%, 2/25/22-11/1/33 718,972 757,384 7%, 11/25/33 2 7,182,000 7,563,544 7.50%, 1/1/08-6/1/08 70,793 75,365 8.50%, 7/1/32 47,892 51,556 -------------------------------------------------------------------------------- Federal National Mortgage Assn., Collateralized Mtg. Obligations, Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates, Trust 2002-77, Cl. WF, 1.52%, 12/18/32 4 186,844 187,417 -------------------------------------------------------------------------------- Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security: Trust 1993-223, Cl. PM, 1.984%, 10/25/23 6 193,300 20,586 Trust 222, Cl. 2, 1.25%, 6/1/23 6 358,401 59,282 Trust 240, Cl. 2, 1.073%, 9/1/23 6 142,525 24,796 Trust 321, Cl. 2, (4.745)%, 3/1/32 6 184,619 30,758 -------------------------------------------------------------------------------- Government National Mortgage Assn.: 7%, 4/15/09-2/15/24 262,848 280,269 7.50%, 3/15/09 132,364 142,059 8%, 5/15/17 70,524 77,144 8.50%, 8/15/17-12/15/17 65,322 72,261 18 | OPPENHEIMER DISCIPLINED ALLOCATION FUND Principal Market Value Amount See Note 1 -------------------------------------------------------------------------------- Mortgage-Backed Obligations Continued Norwest Asset Securities Corp., Collateralized Mtg. Obligations Pass-Through Certificates, Series 1999-18, Cl. A2, 6%, 7/25/29 $ 228,170 $ 228,060 -------------------------------------------------------------------------------- Prudential Mortgage Capital Co. II LLC, Commercial Mtg. Pass-Through Certificates, Series PRU-HTG 2000-C1, Cl. A2, 7.306%, 10/6/15 192,000 220,792 -------------------------------------------------------------------------------- Washington Mutual Mortgage Securities Corp., Collateralized Mtg. Obligations Pass-Through Certificates, Series 2003-AR7, Cl. A1, 1.51%, 8/25/33 4 273,965 273,584 ------------- Total Mortgage-Backed Obligations (Cost $24,108,874) 24,263,908 -------------------------------------------------------------------------------- U.S. Government Obligations--3.6% Federal Home Loan Mortgage Corp. Unsec. Nts.: 4.50%, 1/15/13-7/15/13 130,000 127,901 5.50%, 7/15/06 7 1,600,000 1,725,621 -------------------------------------------------------------------------------- Federal National Mortgage Assn. Unsec. Nts.: 6.375%, 6/15/09 70,000 79,024 7.25%, 1/15/10 1,050,000 1,236,162 -------------------------------------------------------------------------------- Tennessee Valley Authority Bonds: 5.375%, 11/13/08 122,000 131,826 7.125%, 5/1/30 128,000 155,089 -------------------------------------------------------------------------------- U.S. Treasury Bonds: 4.25%, 8/15/13 343,000 341,714 5.375%, 2/15/31 160,000 165,394 STRIPS, 2.99%, 2/15/10 8 125,000 98,428 STRIPS, 4.96%, 2/15/16 8 171,000 92,339 STRIPS, 5.48%, 11/15/27 8 97,000 25,482 -------------------------------------------------------------------------------- U.S. Treasury Nts., 3.125%, 9/15/08 190,000 189,191 ------------- Total U.S. Government Obligations (Cost $4,395,998) 4,368,171 -------------------------------------------------------------------------------- Foreign Government Obligations--0.1% United Mexican States Nts., 7.50%, 1/14/12 (Cost $111,094) 110,000 123,200 -------------------------------------------------------------------------------- Non-Convertible Corporate Bonds and Notes--10.3% AEP Resources, Inc., 6.50% Sr. Nts., 12/1/03 5 180,000 180,576 -------------------------------------------------------------------------------- Aetna, Inc., 7.375% Sr. Unsec. Nts., 3/1/06 75,000 82,883 -------------------------------------------------------------------------------- Allied Waste North America, Inc., 10% Sr. Unsec. Sub. Nts., Series B, 8/1/09 85,000 92,863 -------------------------------------------------------------------------------- American Honda Finance Corp., 3.85% Nts., 11/6/08 2 60,000 59,994 -------------------------------------------------------------------------------- AT&T Wireless Services, Inc., 7.50% Sr. Unsec. Nts., 5/1/07 175,000 196,475 -------------------------------------------------------------------------------- AXA Group, 8.60% Unsec. Sub. Nts., 12/15/30 190,000 234,971 -------------------------------------------------------------------------------- Bankers Trust Corp., 7.375% Unsec. Sub. Nts., 5/1/08 20,000 22,890 -------------------------------------------------------------------------------- Boeing Capital Corp., 7.375% Sr. Nts., 9/27/10 290,000 330,071 -------------------------------------------------------------------------------- British Sky Broadcasting Group plc, 8.20% Sr. Unsec. Nts., 7/15/09 95,000 110,835 -------------------------------------------------------------------------------- British Telecommunications plc, 7.875% Nts., 12/15/05 155,000 171,724 -------------------------------------------------------------------------------- Cardinal Health, Inc., 4.45% Nts., 6/30/05 160,000 166,310 -------------------------------------------------------------------------------- CenterPoint Energy, Inc., 5.875% Nts., 6/1/08 5 135,000 139,074 -------------------------------------------------------------------------------- CIT Group, Inc., 7.75% Sr. Unsec. Unsub. Nts., 4/2/12 120,000 140,270 -------------------------------------------------------------------------------- Citigroup, Inc., 6.625% Unsec. Sub. Nts., 6/15/32 350,000 379,965 -------------------------------------------------------------------------------- Citizens Communications Co., 9.25% Sr. Nts., 5/15/11 115,000 143,779 19 | OPPENHEIMER DISCIPLINED ALLOCATION FUND STATEMENT OF INVESTMENTS Continued Principal Market Value Amount See Note 1 -------------------------------------------------------------------------------- Non-Convertible Corporate Bonds and Notes Continued Credit Suisse First Boston, Inc. (USA), 6.125% Nts., 11/15/11 $ 230,000 $ 248,955 -------------------------------------------------------------------------------- CSX Corp., 6.25% Unsec. Nts., 10/15/08 120,000 131,860 -------------------------------------------------------------------------------- DaimlerChrysler NA Holding Corp., 6.40% Nts., 5/15/06 225,000 240,664 -------------------------------------------------------------------------------- Delhaize America, Inc., 9% Unsub. Debs., 4/15/31 165,000 186,863 -------------------------------------------------------------------------------- Delphi Corp., 6.55% Nts., 6/15/06 135,000 143,935 -------------------------------------------------------------------------------- Deutsche Telekom International Finance BV, 8.50% Unsub. Nts., 6/15/10 155,000 186,836 -------------------------------------------------------------------------------- Dime Capital Trust I, 9.33% Capital Securities, Series A, 5/6/27 240,000 281,759 -------------------------------------------------------------------------------- Dominion Resources, Inc., 8.125% Sr. Unsub. Nts., 6/15/10 135,000 161,674 -------------------------------------------------------------------------------- DTE Energy Co., 6.375% Sr. Nts., 4/15/33 125,000 124,994 -------------------------------------------------------------------------------- El Paso Natural Gas Co., 6.75% Unsec. Unsub. Nts., 11/15/03 3 30,000 30,000 -------------------------------------------------------------------------------- EOP Operating LP, 7.75% Unsec. Nts., 11/15/07 145,000 166,229 -------------------------------------------------------------------------------- Farmers Insurance Exchange, 8.625% Nts., 5/1/24 5 300,000 310,654 -------------------------------------------------------------------------------- Ford Motor Co., 7.45% Bonds, 7/16/31 70,000 63,053 -------------------------------------------------------------------------------- France Telecom SA: 8.45% Sr. Unsec. Nts., 3/1/06 80,000 89,651 9% Sr. Unsec. Nts., 3/1/11 80,000 96,674 9.75% Sr. Unsec. Nts., 3/1/31 4 45,000 59,596 -------------------------------------------------------------------------------- Franklin Resources, Inc., 3.70% Nts., 4/15/08 80,000 79,854 -------------------------------------------------------------------------------- Gap, Inc. (The), 6.90% Nts., 9/15/07 100,000 109,250 -------------------------------------------------------------------------------- General Electric Capital Corp., 2.75% Nts., Series A, 9/25/06 15,000 15,015 -------------------------------------------------------------------------------- General Motors Acceptance Corp., 6.875% Unsec. Unsub. Nts., 8/28/12 340,000 349,097 -------------------------------------------------------------------------------- General Motors Corp., 8.375% Sr. Unsec. Debs., 7/15/33 150,000 158,707 -------------------------------------------------------------------------------- Hartford Financial Services Group, Inc. (The), 2.375% Nts., 6/1/06 70,000 69,288 -------------------------------------------------------------------------------- Health Net, Inc., 8.375% Sr. Unsec. Unsub. Nts., 4/15/11 95,000 112,511 -------------------------------------------------------------------------------- Hertz Corp. (The), 7.625% Sr. Nts., 6/1/12 360,000 362,438 -------------------------------------------------------------------------------- Household Finance Corp., 7% Nts., 5/15/12 160,000 182,005 -------------------------------------------------------------------------------- Hutchison Whampoa International Ltd., 6.50% Nts., 2/13/13 5 155,000 161,776 -------------------------------------------------------------------------------- John Hancock Global Funding II: 5% Nts., 7/27/07 5 165,000 174,514 7.90% Nts., 7/2/10 5 105,000 124,764 -------------------------------------------------------------------------------- Kinder Morgan, Inc., 6.50% Sr. Unsec. Nts., 9/1/12 150,000 165,485 -------------------------------------------------------------------------------- Kroger Co. (The), 7.80% Sr. Nts., 8/15/07 180,000 207,023 -------------------------------------------------------------------------------- Liberty Media Corp., 3.50% Nts., 9/25/06 110,000 108,723 -------------------------------------------------------------------------------- Merrill Lynch & Co., Inc., 3.375% Nts., Series B, 9/14/07 135,000 135,691 -------------------------------------------------------------------------------- MidAmerican Energy Holdings Co., 5.875% Sr. Nts., 10/1/12 265,000 274,664 -------------------------------------------------------------------------------- Morgan Stanley, 6.60% Nts., 4/1/12 155,000 172,871 -------------------------------------------------------------------------------- Nationwide Financial Services, Inc., 5.90% Nts., 7/1/12 125,000 130,128 -------------------------------------------------------------------------------- News America Holdings, Inc., 7.75% Sr. Unsec. Debs., 12/1/45 165,000 189,882 -------------------------------------------------------------------------------- Niagara Mohawk Power Corp., 5.375% Sr. Unsec. Nts., 10/1/04 75,000 77,425 -------------------------------------------------------------------------------- NiSource Finance Corp., 7.875% Sr. Unsec. Nts., 11/15/10 190,000 225,127 -------------------------------------------------------------------------------- NorAm Energy Corp., 6.375% Unsec. Term Enhanced Remarketable Nts., 11/1/03 6,000 6,000 -------------------------------------------------------------------------------- Northrop Grumman Corp., 7.125% Sr. Nts., 2/15/11 140,000 161,107 20 | OPPENHEIMER DISCIPLINED ALLOCATION FUND Principal Market Value Amount See Note 1 -------------------------------------------------------------------------------- Non-Convertible Corporate Bonds and Notes Continued Petroleos Mexicanos, 9.50% Sr. Sub. Nts., 9/15/27 $ 70,000 $ 81,725 -------------------------------------------------------------------------------- PF Export Receivables Master Trust, 3.748% Sr. Nts., Series B, 6/1/13 5 75,000 73,051 -------------------------------------------------------------------------------- Progress Energy, Inc., 6.55% Sr. Unsec. Nts., 3/1/04 225,000 228,661 -------------------------------------------------------------------------------- Prudential Holdings LLC, 8.695% Bonds, Series C, 12/18/23 5 195,000 236,526 -------------------------------------------------------------------------------- Prudential Insurance Co. of America, 8.30% Nts., 7/1/25 5 260,000 316,893 -------------------------------------------------------------------------------- Pulte Homes, Inc., 8.375% Sr. Nts., 8/15/04 45,000 46,584 -------------------------------------------------------------------------------- Raytheon Co., 5.70% Sr. Unsec. Nts., 11/1/03 275,000 275,000 -------------------------------------------------------------------------------- Safeway, Inc., 4.80% Sr. Unsec. Nts., 7/16/07 170,000 177,382 -------------------------------------------------------------------------------- Sears Roebuck Acceptance Corp., 3.03% Nts., Series VII, 2/25/04 4 55,000 55,104 -------------------------------------------------------------------------------- Shopping Center Associates, 6.75% Sr. Unsec. Nts., 1/15/04 5 40,000 40,406 -------------------------------------------------------------------------------- Sprint Capital Corp., 8.75% Nts., 3/15/32 180,000 205,433 -------------------------------------------------------------------------------- TCI Communications, Inc., 9.80% Sr. Unsec. Debs., 2/1/12 290,000 377,293 -------------------------------------------------------------------------------- Telefonos de Mexico SA, 8.25% Sr. Unsec. Nts., 1/26/06 95,000 105,569 -------------------------------------------------------------------------------- Time Warner Cos., Inc., 9.125% Debs., 1/15/13 130,000 162,981 -------------------------------------------------------------------------------- Time Warner Entertainment Co. LP: 8.375% Sr. Debs., 3/15/23 35,000 42,718 10.15% Sr. Nts., 5/1/12 65,000 86,269 -------------------------------------------------------------------------------- Tyco International Group SA, 6.75% Sr. Unsub. Nts., 2/15/11 375,000 400,781 -------------------------------------------------------------------------------- Vornado Realty LP, 5.625% Sr. Unsec. Unsub. Nts., 6/15/07 135,000 142,705 -------------------------------------------------------------------------------- Walt Disney Co. (The), 6.75% Sr. Nts., 3/30/06 145,000 158,309 -------------------------------------------------------------------------------- Waste Management, Inc., 7% Sr. Nts., 7/15/28 90,000 96,704 -------------------------------------------------------------------------------- Weyerhaeuser Co., 5.50% Unsec. Unsub. Nts., 3/15/05 175,000 182,396 -------------------------------------------------------------------------------- Wyeth, 5.875% Nts., 3/15/04 165,000 167,753 ------------- Total Non-Convertible Corporate Bonds and Notes (Cost $11,637,210) 12,389,665 -------------------------------------------------------------------------------- Structured Notes--2.7% Deutsche Bank AG, COUNTS Corp. Sec. Credit Linked Nts., Series 2003-1, 2.89%, 1/7/05 3,4 950,000 936,605 -------------------------------------------------------------------------------- JPMorgan Chase Bank, High Yield Index BB Linked Nts., 6.40%, 6/20/08 1,350,000 1,346,625 -------------------------------------------------------------------------------- UBS AG, High Grade Credit Linked Nts., 2.783%, 12/10/04 4 950,000 954,750 ------------- Total Structured Notes (Cost $3,268,482) 3,237,980 -------------------------------------------------------------------------------- Joint Repurchase Agreements--3.7% Undivided interest of 13.45% in joint repurchase agreement (Principal Amount/Market Value $33,038,000, with a maturity value of $33,040,671) with Zions Bank/Capital Markets Group, 0.97%, dated 10/31/03, to be repurchased at $4,443,359 on 11/3/03, collateralized by U.S. Treasury Bonds, 1.625%, 1/31/05, with a value of $33,755,317 (Cost $4,443,000) 4,443,000 4,443,000 -------------------------------------------------------------------------------- Total Investments, at Value (Cost $127,711,150) 117.1% 140,335,425 -------------------------------------------------------------------------------- Liabilities in Excess of Other Assets (17.1) (20,497,838) -------------------------- Net Assets 100.0% $119,837,587 ========================== 21 | OPPENHEIMER DISCIPLINED ALLOCATION FUND STATEMENT OF INVESTMENTS Continued Footnotes to Statement of Investments 1. Non-income producing security. 2. When-issued security to be delivered and settled after October 31, 2003. See Note 1 of Notes to Financial Statements. 3. Identifies issues considered to be illiquid or restricted. See Note 8 of Notes to Financial Statements. 4. Represents the current interest rate for a variable or increasing rate security. 5. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Directors. These securities amount to $2,125,389 or 1.77% of the Fund's net assets as of October 31, 2003. 6. 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 $135,422 or 0.11% of the Fund's net assets as of October 31, 2003. 7. Securities with an aggregate market value of $129,422 are held in collateralized accounts to cover initial margin requirements on open futures sales contracts. See Note 6 of Notes to Financial Statements. 8. Zero coupon bond reflects effective yield on the date of purchase. 9. Received as the result of issuer reorganization. Currently has minimal market value. See accompanying Notes to Financial Statements. 22 | OPPENHEIMER DISCIPLINED ALLOCATION FUND STATEMENT OF ASSETS AND LIABILITIES October 31, 2003
------------------------------------------------------------------------------------------------------------- Assets Investments, at value (cost $127,711,150)--see accompanying statement $140,335,425 ------------------------------------------------------------------------------------------------------------- Cash 6,869 ------------------------------------------------------------------------------------------------------------- Receivables and other assets: Investments sold (including $1,074,309 sold on a when-issued basis) 1,213,679 Interest, dividends and principal paydowns 544,246 Shares of capital stock sold 103,882 Futures margins 26,513 Swap contract 21,596 Other 390 ------------- Total assets 142,252,600 ------------------------------------------------------------------------------------------------------------- Liabilities Payables and other liabilities: Investments purchased (including $21,686,570 purchased on a when-issued basis) 22,191,440 Shareholder reports 66,638 Shares of capital stock redeemed 50,211 Transfer and shareholder servicing agent fees 25,400 Distribution and service plan fees 25,065 Directors' compensation 24,380 Other 31,879 ------------- Total liabilities 22,415,013 ------------------------------------------------------------------------------------------------------------- Net Assets $119,837,587 ============= ------------------------------------------------------------------------------------------------------------- Composition of Net Assets Par value of shares of capital stock $ 9,178 ------------------------------------------------------------------------------------------------------------- Additional paid-in capital 130,589,388 ------------------------------------------------------------------------------------------------------------- Undistributed net investment income 170,158 ------------------------------------------------------------------------------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (23,523,270) ------------------------------------------------------------------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 12,592,133 ------------- Net Assets $119,837,587 =============
23 | OPPENHEIMER DISCIPLINED ALLOCATION FUND STATEMENT OF ASSETS AND LIABILITIES Continued
------------------------------------------------------------------------------------------------------------- Net Asset Value Per Share Class A Shares: Net asset value and redemption price per share (based on net assets of $100,032,147 and 7,670,718 shares of capital stock outstanding) $13.04 Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $13.84 ------------------------------------------------------------------------------------------------------------- Class B Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $14,747,074 and 1,114,743 shares of capital stock outstanding) $13.23 ------------------------------------------------------------------------------------------------------------- Class C Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $4,666,100 and 362,249 shares of capital stock outstanding) $12.88 ------------------------------------------------------------------------------------------------------------- Class N Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $392,266 and 30,169 shares of capital stock outstanding) $13.00
See accompanying Notes to Financial Statements. 24 | OPPENHEIMER DISCIPLINED ALLOCATION FUND STATEMENT OF OPERATIONS For the Year Ended October 31, 2003
---------------------------------------------------------------------------------------------------------------- Investment Income Interest $ 2,001,467 ---------------------------------------------------------------------------------------------------------------- Dividends (net of foreign withholding taxes of $7,730) 711,899 ------------- Total investment income 2,713,366 ---------------------------------------------------------------------------------------------------------------- Expenses Management fees 698,136 ---------------------------------------------------------------------------------------------------------------- Distribution and service plan fees: Class A 234,550 Class B 127,687 Class C 38,009 Class N 1,706 ---------------------------------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees: Class A 225,317 Class B 48,680 Class C 15,078 Class N 2,635 ---------------------------------------------------------------------------------------------------------------- Shareholder reports 107,603 ---------------------------------------------------------------------------------------------------------------- Accounting service fees 15,000 ---------------------------------------------------------------------------------------------------------------- Directors' compensation 1,301 ---------------------------------------------------------------------------------------------------------------- Custodian fees and expenses 692 ---------------------------------------------------------------------------------------------------------------- Other 35,897 ------------- Total expenses 1,552,291 Less reduction to custodian expenses (692) Less voluntary waiver of transfer and shareholder servicing agent fees--Class A (2,584) Less voluntary waiver of transfer and shareholder servicing agent fees--Class B (5,235) Less voluntary waiver of transfer and shareholder servicing agent fees--Class C (2,016) Less voluntary waiver of transfer and shareholder servicing agent fees--Class N (1,586) ------------- Net expenses 1,540,178 ---------------------------------------------------------------------------------------------------------------- Net Investment Income 1,173,188 ---------------------------------------------------------------------------------------------------------------- Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments (including premiums on options exercised) 1,674,168 Closing of futures contracts (222,469) Foreign currency transactions (248) ------------- Net realized gain 1,451,451 ---------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation on: Investments 11,836,685 Translation of assets and liabilities denominated in foreign currencies 365 Futures contracts 107,054 ------------- Net change in unrealized appreciation 11,944,104 ---------------------------------------------------------------------------------------------------------------- Net Increase in Net Assets Resulting from Operations $14,568,743 =============
See accompanying Notes to Financial Statements. 25 | OPPENHEIMER DISCIPLINED ALLOCATION FUND STATEMENTS OF CHANGES IN NET ASSETS
Year Ended October 31, 2003 2002 ------------------------------------------------------------------------------------------------------------- Operations Net investment income $ 1,173,188 $ 1,967,602 ------------------------------------------------------------------------------------------------------------- Net realized gain (loss) 1,451,451 (10,767,199) ------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation 11,944,104 1,737,908 ----------------------------------- Net increase (decrease) in net assets resulting from operations 14,568,743 (7,061,689) ------------------------------------------------------------------------------------------------------------- Dividends and/or Distributions to Shareholders Dividends from net investment income: Class A (1,140,244) (2,252,545) Class B (45,309) (179,379) Class C (15,476) (40,660) Class N (2,774) (3,372) ------------------------------------------------------------------------------------------------------------- Capital Stock Transactions Net increase (decrease) in net assets resulting from capital stock transactions: Class A (4,085,561) (11,878,838) Class B 1,001,740 (1,491,347) Class C 1,212,712 322,450 Class N 109,096 276,606 ------------------------------------------------------------------------------------------------------------- Net Assets Total increase (decrease) 11,602,927 (22,308,774) ------------------------------------------------------------------------------------------------------------- Beginning of period 108,234,660 130,543,434 ----------------------------------- End of period [including undistributed net investment income of $170,158 and $176,788, respectively] $119,837,587 $108,234,660 ===================================
See accompanying Notes to Financial Statements. 26 | OPPENHEIMER DISCIPLINED ALLOCATION FUND FINANCIAL HIGHLIGHTS
Class A Year Ended October 31, 2003 2002 2001 2000 1999 ------------------------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $11.56 $12.54 $14.23 $15.03 $15.45 ------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .14 .22 .26 .44 .44 Net realized and unrealized gain (loss) 1.48 (.94) (1.69) .68 (.01) --------------------------------------------------------- Total from investment operations 1.62 (.72) (1.43) 1.12 .43 ------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.14) (.26) (.26) (.44) (.44) Distributions from net realized gain -- -- -- (1.48) (.41) --------------------------------------------------------- Total dividends and/or distributions to shareholders (.14) (.26) (.26) (1.92) (.85) ------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $13.04 $11.56 $12.54 $14.23 $15.03 ========================================================= ------------------------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 1 14.17% (5.86)% (10.12)% 8.27% 2.62% ------------------------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $100,032 $ 92,806 $112,864 $144,244 $258,159 ------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 94,811 $104,415 $128,477 $172,514 $293,677 ------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 2 Net investment income 1.18% 1.73% 1.88% 2.88% 2.72% Total expenses 1.26% 3,4 1.21% 3,4 1.19% 3 1.11% 3 1.04% 3 ------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 275% 193% 164% 34% 122%
1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 2. Annualized for periods of less than one full year. 3. Reduction to custodian expenses less than 0.01%. 4. Voluntary waiver of transfer agent fees less than 0.01%. See accompanying Notes to Financial Statements. 27 | OPPENHEIMER DISCIPLINED ALLOCATION FUND FINANCIAL HIGHLIGHTS Continued
Class B Year Ended October 31, 2003 2002 2001 2000 1999 ------------------------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $11.73 $ 12.72 $ 14.43 $15.20 $15.62 ------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .04 .11 .15 .30 .31 Net realized and unrealized gain (loss) 1.50 (.94) (1.70) .73 -- ----------------------------------------------------- Total from investment operations 1.54 (.83) (1.55) 1.03 .31 ------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.04) (.16) (.16) (.32) (.32) Distributions from net realized gain -- -- -- (1.48) (.41) ----------------------------------------------------- Total dividends and/or distributions to shareholders (.04) (.16) (.16) (1.80) (.73) ------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $13.23 $11.73 $12.72 $14.43 $15.20 ===================================================== ------------------------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 1 13.21% (6.61)% (10.79)% 7.48% 1.84% ------------------------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $14,747 $12,204 $14,770 $17,892 $23,522 ------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $12,776 $13,639 $16,569 $19,643 $24,648 ------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 2 Net investment income 0.31% 0.94% 1.14% 2.12% 1.97% Total expenses 2.15% 2.00% 1.94% 1.87% 1.80% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 2.11% N/A 3,4 N/A 3 N/A 3 N/A 3 ------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 275% 193% 164% 34% 122%
1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 2. Annualized for periods of less than one full year. 3. Reduction to custodian expenses less than 0.01%. 4. Voluntary waiver of transfer agent fees less than 0.01%. See accompanying Notes to Financial Statements. 28 | OPPENHEIMER DISCIPLINED ALLOCATION FUND
Class C Year Ended October 31, 2003 2002 2001 2000 1999 ------------------------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $ 11.43 $ 12.41 $ 14.08 $14.88 $15.31 ------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .07 .13 .13 .28 .32 Net realized and unrealized gain (loss) 1.43 (.94) (1.64) .72 (.01) ------------------------------------------------------ Total from investment operations 1.50 (.81) (1.51) 1.00 .31 ------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.05) (.17) (.16) (.32) (.33) Distributions from net realized gain -- -- -- (1.48) (.41) ------------------------------------------------------ Total dividends and/or distributions to shareholders (.05) (.17) (.16) (1.80) (.74) ------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $12.88 $11.43 $12.41 $14.08 $14.88 ====================================================== ------------------------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 1 13.18% (6.64)% (10.76)% 7.44% 1.84% ------------------------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $4,666 $2,984 $2,893 $3,931 $5,719 ------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $3,806 $2,961 $3,280 $4,255 $5,876 ------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 2 Net investment income 0.29% 0.93% 1.14% 2.13% 1.97% Total expenses 2.17% 2.00% 1.94% 1.86% 1.80% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 2.12% N/A 3,4 N/A 3 N/A 3 N/A 3 ------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 275% 193% 164% 34% 122%
1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 2. Annualized for periods of less than one full year. 3. Reduction to custodian expenses less than 0.01%. 4. Voluntary waiver of transfer agent fees less than 0.01%. See accompanying Notes to Financial Statements. 29 | OPPENHEIMER DISCIPLINED ALLOCATION FUND FINANCIAL HIGHLIGHTS Continued
Class N Year Ended October 31, 2003 2002 2001 1 ----------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $ 11.52 $ 12.52 $ 13.74 ----------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .12 .16 .12 Net realized and unrealized gain (loss) 1.46 (.91) (1.20) -------------------------------- Total from investment operations 1.58 (.75) (1.08) ----------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.10) (.25) (.14) Distributions from net realized gain -- -- -- -------------------------------- Total dividends and/or distributions to shareholders (.10) (.25) (.14) ----------------------------------------------------------------------------------------------------- Net asset value, end of period $13.00 $11.52 $12.52 ================================ ----------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 2 13.81% (6.17)% (7.90)% ----------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $392 $241 $2 ----------------------------------------------------------------------------------------------------- Average net assets (in thousands) $342 $160 $1 ----------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 0.79% 1.28% 1.04% Total expenses 2.04% 1.60% 1.68% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 1.58% N/A 4,5 N/A 4 ----------------------------------------------------------------------------------------------------- Portfolio turnover rate 275% 193% 164%
1. For the period from March 1, 2001 (inception of offering) to October 31, 2001. 2. Assumes an investment on the business day before the first day of the fiscal period (or inception of offering), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. 5. Voluntary waiver of transfer agent fees less than 0.01%. See accompanying Notes to Financial Statements. 30 | OPPENHEIMER DISCIPLINED ALLOCATION FUND NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 1. Significant Accounting Policies Oppenheimer Disciplined Allocation Fund (the Fund), a series of Oppenheimer Series Fund, Inc. (the Company), 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 to maximize total investment return (including capital appreciation and income) principally by allocating its assets among stocks, corporate bonds, U.S. government securities and money market instruments, according to changing market conditions. 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. Earnings, net assets and net asset value per share may differ by minor amounts due to each class having its own expenses directly attributable to that class. Classes A, B, C and N have separate distribution and/or service plans. Class B shares will automatically convert to Class A shares six years after the date of purchase. The following is a summary of significant accounting policies consistently followed by the Fund. -------------------------------------------------------------------------------- Securities Valuation. Securities listed or traded on National Stock Exchanges or other domestic or foreign exchanges are valued based on the last sale price of the security traded on that exchange prior to the time when the Fund's assets are valued. Securities traded on NASDAQ are valued based on the closing price provided by NASDAQ prior to the time when the Fund's assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the closing bid and asked prices, and if not, at the closing bid price. Securities (including restricted securities) for which quotations are not readily available are valued primarily using dealer-supplied valuations, a portfolio pricing service authorized by the Board of Directors, or at their fair value. Fair value is determined in good faith using consistently applied procedures under the supervision of the Board of Directors. Short-term "money market type" debt securities with remaining maturities of sixty days or less are valued at amortized cost (which approximates market value). -------------------------------------------------------------------------------- Structured Notes. The Fund invests in index-linked structured notes whose principal and/or interest depend on the performance of an underlying index. The structured notes are leveraged, which increases the volatility of each note's market value relative to the change in the underlying index. Fluctuations in value of these securities are recorded as unrealized gains and losses in the accompanying financial statements. The Fund records a realized gain or loss when a structured note is sold or matures. As of October 31, 2003, the market value of these securities comprised 2.7% of the Fund's net assets, and resulted in unrealized losses of $30,502. 31 | OPPENHEIMER DISCIPLINED ALLOCATION FUND NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- 1. Significant Accounting Policies Continued Securities on a When-Issued Basis. Delivery and payment for securities that have been purchased by the Fund on a when-issued basis can take place a month or more after the trade date. Normally the settlement date occurs within six months after the trade date; however, the Fund may, from time to time, purchase securities whose settlement date extends six months or more beyond trade date. During this period, such securities do not earn interest, are subject to market fluctuation and may increase or decrease in value prior to their delivery. The Fund maintains segregated assets with a market value equal to or greater than the amount of its purchase commitments. The purchase of securities on a when-issued basis may increase the volatility of the Fund's net asset value to the extent the Fund executes such purchases while remaining substantially fully invested. As of October 31, 2003, the Fund had entered into when-issued purchase commitments of $21,686,570. Additionally, the Fund had when-issued sale commitments of $1,074,309. In connection with its ability to purchase securities on a when-issued basis, the Fund may enter into forward roll transactions with respect to mortgage-related securities. Forward roll transactions require the sale of securities for delivery in the current month, and a simultaneous agreement with the same counterparty to repurchase similar (same type, coupon and maturity) but not identical securities on a specified future date. The Fund records the incremental difference between the forward purchase and sale of each forward roll as realized gain (loss) on investments. Risks of entering into forward roll transactions include the potential inability of the counterparty to meet the terms of the agreement; the potential of the Fund to receive inferior securities to what was sold to the counterparty at redelivery; counterparty credit risk; and the potential pay down speed variance between the mortgage-related pools. -------------------------------------------------------------------------------- Foreign Currency Translation. The Fund's accounting records are maintained in U.S. dollars. Prices of securities denominated in foreign currencies are translated into U.S. dollars at the closing rates of exchange. Amounts related to the purchase and sale of foreign securities and investment income are translated at the rates of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund's Statement of Operations. -------------------------------------------------------------------------------- Joint Repurchase Agreements. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated funds advised by the Manager, may transfer uninvested cash balances into joint trading accounts on a daily basis. Secured by U.S. government securities, these balances are invested in one or more repurchase agreements. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. In the event of default by the other party to the agreement, retention of the collateral may be subject to legal proceedings. 32 | OPPENHEIMER DISCIPLINED ALLOCATION FUND -------------------------------------------------------------------------------- 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 table below represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes.
Net Unrealized Appreciation Undistributed Undistributed Accumulated Based on Cost of Net Investment Long-Term Loss Securities for Federal Income Gain Carryforward 1,2 Income Tax Purposes ----------------------------------------------------------------------------------- $194,197 $-- $22,954,949 $12,023,811
1. As of October 31, 2003, the Fund had $22,954,949 of net capital loss carryforwards available to offset future realized capital gains, if any, and thereby reduce future taxable gain distributions. As of October 31, 2003, details of the capital loss carryforwards were as follows: Expiring ---------------------- 2009 $12,735,068 2010 10,219,881 ----------- Total $22,954,949 =========== 2. During the fiscal year October 31, 2003, the Fund utilized $1,129,404 of capital loss carryforward to offset capital gains realized in that fiscal year. During the fiscal year October 31, 2002, the Fund did not utilize any capital loss carryforwards. 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 October 31, 2003. Net assets of the Fund were unaffected by the reclassifications. To To Net Ordinary Capital Tax Return Investment Income Loss of Capital Loss ------------------------------------------------------------- $23,985 $23,985 $-- $-- The tax character of distributions paid during the years ended October 31, 2003 and October 31, 2002 was as follows: Year Ended Year Ended October 31, 2003 October 31, 2002 ----------------------------------------------------------------------- Distributions paid from: Ordinary income $1,203,803 $2,475,956 33 | OPPENHEIMER DISCIPLINED ALLOCATION FUND NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- 1. Significant Accounting Policies Continued 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 October 31, 2003 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 and other investments $133,128,480 ============ Gross unrealized appreciation $ 13,813,222 Gross unrealized depreciation (1,789,411) ------------ Net unrealized appreciation $ 12,023,811 ============ -------------------------------------------------------------------------------- Directors' Compensation. The Fund has adopted an unfunded retirement plan for the Fund's independent directors. Benefits are based on years of service and fees paid to each director during the years of service. During the year ended October 31, 2003, the Fund's projected benefit obligations were decreased by $2,453 and payments of $3,931 were made to retired directors, resulting in an accumulated liability of $24,040 as of October 31, 2003. The Board of Directors has adopted a deferred compensation plan for independent directors that enables directors to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. Under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or are invested in other Oppenheimer funds selected by the Director. Deferral of directors' fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund's assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance to the Plan. -------------------------------------------------------------------------------- Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. Income distributions, if any, are declared and paid quarterly. Capital gain distributions, if any, are declared and paid annually. -------------------------------------------------------------------------------- Investment Income. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, which includes accretion of discount and amortization of premium, is accrued as earned. -------------------------------------------------------------------------------- Expense Offset Arrangement. The reduction of custodian fees represents earnings on cash balances maintained by the Fund. -------------------------------------------------------------------------------- Security Transactions. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost. 34 | OPPENHEIMER DISCIPLINED ALLOCATION FUND -------------------------------------------------------------------------------- Other. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. -------------------------------------------------------------------------------- 2. Shares of Capital Stock The Fund has authorized 550 million shares of $0.001 par value capital stock. Transactions in shares of capital stock were as follows:
Year Ended October 31, 2003 Year Ended October 31, 2002 Shares Amount Shares Amount ----------------------------------------------------------------------------------------------------- Class A Sold 999,373 $ 12,060,988 628,916 $ 7,576,816 Dividends and/or distributions reinvested 91,508 1,096,971 174,069 2,175,432 Redeemed (1,446,531) (17,243,520) (1,777,767) (21,631,086) ------------------------------------------------------------------- Net decrease (355,650) $ (4,085,561) (974,782) $(11,878,838) =================================================================== ----------------------------------------------------------------------------------------------------- Class B Sold 443,368 $ 5,482,870 220,549 $ 2,710,789 Dividends and/or distributions reinvested 3,597 42,750 13,413 171,302 Redeemed (372,443) (4,523,880) (354,813) (4,373,438) ------------------------------------------------------------------- Net increase (decrease) 74,522 $ 1,001,740 (120,851) $ (1,491,347) =================================================================== ----------------------------------------------------------------------------------------------------- Class C Sold 186,268 $ 2,221,285 101,338 $ 1,207,406 Dividends and/or distributions reinvested 1,273 14,766 3,185 39,488 Redeemed (86,326) (1,023,339) (76,698) (924,444) ------------------------------------------------------------------- Net increase 101,215 $ 1,212,712 27,825 $ 322,450 =================================================================== ----------------------------------------------------------------------------------------------------- Class N Sold 21,478 $ 261,761 108,852 $ 1,331,998 Dividends and/or distributions reinvested 230 2,766 134 1,621 Redeemed (12,426) (155,431) (88,230) (1,057,013) ------------------------------------------------------------------- Net increase 9,282 $ 109,096 20,756 $ 276,606 ===================================================================
-------------------------------------------------------------------------------- 3. Purchases and Sales of Securities The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the year ended October 31, 2003, were $334,038,680 and $325,463,748, respectively. 35 | OPPENHEIMER DISCIPLINED ALLOCATION FUND NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- 4. Fees and Other Transactions with Affiliates Management Fees. Management fees paid to the Manager are in accordance with the investment advisory agreement with the Fund which provides for a fee at an annual rate of 0.625% of the first $300 million of average annual net assets of the Fund, 0.50% of the next $100 million, and 0.45% of average annual net assets in excess of $400 million. -------------------------------------------------------------------------------- Accounting Fees. The Manager acts as the accounting agent for the Fund at an annual fee of $15,000, plus out-of-pocket costs and expenses reasonably incurred. -------------------------------------------------------------------------------- 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 October 31, 2003, the Fund paid $280,964 to OFS for services to the Fund. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees for all classes, up to an annual rate of 0.35% of average net assets per class. This undertaking may be amended or withdrawn at any time. -------------------------------------------------------------------------------- Distribution and Service Plan (12b-1) Fees. Under its General Distributor's Agreement with the Manager, OppenheimerFunds Distributor, Inc. (the Distributor) acts as the Fund's principal underwriter in the continuous public offering of the different classes of shares of the Fund. The compensation paid to (or retained by) the Distributor from the sale of shares or on the redemption of shares is shown in the table below for the period indicated.
Aggregate Class A Concessions Concessions Concessions Concessions Front-End Front-End on Class A on Class B on Class C on Class N Sales Charges Sales Charges Shares Shares Shares Shares on Class A Retained by Advanced by Advanced by Advanced by Advanced by Year Ended Shares Distributor Distributor 1 Distributor 1 Distributor 1 Distributor 1 ----------------------------------------------------------------------------------------------------------------------- October 31, 2003 $110,906 $54,405 $7,898 $75,513 $10,372 $2,258
1. The Distributor advances concession payments to dealers for certain sales of Class A shares and for sales of Class B, Class C and Class N shares from its own resources at the time of sale.
Class A Class B Class C Class N Contingent Contingent Contingent Contingent Deferred Deferred Deferred Deferred Sales Charges Sales Charges Sales Charges Sales Charges Retained by Retained by Retained by Retained by Year Ended Distributor Distributor Distributor Distributor ------------------------------------------------------------------------------------------------------- October 31, 2003 $791 $70,283 $742 $567
-------------------------------------------------------------------------------- Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A shares. It reimburses the Distributor for a portion of its costs incurred for services provided to accounts that hold Class A shares. Reimbursement is made quarterly at an annual rate of up to 0.25% of the average annual net assets of Class A shares of the Fund. For the year ended October 31, 2003, expense under the Class A Plan totaled $234,550, all of which were paid by the Distributor to recipients, which included $1,229 retained by the Distributor and $182,977 which was paid to an affiliate of the Manager. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent years. 36 | OPPENHEIMER DISCIPLINED ALLOCATION FUND -------------------------------------------------------------------------------- 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. Under the plans, the Fund pays the Distributor an annual asset-based sales charge of 0.75% per year on Class B shares and on Class C shares and the Fund pays the Distributor an annual asset-based sales charge of 0.25% per year on Class N shares. The Distributor also receives a service fee of 0.25% per year under each plan. Distribution fees paid to the Distributor for the year ended October 31, 2003, were as follows:
Distributor's Distributor's Aggregate Aggregate Uncompensated Uncompensated Expenses as % Total Expenses Amount Retained Expenses of Net Assets Under Plan by Distributor Under Plan of Class ---------------------------------------------------------------------------------------------- Class B Plan $127,687 $92,375 $472,270 3.20% Class C Plan 38,009 9,167 107,287 2.30 Class N Plan 1,706 1,510 3,586 0.91
-------------------------------------------------------------------------------- 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 forward transaction. Contracts closed or settled with the same broker are recorded as net realized gain or loss. Such realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations. As of October 31, 2003, the Fund had no outstanding foreign currency contracts. -------------------------------------------------------------------------------- 6. Futures Contracts A futures contract is a commitment to buy or sell a specific amount of a commodity or financial instrument at a negotiated price on a stipulated future date. Futures contracts are traded on a commodity exchange. The Fund may buy and sell futures contracts that relate to broadly based securities indices "financial futures" or debt securities "interest rate futures" in order to gain exposure to or protection from changes in market value of stock and bonds or interest rates. The Fund may also buy or write put or call options on these futures contracts. 37 | OPPENHEIMER DISCIPLINED ALLOCATION FUND NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- 6. Futures Contracts Continued The Fund generally sells futures contracts as a hedge against increases in interest rates and decreases in market value of portfolio securities. The Fund may also purchase futures contracts to gain exposure to market changes as it may be more efficient or cost effective than actually buying fixed income securities. Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin) in an amount equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or has expired. Cash held by the broker to cover initial margin requirements on open futures contracts is noted in the Statement of Assets and Liabilities. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. The Statement of Assets and Liabilities reflects a receivable and/or payable for the daily mark to market for variation margin. Realized gains and losses are reported on the Statement of Operations as closing and expiration of futures contracts. The net change in unrealized appreciation and depreciation is reported on the Statement of Operations. Risks of entering into futures contracts (and related options) include the possibility that there may be an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. As of October 31, 2003, the Fund had outstanding futures contracts as follows:
Unrealized Expiration Number of Valuation as of Appreciation Contract Description Dates Contracts October 31, 2003 (Depreciation) ------------------------------------------------------------------------------------------------------ Contracts to Purchase U.S. Long Bonds 12/19/03 19 $2,065,656 $(12,991) U.S. Treasury Nts., 10 yr. 12/19/03 57 6,400,922 17,037 --------- 4,046 --------- Contracts to Sell U.S. Treasury Nts., 2 yr. 12/29/03 2 428,938 (39) U.S. Treasury Nts., 5 yr. 12/19/03 29 3,242,563 (57,937) --------- (57,976) --------- $(53,930) =========
-------------------------------------------------------------------------------- 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, 38 | OPPENHEIMER DISCIPLINED ALLOCATION FUND the Fund receives a premium and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of the option. Options are valued daily based upon the last sale price on the principal exchange on which the option is traded and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss upon the expiration or closing of the option transaction. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of the security for a purchased put or call option is adjusted by the amount of premium received or paid. Securities designated to cover outstanding call options are noted in the Statement of Investments where applicable. Shares subject to call, expiration date, exercise price, premium received and market value are detailed in a note to the Statement of Investments. Options written are reported as a liability in the Statement of Assets and Liabilities. Realized gains and losses are reported in the Statement of Operations. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. Written option activity for the year ended October 31, 2003 was as follows: Call Options ------------------------------ Number of Amount of Contracts Premiums ------------------------------------------------------------- Options outstanding as of October 31, 2002 2 $ 106 Options written 236 11,340 Options exercised (238) (11,446) ----------------------------- Options outstanding as of October 31, 2003 -- $ -- ============================= -------------------------------------------------------------------------------- 8. Illiquid or Restricted Securities As of October 31, 2003, investments in securities included issues that are illiquid or restricted. Restricted securities are purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and are valued under methods approved by the Board of Directors as reflecting fair value. A security may also be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. The Fund intends to invest no more than 10% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid or restricted securities. Certain restricted securities, eligible for resale to qualified institutional investors, are not subject to that limitation. The aggregate value of illiquid or restricted securities subject to this limitation as of October 31, 2003 was $3,812,446, which represents 3.18% of the Fund's net assets, of which zero is considered restricted. Information concerning restricted securities is as follows: 39 | OPPENHEIMER DISCIPLINED ALLOCATION FUND NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- 8. Illiquid or Restricted Securities Continued
Valuation as of Unrealized Security Acquisition Date Cost Oct. 31, 2003 Depreciation --------------------------------------------------------------------------------------------------------------- Stocks and/or Warrants Geotek Communications, Inc., Series B, Escrow Shares 1/4/01 $400 $-- $400
-------------------------------------------------------------------------------- 9. Total Return Swap Contracts The Fund may enter into a total return swap transaction to maintain a total return on a particular investment, or portion of its portfolio, or for other non-speculative purposes. Because the principal amount is not exchanged, it represents neither an asset nor a liability to either counterparty, and is referred to as notional. The Fund records an increase or decrease to interest income, in the amount due to or owed by the Fund at termination or settlement. Total return swaps are subject to risks (if the counterparty fails to meet its obligations). As of October 31, 2003, the Fund had entered into the following total return swap agreements:
Paid by Received by Swap the Fund at the Fund at Termination Unrealized Counterparty Notional Oct. 31, 2003 Oct. 31, 2003 Date Appreciation --------------------------------------------------------------------------------------------------------------- Value of total Six-Month return of Lehman LIBOR less 40 Brothers CMBS Deutsche Bank $871,000 basis points Index 12/31/03 $21,596
-------------------------------------------------------------------------------- 10. Borrowing and Lending Arrangements The Fund entered into an "interfund borrowing and lending arrangement" with other funds in the Oppenheimer funds complex, to allow funds to borrow for liquidity purposes. The arrangement was initiated pursuant to exemptive relief granted by the Securities and Exchange Commission to allow these affiliated funds to lend money to, and borrow money from, each other, in an attempt to reduce borrowing costs below those of bank loan facilities. Under the arrangement the Fund may lend money to other Oppenheimer funds and may borrow from other Oppenheimer funds at a rate set by the Fund's Board of Directors, based upon a recommendation by the Manager. The Fund's borrowings, if any, are subject to asset coverage requirements under the Investment Company Act and the provisions of the SEC order and other applicable regulations. If the Fund borrows money, there is a risk that the loan could be called on one day's notice, in which case the Fund might have to borrow from a bank at higher rates if a loan were not available from another Oppenheimer fund. If the Fund lends money to another fund, it will be subject to the risk that the other fund might not repay the loan in a timely manner, or at all. The Fund had no interfund borrowings or loans outstanding during the year ended or at October 31, 2003. 40 | OPPENHEIMER DISCIPLINED ALLOCATION FUND INDEPENDENT AUDITORS' REPORT -------------------------------------------------------------------------------- The Board of Directors and Shareholders of Oppenheimer Series Fund, Inc.: We have audited the accompanying statement of assets and liabilities including the statement of investments of Oppenheimer Disciplined Allocation Fund (one of the portfolios constituting the Oppenheimer Series Fund, Inc.) as of October 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 October 31, 2003, 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 Disciplined Allocation Fund as of October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Denver, Colorado November 21, 2003 41 | OPPENHEIMER DISCIPLINED ALLOCATION FUND FEDERAL INCOME TAX INFORMATION Unaudited -------------------------------------------------------------------------------- In early 2004, if applicable, shareholders of record will receive information regarding all dividends and distributions paid to them by the Fund during calendar year 2003. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service. Dividends, if any, paid by the Fund during the fiscal year ended October 31, 2003 which are not designated as capital gain distributions should be multiplied by 50.69% 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 October 31, 2003 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. $582,787 of the Fund's fiscal year taxable income may be eligible for the lower individual income tax rates. In early 2004, shareholders of record will receive information regarding the percentage of distributions that are eligible for lower individual income tax rates. The foregoing information is presented to assist shareholders in reporting distributions received from the Fund to the Internal Revenue Service. Because of the complexity of the federal regulations which may affect your individual tax return and the many variations in state and local tax regulations, we recommend that you consult your tax advisor for specific guidance. PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES 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 1.800.225.5677, (ii) on the Fund's website at www.oppenheimerfunds.com, and (iii) on the SEC's website at www.sec.gov. In addition, the Fund will be required to file new Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The first such filing is due no later than August 31, 2004, for the twelve months ended June 30, 2004. Once filed, the Fund's Form N-PX filing will be available (i) without charge, upon request, by calling the Fund toll-free at 1.800.225.5677, and (ii) on the SEC's website at www.sec.gov. 42 | OPPENHEIMER DISCIPLINED ALLOCATION FUND DIRECTORS AND OFFICERS Unaudited -------------------------------------------------------------------------------- Name, Position(s) Held Principal Occupation(s) During Past 5 Years; Other with Fund, Length of Trusteeships/Directorships Held by Director; Service, Age Number of Portfolios in Fund Complex Currently Overseen by Director INDEPENDENT The address of each Director in the chart below is DIRECTORS 6803 S. Tucson Way, Centennial, CO 80112-3924. Each Director serves for an indefinite term, until his or her resignation, retirement, death or removal. Mr. Motley was elected as Director to the Board I funds effective October 10, 2002 and did not hold shares of Board I funds during the calendar year ended December 31, 2002. Clayton K. Yeutter, Of Counsel (since 1993), Hogan & Hartson (a law Chairman of the Board firm). Other directorships: Weyerhaeuser Corp. of Directors (since 2003), (since 1999) and Danielson Holding Corp. (since Director (since 1991) 2002); formerly a director of Caterpillar, Inc. Age: 72 (1993-December 2002). Oversees 25 portfolios in the OppenheimerFunds complex. Robert G. Galli, A trustee or director of other Oppenheimer funds. Director (since 1996) Oversees 35 portfolios in the OppenheimerFunds Age: 70 complex. Phillip A. Griffiths, A director (since 1991) of the Institute for Director (since 1999) Advanced Study, Princeton, N.J., a director (since Age: 65 2001) of GSI Lumonics, a trustee (since 1983) of Woodward Academy, a Senior Advisor (since 2001) of The Andrew W. Mellon Foundation. A member of: the National Academy of Sciences (since 1979), American Academy of Arts and Sciences (since 1995), American Philosophical Society (since 1996) and Council on Foreign Relations (since 2002). Formerly a director of Bankers Trust New York Corporation (1994-1999). Oversees 25 portfolios in the OppenheimerFunds complex. Joel W. Motley, Director (since 2002) Columbia Equity Financial Director (since 2002) Corp. (privately-held financial adviser); Managing Age: 51 Director (since 2002) Carmona Motley, Inc. (privately-held financial adviser); Formerly he held the following positions: Managing Director (January 1998-December 2001), Carmona Motley Hoffman Inc. (privately-held financial adviser); Managing Director (January 1992-December 1997), Carmona Motley & Co. (privately-held financial adviser). Oversees 25 portfolios in the OppenheimerFunds complex. Kenneth A. Randall, A director of Dominion Resources, Inc. (electric Director (since 1985) utility holding company) and Prime Retail, Inc. Age: 76 (real estate investment trust); formerly a director of Dominion Energy, Inc. (electric power and oil & gas producer), President and Chief Executive Officer of The Conference Board, Inc. (international economic and business research) and a director of Lumbermens Mutual Casualty Company, American Motorists Insurance Company and American Manufacturers Mutual Insurance Company. Oversees 25 portfolios in the OppenheimerFunds complex. Edward V. Regan, President, Baruch College, CUNY; a director of Director (since 1993) RBAsset (real estate manager); a director of Age: 73 OffitBank; formerly Trustee, Financial Accounting Foundation (FASB and GASB), Senior Fellow of Jerome Levy Economics Institute, Bard College, Chairman of Municipal Assistance Corporation for the City of New York, New York State Comptroller and Trustee of New York State and Local Retirement Fund. Oversees 25 investment companies in the OppenheimerFunds complex. Russell S. Reynolds, Jr., Chairman (since 1993) of The Directorship Search Director (since 1989) Group, Inc. (corporate governance consulting and Age: 71 executive recruiting); a life trustee of International House (non-profit educational organization), and a trustee (since 1996) of the Greenwich Historical Society. Oversees 25 portfolios in the OppenheimerFunds complex. 43 | OPPENHEIMER DISCIPLINED ALLOCATION FUND DIRECTORS AND OFFICERS Unaudited/Continued -------------------------------------------------------------------------------- Donald W. Spiro, Chairman Emeritus (since January 1991) of the Vice Chairman of the Manager. Formerly a director (January 1969-August Board of Directors, 1999) of the Manager. Oversees 25 portfolios in Director (since 1985) the OppenheimerFunds complex. Age: 77 -------------------------------------------------------------------------------- INTERESTED DIRECTOR The address of Mr. Murphy in the chart below is AND OFFICER Two World Financial Center, 225 Liberty St., New York, NY 10281-1008. Mr. Murphy serves for an indefinite term, until his resignation, death or removal. John V. Murphy, Chairman, Chief Executive Officer and director President and Director (since June 2001) and President (since September (since 2001) 2000) of the Manager; President and a director or Age: 54 trustee of other Oppenheimer funds; President and a director (since July 2001) of Oppenheimer Acquisition Corp. (the Manager's parent holding company) and of Oppenheimer Partnership Holdings, Inc. (a holding company subsidiary of the Manager); a director (since November 2001) of OppenheimerFunds Distributor, Inc. (a subsidiary of the Manager); Chairman and a director (since July 2001) of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager); President and a director (since July 2001) of OppenheimerFunds Legacy Program (a charitable trust program established by the Manager); a director of the investment advisory subsidiaries of the Manager: OFI Institutional Asset Management, Inc. and Centennial Asset Management Corporation (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 1, 2001) and a director (since July 2001) of Oppenheimer Real Asset Management, Inc.; a director (since November 2001) of Trinity Investment Management Corp. and Tremont Advisers, Inc. (investment advisory affiliates of the Manager); Executive Vice President (since February 1997) of Massachusetts Mutual Life Insurance Company (the Manager's parent company); a director (since June 1995) of DLB Acquisition Corporation (a holding company that owns the shares of David L. Babson & Company, Inc.); formerly, Chief Operating Officer (September 2000-June 2001) of the Manager; President and trustee (November 1999-November 2001) of MML Series Investment Fund and MassMutual Institutional Funds (open-end investment companies); a director (September 1999-August 2000) of C.M. Life Insurance Company; President, Chief Executive Officer and director (September 1999-August 2000) of MML Bay State Life Insurance Company; a director (June 1989-June 1998) of Emerald Isle Bancorp and Hibernia Savings Bank (a wholly-owned subsidiary of Emerald Isle Bancorp). Oversees 72 portfolios as Trustee/Officer and 10 portfolios as officer in the OppenheimerFunds complex. -------------------------------------------------------------------------------- OFFICERS OF THE FUND The address of the Officers in the chart below is as follows: for Messrs. Ferreira, Leavy, Manioudakis and Zack, Two World Financial Center, 225 Liberty St., New York, NY 10281-1008, for Mr. Wixted, 6803 S. Tucson Way, Centennial, CO 80112-3924. Each Officer serves for an annual term or until his or her earlier resignation, death or removal. Emmanuel Ferreira, Vice President of the Manager (since January Vice President (since 2003) 2003). An officer of 2 portfolios in the Age: 36 OppenheimerFunds complex. Formerly, Portfolio Manager at Lashire Investments (July 1999-December 2002), and a Senior Analyst at Mark Asset Management (July 1997-June 1999). 44 | OPPENHEIMER DISCIPLINED ALLOCATION FUND Christopher Leavy, Senior Vice President (since September 2000) of Vice President and Portfolio the Manager; an officer of 7 portfolios in the Manager (since 2001) OppenheimerFunds complex; prior to joining the Age: 32 Manager in September 2000, he was a portfolio manager of Morgan Stanley Dean Witter Investment Management (1997 - September 2000). Angelo Manioudakis, Senior Vice President of the Manager (since April Vice President and 2002); an officer of 12 portfolios in the Portfolio Manager OppenheimerFunds complex; formerly Executive (since 2003) Director and portfolio manager for Miller, Age: 36 Anderson & Sherrerd, a division of Morgan Stanley Investment Management (August 1993-April 2002). Brian W. Wixted, Senior Vice President and Treasurer (since March Treasurer (since 1999) 1999) of the Manager; Treasurer (since March 1999) Age: 44 of HarbourView Asset Management Corporation, Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, Shareholder Financial Services, Inc., Oppenheimer Partnership Holdings, Inc., OFI Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000) and OFI Institutional Asset Management, Inc. (since November 2000) (offshore fund management subsidiaries of the Manager); Treasurer and Chief Financial Officer (since May 2000) of Oppenheimer Trust Company (a trust company subsidiary of the Manager); Assistant Treasurer (since March 1999) of Oppenheimer Acquisition Corp. and OppenheimerFunds Legacy Program (since April 2000); formerly Principal and Chief Operating Officer (March 1995-March 1999), Bankers Trust Company-Mutual Fund Services Division. An officer of 82 portfolios in the OppenheimerFunds complex. Robert G. Zack, Senior Vice President (since May 1985) and General Secretary (since 2001) Counsel (since February 2002) of the Manager; Age: 55 General Counsel and a director (since November 2001) of OppenheimerFunds Distributor, Inc.; Senior Vice President and General Counsel (since November 2001) of HarbourView Asset Management Corporation; Vice President and a director (since November 2000) of Oppenheimer Partnership Holdings, Inc.; Senior Vice President, General Counsel and a director (since November 2001) of Shareholder Services, Inc., Shareholder Financial Services, Inc., OFI Private Investments, Inc., Oppenheimer Trust Company and OFI Institutional Asset Management, Inc.; General Counsel (since November 2001) of Centennial Asset Management Corporation; a director (since November 2001) of Oppenheimer Real Asset Management, Inc.; Assistant Secretary and a director (since November 2001) of OppenheimerFunds International Ltd.; Vice President (since November 2001) of OppenheimerFunds Legacy Program; Secretary (since November 2001) of Oppenheimer Acquisition Corp.; formerly Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001); OppenheimerFunds International Ltd. and OppenheimerFunds plc (October 1997-November 2001). An officer of 82 portfolios in the OppenheimerFunds complex. The Fund's Statement of Additional Information contains additional information about the Fund's Directors and is available without charge upon request. 45 | OPPENHEIMER DISCIPLINED ALLOCATION FUND ITEM 2. CODE OF ETHICS ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT The Board of Directors of the Fund has determined that Edward V. Regan, the Chairman of the Board's Audit Committee, possesses the technical attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as an "audit committee financial expert," and has designated Mr. Regan as the Audit Committee's financial expert. Mr. Regan is an "independent" Director pursuant to paragraph (a)(2) of Item 3 to Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES - NOT REQUIRED ITEM 5. NOT APPLICABLE ITEM 6. RESERVED ITEM 7. NOT APPLICABLE ITEM 8. RESERVED ITEM 9. CONTROLS AND PROCEDURES (a) Based on their evaluation of registrant's disclosure controls and procedures (as defined in rule 30a-2(c) under the Investment Company Act of 1940 (17 CFR 270.30a-2(c)) as of October 31, 2003, registrant's principal executive officer and principal financial officer found registrant's disclosure controls and procedures to be appropriately designed to ensure that information required to be disclosed by registrant in the reports that it files under the Securities Exchange Act of 1934 (a) is accumulated and communicated to registrant's management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure, and (b) is recorded, processed, summarized and reported, within the time periods specified in the rules and forms adopted by the U.S. Securities and Exchange Commission. (b) There have been no significant changes in registrant's internal controls or in other factors that could significantly affect registrant's internal controls subsequent to the date of the most recent evaluation as indicated, including no significant deficiencies or material weaknesses that required corrective action. ITEM 10. EXHIBITS. (A) EXHIBIT ATTACHED HERETO. (ATTACH CODE OF ETHICS AS EXHIBIT) (B) EXHIBITS ATTACHED HERETO. (ATTACH CERTIFICATIONS AS EXHIBITS)