-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AJpNzV2DzPipGVGnfPWUGKjGSAwczZHin3y03gjZZFAbNTFsTgb+QXg4PvOh4PED Ury1y2zwpsDDuc/2nehl9g== 0000935069-06-003146.txt : 20061128 0000935069-06-003146.hdr.sgml : 20061128 20061128122759 ACCESSION NUMBER: 0000935069-06-003146 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20060930 FILED AS OF DATE: 20061128 DATE AS OF CHANGE: 20061128 EFFECTIVENESS DATE: 20061128 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPPENHEIMER BALANCED FUND CENTRAL INDEX KEY: 0000729968 IRS NUMBER: 133395850 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-03864 FILM NUMBER: 061241415 BUSINESS ADDRESS: STREET 1: 6803 SOUTH TUCSON WAY STREET 2: N/A CITY: CENTENNIAL STATE: CO ZIP: 80112-3924 BUSINESS PHONE: 303-768-3200 MAIL ADDRESS: STREET 1: 6803 SOUTH TUCSON WAY STREET 2: N/A CITY: CENTENNIAL STATE: CO ZIP: 80112-3924 FORMER COMPANY: FORMER CONFORMED NAME: OPPENHEIMER MULTIPLE STRATEGIES FUND DATE OF NAME CHANGE: 19970306 FORMER COMPANY: FORMER CONFORMED NAME: OPPENHEIMER ASSET ALLOCATION FUND DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: OPPENHEIMER RETIREMENT FUND DATE OF NAME CHANGE: 19870503 0000729968 S000008978 OPPENHEIMER BALANCED FUND C000024395 A C000024396 B C000024397 C C000024398 N N-CSR 1 ra240_35564ncsr.txt RA240_35564NCSR UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-3864 OPPENHEIMER BALANCED FUND (Exact name of registrant as specified in charter) 6803 SOUTH TUCSON WAY, CENTENNIAL, COLORADO 80112-3924 (Address of principal executive offices) (Zip code) ROBERT G. ZACK, ESQ. OPPENHEIMERFUNDS, INC. TWO WORLD FINANCIAL CENTER, NEW YORK, NEW YORK 10281-1008 (Name and address of agent for service) Registrant's telephone number, including area code: (303) 768-3200 Date of fiscal year end: SEPTEMBER Date of reporting period: 09/30/2006 ITEM 1. REPORTS TO STOCKHOLDERS. TOP HOLDINGS AND ALLOCATIONS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOP TEN COMMON STOCK INDUSTRIES - -------------------------------------------------------------------------------- Software 8.0% - -------------------------------------------------------------------------------- Media 4.3 - -------------------------------------------------------------------------------- Tobacco 3.5 - -------------------------------------------------------------------------------- Aerospace & Defense 3.1 - -------------------------------------------------------------------------------- Pharmaceuticals 2.5 - -------------------------------------------------------------------------------- Biotechnology 2.1 - -------------------------------------------------------------------------------- Oil & Gas 2.1 - -------------------------------------------------------------------------------- Capital Markets 2.0 - -------------------------------------------------------------------------------- Communications Equipment 1.9 - -------------------------------------------------------------------------------- Insurance 1.8 Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2006, and are based on net assets. TOP TEN COMMON STOCK HOLDINGS - -------------------------------------------------------------------------------- Microsoft Corp. 3.0% - -------------------------------------------------------------------------------- Take-Two Interactive Software, Inc. 2.7 - -------------------------------------------------------------------------------- Altria Group, Inc. 2.5 - -------------------------------------------------------------------------------- UBS AG 2.0 - -------------------------------------------------------------------------------- Liberty Global, Inc., Series A 1.6 - -------------------------------------------------------------------------------- Liberty Global, Inc., Series C 1.6 - -------------------------------------------------------------------------------- Capital One Financial Corp. 1.6 - -------------------------------------------------------------------------------- Bank of America Corp. 1.5 - -------------------------------------------------------------------------------- Orbital Sciences Corp. 1.5 - -------------------------------------------------------------------------------- Siemens AG, Sponsored ADR 1.5 Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2006, and are based on net assets. For more current Fund holdings, please visit www.oppenheimerfunds.com. - -------------------------------------------------------------------------------- 10 | OPPENHEIMER BALANCED FUND - -------------------------------------------------------------------------------- PORTFOLIO ALLOCATION [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Stocks 43.3% Bonds and Notes 41.1 Cash Equivalents 15.6 Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2006, and are based on the total market value of investments. - -------------------------------------------------------------------------------- 11 | OPPENHEIMER BALANCED FUND 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 SEPTEMBER 30, 2006, FOLLOWED BY A GRAPHICAL COMPARISON OF THE FUND'S PERFORMANCE TO AN APPROPRIATE BROAD-BASED MARKET INDEX. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. For the fiscal year ended September 30, 2006, Oppenheimer Balanced Fund's Class A shares (without sales charge) underperformed its primary benchmark, the S&P 500 Index, but outperformed its secondary benchmark, the Lehman Brothers Aggregate Bond Index. Results were driven by a few key factors. To begin, although the Fund's equity component lagged its respective benchmark throughout the bulk of the period due to its relatively conservative posture, this positioning largely enabled it to rally beginning in May, when the equity markets corrected. From May through the end of the Fund's fiscal year, the equity component significantly outperformed, and therefore added to Fund performance over that segment of the period. Active management of the Fund's equity component derived a mixture of results over the period. On the positive side, our underweighted exposure to energy stocks was a strong contributor to performance. Additionally, our conservative positioning within the energy sector further boosted returns. Holdings such as Exxon Mobil Corp. and BP plc, ADR, two of the market's largest integrated energy companies, fared well for us, given each of these companies' generally bearish outlook on energy prices. Another energy holding, Halliburton Co., also delivered good performance over the year. Although it is technically an energy-services company, Halliburton serves as a close equivalent to an integrated oil company, and fared comparatively well over the period even as oil prices declined, due to its more integrated nature. Lastly in energy, our decision to sell shares of both Lukoil and Talisman Energy, Inc., added to Fund returns. These names performed quite well over the review period, increasing in value far beyond our original investment. As such, we reaped gains for the Fund's portfolio in selling off these positions. Finally, our decision to emphasize unregulated utilities companies within our exposure to that sector substantially benefited Fund returns. Names like AES Corp. (The) and Reliant Energy, Inc., delivered extremely strong performance due to strong fundamentals and support from good performance in the bond markets, and positively impacted the Fund's fiscal-year results. On the negative side, select holdings within the equity component detracted from our returns, as names like Cendant Corp. performed poorly after divesting into three new components, an event that led to unexpectedly heavy shareholder turnover. We have since exited the stock. Also hurting us in the short-term was our specific strategy within the health care sector. Based on our belief that select biotech names offered attractive valuations relative to many major pharmaceutical company stocks, we invested in a basket, or grouping, of select biotech names in an effort to diversify our health care holdings and 12 | OPPENHEIMER BALANCED FUND reduce risk. When biotech as a sub-sector of health care suffered a correction over the period, this strategy hurt us. However, we are convinced this decision will serve us well over the long-term, particularly as the product pipeline for these select biotech names begins to materialize over the coming months. Finally, our position in Take-Two Interactive Software, Inc., a leading videogame developer, underperformed on the heels of both a console transition and some short-term political controversy surrounding the content of one of its video games. However, because we are convinced that Take-Two possesses a solid, creative management team capable of positioning the company extremely well for the next product cycle, we opportunistically added to our position in this name at what we believe to be bargain prices. On the fixed-income side, the most significant factor supporting the Fund's performance for the 12-month review period was our active management of the portfolio's exposure to interest-rate risk. Over the period, we successfully adjusted our duration, or interest-rate sensitivity, such that we were able to not only profit from shifts in rates, but also avoid unnecessary interest-rate risk, thereby helping to buffer the Fund from potential losses. Another factor that added to returns was our active management of the bond component's mortgage holdings. First, our decision to generally emphasize higher-coupon mortgages in the first half of the review period supported performance, given the attractive risk/reward profile these securities offered early in the period. For the first five months of the Fund's fiscal year, these mortgages performed well for us, and added to our overall returns. Second, we derived positive performance from opportunistically adjusting our risk exposure to the overall mortgage sector. Specifically, we began the fiscal year with less mortgage risk than our benchmark, particularly in lower-coupon mortgages, as we considered the sector overvalued at that point in time. This underweight positioning substantially benefited the Fund's returns when, in late 2005, the mortgage sector suffered relative to the overall government securities market. Soon after, we perceived valuations in this sector as attractive, and proceeded to overweight our exposure to mortgages relative to the benchmark. This adjustment to our mortgage holdings proved very beneficial to the Fund's relative performance when mortgage securities at large performed quite strongly in the first two months of 2006. Finally, when we perceived that mortgages as a whole had become richly valued, we began to trim back our overweighted exposure to a more neutral posture. Our holdings of agency debt securities provided a small, but consistent, boost to performance during the reporting period. However, as the period approached its end, we concluded that the agency sector had peaked relative to Treasuries and trimmed our exposure to a neutral position relative to our benchmark. 13 | OPPENHEIMER BALANCED FUND FUND PERFORMANCE DISCUSSION - -------------------------------------------------------------------------------- Our exposure to corporate bonds positively impacted performance as well. Our decision to overweight our overall exposure to the credit sector throughout the bulk of the period helped, as did our decision to emphasize bonds issued in the financials sector, which performed well this period. Similarly, reducing our exposure to industrial-related credit added to returns, since these bonds lagged the overall credit market. In general, our strategy of emphasizing shorter-term, lower-quality (BBB-rated) investment-grade credit worked in our favor, as these bonds exhibited relatively less volatility yet performed favorably. Finally, our decision to significantly add to our high-yield bond holdings boosted Fund returns. High-yield bonds in general continue to enjoy good performance thanks to solid fundamentals, still-low default rates and good incremental yield. Our holdings in this area performed quite well, particularly since we focused on the highest-quality tiers of the high-yield bond market, and as such, positively impacted Fund performance for its recent fiscal year. COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the performance of a hypothetical $10,000 investment in each class of shares of the Fund held until September 30, 2006. In the case of Class A, Class B and Class C shares, performance is measured over a ten-fiscal-year period. In the case of Class N shares, performance is measured from inception of the Class on March 1, 2001. The Fund's performance reflects the deduction of the maximum initial sales charge on Class A shares, the applicable contingent deferred sales charge on Class B, Class C and Class N shares, and reinvestments of all dividends and capital gains distributions. Past performance cannot guarantee future results. The Fund's performance is compared to the performance of the S&P 500 Index, a broad-based index of equity securities widely regarded as a general measure of the performance of the U.S. equity securities market. The Fund's performance is also compared to the Lehman Brothers Aggregate Bond Index, an unmanaged index of U.S. Government Treasury and agency issues, investment grade corporate bond issues and fixed-rate mortgage-backed securities. That index is widely regarded as a measure of the performance of the domestic debt securities market. Index performance reflects the reinvestment of income but does not consider the effect of transaction costs, and none of the data in the graphs shows the effect of taxes. The Fund's performance reflects the effects of the Fund's business and operating expenses. While index comparisons may be useful to provide a benchmark for the Fund's performance, it must be noted that the Fund's investments are not limited to the investments in the index. 14 | OPPENHEIMER BALANCED FUND CLASS A SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Balanced Fund (Class A) S&P 500 Index Lehman Brothers Aggregate Bond Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Balanced Lehman Brothers Fund (Class A) S&P 500 Index Aggregate Bond Index -------------------- ------------------ -------------------- 09/30/1996 $ 9,425 $ 10,000 $ 10,000 12/31/1996 $ 9,934 $ 10,833 $ 10,300 03/31/1997 $ 10,003 $ 11,124 $ 10,242 06/30/1997 $ 10,909 $ 13,064 $ 10,619 09/30/1997 $ 11,825 $ 14,043 $ 10,971 12/31/1997 $ 11,699 $ 14,446 $ 11,294 03/31/1998 $ 12,543 $ 16,459 $ 11,470 06/30/1998 $ 12,574 $ 17,006 $ 11,738 09/30/1998 $ 11,268 $ 15,318 $ 12,234 12/31/1998 $ 12,524 $ 18,577 $ 12,275 03/31/1999 $ 12,678 $ 19,502 $ 12,215 06/30/1999 $ 13,626 $ 20,874 $ 12,107 09/30/1999 $ 13,103 $ 19,574 $ 12,189 12/31/1999 $ 13,851 $ 22,484 $ 12,175 03/31/2000 $ 14,640 $ 22,999 $ 12,443 06/30/2000 $ 14,743 $ 22,388 $ 12,660 09/30/2000 $ 14,847 $ 22,171 $ 13,041 12/31/2000 $ 14,762 $ 20,438 $ 13,590 03/31/2001 $ 14,602 $ 18,016 $ 14,002 06/30/2001 $ 15,476 $ 19,070 $ 14,081 09/30/2001 $ 13,768 $ 16,272 $ 14,731 12/31/2001 $ 15,010 $ 18,011 $ 14,738 03/31/2002 $ 15,094 $ 18,060 $ 14,751 06/30/2002 $ 13,980 $ 15,642 $ 15,296 09/30/2002 $ 12,587 $ 12,941 $ 15,997 12/31/2002 $ 13,419 $ 14,032 $ 16,249 03/31/2003 $ 13,268 $ 13,590 $ 16,475 06/30/2003 $ 14,867 $ 15,681 $ 16,887 09/30/2003 $ 15,355 $ 16,096 $ 16,863 12/31/2003 $ 16,627 $ 18,054 $ 16,916 03/31/2004 $ 16,993 $ 18,360 $ 17,365 06/30/2004 $ 16,818 $ 18,675 $ 16,941 09/30/2004 $ 16,947 $ 18,326 $ 17,483 12/31/2004 $ 18,234 $ 20,017 $ 17,650 03/31/2005 $ 18,018 $ 19,587 $ 17,565 06/30/2005 $ 18,485 $ 19,855 $ 18,093 09/30/2005 $ 19,002 $ 20,571 $ 17,971 12/31/2005 $ 18,888 $ 20,999 $ 18,078 03/31/2006 $ 19,238 $ 21,883 $ 17,961 06/30/2006 $ 18,778 $ 21,568 $ 17,948 09/30/2006 $ 19,736 $ 22,788 $ 18,631 AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE FUND AT 9/30/06 1-Year -2.11% 5-Year 6.20% 10-Year 7.03% THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM, OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE, REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES, THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD. BECAUSE CLASS B SHARES CONVERT TO CLASS A SHARES 72 MONTHS AFTER PURCHASE, SINCE-INCEPTION RETURN FOR CLASS B SHARES USES CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 19 FOR FURTHER INFORMATION. 15 | OPPENHEIMER BALANCED FUND FUND PERFORMANCE DISCUSSION - -------------------------------------------------------------------------------- CLASS B SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Balanced Fund (Class B) S&P 500 Index Lehman Brothers Aggregate Bond Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Balanced Lehman Brothers Fund (Class B) S&P 500 Index Aggregate Bond Index -------------------- ------------------ -------------------- 09/30/1996 $ 10,000 $ 10,000 $ 10,000 12/31/1996 $ 10,516 $ 10,833 $ 10,300 03/31/1997 $ 10,564 $ 11,124 $ 10,242 06/30/1997 $ 11,492 $ 13,064 $ 10,619 09/30/1997 $ 12,434 $ 14,043 $ 10,971 12/31/1997 $ 12,270 $ 14,446 $ 11,294 03/31/1998 $ 13,138 $ 16,459 $ 11,470 06/30/1998 $ 13,135 $ 17,006 $ 11,738 09/30/1998 $ 11,751 $ 15,318 $ 12,234 12/31/1998 $ 13,031 $ 18,577 $ 12,275 03/31/1999 $ 13,166 $ 19,502 $ 12,215 06/30/1999 $ 14,120 $ 20,874 $ 12,107 09/30/1999 $ 13,554 $ 19,574 $ 12,189 12/31/1999 $ 14,299 $ 22,484 $ 12,175 03/31/2000 $ 15,077 $ 22,999 $ 12,443 06/30/2000 $ 15,154 $ 22,388 $ 12,660 09/30/2000 $ 15,222 $ 22,171 $ 13,041 12/31/2000 $ 15,119 $ 20,438 $ 13,590 03/31/2001 $ 14,918 $ 18,016 $ 14,002 06/30/2001 $ 15,778 $ 19,070 $ 14,081 09/30/2001 $ 14,011 $ 16,272 $ 14,731 12/31/2001 $ 15,235 $ 18,011 $ 14,738 03/31/2002 $ 15,297 $ 18,060 $ 14,751 06/30/2002 $ 14,150 $ 15,642 $ 15,296 09/30/2002 $ 12,719 $ 12,941 $ 15,997 12/31/2002 $ 13,559 $ 14,032 $ 16,249 03/31/2003 $ 13,407 $ 13,590 $ 16,475 06/30/2003 $ 15,023 $ 15,681 $ 16,887 09/30/2003 $ 15,515 $ 16,096 $ 16,863 12/31/2003 $ 16,801 $ 18,054 $ 16,916 03/31/2004 $ 17,171 $ 18,360 $ 17,365 06/30/2004 $ 16,994 $ 18,675 $ 16,941 09/30/2004 $ 17,125 $ 18,326 $ 17,483 12/31/2004 $ 18,425 $ 20,017 $ 17,650 03/31/2005 $ 18,206 $ 19,587 $ 17,565 06/30/2005 $ 18,678 $ 19,855 $ 18,093 09/30/2005 $ 19,201 $ 20,571 $ 17,971 12/31/2005 $ 19,086 $ 20,999 $ 18,078 03/31/2006 $ 19,440 $ 21,883 $ 17,961 06/30/2006 $ 18,975 $ 21,568 $ 17,948 09/30/2006 $ 19,943 $ 22,788 $ 18,631 AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE FUND AT 9/30/06 1-Year -1.95% 5-Year 6.17% 10-Year 7.15% 16 | OPPENHEIMER BALANCED FUND CLASS C SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Balanced Fund (Class C) S&P 500 Index Lehman Brothers Aggregate Bond Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Balanced Lehman Brothers Fund (Class C) S&P 500 Index Aggregate Bond Index -------------------- ------------------ -------------------- 09/30/1996 $ 10,000 $ 10,000 $ 10,000 12/31/1996 $ 10,521 $ 10,833 $ 10,300 03/31/1997 $ 10,568 $ 11,124 $ 10,242 06/30/1997 $ 11,501 $ 13,064 $ 10,619 09/30/1997 $ 12,442 $ 14,043 $ 10,971 12/31/1997 $ 12,287 $ 14,446 $ 11,294 03/31/1998 $ 13,145 $ 16,459 $ 11,470 06/30/1998 $ 13,150 $ 17,006 $ 11,738 09/30/1998 $ 11,767 $ 15,318 $ 12,234 12/31/1998 $ 13,043 $ 18,577 $ 12,275 03/31/1999 $ 13,178 $ 19,502 $ 12,215 06/30/1999 $ 14,139 $ 20,874 $ 12,107 09/30/1999 $ 13,564 $ 19,574 $ 12,189 12/31/1999 $ 14,307 $ 22,484 $ 12,175 03/31/2000 $ 15,094 $ 22,999 $ 12,443 06/30/2000 $ 15,161 $ 22,388 $ 12,660 09/30/2000 $ 15,238 $ 22,171 $ 13,041 12/31/2000 $ 15,125 $ 20,438 $ 13,590 03/31/2001 $ 14,935 $ 18,016 $ 14,002 06/30/2001 $ 15,794 $ 19,070 $ 14,081 09/30/2001 $ 14,019 $ 16,272 $ 14,731 12/31/2001 $ 15,252 $ 18,011 $ 14,738 03/31/2002 $ 15,314 $ 18,060 $ 14,751 06/30/2002 $ 14,158 $ 15,642 $ 15,296 09/30/2002 $ 12,711 $ 12,941 $ 15,997 12/31/2002 $ 13,521 $ 14,032 $ 16,249 03/31/2003 $ 13,346 $ 13,590 $ 16,475 06/30/2003 $ 14,926 $ 15,681 $ 16,887 09/30/2003 $ 15,377 $ 16,096 $ 16,863 12/31/2003 $ 16,625 $ 18,054 $ 16,916 03/31/2004 $ 16,947 $ 18,360 $ 17,365 06/30/2004 $ 16,746 $ 18,675 $ 16,941 09/30/2004 $ 16,829 $ 18,326 $ 17,483 12/31/2004 $ 18,073 $ 20,017 $ 17,650 03/31/2005 $ 17,812 $ 19,587 $ 17,565 06/30/2005 $ 18,231 $ 19,855 $ 18,093 09/30/2005 $ 18,711 $ 20,571 $ 17,971 12/31/2005 $ 18,563 $ 20,999 $ 18,078 03/31/2006 $ 18,853 $ 21,883 $ 17,961 06/30/2006 $ 18,369 $ 21,568 $ 17,948 09/30/2006 $ 19,266 $ 22,788 $ 18,631 AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE FUND AT 9/30/06 1-Year 2.01% 5-Year 6.57% 10-Year 6.78% THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM, OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE, REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES, THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD. BECAUSE CLASS B SHARES CONVERT TO CLASS A SHARES 72 MONTHS AFTER PURCHASE, SINCE-INCEPTION RETURN FOR CLASS B SHARES USES CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 19 FOR FURTHER INFORMATION. 17 | OPPENHEIMER BALANCED FUND FUND PERFORMANCE DISCUSSION - -------------------------------------------------------------------------------- CLASS N SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Balanced Fund (Class N) S&P 500 Index Lehman Brothers Aggregate Bond Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Balanced Lehman Brothers Fund (Class N) S&P 500 Index Aggregate Bond Index -------------------- ------------------ -------------------- 03/01/2001 $ 10,000 $ 10,000 $ 10,000 03/31/2001 $ 9,640 $ 9,367 $ 10,050 06/30/2001 $ 10,197 $ 9,915 $ 10,107 09/30/2001 $ 9,070 $ 8,460 $ 10,573 12/31/2001 $ 9,876 $ 9,364 $ 10,578 03/31/2002 $ 9,930 $ 9,390 $ 10,588 06/30/2002 $ 9,190 $ 8,132 $ 10,979 09/30/2002 $ 8,266 $ 6,728 $ 11,482 12/31/2002 $ 8,793 $ 7,295 $ 11,663 03/31/2003 $ 8,678 $ 7,065 $ 11,825 06/30/2003 $ 9,719 $ 8,153 $ 12,121 09/30/2003 $ 10,025 $ 8,368 $ 12,103 12/31/2003 $ 10,843 $ 9,387 $ 12,141 03/31/2004 $ 11,065 $ 9,545 $ 12,464 06/30/2004 $ 10,936 $ 9,710 $ 12,159 09/30/2004 $ 11,004 $ 9,528 $ 12,548 12/31/2004 $ 11,829 $ 10,407 $ 12,668 03/31/2005 $ 11,677 $ 10,184 $ 12,607 06/30/2005 $ 11,961 $ 10,323 $ 12,986 09/30/2005 $ 12,286 $ 10,695 $ 12,899 12/31/2005 $ 12,206 $ 10,918 $ 12,976 03/31/2006 $ 12,416 $ 11,377 $ 12,892 06/30/2006 $ 12,105 $ 11,213 $ 12,882 09/30/2006 $ 12,706 $ 11,848 $ 13,372 AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE FUND AT 9/30/06 1-Year 2.46% 5-Year 6.97% Since Inception (3/1/01) 4.39% THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM, OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE, REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES, THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD. BECAUSE CLASS B SHARES CONVERT TO CLASS A SHARES 72 MONTHS AFTER PURCHASE, SINCE-INCEPTION RETURN FOR CLASS B SHARES USES CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 19 FOR FURTHER INFORMATION. 18 | OPPENHEIMER BALANCED FUND NOTES - -------------------------------------------------------------------------------- Total returns and the ending account values in the graphs include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown. The Fund's total returns shown do not reflect the deduction of income taxes on an individual's investment. Taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares. INVESTORS SHOULD CONSIDER THE FUND'S INVESTMENT OBJECTIVES, RISKS, AND OTHER CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE FUND'S PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT THE FUND, AND MAY BE OBTAINED BY ASKING YOUR FINANCIAL ADVISOR, CALLING US AT 1.800.525.7048 OR VISITING OUR WEBSITE AT WWW.OPPENHEIMERFUNDS.COM. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. The Fund's investment strategy and focus can change over time. The mention of specific fund holdings does not constitute a recommendation by OppenheimerFunds, Inc. CLASS A shares of the Fund were first publicly offered on 4/24/87. Unless otherwise noted, Class A returns include the current maximum initial sales charge of 5.75%. The Fund's maximum sales charge for Class A shares was lower prior to 4/1/91, so actual performance may have been higher. CLASS B shares of the Fund were first publicly offered on 8/29/95. Unless otherwise noted, Class B returns include the applicable contingent deferred sales charge of 5% (1-year) and 2% (5-year). Because Class B shares convert to Class A shares 72 months after purchase, the 10-year return for Class B uses Class A performance for the period after conversion. Class B shares are subject to an annual 0.75% asset-based sales charge. CLASS C shares of the Fund were first publicly offered on 12/1/93. Unless otherwise noted, Class C returns include the contingent deferred sales charge of 1% for the 1-year period. Class C shares are subject to an annual 0.75% asset-based sales charge. CLASS N shares of the Fund were first publicly offered on 3/1/01. Class N shares are offered only through retirement plans. Unless otherwise noted, Class N returns include the contingent deferred sales charge of 1% for the 1-year period. Class N shares are subject to an annual 0.25% asset-based sales charge. An explanation of the calculation of performance is in the Fund's Statement of Additional Information. 19 | OPPENHEIMER BALANCED FUND FUND EXPENSES - -------------------------------------------------------------------------------- FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended September 30, 2006. ACTUAL EXPENSES. The "actual" lines of the table provide information about actual account values and actual expenses. You may use the information on this line for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the "actual" line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio for each class of shares, and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as front-end or contingent deferred sales charges (loads), or a $12.00 fee imposed annually on accounts valued at less than $500.00 (subject to exceptions described in 20 | OPPENHEIMER BALANCED FUND the Statement of Additional Information). Therefore, the "hypothetical" lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING VALUE VALUE 6 MONTHS ENDED (4/1/06) (9/30/06) SEPTEMBER 30, 2006 - -------------------------------------------------------------------------------- Class A Actual $ 1,000.00 $ 1,025.90 $ 5.45 - -------------------------------------------------------------------------------- Class A Hypothetical 1,000.00 1,019.70 5.43 - -------------------------------------------------------------------------------- Class B Actual 1,000.00 1,021.00 10.13 - -------------------------------------------------------------------------------- Class B Hypothetical 1,000.00 1,015.09 10.10 - -------------------------------------------------------------------------------- Class C Actual 1,000.00 1,021.90 9.83 - -------------------------------------------------------------------------------- Class C Hypothetical 1,000.00 1,015.39 9.80 - -------------------------------------------------------------------------------- Class N Actual 1,000.00 1,023.40 7.48 - -------------------------------------------------------------------------------- Class N Hypothetical 1,000.00 1,017.70 7.46 Hypothetical assumes 5% annual return before expenses. Expenses are equal to the Fund's annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). Those annualized expense ratios based on the 6-month period ended September 30, 2006 are as follows: CLASS EXPENSE RATIOS - --------------------------- Class A 1.07% - --------------------------- Class B 1.99 - --------------------------- Class C 1.93 - --------------------------- Class N 1.47 - -------------------------------------------------------------------------------- 21 | OPPENHEIMER BALANCED FUND STATEMENT OF INVESTMENTS September 30, 2006 - --------------------------------------------------------------------------------
VALUE SHARES SEE NOTE 1 - -------------------------------------------------------------------------------------------------------------------- COMMON STOCKS--50.5% - -------------------------------------------------------------------------------------------------------------------- CONSUMER DISCRETIONARY--6.5% - -------------------------------------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE--1.3% Hilton Hotels Corp. 105,200 $ 2,929,820 - -------------------------------------------------------------------------------------------------------------------- Starwood Hotels & Resorts Worldwide, Inc. 85,700 4,901,183 - -------------------------------------------------------------------------------------------------------------------- Wyndham Worldwide Corp. 1 209,460 5,858,596 ---------------- 13,689,599 - -------------------------------------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL--0.9% Liberty Media Holding Corp.-Interactive, Series A 1 440,200 8,971,276 - -------------------------------------------------------------------------------------------------------------------- MEDIA--4.3% Liberty Global, Inc., Series A 1 635,277 16,352,030 - -------------------------------------------------------------------------------------------------------------------- Liberty Global, Inc., Series C 1 644,261 16,145,181 - -------------------------------------------------------------------------------------------------------------------- Liberty Media Holding Corp.-Capital, Series A 1,2 134,920 11,275,264 ---------------- 43,772,475 - -------------------------------------------------------------------------------------------------------------------- CONSUMER STAPLES--5.7% - -------------------------------------------------------------------------------------------------------------------- BEVERAGES--1.1% Constellation Brands, Inc., Cl. A 1 185,100 5,327,178 - -------------------------------------------------------------------------------------------------------------------- Diageo plc, Sponsored ADR 85,400 6,066,816 ---------------- 11,393,994 - -------------------------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING--0.8% Wal-Mart Stores, Inc. 165,700 8,172,324 - -------------------------------------------------------------------------------------------------------------------- FOOD PRODUCTS--0.3% ConAgra Foods, Inc. 126,100 3,086,928 - -------------------------------------------------------------------------------------------------------------------- TOBACCO--3.5% Altria Group, Inc. 337,600 25,843,280 - -------------------------------------------------------------------------------------------------------------------- Loews Corp./Carolina Group 176,000 9,748,640 ---------------- 35,591,920 - -------------------------------------------------------------------------------------------------------------------- ENERGY--2.4% - -------------------------------------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES--0.3% Halliburton Co. 2 109,000 3,101,050 - -------------------------------------------------------------------------------------------------------------------- OIL & GAS--2.1% BP plc, ADR 114,100 7,482,678 - -------------------------------------------------------------------------------------------------------------------- Exxon Mobil Corp. 86,300 5,790,730 - -------------------------------------------------------------------------------------------------------------------- Kinder Morgan, Inc. 29,000 3,040,650 - -------------------------------------------------------------------------------------------------------------------- Petroleo Brasileiro SA, Preference 129,000 2,405,215 - -------------------------------------------------------------------------------------------------------------------- Talisman Energy, Inc. 150,900 2,462,461 ---------------- 21,181,734
22 | OPPENHEIMER BALANCED FUND
VALUE SHARES SEE NOTE 1 - -------------------------------------------------------------------------------------------------------------------- FINANCIALS--9.3% - -------------------------------------------------------------------------------------------------------------------- CAPITAL MARKETS--2.0% UBS AG 331,778 $ 19,846,451 - -------------------------------------------------------------------------------------------------------------------- COMMERCIAL BANKS--1.3% Wachovia Corp. 240,562 13,423,360 - -------------------------------------------------------------------------------------------------------------------- CONSUMER FINANCE--1.6% Capital One Financial Corp. 202,800 15,952,248 - -------------------------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES--1.5% Bank of America Corp. 291,354 15,607,834 - -------------------------------------------------------------------------------------------------------------------- INSURANCE--1.8% Everest Re Group Ltd. 80,100 7,812,153 - -------------------------------------------------------------------------------------------------------------------- Genworth Financial, Inc., Cl. A 141,300 4,946,913 - -------------------------------------------------------------------------------------------------------------------- Platinum Underwriters Holdings Ltd. 179,600 5,537,068 ---------------- 18,296,134 - -------------------------------------------------------------------------------------------------------------------- REAL ESTATE MANAGEMENT & DEVELOPMENT--0.6% Realogy Corp. 1 261,825 5,938,191 - -------------------------------------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE--0.5% Countrywide Financial Corp. 25,700 900,528 - -------------------------------------------------------------------------------------------------------------------- Freddie Mac 62,200 4,125,726 ---------------- 5,026,254 - -------------------------------------------------------------------------------------------------------------------- HEALTH CARE--6.0% - -------------------------------------------------------------------------------------------------------------------- BIOTECHNOLOGY--2.1% Amgen, Inc. 1 75,700 5,414,821 - -------------------------------------------------------------------------------------------------------------------- Human Genome Sciences, Inc. 1,2 257,500 2,971,550 - -------------------------------------------------------------------------------------------------------------------- MedImmune, Inc. 1 240,900 7,036,689 - -------------------------------------------------------------------------------------------------------------------- Myogen, Inc. 1,2 70,900 2,487,172 - -------------------------------------------------------------------------------------------------------------------- Vanda Pharmaceuticals, Inc. 1 399,800 3,714,142 ---------------- 21,624,374 - -------------------------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES--0.9% Beckman Coulter, Inc. 88,400 5,088,304 - -------------------------------------------------------------------------------------------------------------------- Boston Scientific Corp. 1 261,100 3,861,669 ---------------- 8,949,973 - -------------------------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES--0.5% WellPoint, Inc. 1 68,300 5,262,515 - -------------------------------------------------------------------------------------------------------------------- PHARMACEUTICALS--2.5% Medicines Co. (The) 1,2 124,600 2,810,976 - -------------------------------------------------------------------------------------------------------------------- Pfizer, Inc. 452,640 12,836,870
23 | OPPENHEIMER BALANCED FUND STATEMENT OF INVESTMENTS Continued - --------------------------------------------------------------------------------
VALUE SHARES SEE NOTE 1 - -------------------------------------------------------------------------------------------------------------------- PHARMACEUTICALS Continued Sanofi-Aventis SA, ADR 213,000 $ 9,472,110 ---------------- 25,119,956 - -------------------------------------------------------------------------------------------------------------------- INDUSTRIALS--4.8% - -------------------------------------------------------------------------------------------------------------------- AEROSPACE & DEFENSE--3.1% Empresa Brasileira de Aeronautica SA, ADR 2 142,100 5,580,267 - -------------------------------------------------------------------------------------------------------------------- Orbital Sciences Corp. 1 824,917 15,483,692 - -------------------------------------------------------------------------------------------------------------------- United Technologies Corp. 170,500 10,801,175 ---------------- 31,865,134 - -------------------------------------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES--1.5% Siemens AG, Sponsored ADR 175,200 15,259,920 - -------------------------------------------------------------------------------------------------------------------- ROAD & RAIL--0.2% Avis Budget Group, Inc. 104,730 1,915,512 - -------------------------------------------------------------------------------------------------------------------- INFORMATION TECHNOLOGY--11.5% - -------------------------------------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT--1.9% Cisco Systems, Inc. 1 500,900 11,520,700 - -------------------------------------------------------------------------------------------------------------------- Juniper Networks, Inc. 1 295,300 5,102,784 - -------------------------------------------------------------------------------------------------------------------- QUALCOMM, Inc. 60,400 2,195,540 ---------------- 18,819,024 - -------------------------------------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS--0.8% Hutchinson Technology, Inc. 1,2 158,200 3,326,946 - -------------------------------------------------------------------------------------------------------------------- International Business Machines Corp. 63,200 5,178,608 ---------------- 8,505,554 - -------------------------------------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES--0.8% eBay, Inc. 1 227,300 6,446,228 - -------------------------------------------------------------------------------------------------------------------- Yahoo!, Inc. 1 47,600 1,203,328 ---------------- 7,649,556 - -------------------------------------------------------------------------------------------------------------------- SOFTWARE--8.0% Compuware Corp. 1 999,029 7,782,436 - -------------------------------------------------------------------------------------------------------------------- Microsoft Corp. 1,105,400 30,210,582 - -------------------------------------------------------------------------------------------------------------------- Novell, Inc. 1 1,049,500 6,422,940 - -------------------------------------------------------------------------------------------------------------------- Synopsys, Inc. 1 502,100 9,901,412 - -------------------------------------------------------------------------------------------------------------------- Take-Two Interactive Software, Inc. 1,2 1,911,047 27,251,530 ---------------- 81,568,900
24 | OPPENHEIMER BALANCED FUND
VALUE SHARES SEE NOTE 1 - -------------------------------------------------------------------------------------------------------------------- MATERIALS--0.8% - -------------------------------------------------------------------------------------------------------------------- CHEMICALS--0.6% Praxair, Inc. 102,200 $ 6,046,152 - -------------------------------------------------------------------------------------------------------------------- METALS & MINING--0.2% Companhia Vale do Rio Doce, Sponsored ADR 136,200 2,521,062 - -------------------------------------------------------------------------------------------------------------------- Kaiser Aluminum Corp. 1 1,456 64,559 ---------------- 2,585,621 - -------------------------------------------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES--1.5% - -------------------------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES--1.1% IDT Corp., Cl. B 1,2 777,500 11,211,550 - -------------------------------------------------------------------------------------------------------------------- WorldCom, Inc./WorldCom Group 1,3 450,000 -- ---------------- 11,211,550 - -------------------------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES--0.4% Sprint Nextel Corp. 228,100 3,911,915 - -------------------------------------------------------------------------------------------------------------------- UTILITIES--2.0% - -------------------------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES--0.6% Reliant Energy, Inc. 1 521,400 6,418,434 - -------------------------------------------------------------------------------------------------------------------- ENERGY TRADERS--1.4% AES Corp. (The) 1 675,700 13,777,523 ---------------- Total Common Stocks (Cost $427,365,952) 513,543,385 UNITS - -------------------------------------------------------------------------------------------------------------------- RIGHTS, WARRANTS AND CERTIFICATES--0.0% - -------------------------------------------------------------------------------------------------------------------- Lucent Technologies, Inc. Wts., Exp. 12/10/07 1 (Cost $0) 11,758 2,234 PRINCIPAL AMOUNT - -------------------------------------------------------------------------------------------------------------------- ASSET-BACKED SECURITIES--4.4% - -------------------------------------------------------------------------------------------------------------------- Ace Securities Corp., Home Equity Loan Pass-Through Certificates, Series 2005-HE7, Cl. A2B, 5.51%, 11/25/35 4 $ 890,000 890,954 - -------------------------------------------------------------------------------------------------------------------- Aesop Funding II LLC, Automobile Asset-Backed Certificates, Series 2005-1A, Cl. A2, 5.39%, 4/20/08 4 630,000 630,482 - -------------------------------------------------------------------------------------------------------------------- Argent Securities Trust 2004-W8, Asset-Backed Pass-Through Certificates, Series 2004-W8, Cl. A2, 5.81%, 5/25/34 4 3,180,000 3,194,287 - -------------------------------------------------------------------------------------------------------------------- Argent Securities Trust 2006-W5, Asset-Backed Pass-Through Certificates, Series 2006-W5, Cl. A2B, 5.43%, 5/26/36 4 1,250,000 1,250,783 - -------------------------------------------------------------------------------------------------------------------- BMW Vehicle Owner Trust 2005-A, Automobile Asset-Backed Securities, Series 2005-A, Cl. A2, 3.66%, 12/26/07 95,241 95,211 - -------------------------------------------------------------------------------------------------------------------- Capital Auto Receivables Asset Trust 2004-2, Automobile Asset-Backed Securities, Series 2004-2, Cl. A3, 3.58%, 1/15/09 2,140,000 2,109,928
25 | OPPENHEIMER BALANCED FUND STATEMENT OF INVESTMENTS Continued - --------------------------------------------------------------------------------
PRINCIPAL VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------------------------------------------- ASSET-BACKED SECURITIES Continued - -------------------------------------------------------------------------------------------------------------------- Capital One Prime Auto Receivables Trust, Automobile Loan Asset-Backed Securities, Series 2005-1, Cl. A2, 4.24%, 11/15/07 $ 507,697 $ 507,730 - -------------------------------------------------------------------------------------------------------------------- Centex Home Equity Loan Trust 2005-C, Asset-Backed Certificates, Series 2005-C, Cl. AF1, 4.196%, 6/25/35 141,221 140,792 - -------------------------------------------------------------------------------------------------------------------- Centex Home Equity Loan Trust 2005-D, Asset-Backed Certificates: Series 2005-D, Cl. AF1, 5.04%, 10/25/35 686,623 683,775 Series 2005-D, Cl. AV2, 5.60%, 10/25/35 4 1,750,000 1,751,920 - -------------------------------------------------------------------------------------------------------------------- Centex Home Equity Loan Trust 2006-A, Asset-Backed Certificates, Series 2006-A, Cl. AV2, 5.43%, 5/16/36 4 1,570,000 1,570,983 - -------------------------------------------------------------------------------------------------------------------- Chase Manhattan Auto Owner Trust, Automobile Loan Pass-Through Certificates, Series 2005-A, Cl. A2, 3.72%, 12/15/07 379,136 378,818 - -------------------------------------------------------------------------------------------------------------------- Citibank Credit Card Issuance Trust, Credit Card Receivable Nts., Series 2003-C4, Cl. C4, 5%, 6/10/15 310,000 301,707 - -------------------------------------------------------------------------------------------------------------------- Citigroup Mortgage Loan Trust, Inc., Asset-Backed Pass-Through Certificates, Series 2005-WF2, Cl. AF2, 4.922%, 8/25/35 4 1,441,714 1,428,956 - -------------------------------------------------------------------------------------------------------------------- Consumer Credit Reference Index Securities Program, Credit Card Asset-Backed Certificates, Series 2002-B, Cl. FX, 10.421%, 3/22/07 5 1,970,000 1,999,900 - -------------------------------------------------------------------------------------------------------------------- CWABS Asset-Backed Certificates Trust 2002-4, Asset-Backed Certificates, Series 2002-4, Cl. A1, 5.70% 2/25/33 4 31,485 31,519 - -------------------------------------------------------------------------------------------------------------------- CWABS Asset-Backed Certificates Trust 2005-16, Asset-Backed Certificates, Series 2005-16, Cl. 2AF2, 5.382%, 5/25/36 4 630,000 629,024 - -------------------------------------------------------------------------------------------------------------------- CWABS Asset-Backed Certificates Trust 2005-17, Asset-Backed Certificates: Series 2005-17, Cl. 1AF1, 5.53%, 5/25/36 4 942,294 943,436 Series 2005-17, Cl. 1AF2, 5.363%, 5/25/36 4 420,000 419,236 - -------------------------------------------------------------------------------------------------------------------- CWABS Asset-Backed Certificates Trust 2005-7, Asset-Backed Certificates, Series 2005-7, Cl. AF1B, 4.317%, 11/25/35 4 129,362 128,985 - -------------------------------------------------------------------------------------------------------------------- DaimlerChrysler Auto Trust, Automobile Loan Pass-Through Certificates, Series 2005-B, Cl. A2, 3.75%, 12/8/07 9,021 9,024 - -------------------------------------------------------------------------------------------------------------------- First Franklin Mortgage Loan Trust 2006-FF5, Mtg. Pass-Through Certificates, Series 2006-FF5, Cl. 2A1, 5.38%, 5/15/36 4 832,425 833,004 - -------------------------------------------------------------------------------------------------------------------- First Franklin Mortgage Loan Trust 2006-FF9, Mtg. Pass-Through Certificates, Series 2006-FF9, Cl. 2A2, 5.434%, 7/7/36 4 620,000 620,388 - -------------------------------------------------------------------------------------------------------------------- First Franklin Mortgage Loan Trust 2005-FF10, Mtg. Pass-Through Certificates, Series 2005-FF10, Cl. A3, 5.54%, 11/25/35 4 2,600,000 2,602,767 - -------------------------------------------------------------------------------------------------------------------- First Franklin Mortgage Loan Trust 2006-FF10, Mtg. Pass-Through Certificates, Series 2006-FF10, Cl. A3, 5.414%, 7/25/36 4 1,230,000 1,230,769 - -------------------------------------------------------------------------------------------------------------------- Ford Credit Auto Owner Trust, Automobile Loan Pass-Through Certificates, Series 2005-A, Cl. A3, 3.48%, 11/17/08 1,158,422 1,149,907 - -------------------------------------------------------------------------------------------------------------------- GS Auto Loan Trust, Automobile Loan Asset-Backed Securities, Series 2005-1, Cl. A2, 4.32%, 5/15/08 1,778,177 1,775,687 - -------------------------------------------------------------------------------------------------------------------- Honda Auto Receivables Owner Trust, Automobile Receivable Obligations, Series 2005-3, Cl. A2, 3.73%, 10/18/07 3 418,046 417,643
26 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------------------------------------------- ASSET-BACKED SECURITIES Continued - -------------------------------------------------------------------------------------------------------------------- Household Home Equity Loan Trust, Home Equity Loan Pass-Through Certificates, Series 2005-3, Cl. A1, 5.59%, 1/20/35 4 $ 926,990 $ 928,434 - -------------------------------------------------------------------------------------------------------------------- Lehman XS Trust, Mtg. Pass-Through Certificates, Series 2005-2, Cl. 2A1B, 5.18%, 8/25/35 4 1,231,729 1,228,338 - -------------------------------------------------------------------------------------------------------------------- Litigation Settlement Monetized Fee Trust, Asset-Backed Certificates, Series 2001-1A, Cl. A1, 8.33%, 4/25/31 3 517,467 528,209 - -------------------------------------------------------------------------------------------------------------------- MBNA Credit Card Master Note Trust, Credit Card Receivables, Series 2003-C7, Cl. C7, 6.68%, 3/15/16 4 2,900,000 3,082,519 - -------------------------------------------------------------------------------------------------------------------- Morgan Stanley ABS Capital I, Mtg. Pass-Through Certificates, Series 2005-WMC6, Cl. A2B, 5.59%, 7/25/35 4 790,000 791,816 - -------------------------------------------------------------------------------------------------------------------- Onyx Acceptance Owner Trust, Automobile Receivable Obligations, Series 2005-B, Cl. A2, 4.03%, 4/15/08 128,956 128,972 - -------------------------------------------------------------------------------------------------------------------- Option One Mortgage Loan Trust, Asset-Backed Certificates, Series 2006-2, Cl. 2A2, 5.43%, 7/1/36 4 2,060,000 2,061,289 - -------------------------------------------------------------------------------------------------------------------- Popular ABS Mortgage Pass-Through Trust 2004-5, Mtg. Pass-Through Certificates, Series 2004-5, Cl. AF2, 3.735%, 11/10/34 4 299,798 298,379 - -------------------------------------------------------------------------------------------------------------------- Popular ABS Mortgage Pass-Through Trust 2005-1, Mtg. Pass-Through Certificates, Series 2005-1, Cl. AF2, 3.914%, 5/25/35 4 408,590 405,938 - -------------------------------------------------------------------------------------------------------------------- Popular ABS Mortgage Pass-Through Trust 2005-2, Mtg. Pass-Through Certificates, Series 2005-2, Cl. AF2, 4.415%, 4/25/35 4 720,000 713,432 - -------------------------------------------------------------------------------------------------------------------- RAMP Series 2004-RS7 Trust, Mtg. Asset-Backed Pass-Through Certificates, Series 2004-RS7, Cl. AI32 4.45%, 7/25/28 1,228,817 1,218,482 - -------------------------------------------------------------------------------------------------------------------- RAMP Series 2006-RS4 Trust, Mtg. Asset-Backed Pass-Through Certificates, Series 2006-RS4, Cl. A1, 5.41%, 7/25/36 4 761,858 762,336 - -------------------------------------------------------------------------------------------------------------------- RASC Series 2006-KS7 Trust, Home Equity Mtg. Asset-Backed Pass-Through Certificates, Series 2006-KS7, Cl. A2, 5.428%, 9/25/36 4 1,500,000 1,499,721 - -------------------------------------------------------------------------------------------------------------------- Structured Asset Investment Loan Trust, Mtg. Pass-Through Certificates, Series 2006-2, Cl. A1, 5.39%, 4/25/36 4 872,108 872,709 - -------------------------------------------------------------------------------------------------------------------- Structured Asset Securities Corp., Mtg. Pass-Through Certificates, Series 2005-4XS, Cl. 3A1, 5.18%, 3/26/35 1,687,754 1,682,420 - -------------------------------------------------------------------------------------------------------------------- Wells Fargo Home Equity Asset-Backed Securities 2006-2 Trust, Home Equity Asset-Backed Certificates, Series 2006-2, Cl. A2, 5.424%, 7/25/36 4 1,230,000 1,230,769 ---------------- Total Asset-Backed Securities (Cost $45,213,713) 45,161,378 - -------------------------------------------------------------------------------------------------------------------- MORTGAGE-BACKED OBLIGATIONS--25.7% - -------------------------------------------------------------------------------------------------------------------- GOVERNMENT AGENCY--21.7% - -------------------------------------------------------------------------------------------------------------------- FHLMC/FNMA/SPONSORED--21.5% Federal Home Loan Mortgage Corp.: 4.50%, 5/1/18-5/1/19 7,633,017 7,370,923 5%, 8/1/33 539,491 520,778 5%, 10/1/36 6 5,190,000 4,992,131 6%, 4/1/17-9/1/24 1,645,095 1,667,676
27 | OPPENHEIMER BALANCED FUND STATEMENT OF INVESTMENTS Continued - --------------------------------------------------------------------------------
PRINCIPAL VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------------------------------------------- FHLMC/FNMA/SPONSORED Continued Federal Home Loan Mortgage Corp.: Continued 6.50%, 4/1/18-4/1/34 $ 5,721,196 $ 5,850,121 7%, 5/1/29-11/1/32 3,640,652 3,750,930 8%, 4/1/16 63,881 67,572 9%, 8/1/22-5/1/25 18,824 20,168 - -------------------------------------------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., CMO Gtd. Multiclass Mtg. Participation Certificates, Series 3153, Cl. FJ, 5.71%, 5/15/36 4 782,505 784,774 - -------------------------------------------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., CMO Gtd. Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates: Series 2034, Cl. Z, 6.50%, 2/15/28 482,410 495,475 Series 2053, Cl. Z, 6.50%, 4/15/28 525,290 539,733 Series 2055, Cl. ZM, 6.50%, 5/15/28 679,696 693,790 Series 2075, Cl. D, 6.50%, 8/15/28 1,622,125 1,666,826 Series 2080, Cl. Z, 6.50%, 8/15/28 437,397 447,074 Series 2387, Cl. PD, 6%, 4/15/30 316,290 316,670 Series 2500, Cl. FD, 5.83%, 3/15/32 4 213,640 215,868 Series 2526, Cl. FE, 5.73%, 6/15/29 4 295,755 297,013 Series 2551, Cl. FD, 5.73%, 1/15/33 4 232,657 235,199 Series 2583, Cl. KA, 5.50%, 3/15/22 636,701 636,069 - -------------------------------------------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., CMO Pass-Through Participation Certificates, Series 151, Cl. F, 9%, 5/15/21 42,128 42,043 - -------------------------------------------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed Security: Series 176, Cl. IO, 13.464%, 6/1/26 7 418,070 93,214 Series 183, Cl. IO, 10.551%, 4/1/27 7 645,744 140,311 Series 184, Cl. IO, 15.866%, 12/1/26 7 696,743 155,617 Series 192, Cl. IO, 14.14%, 2/1/28 7 197,479 42,099 Series 200, Cl. IO, 13.356%, 1/1/29 7 238,567 52,227 Series 2003-118, Cl. S, 10.052%, 12/25/33 7 3,568,947 392,574 Series 2130, Cl. SC, (1.251)%, 3/15/29 7 531,843 33,139 Series 2005-87, Cl. SG, 10.772%, 10/25/35 7 6,016,414 348,382 Series 2796, Cl. SD, 1.434%, 7/15/26 7 771,719 51,806 Series 2920, Cl. S, (0.444)%, 1/15/35 7 4,526,052 218,035 Series 3000, Cl. SE, (3.763)%, 7/15/25 7 4,491,949 171,759 - -------------------------------------------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., Principal-Only Stripped Mtg.-Backed Security, Series 176, Cl. PO, 4.463%, 6/1/26 8 177,613 145,841 - -------------------------------------------------------------------------------------------------------------------- Federal National Mortgage Assn.: 4.50%, 10/1/21 6 3,378,000 3,259,770 5%, 1/1/18-3/1/34 18,947,781 18,452,188 5%, 10/1/21-10/1/36 6 24,040,000 23,297,010 5.50%, 2/1/33-11/1/34 27,758,573 27,433,354 5.50%, 10/1/21-10/1/36 6 21,728,000 21,496,308 6%, 9/1/32-11/1/32 6,749,121 6,802,509 6%, 10/1/21-10/1/36 6 14,783,000 14,996,895 6.50%, 6/1/17-11/1/31 12,974,357 13,288,221 6.50%, 10/1/36 6 7,232,000 7,365,344
28 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------------------------------------------- FHLMC/FNMA/SPONSORED Continued Federal National Mortgage Assn.: Continued 7%, 11/1/17-1/1/35 $ 5,648,617 $ 5,825,931 7.50%, 1/1/08-1/1/33 575,858 597,716 8.50%, 7/1/32 30,496 32,839 - -------------------------------------------------------------------------------------------------------------------- Federal National Mortgage Assn. Grantor Trust, CMO, Trust 2002-T1, Cl. A2, 7%, 11/25/31 1,499,793 1,545,607 - -------------------------------------------------------------------------------------------------------------------- Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates: Trust 1992-15, Cl. KZ, 7%, 2/25/22 105,894 107,340 Trust 1993-87, Cl. Z, 6.50%, 6/25/23 1,273,539 1,313,298 Trust 1993-215, Cl. ZQ, 6.50%, 11/25/23 1,594,576 1,629,527 Trust 1996-35, Cl. Z, 7%, 7/25/26 225,637 231,146 Trust 2001-50, Cl. NE, 6%, 8/25/30 169,258 169,643 Trust 2001-51, Cl. OD, 6.50%, 10/25/31 1,779,068 1,815,858 Trust 2001-70, Cl. LR, 6%, 9/25/30 254,993 255,468 Trust 2001-72, Cl. NH, 6%, 4/25/30 102,331 102,285 Trust 2001-74, Cl. PD, 6%, 5/25/30 42,678 42,589 Trust 2002-77, Cl. WF, 5.73%, 12/18/32 4 347,147 350,068 Trust 2003-17, Cl. EQ, 5.50%, 3/25/23 630,000 621,647 Trust 2003-28, Cl. KG, 5.50%, 4/25/23 1,045,000 1,036,217 Trust 2003-84, Cl. PW, 3%, 6/25/22 1,560,000 1,526,899 Trust 2004-101, Cl. BG, 5%, 1/25/20 1,869,000 1,827,197 Trust 2005-71, Cl. DB, 4.50%, 8/25/25 160,000 148,459 Trust 2006-24, Cl. DB, 5.50%, 4/25/26 4,010,000 4,015,446 Trust 2006-44, Cl. OA, 5.50%, 12/25/26 3,100,000 3,110,612 Trust 2006-50, Cl. KS, 4.657%, 6/25/36 4 1,573,678 1,534,266 Trust 2006-50, Cl. SA, 4.657%, 6/25/36 4 518,545 501,803 Trust 2006-50, Cl. SK, 5.657%, 6/25/36 4 1,462,179 1,433,294 Trust 2006-57, Cl. PA, 5.50%, 8/25/27 4,346,287 4,354,975 Trust 2006-64, Cl. MD, 5.50%, 7/25/36 5,101,000 4,972,974 - -------------------------------------------------------------------------------------------------------------------- Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg. InvestmentConduit Pass-Through Certificates, Interest-Only Stripped Mtg.-Backed Security: Trust 1993-223, Cl. PM, 2.119%, 10/25/23 7 43,278 3,425 Trust 2002-38, Cl. SO, (3.594)%, 4/25/32 7 780,141 46,195 Trust 2002-47, Cl. NS, 0.436%, 4/25/32 7 877,529 69,907 Trust 2002-51, Cl. S, 0.555%, 8/25/32 7 805,768 63,104 Trust 2002-77, Cl. IS, 1.525%, 12/18/32 7 1,329,129 106,060 - -------------------------------------------------------------------------------------------------------------------- Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security: Trust 214, Cl. 2, 16.174%, 3/1/23 7 1,123,096 257,639 Trust 222, Cl. 2, 13.516%, 6/1/23 7 1,473,792 319,072 Trust 240, Cl. 2, 17.455%, 9/1/23 7 2,280,081 507,461 Trust 247, Cl. 2, 13.069%, 10/1/23 7 299,960 71,683 Trust 252, Cl. 2, 10.294%, 11/1/23 7 1,080,269 266,394 Trust 273, Cl. 2, 14.097%, 8/1/26 7 311,079 68,222
29 | OPPENHEIMER BALANCED FUND STATEMENT OF INVESTMENTS Continued - --------------------------------------------------------------------------------
PRINCIPAL VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------------------------------------------- FHLMC/FNMA/SPONSORED Continued Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security: Continued Trust 319, Cl. 2, 11.481%, 2/1/32 7 $ 434,784 $ 100,076 Trust 321, Cl. 2, 6.841%, 4/1/32 7 4,468,387 1,029,870 Trust 329, Cl. 2, 10.123%, 1/1/33 7 1,140,724 273,885 Trust 331, Cl. 9, 8.306%, 2/1/33 7 151,622 37,023 Trust 334, Cl. 17, 16.449%, 2/1/33 7 726,109 161,169 Trust 340, Cl. 2, 8.005%, 9/1/33 7 354,585 86,883 Trust 344, Cl. 2, 7.655%, 12/1/33 7 1,539,307 356,420 Trust 362, Cl. 12, 4.14%, 8/1/35 7 6,165,391 1,325,703 Trust 362, Cl. 13, 4.145%, 8/1/35 7 3,420,821 760,330 Trust 2001-65, Cl. S, 9.137%, 11/25/31 7 2,044,537 190,952 Trust 2001-81, Cl. S, 2.652%, 1/25/32 7 450,764 33,966 Trust 2002-9, Cl. MS, 1.205%, 3/25/32 7 606,540 48,611 Trust 2002-52, Cl. SD, (1.823)%, 9/25/32 7 960,932 77,986 Trust 2002-77, Cl. SH, 2.822%, 12/18/32 7 578,838 55,240 Trust 2002-96, Cl. SK, 10.441%, 4/25/32 7 5,328,322 542,692 Trust 2003-4, Cl. S, 9.973%, 2/25/33 7 1,120,387 127,342 Trust 2003-33, Cl. SP, 13.034%, 5/25/33 7 2,058,865 240,991 Trust 2003-46, Cl. IH, 6.656%, 6/25/33 7 7,339,219 1,551,875 Trust 2004-54, Cl. DS, (4.485)%, 11/25/30 7 856,863 46,896 Trust 2005-6, Cl. SE, (2.001)%, 2/25/35 7 3,081,300 155,855 Trust 2005-19, Cl. SA, (2.712)%, 3/25/35 7 11,934,843 608,573 Trust 2005-40, Cl. SA, (2.74)%, 5/25/35 7 2,598,876 131,269 Trust 2005-71, Cl. SA, 3.357%, 8/25/25 7 2,851,363 162,961 Trust 2006-33, Cl. SP, 13.721%, 5/25/36 7 6,365,296 496,405 - -------------------------------------------------------------------------------------------------------------------- Federal National Mortgage Assn., Principal-Only Stripped Mtg.-Backed Security: Trust 340, Cl. 1, 5.181%, 9/1/33 8 354,585 256,933 Trust 1993-184, Cl. M, 5.65%, 9/25/23 8 510,564 413,423 ---------------- 219,003,031 - -------------------------------------------------------------------------------------------------------------------- GNMA/GUARANTEED--0.2% Government National Mortgage Assn.: 5.375%, 3/20/26 4 27,384 27,602 7%, 4/15/09-4/15/26 278,173 286,989 7.50%, 3/15/09-5/15/27 977,891 1,019,217 8%, 5/15/17 41,857 44,143 8.50%, 8/15/17-12/15/17 25,164 26,835 - -------------------------------------------------------------------------------------------------------------------- Government National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security: Series 2001-21, Cl. SB, (5.732)%, 1/16/27 7 1,087,504 70,467 Series 2002-15, Cl. SM, (9.288)%, 2/16/32 7 834,694 51,340 Series 2002-76, Cl. SY, (5)%, 12/16/26 7 2,042,659 142,678 Series 2004-11, Cl. SM, (8.513)%, 1/17/30 7 712,991 45,856 ---------------- 1,715,127
30 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------------------------------------------- NON-AGENCY--4.0% - -------------------------------------------------------------------------------------------------------------------- COMMERCIAL--3.6% Banc of America Commercial Mortgage, Inc., Commercial Mtg. Pass-Through Certificates, Series 2005-3, Cl. A2, 4.501%, 7/10/43 $ 1,810,000 $ 1,771,018 - -------------------------------------------------------------------------------------------------------------------- Banc of America Funding Corp., CMO Pass-Through Certificates, Series 2004-2, Cl. 2A1, 6.50%, 7/20/32 1,367,400 1,390,618 - -------------------------------------------------------------------------------------------------------------------- Banc of America Mortgage Securities, Inc., CMO Pass-Through Certificates: Series 2004-8, Cl. 5A1, 6.50%, 5/25/32 1,123,644 1,133,125 Series 2005-E, Cl. 2A2, 4.975%, 6/25/35 4 159,627 159,435 - -------------------------------------------------------------------------------------------------------------------- ChaseFlex Trust 2006-2, Multi-Class Mtg. Pass-Through Certificates, Series 2006-2, Cl. A1B, 5.43%, 8/25/08 4 1,256,128 1,257,388 - -------------------------------------------------------------------------------------------------------------------- Citigroup Mortgage Loan Trust 2006-WF1, Asset-Backed Pass-Through Certificates, Series 2006-WF1, Cl. A2B, 5.536%, 3/1/36 460,000 459,485 - -------------------------------------------------------------------------------------------------------------------- Deutsche Alt-A Securities, Inc. Mortgage Loan Trust, CMO, Series 2006-AB2, Cl. A7, 5.961%, 6/25/36 2,497,685 2,495,539 - -------------------------------------------------------------------------------------------------------------------- Deutsche Alt-B Securities, Inc. Mortgage Loan Trust, CMO, Series 2006-AB3, Cl. A7, 6.36%, 4/25/08 806,318 809,012 - -------------------------------------------------------------------------------------------------------------------- GE Capital Commercial Mortgage Corp., Commercial Mtg. Obligations: Series 2004-C3, Cl. A2, 4.433%, 7/10/39 960,000 944,665 Series 2005-C3, Cl. A2, 4.853%, 7/10/45 1,080,000 1,070,028 - -------------------------------------------------------------------------------------------------------------------- GMAC Commercial Mortgage Securities, Inc., Commercial Mtg. Pass-Through Certificates, Series 1997-C1, Cl. A3, 6.869%, 7/15/29 381,366 384,233 - -------------------------------------------------------------------------------------------------------------------- Greenwich Capital Commercial Funding Corp., Commercial Mtg. Pass-Through Certificates: Series 2005-G G3, Cl. A2, 4.305%, 8/10/42 1,520,000 1,485,918 Series 2005-G G5, Cl. A2, 5.117%, 4/10/37 1,200,000 1,198,741 - -------------------------------------------------------------------------------------------------------------------- JPMorgan Chase Commercial Mortgage Securities Corp., Commercial Mtg. Pass-Through Certificates: Series 2005-LDP2, Cl. A2, 4.575%, 7/15/42 440,000 431,634 Series 2005-LDP4, Cl. A2, 4.79%, 10/15/42 1,560,000 1,538,860 - -------------------------------------------------------------------------------------------------------------------- LB-UBS Commercial Mortgage Trust, Commercial Mtg. Pass-Through Certificates, Series 2005-C5, Cl. A2, 4.885%, 9/15/30 1,280,000 1,271,140 - -------------------------------------------------------------------------------------------------------------------- Mastr Alternative Loan Trust, CMO Pass-Through Certificates: Series 2004-6, Cl. 10A1, 6%, 7/25/34 1,845,193 1,835,734 Series 2004-9, Cl. A3, 4.70%, 8/25/34 4 2,439,905 2,424,642 - -------------------------------------------------------------------------------------------------------------------- Prudential Mortgage Capital Co. II LLC, Commercial Mtg. Pass-Through Certificates, Series PRU-HTG 2000-C1, Cl. A2, 7.306%, 10/6/15 1,554,000 1,669,612 - -------------------------------------------------------------------------------------------------------------------- RALI Series 2003-QS1 Trust, Mtg. Asset-Backed Pass-Through Certificates, Series 2003-QS1, Cl. A2, 5.75%, 1/25/33 914,881 913,113 - -------------------------------------------------------------------------------------------------------------------- RALI Series 2006-QS5 Trust, Mtg. Asset-Backed Pass-Through Certificates, Series 2006-QS5, Cl. 2A2, 6%, 4/25/08 2,975,216 2,973,212 - -------------------------------------------------------------------------------------------------------------------- RALI Series 2006-QS13 Trust, Mtg. Asset-Backed Pass-Through Certificates, Series 2006-QS13, Cl. 1A8, 6%, 9/25/36 2,630,000 2,631,233
31 | OPPENHEIMER BALANCED FUND STATEMENT OF INVESTMENTS Continued - --------------------------------------------------------------------------------
PRINCIPAL VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------------------------------------------- COMMERCIAL Continued Residential Asset Securitization Trust 2006-A9CB, CMO Pass-Through Certificates, Series 2006-A9CB, Cl. A5, 6%, 9/25/36 $ 2,692,060 $ 2,689,326 - -------------------------------------------------------------------------------------------------------------------- Wachovia Bank Commercial Mortgage Trust, Commercial Mtg. Obligations, Series 2005-C17, Cl. A2, 4.782%, 3/15/42 2,490,000 2,462,768 - -------------------------------------------------------------------------------------------------------------------- WAMU Mortgage Pass-Through Certificates Series 2005-AR5 Trust, Series 2005-AR5, Cl. A1, 4.673%, 5/25/35 4 766,289 764,159 - -------------------------------------------------------------------------------------------------------------------- Wells Fargo Mortgage-Backed Securities 2004-DD Trust, CMO Mtg. Pass-Through Certificates, Series 2004-DD, Cl. 2A1, 4.509%, 1/25/35 4 169,219 168,689 ---------------- 36,333,327 - -------------------------------------------------------------------------------------------------------------------- RESIDENTIAL--0.4% Countrywide Alternative Loan Trust, CMO: Series 2005-J1, Cl. 3A1, 6.50%, 8/25/32 2,864,304 2,894,738 Series 2005-J3, Cl. 3A1, 6.50%, 9/25/34 1,543,383 1,576,108 ---------------- 4,470,846 ---------------- Total Mortgage-Backed Obligations (Cost $262,212,193) 261,522,331 - -------------------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS--3.0% - -------------------------------------------------------------------------------------------------------------------- Fannie Mae Unsec. Nts., 3.69%, 10/5/07 9 1,245,000 1,182,362 - -------------------------------------------------------------------------------------------------------------------- Federal Home Loan Bank Unsec. Bonds: 3.125%, 11/15/06 2,600,000 2,593,172 3.50%, 11/15/07 2 1,160,000 1,140,230 - -------------------------------------------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp. Unsec. Nts.: 4.125%, 7/12/10 2 786,000 765,492 5.25%, 7/18/11 845,000 857,762 6.625%, 9/15/09 475,000 496,925 - -------------------------------------------------------------------------------------------------------------------- Federal National Mortgage Assn. Unsec. Nts.: 4%, 2/28/07 2,630,000 2,616,340 4.25%, 7/15/07 2 2,555,000 2,536,558 4.75%, 12/15/10 2 130,000 129,370 6%, 5/15/11 10 4,605,000 4,815,476 6.625%, 9/15/09 135,000 141,377 7.25%, 1/15/10 10 2,250,000 2,409,935 - -------------------------------------------------------------------------------------------------------------------- U.S. Treasury Bonds: 4.50%, 2/15/36 2 2,995,000 2,870,755 8.875%, 8/15/17 2 790,000 1,067,550 STRIPS, 4.96%, 2/15/16 9 171,000 110,551 - -------------------------------------------------------------------------------------------------------------------- U.S. Treasury Nts.: 4.625%, 8/31/11 2 4,419,000 4,425,218 4.875%, 8/15/16 2 365,000 372,015 5.125%, 6/30/11-5/15/16 2 1,988,000 2,043,082 ---------------- Total U.S. Government Obligations (Cost $30,656,194) 30,574,170
32 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------------------------------------------- NON-CONVERTIBLE CORPORATE BONDS AND NOTES--14.8% - -------------------------------------------------------------------------------------------------------------------- ABN Amro Bank NV (NY Branch), 7.125% Sub. Nts., Series B, 10/15/93 $ 500,000 $ 565,610 - -------------------------------------------------------------------------------------------------------------------- Ahold Finance USA, Inc., 6.25% Sr. Unsec. Unsub. Nts., 5/1/09 1,880,000 1,908,200 - -------------------------------------------------------------------------------------------------------------------- Albertson's, Inc., 8% Sr. Unsec. Debs., 5/1/31 2 1,645,000 1,607,351 - -------------------------------------------------------------------------------------------------------------------- AT&T Wireless Services, Inc., 8.125% Sr. Unsec. Nts., 5/1/12 1,435,000 1,617,038 - -------------------------------------------------------------------------------------------------------------------- BAE Systems Holdings, Inc., 5.20% Nts., 8/15/15 5 2,115,000 2,027,151 - -------------------------------------------------------------------------------------------------------------------- Barclays Bank plc, 6.278% Perpetual Bonds 11 2,780,000 2,652,787 - -------------------------------------------------------------------------------------------------------------------- Beazer Homes USA, Inc., 6.875% Sr. Unsec. Nts., 7/15/15 2 1,025,000 932,750 - -------------------------------------------------------------------------------------------------------------------- British Sky Broadcasting Group plc, 8.20% Sr. Unsec. Nts., 7/15/09 1,255,000 1,345,379 - -------------------------------------------------------------------------------------------------------------------- Caesars Entertainment, Inc., 7.50% Sr. Unsec. Nts., 9/1/09 2,220,000 2,321,998 - -------------------------------------------------------------------------------------------------------------------- Cardinal Health, Inc., 5.80% Nts., 10/15/16 5 1,585,000 1,582,575 - -------------------------------------------------------------------------------------------------------------------- CenterPoint Energy, Inc., 7.25% Sr. Nts., Series B, 9/1/10 1,925,000 2,036,773 - -------------------------------------------------------------------------------------------------------------------- Centex Corp., 4.875% Sr. Unsec. Nts., 8/15/08 1,235,000 1,221,753 - -------------------------------------------------------------------------------------------------------------------- Chancellor Media CCU, 8% Sr. Unsec. Nts., 11/1/08 995,000 1,040,866 - -------------------------------------------------------------------------------------------------------------------- CIT Group, Inc., 5.40% Sr. Nts., 3/7/13 2,010,000 2,002,786 - -------------------------------------------------------------------------------------------------------------------- Citigroup, Inc., 6.125% Sub. Nts., 8/25/36 820,000 846,296 - -------------------------------------------------------------------------------------------------------------------- Clear Channel Communications, Inc., 6.25% Nts., 3/15/11 1,425,000 1,430,737 - -------------------------------------------------------------------------------------------------------------------- Coca-Cola Co. (The), 7.375% Unsec. Debs., 7/29/93 440,000 548,779 - -------------------------------------------------------------------------------------------------------------------- Comcast Corp., 6.45% Unsec. Nts., 3/15/37 2,380,000 2,389,065 - -------------------------------------------------------------------------------------------------------------------- Cox Communications, Inc., 4.625% Unsec. Nts., 1/15/10 3,060,000 2,978,717 - -------------------------------------------------------------------------------------------------------------------- D.R. Horton, Inc.: 5.375% Sr. Unsec. Nts., 6/15/12 2 1,265,000 1,209,536 6.125% Nts., 1/15/14 2 895,000 874,610 - -------------------------------------------------------------------------------------------------------------------- DaimlerChrysler North America Holding Corp., 7.30% Nts., 1/15/12 1,955,000 2,080,202 - -------------------------------------------------------------------------------------------------------------------- Delhaize America, Inc., 9% Unsub. Debs., 4/15/31 1,235,000 1,452,840 - -------------------------------------------------------------------------------------------------------------------- Dominion Resources, Inc., 8.125% Sr. Unsub. Nts., 6/15/10 1,740,000 1,895,323 - -------------------------------------------------------------------------------------------------------------------- Eastman Kodak Co., 3.625% Nts., Series A, 5/15/08 244,000 235,450 - -------------------------------------------------------------------------------------------------------------------- EchoStar DBS Corp., 5.75% Sr. Unsec. Nts., 10/1/08 2 1,225,000 1,217,344 - -------------------------------------------------------------------------------------------------------------------- El Paso Corp.: 6.50% Sr. Unsec. Nts., 6/1/08 2 390,000 392,438 7.625% Sr. Unsec. Nts., 9/1/08 2,3 1,460,000 1,501,975 - -------------------------------------------------------------------------------------------------------------------- Enterprise Products Operating LP, 7.50% Sr. Unsec. Unsub. Nts., 2/1/11 1,885,000 2,012,111 - -------------------------------------------------------------------------------------------------------------------- EOP Operating LP, 8.10% Unsec. Nts., 8/1/10 1,900,000 2,064,871 - -------------------------------------------------------------------------------------------------------------------- Federated Department Stores, Inc., 6.625% Sr. Unsec. Nts., 9/1/08 1,335,000 1,362,083 - -------------------------------------------------------------------------------------------------------------------- FirstEnergy Corp., 7.375% Sr. Unsub. Nts., Series C, 11/15/31 1,790,000 2,075,865 - -------------------------------------------------------------------------------------------------------------------- Ford Motor Credit Co., 9.75% Sr. Unsec. Nts., 9/15/10 2,5 3,780,000 3,905,916 - -------------------------------------------------------------------------------------------------------------------- Gap, Inc. (The): 6.90% Nts., 9/15/07 1,495,000 1,510,156 9.393% Unsub. Nts., 12/15/08 4 228,000 246,002 - -------------------------------------------------------------------------------------------------------------------- General Motors Acceptance Corp., 8% Bonds, 11/1/31 2 1,670,000 1,750,948
33 | OPPENHEIMER BALANCED FUND STATEMENT OF INVESTMENTS Continued - --------------------------------------------------------------------------------
PRINCIPAL VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------------------------------------------- NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued - -------------------------------------------------------------------------------------------------------------------- Goldman Sachs Capital, Inc. (The), 6.345% Sub. Bonds, 2/15/34 $ 2,680,000 $ 2,671,518 - -------------------------------------------------------------------------------------------------------------------- HBOS plc, 6.413% Sub. Perpetual Bonds, Series A 5,11 2,700,000 2,614,289 - -------------------------------------------------------------------------------------------------------------------- HCA, Inc., 8.75% Sr. Nts., 9/1/10 2 2,015,000 2,040,188 - -------------------------------------------------------------------------------------------------------------------- Hilton Hotels Corp., 8.25% Sr. Unsec. Nts., 2/15/11 1,465,000 1,585,863 - -------------------------------------------------------------------------------------------------------------------- HSBC Finance Capital Trust IX, 5.911% Nts., 11/30/35 4 2,000,000 2,003,036 - -------------------------------------------------------------------------------------------------------------------- Hyatt Equities LLC, 6.875% Nts., 6/15/07 5 1,955,000 1,968,267 - -------------------------------------------------------------------------------------------------------------------- Hyundai Motor Manufacturing Alabama LLC, 5.30% Sr. Unsec. Nts., 12/19/08 5 1,140,000 1,130,815 - -------------------------------------------------------------------------------------------------------------------- IPALCO Enterprises, Inc., 8.375% Sr. Sec. Nts., 11/14/08 4 920,000 949,900 - -------------------------------------------------------------------------------------------------------------------- iStar Financial, Inc., 5.15% Sr. Unsec. Nts., 3/1/12 2,195,000 2,143,951 - -------------------------------------------------------------------------------------------------------------------- JPMorgan Chase & Co., 5.15% Sub. Nts., 10/1/15 2,000,000 1,954,308 - -------------------------------------------------------------------------------------------------------------------- K. Hovnanian Enterprises, Inc., 6.50% Sr. Nts., 1/15/14 2 1,735,000 1,596,200 - -------------------------------------------------------------------------------------------------------------------- KB Home, 5.75% Sr. Unsec. Unsub. Nts., 2/1/14 2 1,310,000 1,193,569 - -------------------------------------------------------------------------------------------------------------------- Kinder Morgan Energy Partners LP, 7.30% Sr. Unsec. Nts., 8/15/33 1,810,000 1,969,418 - -------------------------------------------------------------------------------------------------------------------- Kroger Co. (The), 5.50% Unsec. Unsub. Nts., 2/1/13 2,075,000 2,048,139 - -------------------------------------------------------------------------------------------------------------------- Lennar Corp., 7.625% Sr. Unsec. Nts., 3/1/09 1,845,000 1,929,130 - -------------------------------------------------------------------------------------------------------------------- Liberty Media Corp.: 5.70% Sr. Unsec. Nts., 5/15/13 1,070,000 1,015,024 7.875% Sr. Nts., 7/15/09 2 610,000 641,667 - -------------------------------------------------------------------------------------------------------------------- Limited Brands, Inc., 6.125% Sr. Unsec. Nts., 12/1/12 2,035,000 2,062,326 - -------------------------------------------------------------------------------------------------------------------- Marsh & McLennan Cos., Inc.: 5.875% Sr. Unsec. Bonds, 8/1/33 1,300,000 1,193,494 7.125% Sr. Unsec. Nts., 6/15/09 1,170,000 1,215,793 - -------------------------------------------------------------------------------------------------------------------- May Department Stores Co., 7.90% Unsec. Debs., 10/15/07 715,000 727,631 - -------------------------------------------------------------------------------------------------------------------- MBIA, Inc., 5.70% Sr. Unsec. Unsub. Nts., 12/1/34 1,585,000 1,531,725 - -------------------------------------------------------------------------------------------------------------------- MeadWestvaco Corp., 6.85% Unsec. Unsub. Nts., 4/1/12 2 1,925,000 2,012,930 - -------------------------------------------------------------------------------------------------------------------- MGM Mirage, Inc., 6% Sr. Sec. Nts., 10/1/09 1,985,000 1,970,113 - -------------------------------------------------------------------------------------------------------------------- Mission Energy Holding Co., 13.50% Sr. Sec. Nts., 7/15/08 1,755,000 1,967,794 - -------------------------------------------------------------------------------------------------------------------- Morgan Stanley, 4.75% Sub. Nts., 4/1/14 2,090,000 1,990,625 - -------------------------------------------------------------------------------------------------------------------- NiSource Finance Corp., 7.875% Sr. Unsec. Nts., 11/15/10 2,740,000 2,958,293 - -------------------------------------------------------------------------------------------------------------------- Pemex Project Funding Master Trust, 7.875% Unsec. Unsub. Nts., 2/1/09 2,865,000 3,006,818 - -------------------------------------------------------------------------------------------------------------------- Petroleum Export Ltd. Cayman SPV, 4.623% Sr. Nts., Cl. A1, 6/15/10 5 2,593,333 2,558,627 - -------------------------------------------------------------------------------------------------------------------- PF Export Receivables Master Trust, 3.748% Sr. Nts., Series B, 6/1/13 5 546,270 514,562 - -------------------------------------------------------------------------------------------------------------------- Popular North America, Inc., 4.70% Nts., 6/30/09 2,540,000 2,492,266 - -------------------------------------------------------------------------------------------------------------------- Prudential Holdings LLC, 8.695% Bonds, Series C, 12/18/23 5 1,885,000 2,329,270 - -------------------------------------------------------------------------------------------------------------------- Prudential Insurance Co. of America, 8.30% Nts., 7/1/25 1,990,000 2,502,972 - -------------------------------------------------------------------------------------------------------------------- PSEG Funding Trust I, 5.381% Nts., 11/16/07 1,030,000 1,028,687 - -------------------------------------------------------------------------------------------------------------------- Pulte Homes, Inc., 4.875% Nts., 7/15/09 2 2,005,000 1,970,678 - -------------------------------------------------------------------------------------------------------------------- Qwest Corp., 5.625% Unsec. Nts., 11/15/08 245,000 244,388
34 | OPPENHEIMER BALANCED FUND
PRINCIPAL VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------------------------------------------- NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued - -------------------------------------------------------------------------------------------------------------------- R&B Falcon Corp., 9.50% Sr. Unsec. Nts., 12/15/08 $ 750,000 $ 814,988 - -------------------------------------------------------------------------------------------------------------------- Reed Elsevier Capital, Inc., 4.625% Nts., 6/15/12 865,000 827,469 - -------------------------------------------------------------------------------------------------------------------- Reynolds American, Inc., 6.50% Sr. Sec. Nts., 6/1/07 5 1,249,000 1,258,537 - -------------------------------------------------------------------------------------------------------------------- Royal Caribbean Cruises Ltd., 7% Sr. Unsec. Unsub. Nts., 10/15/07 550,000 558,212 - -------------------------------------------------------------------------------------------------------------------- Safeway, Inc., 6.50% Sr. Unsec. Nts., 3/1/11 2,010,000 2,076,700 - -------------------------------------------------------------------------------------------------------------------- Telecom Italia Capital SA, 4% Unsec. Nts., 11/15/08 2,045,000 1,984,703 - -------------------------------------------------------------------------------------------------------------------- Telefonos de Mexico SA de CV, 4.50% Nts., 11/19/08 2,060,000 2,029,436 - -------------------------------------------------------------------------------------------------------------------- Telus Corp., 8% Nts., 6/1/11 895,000 987,528 - -------------------------------------------------------------------------------------------------------------------- Time Warner Entertainment Co. LP, 8.375% Sr. Nts., 7/15/33 2 1,615,000 1,910,329 - -------------------------------------------------------------------------------------------------------------------- Tribune Co., 5.50% Nts., Series E, 10/6/08 1,110,000 1,102,684 - -------------------------------------------------------------------------------------------------------------------- TXU Energy Co., 6.125% Nts., 3/15/08 1,330,000 1,341,471 - -------------------------------------------------------------------------------------------------------------------- Tyson Foods, Inc., 7.25% Sr. Unsec. Nts., 10/1/06 2,300,000 2,300,000 - -------------------------------------------------------------------------------------------------------------------- United States Steel Corp., 10.75% Sr. Nts., 8/1/08 370,000 401,913 - -------------------------------------------------------------------------------------------------------------------- Univision Communications, Inc.: 3.50% Sr. Unsec. Nts., 10/15/07 1,270,000 1,235,616 3.875% Sr. Unsec. Nts., 10/15/08 590,000 560,971 - -------------------------------------------------------------------------------------------------------------------- Verizon Global Funding Corp., 7.25% Sr. Unsec. Unsub. Nts., 12/1/10 960,000 1,030,651 - -------------------------------------------------------------------------------------------------------------------- Vornado Realty LP, 5.625% Sr. Unsec. Unsub. Nts., 6/15/07 2,055,000 2,053,352 - -------------------------------------------------------------------------------------------------------------------- Westar Energy, Inc., 7.125% Sr. Unsec. Nts., 8/1/09 1,515,000 1,582,928 - -------------------------------------------------------------------------------------------------------------------- Williams Cos., Inc., Credit Linked Certificate Trust (The), 6.75% Nts., 4/15/09 5 1,955,000 1,974,550 - -------------------------------------------------------------------------------------------------------------------- Xerox Corp., 9.75% Sr. Unsec. Nts., 1/15/09 1,840,000 2,001,000 - -------------------------------------------------------------------------------------------------------------------- Yum! Brands, Inc., 7.70% Sr. Nts., 7/1/12 1,345,000 1,474,299 ---------------- Total Non-Convertible Corporate Bonds and Notes (Cost $149,389,552) 150,085,892 - -------------------------------------------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS--9.4% - -------------------------------------------------------------------------------------------------------------------- Undivided interest of 6.49% in joint repurchase agreement (Principal Amount/ Value $1,469,294,000, with a maturity value of $1,469,936,816) with UBS Warburg LLC, 5.25%, dated 9/29/06, to be repurchased at $95,359,702 on 10/2/06, collateralized by Federal National Mortgage Assn., 5%, 2/1/36, with a value of $1,502,659,342 (Cost $95,318,000) 95,318,000 95,318,000 - -------------------------------------------------------------------------------------------------------------------- Total Investments, at Value (excluding Investments Purchased with Cash Collateral) (Cost $1,010,155,604) 1,096,207,390 - -------------------------------------------------------------------------------------------------------------------- INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED--8.8% 12 - -------------------------------------------------------------------------------------------------------------------- ASSET BACKED FLOATING NOTE--0.2% Whitehawk CDO Funding Corp., 5.44%, 12/15/06 2,000,000 2,000,000
35 | OPPENHEIMER BALANCED FUND STATEMENT OF INVESTMENTS Continued - --------------------------------------------------------------------------------
PRINCIPAL VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS--8.6% Undivided interest of 0.95% in joint repurchase agreement (Principal Amount/ Value $3,950,000,000, with a maturity value of $3,951,787,375) with Nomura Securities, 5.43%, dated 9/29/06, to be repurchased at $37,490,219 on 10/2/06, collateralized by U.S. Agency Mortgages, 0.00%-22.12%, 3/15/14-6/25/43, with a value of $4,029,000,000 $ 37,473,262 $ 37,473,262 - -------------------------------------------------------------------------------------------------------------------- Undivided interest of 1% in joint repurchase agreement (Principal Amount/ Value $2,500,000,000 with a maturity value of $2,501,131,250) with ING Financial Markets LLC, 5.43%, dated 9/29/06, to be repurchased at $25,011,313 on 10/2/06, collateralized by U.S. Agency Mortgages, 0.00%-7%, 9/1/18-8/1/36, with a value of $2,550,003,623 25,000,000 25,000,000 - -------------------------------------------------------------------------------------------------------------------- Undivided interest of 10% in joint repurchase agreement (Principal Amount/ Value $250,000,000, with a maturity value of $250,112,500) with Cantor Fitzgerald & Co., 5.40%, dated 9/29/06, to be repurchased at $25,011,250 on 10/2/06, collateralized by U.S. Agency Mortgages, 0.0001%-6.50%, 8/1/12-9/1/36, with a value of $255,002,127 25,000,000 25,000,000 ---------------- 87,473,262 ---------------- Total Investments Purchased with Cash Collateral from Securities Loaned (Cost $89,473,262) 89,473,262 - -------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $1,099,628,866) 116.6% 1,185,680,652 - -------------------------------------------------------------------------------------------------------------------- LIABILITIES IN EXCESS OF OTHER ASSETS (16.6) (169,206,543) -------------------------------- NET ASSETS 100.0% $ 1,016,474,109 ================================
36 | OPPENHEIMER BALANCED FUND FOOTNOTES TO STATEMENT OF INVESTMENTS 1. Non-income producing security. 2. Partial or fully-loaned security. See Note 11 of accompanying Notes. 3. Illiquid security. The aggregate value of illiquid securities as of September 30, 2006 was $2,447,827, which represents 0.24% of the Fund's net assets. See Note 10 of accompanying Notes. 4. Represents the current interest rate for a variable or increasing rate security. 5. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $23,864,459 or 2.35% of the Fund's net assets as of September 30, 2006. 6. When-issued security or forward commitment to be delivered and settled after September 30, 2006. See Note 1 of accompanying Notes. 7. Interest-Only Strips represent the right to receive the monthly interest payments on an underlying pool of mortgage loans. These securities typically decline in price as interest rates decline. Most other fixed income securities increase in price when interest rates decline. The principal amount of the underlying pool represents the notional amount on which current interest is calculated. The price of these securities is typically more sensitive to changes in prepayment rates than traditional mortgage-backed securities (for example, GNMA pass-throughs). Interest rates disclosed represent current yields based upon the current cost basis and estimated timing and amount of future cash flows. These securities amount to $12,391,639 or 1.22% of the Fund's net assets as of September 30, 2006. 8. Principal-Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans. The value of these securities generally increases as interest rates decline and prepayment rates rise. The price of these securities is typically more volatile than that of coupon-bearing bonds of the same maturity. Interest rates disclosed represent current yields based upon the current cost basis and estimated timing of future cash flows. These securities amount to $816,197 or 0.08% of the Fund's net assets as of September 30, 2006. 9. Zero coupon bond reflects effective yield on the date of purchase. 10. All or a portion of the security is held in collateralized accounts to cover initial margin requirements on open futures sales contracts. The aggregate market value of such securities is $1,489,719. See Note 6 of accompanying Notes. 11. This bond has no contractual maturity date, is not redeemable and contractually pays an indefinite stream of interest. Rate reported represents the current interest rate for this variable rate security. 12. The security/securities have been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Note 11 of accompanying Notes. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 37 | OPPENHEIMER BALANCED FUND STATEMENT OF ASSETS AND LIABILITIES September 30, 2006 - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------ ASSETS - ------------------------------------------------------------------------------------------------------------ Investments, at value (cost $1,099,628,866)--see accompanying statement of investments $ 1,185,680,652 - ------------------------------------------------------------------------------------------------------------ Unrealized appreciation on swap contracts 137,794 - ------------------------------------------------------------------------------------------------------------ Receivables and other assets: Investments sold 8,493,669 Interest, dividends and principal paydowns 4,563,933 Shares of beneficial interest sold 1,045,920 Futures margins 55,193 Other 41,844 ----------------- Total assets 1,200,019,005 - ------------------------------------------------------------------------------------------------------------ LIABILITIES - ------------------------------------------------------------------------------------------------------------ Bank overdraft 236,891 - ------------------------------------------------------------------------------------------------------------ Return of collateral for securities loaned 89,473,262 - ------------------------------------------------------------------------------------------------------------ Unrealized depreciation on swap contracts 82,713 - ------------------------------------------------------------------------------------------------------------ Payables and other liabilities: Investments purchased (including $75,149,339 purchased on a when-issued basis or forward commitment) 89,545,735 Shares of beneficial interest redeemed 3,182,644 Distribution and service plan fees 554,061 Trustees' compensation 166,721 Transfer and shareholder servicing agent fees 138,448 Shareholder communications 83,125 Other 81,296 ----------------- Total liabilities 183,544,896 - ------------------------------------------------------------------------------------------------------------ NET ASSETS $ 1,016,474,109 ================= - ------------------------------------------------------------------------------------------------------------ COMPOSITION OF NET ASSETS - ------------------------------------------------------------------------------------------------------------ Paid-in capital $ 869,353,893 - ------------------------------------------------------------------------------------------------------------ Accumulated net investment income 6,230,268 - ------------------------------------------------------------------------------------------------------------ Accumulated net realized gain on investments and foreign currency transactions 54,651,047 - ------------------------------------------------------------------------------------------------------------ Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 86,238,901 ----------------- NET ASSETS $ 1,016,474,109 =================
38 | OPPENHEIMER BALANCED FUND
- ------------------------------------------------------------------------------------------------------------ NET ASSET VALUE PER SHARE - ------------------------------------------------------------------------------------------------------------ Class A Shares: Net asset value and redemption price per share (based on net assets of $810,738,254 and 58,162,367 shares of beneficial interest outstanding) $13.94 Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $14.79 - ------------------------------------------------------------------------------------------------------------ Class B Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $98,021,445 and 7,185,989 shares of beneficial interest outstanding) $13.64 - ------------------------------------------------------------------------------------------------------------ Class C Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $92,781,538 and 6,769,545 shares of beneficial interest outstanding) $13.71 - ------------------------------------------------------------------------------------------------------------ Class N Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $14,932,872 and 1,081,998 shares of beneficial interest outstanding) $13.80
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 39 | OPPENHEIMER BALANCED FUND STATEMENT OF OPERATIONS For the Year Ended September 30, 2006 - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME - ------------------------------------------------------------------------------------------------------------ Interest $ 24,238,538 - ------------------------------------------------------------------------------------------------------------ Dividends (net of foreign withholding taxes of $205,287) 6,247,156 - ------------------------------------------------------------------------------------------------------------ Portfolio lending fees 210,181 - ------------------------------------------------------------------------------------------------------------ Other income 37,373 ----------------- Total investment income 30,733,248 - ------------------------------------------------------------------------------------------------------------ EXPENSES - ------------------------------------------------------------------------------------------------------------ Management fees 6,551,281 - ------------------------------------------------------------------------------------------------------------ Distribution and service plan fees: Class A 1,546,642 Class B 958,842 Class C 904,171 Class N 67,000 - ------------------------------------------------------------------------------------------------------------ Transfer and shareholder servicing agent fees: Class A 971,045 Class B 224,727 Class C 171,345 Class N 32,719 - ------------------------------------------------------------------------------------------------------------ Shareholder communications: Class A 179,696 Class B 48,213 Class C 29,217 Class N 3,197 - ------------------------------------------------------------------------------------------------------------ Custodian fees and expenses 19,584 - ------------------------------------------------------------------------------------------------------------ Trustees' compensation 14,460 - ------------------------------------------------------------------------------------------------------------ Other 135,728 ----------------- Total expenses 11,857,867 Less reduction to custodian expenses (8,697) ----------------- Net expenses 11,849,170 - ------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME 18,884,078
40 | OPPENHEIMER BALANCED FUND
- ------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) - ------------------------------------------------------------------------------------------------------------ Net realized gain on: Investments $ 66,702,303 Closing and expiration of option contracts written 171,911 Closing and expiration of futures contracts 1,569,827 Foreign currency transactions 908,096 Swap contracts 12,831 ----------------- Net realized gain 69,364,968 - ------------------------------------------------------------------------------------------------------------ Net change in unrealized appreciation (depreciation) on: Investments (52,593,617) Translation of assets and liabilities denominated in foreign currencies (444,188) Futures contracts (214,055) Option contracts (41,457) Swap contracts 126,054 ----------------- Net change in unrealized appreciation (53,167,263) - ------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 35,081,783 =================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 41 | OPPENHEIMER BALANCED FUND STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2006 2005 - ------------------------------------------------------------------------------------------------------------ OPERATIONS - ------------------------------------------------------------------------------------------------------------ Net investment income $ 18,884,078 $ 13,213,675 - ------------------------------------------------------------------------------------------------------------ Net realized gain 69,364,968 59,841,198 - ------------------------------------------------------------------------------------------------------------ Net change in unrealized appreciation (53,167,263) 24,412,348 ------------------------------------ Net increase in net assets resulting from operations 35,081,783 97,467,221 - ------------------------------------------------------------------------------------------------------------ DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS - ------------------------------------------------------------------------------------------------------------ Dividends from net investment income: Class A (16,011,740) (7,922,968) Class B (1,186,200) (487,362) Class C (1,173,973) (462,164) Class N (238,509) (90,860) - ------------------------------------------------------------------------------------------------------------ Distributions from net realized gain: Class A (39,741,174) (33,213,932) Class B (5,399,948) (4,435,493) Class C (4,997,038) (3,587,318) Class N (703,418) (466,585) - ------------------------------------------------------------------------------------------------------------ BENEFICIAL INTEREST TRANSACTIONS - ------------------------------------------------------------------------------------------------------------ Net increase in net assets resulting from beneficial interest transactions: Class A 111,393,954 36,521,136 Class B 3,678,115 8,636,193 Class C 8,465,336 15,819,238 Class N 3,576,958 2,483,994 - ------------------------------------------------------------------------------------------------------------ NET ASSETS - ------------------------------------------------------------------------------------------------------------ Total increase 92,744,146 110,261,100 - ------------------------------------------------------------------------------------------------------------ Beginning of period 923,729,963 813,468,863 ------------------------------------ End of period (including accumulated net investment income of $6,230,268 and $5,145,284, respectively) $ 1,016,474,109 $ 923,729,963 ====================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 42 | OPPENHEIMER BALANCED FUND FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
CLASS A YEAR ENDED SEPTEMBER 30, 2006 2005 2004 2003 2002 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING DATA - ------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 14.51 $ 13.75 $ 12.55 $ 10.51 $ 12.14 - ------------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income .30 1 .24 1 .14 .21 .35 Net realized and unrealized gain (loss) .21 1.38 1.16 2.08 (1.29) -------------------------------------------------------------------------- Total from investment operations .51 1.62 1.30 2.29 (.94) - ------------------------------------------------------------------------------------------------------------------------------ Dividends and/or distributions to shareholders: Dividends from net investment income (.29) (.16) (.10) (.22) (.31) Tax return of capital distribution -- -- -- (.03) -- Distributions from net realized gain (.79) (.70) -- -- (.38) -------------------------------------------------------------------------- Total dividends and/or distributions to shareholders (1.08) (.86) (.10) (.25) (.69) - ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 13.94 $ 14.51 $ 13.75 $ 12.55 $ 10.51 ========================================================================== - ------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN, AT NET ASSET VALUE 2 3.86% 12.13% 10.37% 21.98% (8.58)% - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $ 810,738 $ 725,836 $ 651,754 $ 575,799 $ 483,311 - ------------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $ 752,163 $ 694,147 $ 631,041 $ 523,477 $ 570,796 - ------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: 3 Net investment income 2.16% 1.69% 1.05% 1.78% 2.84% Total expenses 1.06% 1.05% 1.07% 1.11% 1.15% Expenses after payments and waivers and reduction to custodian expenses 1.06% 1.05% 1.06% 1.11% 1.15% - ------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 84% 4 73% 4 61% 4 205% 31%
1. Per share amounts calculated based on the average shares outstanding during the period. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 3. Annualized for periods of less than one full year. 4. The portfolio turnover rate excludes purchase and sales of To Be Announced (TBA) mortgage-related securities as follows: PURCHASE TRANSACTIONS SALE TRANSACTIONS - ------------------------------------------------------------------------------ Year Ended September 30, 2006 $1,329,963,782 $1,377,730,782 Year Ended September 30, 2005 $2,097,453,846 $2,135,377,175 Year Ended September 30, 2004 $1,069,526,653 $1,026,457,980 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 43 | OPPENHEIMER BALANCED FUND FINANCIAL HIGHLIGHTS Continued - --------------------------------------------------------------------------------
CLASS B YEAR ENDED SEPTEMBER 30, 2006 2005 2004 2003 2002 - ------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA - ------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 14.23 $ 13.53 $ 12.40 $ 10.38 $ 12.01 - ------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .17 1 .11 1 .02 .09 .25 Net realized and unrealized gain (loss) .20 1.36 1.13 2.07 (1.29) --------------------------------------------------------------------------- Total from investment operations .37 1.47 1.15 2.16 (1.04) - ------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.17) (.07) (.02) (.11) (.21) Tax return of capital distribution -- -- -- (.03) -- Distributions from net realized gain (.79) (.70) -- -- (.38) --------------------------------------------------------------------------- Total dividends and/or distributions to shareholders (.96) (.77) (.02) (.14) (.59) - ------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 13.64 $ 14.23 $ 13.53 $ 12.40 $ 10.38 =========================================================================== - ------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 2 2.84% 11.17% 9.26% 20.91% (9.38)% - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 98,021 $ 98,271 $ 84,924 $ 64,944 $ 54,757 - ------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 95,979 $ 92,677 $ 77,082 $ 57,836 $ 64,702 - ------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 1.24% 0.76% 0.11% 0.81% 2.02% Total expenses 1.99% 4 1.98% 4 2.02% 4,5 2.08% 4 1.97% 4 - ------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 84% 6 73% 6 61% 6 205% 31%
1. Per share amounts calculated based on the average shares outstanding during the period. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. 5. Voluntary waiver of transfer agent fees less than 0.01%. 6. The portfolio turnover rate excludes purchase and sales of To Be Announced (TBA) mortgage-related securities as follows: PURCHASE TRANSACTIONS SALE TRANSACTIONS - ------------------------------------------------------------------------------ Year Ended September 30, 2006 $1,329,963,782 $1,377,730,782 Year Ended September 30, 2005 $2,097,453,846 $2,135,377,175 Year Ended September 30, 2004 $1,069,526,653 $1,026,457,980 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 44 | OPPENHEIMER BALANCED FUND
CLASS C YEAR ENDED SEPTEMBER 30, 2006 2005 2004 2003 2002 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING DATA - ------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 14.29 $ 13.59 $ 12.44 $ 10.42 $ 12.06 - ------------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income .18 1 .11 1 .04 .11 .24 Net realized and unrealized gain (loss) .21 1.37 1.13 2.06 (1.29) -------------------------------------------------------------------------- Total from investment operations .39 1.48 1.17 2.17 (1.05) - ------------------------------------------------------------------------------------------------------------------------------ Dividends and/or distributions to shareholders: Dividends from net investment income (.18) (.08) (.02) (.12) (.21) Tax return of capital distribution -- -- -- (.03) -- Distributions from net realized gain (.79) (.70) -- -- (.38) -------------------------------------------------------------------------- Total dividends and/or distributions to shareholders (.97) (.78) (.02) (.15) (.59) - ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 13.71 $ 14.29 $ 13.59 $ 12.44 $ 10.42 ========================================================================== - ------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN, AT NET ASSET VALUE 2 2.97% 11.18% 9.45% 20.98% (9.41)% - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $ 92,782 $ 87,820 $ 68,018 $ 47,212 $ 33,300 - ------------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $ 90,567 $ 78,091 $ 60,095 $ 38,407 $ 37,412 - ------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: 3 Net investment income 1.30% 0.83% 0.19% 0.90% 2.03% Total expenses 1.93% 1.91% 1.93% 1.98% 1.96% Expenses after payments and waivers and reduction to custodian expenses 1.92% 1.91% 1.93% 1.98% 1.96% - ------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 84% 4 73% 4 61% 4 205% 31%
1. Per share amounts calculated based on the average shares outstanding during the period. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 3. Annualized for periods of less than one full year. 4. The portfolio turnover rate excludes purchase and sales of To Be Announced (TBA) mortgage-related securities as follows: PURCHASE TRANSACTIONS SALE TRANSACTIONS - ------------------------------------------------------------------------------ Year Ended September 30, 2006 $1,329,963,782 $1,377,730,782 Year Ended September 30, 2005 $2,097,453,846 $2,135,377,175 Year Ended September 30, 2004 $1,069,526,653 $1,026,457,980 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 45 | OPPENHEIMER BALANCED FUND FINANCIAL HIGHLIGHTS Continued - --------------------------------------------------------------------------------
CLASS N YEAR ENDED SEPTEMBER 30, 2006 2005 2004 2003 2002 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING DATA - ------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 14.38 $ 13.65 $ 12.49 $ 10.48 $ 12.13 - ------------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income .24 1 .17 1 .10 .20 .39 Net realized and unrealized gain (loss) .21 1.38 1.12 2.01 (1.38) -------------------------------------------------------------------------- Total from investment operations .45 1.55 1.22 2.21 (.99) - ------------------------------------------------------------------------------------------------------------------------------ Dividends and/or distributions to shareholders: Dividends from net investment income (.24) (.12) (.06) (.17) (.28) Tax return of capital distribution -- -- -- (.03) -- Distributions from net realized gain (.79) (.70) -- -- (.38) -------------------------------------------------------------------------- Total dividends and/or distributions to shareholders (1.03) (.82) (.06) (.20) (.66) - ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 13.80 $ 14.38 $ 13.65 $ 12.49 $ 10.48 ========================================================================== - ------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN, AT NET ASSET VALUE 2 3.42% 11.66% 9.77% 21.27% (8.94)% - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $ 14,933 $ 11,803 $ 8,772 $ 3,349 $ 798 - ------------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $ 13,425 $ 10,278 $ 5,701 $ 1,604 $ 454 - ------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: 3 Net investment income 1.76% 1.24% 0.55% 1.24% 2.49% Total expenses 1.47% 1.50% 1.58% 1.76% 1.48% Expenses after payments and waivers and reduction to custodian expenses 1.47% 1.50% 1.57% 1.62% 1.48% - ------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 84% 4 73% 4 61% 4 205% 31%
1. Per share amounts calculated based on the average shares outstanding during the period. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 3. Annualized for periods of less than one full year. 4. The portfolio turnover rate excludes purchase and sales of To Be Announced (TBA) mortgage-related securities as follows: PURCHASE TRANSACTIONS SALE TRANSACTIONS - ------------------------------------------------------------------------------ Year Ended September 30, 2006 $1,329,963,782 $1,377,730,782 Year Ended September 30, 2005 $2,097,453,846 $2,135,377,175 Year Ended September 30, 2004 $1,069,526,653 $1,026,457,980 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 46 | OPPENHEIMER BALANCED FUND NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Oppenheimer Balanced Fund (the Fund) is registered under the Investment Company Act of 1940, as amended, as an open end management investment company. The Fund's investment objective is to seek high total investment return consistent with preservation of principal. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund offers Class A, Class B, Class C and Class N shares. Class A shares are sold at their offering price, which is normally net asset value plus a front-end sales charge. Class B, Class C and Class N shares are sold without a front-end sales charge but may be subject to a contingent deferred sales charge (CDSC). Class N shares are sold only through retirement plans. Retirement plans that offer Class N shares may impose charges on those accounts. All classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class. Class A, B, C and N have separate distribution and/or service plans. Class B shares will automatically convert to Class A shares six years after the date of purchase. The following is a summary of significant accounting policies consistently followed by the Fund. - -------------------------------------------------------------------------------- SECURITIES VALUATION. The Fund calculates the net asset value of its shares as of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Securities may be valued primarily using dealer-supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Securities listed or traded on National Stock Exchanges or other domestic exchanges are valued based on the last sale price of the security traded on that exchange prior to the time when the Fund's assets are valued. Securities traded on NASDAQ(R) are valued based on the closing price provided by NASDAQ prior to the time when the Fund's assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the closing "bid" and "asked" prices, and if not, at the closing bid price. Securities traded on foreign exchanges are valued based on the last sale price on the principal exch-ange on which the security is traded, as identified by the portfolio pricing service, prior to the time when the Fund's assets are valued. In the absence of a sale, the security is valued at the official closing price on the principal exchange. Corporate, government and municipal debt instruments having a remaining maturity in excess of sixty days and all mortgage-backed securities will be valued at the mean between the "bid" and "asked" prices. Futures contracts traded on a commodities or futures exchange will be valued at the final settlement price or official closing price on the principal exchange as reported by such principal ex-change at its trading session ending at, or most recently prior to, the time when the Fund's assets are valued. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value. Foreign and domestic securities whose values have been materially affected by what the Manager identifies as a significant event 47 | OPPENHEIMER BALANCED FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued occurring before the Fund's assets are valued but after the close of their respective exchanges will be fair valued. Fair value is determined in good faith using consistently applied procedures under the supervision of the Board of Trustees. Short-term "money market type" debt securities with remaining maturities of sixty days or less are valued at amortized cost (which approximates market value). - -------------------------------------------------------------------------------- SECURITIES ON A WHEN-ISSUED BASIS OR FORWARD COMMITMENT. Delivery and payment for securities that have been purchased by the Fund on a when-issued basis or forward commitment can take place up to ten days or more after the trade date. Normally the settlement date occurs within six months after the trade date; however, the Fund may, from time to time, purchase securities whose settlement date extends six months or more beyond trade date. During this period, such securities do not earn interest, are subject to market fluctuation and may increase or decrease in value prior to their delivery. The Fund maintains internally designated assets with a market value equal to or greater than the amount of its purchase commitments. The purchase of securities on a when-issued basis or forward commitment may increase the volatility of the Fund's net asset value to the extent the Fund executes such transactions while remaining substantially fully invested. The Fund may also sell securities that it purchased on a when-issued basis or forward commitment prior to settlement of the original purchase. As of September 30, 2006, the Fund had purchased $75,149,339 of securities issued on a when-issued basis or forward commitment. In connection with its ability to purchase or sell securities on a when-issued basis, the Fund may enter into forward roll transactions with respect to mortgage-related securities. Forward roll transactions require the sale of securities for delivery in the current month, and a simultaneous agreement with the same counterparty to repurchase similar (same type, coupon and maturity) but not identical securities on a specified future date. The Fund records the incremental difference between the forward purchase and sale of each forward roll as realized gain (loss) on investments or as fee income in the case of such transactions that have an associated fee in lieu of a difference in the forward purchase and sale price. Risks of entering into forward roll transactions include the potential inability of the counterparty to meet the terms of the agreement; the potential of the Fund to receive inferior securities at redelivery as compared to the securities sold to the counterparty; counterparty credit risk; and the potential pay down speed variance between the mortgage-related pools. - -------------------------------------------------------------------------------- FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in U.S. dollars. The values of securities denominated in foreign currencies and amounts related to the purchase and sale of foreign securities and foreign investment income are translated into U.S. dollars as of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Foreign 48 | OPPENHEIMER BALANCED FUND exchange rates may be valued primarily using dealer supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually re-ceived or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, including investments in securities at fiscal period end, resulting from changes in exchange rates. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund's Statement of Operations. - -------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated funds advised by the Manager, may transfer uninvested cash balances into joint trading accounts on a daily basis. These balances are invested in one or more repurchase agreements. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. In the event of default by the other party to the agreement, retention of the collateral may be subject to legal proceedings. - -------------------------------------------------------------------------------- INVESTMENTS WITH OFF BALANCE SHEET RISK. The Fund enters into financial instrument transactions (such as swaps, futures and other derivatives) that may have off-balance sheet market risk. Off-balance sheet market risk exists when the maximum potential loss on a particular financial instrument is greater than the value of such financial instrument, as reflected in the Fund's Statement of Assets and Liabilities. - -------------------------------------------------------------------------------- ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class. - -------------------------------------------------------------------------------- FEDERAL TAXES. The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders, therefore, no federal income or excise tax provision is required. 49 | OPPENHEIMER BALANCED FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued The tax components of capital shown in the table below represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes. NET UNREALIZED APPRECIATION BASED ON COST OF SECURITIES AND UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME INCOME GAIN CARRYFORWARD 1,2,3,4 TAX PURPOSES -------------------------------------------------------------------------- $6,406,054 $56,362,805 $884,542 $85,397,193 1. The Fund had $156,550 of post-October foreign currency losses which were deferred. 2. The Fund had $727,992 of straddle losses which were deferred. 3. During the fiscal year ended September 30, 2006, the Fund utilized $2,115,654 of capital loss carryforward to offset capital gains realized in that fiscal year. 4. During the fiscal year ended September 30, 2005, the Fund utilized $248,875 of capital loss carryforward to offset capital gains realized in that fiscal year. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Fund. Accordingly, the following amounts have been reclassified for September 30, 2006. Net assets of the Fund were unaffected by the reclassifications. INCREASE TO REDUCTION TO ACCUMULATED ACCUMULATED NET INCREASE TO NET INVESTMENT REALIZED GAIN PAID-IN CAPITAL INCOME ON INVESTMENTS 5 -------------------------------------------------------------------------- $8,845,539 $811,328 $9,656,867 5. $6,799,234, all of which was long-term capital gain, was distributed in connection with Fund share redemptions. The tax character of distributions paid during the years ended September 30, 2006 and September 30, 2005 was as follows: YEAR ENDED YEAR ENDED SEPT. 30, 2006 SEPT. 30, 2005 -------------------------------------------------------------------------- Distributions paid from: Ordinary income $ 27,772,855 $ 20,732,822 Long-term capital gain 41,679,145 29,933,860 ---------------------------------- Total $ 69,452,000 $ 50,666,682 ================================== The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income 50 | OPPENHEIMER BALANCED FUND tax purposes as of September 30, 2006 are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss. Federal tax cost of securities $1,100,215,289 Federal tax cost of other investments (102,684,682) -------------- Total federal tax cost $ 997,530,607 ============== Gross unrealized appreciation $ 110,837,661 Gross unrealized depreciation (25,440,468) -------------- Net unrealized appreciation $ 85,397,193 ============== - -------------------------------------------------------------------------------- TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for the Fund's independent trustees. Benefits are based on years of service and fees paid to each trustee during the years of service. During the year ended September 30, 2006, the Fund's projected benefit obligations were decreased by $787, resulting in an accumulated liability of $123,818 as of September 30, 2006. The Board of Trustees has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of "Other" within the asset section of the Statement of Assets and Liabilities. Deferral of trustees' fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund's assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance to the Plan. - -------------------------------------------------------------------------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. Income distributions, if any, are declared and paid quarterly. Capital gain distributions, if any, are declared and paid annually. - -------------------------------------------------------------------------------- INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, which includes accretion of discount and amortization of premium, is accrued as earned. - -------------------------------------------------------------------------------- CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed 51 | OPPENHEIMER BALANCED FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts, to the extent they are not offset by positive cash balances maintained by the Fund, at a rate equal to the Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings. - -------------------------------------------------------------------------------- SECURITY TRANSACTIONS. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost. - -------------------------------------------------------------------------------- INDEMNIFICATIONS. The Fund's organizational documents provide current and former trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote. - -------------------------------------------------------------------------------- OTHER. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. - -------------------------------------------------------------------------------- 2. SHARES OF BENEFICIAL INTEREST The Fund has authorized an unlimited number of no par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
YEAR ENDED SEPTEMBER 30, 2006 YEAR ENDED SEPTEMBER 30, 2005 SHARES AMOUNT SHARES AMOUNT - --------------------------------------------------------------------------------------------- CLASS A Sold 6,707,218 $ 92,313,989 6,341,196 $ 89,407,865 Dividends and/or distributions reinvested 3,764,837 51,001,543 2,700,256 37,680,524 Acquisition-Note 14 7,679,053 105,279,820 -- -- Redeemed (9,999,585) (137,201,398) (6,426,942) (90,567,253) -------------------------------------------------------------- Net increase 8,151,523 $ 111,393,954 2,614,510 $ 36,521,136 ============================================================== - --------------------------------------------------------------------------------------------- CLASS B Sold 1,486,495 $ 20,023,127 2,164,968 $ 29,908,987 Dividends and/or distributions reinvested 459,149 6,095,358 334,015 4,563,228 Acquisition-Note 14 852,361 11,421,633 -- -- Redeemed (2,519,583) (33,862,003) (1,865,946) (25,836,022) -------------------------------------------------------------- Net increase 278,422 $ 3,678,115 633,037 $ 8,636,193 ==============================================================
52 | OPPENHEIMER BALANCED FUND
YEAR ENDED SEPTEMBER 30, 2006 YEAR ENDED SEPTEMBER 30, 2005 SHARES AMOUNT SHARES AMOUNT - --------------------------------------------------------------------------------------------- CLASS C Sold 1,733,303 $ 23,444,138 1,913,961 $ 26,621,005 Dividends and/or distributions reinvested 420,150 5,602,992 273,835 3,758,922 Acquisition-Note 14 622,399 8,383,715 -- -- Redeemed (2,152,123) (28,965,509) (1,047,238) (14,560,689) -------------------------------------------------------------- Net increase 623,729 $ 8,465,336 1,140,558 $ 15,819,238 ============================================================== - --------------------------------------------------------------------------------------------- CLASS N Sold 394,439 $ 5,367,295 295,550 $ 4,136,828 Dividends and/or distributions reinvested 67,430 905,224 39,150 541,581 Acquisition-Note 14 134,474 1,824,806 -- -- Redeemed (334,942) (4,520,367) (156,565) (2,194,415) -------------------------------------------------------------- Net increase 261,401 $ 3,576,958 178,135 $ 2,483,994 ==============================================================
- -------------------------------------------------------------------------------- 3. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the year ended September 30, 2006, were as follows: PURCHASES SALES - ---------------------------------------------------------------------- Investment securities $ 666,663,552 $ 594,918,151 U.S. government and government agency obligations 76,282,041 94,099,652 To Be Announced (TBA) mortgage-related securities 1,329,963,782 1,377,730,782 - -------------------------------------------------------------------------------- 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the investment advisory agreement with the Fund which provides for a fee at an average annual rate as shown in the following table: FEE SCHEDULE --------------------------------------------- Up to $200 million of net assets 0.75% Next $200 million of net assets 0.72 Next $200 million of net assets 0.69 Next $200 million of net assets 0.66 Next $700 million of net assets 0.60 Over $1.5 billion of net assets 0.58 - -------------------------------------------------------------------------------- TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. The Fund pays OFS a per account fee. For the year ended September 30, 2006, the Fund paid $1,372,944 to OFS for services to the Fund. 53 | OPPENHEIMER BALANCED FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor) acts as the Fund's principal underwriter in the continuous public offering of the Fund's classes of shares. - -------------------------------------------------------------------------------- SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A shares. It reimburses the Distributor for a portion of its costs incurred for services provided to accounts that hold Class A shares. Reimbursement is made periodically at an annual rate of up to 0.25% of the average annual net assets of Class A shares of the Fund. The Distributor currently uses all of those fees to pay dealers, brokers, banks and other financial institutions periodically for providing personal services and maintenance of accounts of their customers that hold Class A shares. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent periods. Fees incurred by the Fund under the plan are detailed in the Statement of Operations. - -------------------------------------------------------------------------------- DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund has adopted Distribution and Service Plans for Class B, Class C and Class N shares to compensate the Distributor for its services in connection with the distribution of those shares and servicing accounts. Under the plans, the Fund pays the Distributor an annual asset-based sales charge of 0.75% on Class B and Class C shares and 0.25% on Class N shares. The Distributor also receives a service fee of 0.25% per year under each plan. If either the Class B, Class C or Class N plan is terminated by the Fund or by the shareholders of a class, the Board of Trustees and its independent trustees must determine whether the Distributor shall be entitled to payment from the Fund of all or a portion of the service fee and/or asset-based sales charge in respect to shares sold prior to the effective date of such termination. The Distributor's aggregate uncompensated expenses under the plan at September 30, 2006 for Class B, Class C and Class N shares were $2,646,317, $1,605,654 and $172,056, respectively. Fees incurred by the Fund under the plans are detailed in the Statement of Operations. - -------------------------------------------------------------------------------- SALES CHARGES. Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. The sales charges retained by the Distributor from the sale of shares and the CDSC retained by the Distributor on the redemption of shares is shown in the following table for the period indicated.
CLASS A CLASS B CLASS C CLASS N CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR - -------------------------------------------------------------------------------------------------- September 30, 2006 $347,378 $11,568 $220,052 $20,088 $4,077
54 | OPPENHEIMER BALANCED FUND - -------------------------------------------------------------------------------- WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees for all classes to 0.35% of average annual net assets per class. This undertaking may be amended or withdrawn at any time. - -------------------------------------------------------------------------------- 5. FOREIGN CURRENCY CONTRACTS A foreign currency contract is a commitment to purchase or sell a foreign currency at a future date, at a negotiated rate. The Fund may enter into foreign currency contracts to settle specific purchases or sales of securities denominated in a foreign currency and for protection from adverse exchange rate fluctuation. Risks to the Fund include the potential inability of the counterparty to meet the terms of the contract. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using prevailing foreign currency exchange rates. Unrealized appreciation and depreciation on foreign currency contracts are reported in the Statement of Assets and Liabilities as a receivable or payable and in the Statement of Operations with the change in unrealized appreciation or depreciation. The Fund may realize a gain or loss upon the closing or settlement of the foreign transaction. Contracts closed or settled with the same broker are recorded as net realized gains or losses. Such realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations. As of September 30, 2006, the Fund had no outstanding foreign currency contracts. - -------------------------------------------------------------------------------- 6. FUTURES CONTRACTS A futures contract is a commitment to buy or sell a specific amount of a commodity or financial instrument at a negotiated price on a stipulated future date. Futures contracts are traded on a commodity exchange. The Fund may buy and sell futures contracts that relate to broadly based securities indices (financial futures) or debt securities (interest rate futures) in order to gain exposure to or protection from changes in market value of stocks and bonds or interest rates. The Fund may also buy or write put or call options on these futures contracts. The Fund generally sells futures contracts as a hedge against increases in interest rates and decreases in market value of portfolio securities. The Fund may also purchase futures contracts to gain exposure to market changes as it may be more efficient or cost effective than actually buying securities. Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin) in an amount equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or has expired. 55 | OPPENHEIMER BALANCED FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 6. FUTURES CONTRACTS Continued Cash held by the broker to cover initial margin requirements on open futures contracts is noted in the Statement of Assets and Liabilities. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. The Statement of Assets and Liabilities reflects a receivable and/or payable for the daily mark to market for variation margin. Realized gains and losses are reported in the Statement of Operations at the closing and expiration of futures contracts. The net change in unrealized appreciation and depreciation is reported in the Statement of Operations. Risks of entering into futures contracts (and related options) include the possibility that there may be an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. As of September 30, 2006, the Fund had outstanding futures contracts as follows:
UNREALIZED EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION CONTRACT DESCRIPTION DATES CONTRACTS SEPT. 30, 2006 (DEPRECIATION) - ------------------------------------------------------------------------------------------ CONTRACTS TO PURCHASE U.S. Long Bonds 12/19/06 272 $ 30,574,500 $ 564,930 --------------- CONTRACTS TO SELL Euro-Bundesobligation, 10 yr. 12/7/06 111 16,623,046 (110,551) U.S. Treasury Nts., 2 yr. 12/29/06 493 100,818,500 (219,990) U.S. Treasury Nts., 5 yr. 12/29/06 147 15,510,797 (105,415) U.S. Treasury Nts., 10 yr. 12/19/06 4 432,250 1,270 --------------- (434,686) --------------- $ 130,244 ===============
- -------------------------------------------------------------------------------- 7. OPTION ACTIVITY The Fund may buy and sell put and call options, or write put and covered call options on portfolio securities in order to produce incremental earnings or protect against changes in the value of portfolio securities. The Fund generally purchases put options or writes covered call options to hedge against adverse movements in the value of portfolio holdings. When an option is written, the Fund receives a premium and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of the option. Options are valued daily based upon the last sale price on the principal exchange on which the option is traded and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss upon the expiration or closing of the option transaction. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of the security for a purchased put or call option is adjusted by the amount of premium received or paid. Securities designated to cover outstanding call or put options are noted in the Statement of Investments where applicable. Contracts subject to call or put, expiration date, exercise price, premium received and market value are detailed in a note to the 56 | OPPENHEIMER BALANCED FUND Statement of Investments. Options written are reported as a liability in the Statement of Assets and Liabilities. Realized gains and losses are reported in the Statement of Operations. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security [or commodity] increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the security [or commodity] decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. Written option activity for the year ended September 30, 2006 was as follows: CALL OPTIONS ----------------------------- NUMBER OF AMOUNT OF CONTRACTS PREMIUMS - ------------------------------------------------------------------ Options outstanding as of September 30, 2005 786 $ 96,477 Options written 802 75,434 Options closed or expired (1,588) (171,911) ----------------------------- Options outstanding as of September 30, 2006 -- $ -- ============================= - -------------------------------------------------------------------------------- 8. TOTAL RETURN SWAP CONTRACTS A total return swap is an agreement under which a set of future cash flows is exchanged between two counterparties. One cash flow stream will typically be based on a reference interest rate or index and the other on the total return of a reference asset such as a security, a basket of securities, or an index. The total return includes appreciation or depreciation on the reference asset, plus any interest or dividend payments. Payments under the swap are based on an agreed upon principal amount but since this principal amount is not exchanged, it represents neither an asset nor a liability to either counterparty, and is referred to as notional. Total return swaps are marked to market daily using different sources, including quotations from counterparties, pricing services, brokers or market makers. The unrealized appreciation (depreciation) related to the change in the valuation of the notional amount of the swap is combined with the amount due to (owed by) the Fund at termination or settlement and disclosed separately on the Statement of Assets and Liabilities. The net change in this amount is included on the Statement of Operations. The Fund also records any periodic payments received from (paid to) the counterparty, including at termination, under such contracts as realized gain (loss) on the Statement of Operations. The primary risks associated with total return swaps are credit risks (if the counterparty fails to meet its obligations) and market risk (if there is no liquid market for the agreement or unfavorable changes occur in the reference asset). 57 | OPPENHEIMER BALANCED FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 8. TOTAL RETURN SWAP CONTRACTS Continued As of September 30, 2006, the Fund had entered into the following total return swap agreements:
SWAP NOTIONAL PAID BY RECEIVED BY TERMINATION UNREALIZED COUNTERPARTY AMOUNT THE FUND THE FUND DATES APPRECIATION - ------------------------------------------------------------------------------------------------------------------ Lehman Brothers If negative, CMBS Index Spread the absolute value plus Total Return of the Total Return Amount value Amount for a given for a given Deutsche Bank AG $ 3,880,000 Index Period. Index Period. 12/1/06 $ 2,859 - ------------------------------------------------------------------------------------------------------------------ If positive, If negative, receive the Spread the absolute value on the Lehman of the Lehman Brothers CMBS Brothers CMBS AAA 8.5+ Index AAA 8.5+ Spread Return Lehman Brothers Index Spread Amount, and Special Financing, Inc. 4,300,000 Return Amount. Carry Amount. 12/1/06 3,111 ------------- $ 5,970 ============= Abbreviation is as follows: CMBS Commercial Mortgage Backed Securities
- -------------------------------------------------------------------------------- 9. CREDIT DEFAULT SWAP CONTRACTS Credit default swaps are designed to transfer the credit exposure of fixed income products between counterparties. The Fund may enter into credit default swaps, both directly ("unfunded swaps") and indirectly in the form of a swap embedded within a structured note ("funded swaps"), to protect against the risk that a security will default. Unfunded and funded credit default swaps may be on a single security, or a basket of securities. The Fund may take a short position (purchaser of credit protection) or a long position (seller of credit protection) in the credit default swap. Risks of credit default swaps include, but are not limited to, the cost of paying for credit protection if there are no credit events, pricing transparency when assessing the cost of a credit default swap, counterparty risk, and the need to fund the delivery obligation (either cash or defaulted bonds depending on whether the Fund is long or short the swap, respectively). The Fund would take a short position in a credit default swap (the "unfunded swap") against a long portfolio position to decrease exposure to specific high yield issuers. As a purchaser of credit protection under a swap contract, the Fund pays a periodic interest fee on the notional amount to the counterparty. This interest fee is accrued daily as a component of unrealized appreciation (depreciation) and is recorded as realized loss upon payment. Upon occurrence of a specific credit event with respect to the underlying referenced debt obligation, the Fund is obligated to deliver that security to the counterparty in exchange for receipt of the notional amount from the counterparty. The difference 58 | OPPENHEIMER BALANCED FUND between the value of the security delivered and the notional amount received is recorded as realized gain and is included on the Statement of Operations. Credit default swaps are marked to market daily using different sources, including quotations from counterparties, pricing services, brokers or market makers. The unrealized appreciation (depreciation) related to the change in the valuation of the notional amount of the swap is combined with the amount due to (owed by) the Fund at termination or settlement and disclosed separately on the Statement of Assets and Liabilities. The net change in this amount is included on the Statement of Operations. Information regarding such credit default swaps as of September 30, 2006 is as follows:
ANNUAL NOTIONAL AMOUNT INTEREST REFERENCED RECEIVED BY THE RATE PAID UNREALIZED DEBT FUND UPON CREDIT BY THE TERMINATION APPRECIATION COUNTERPARTY OBLIGATION EVENT FUND DATES (DEPRECIATION) - ---------------------------------------------------------------------------------------------------------------- Deutsche Bank AG: CDX.NA.IG.7 $ 3,600,000 0.400% 12/20/11 $ (729) Weyerhaeuser Co. 1,990,000 0.580 9/20/11 (1,140) - ---------------------------------------------------------------------------------------------------------------- Morgan Stanley Capital Services, Inc.: Arrow Electronics, Inc. 1,990,000 0.790 9/20/11 (18,841) Arrow Electronics, Inc. 1,000,000 0.770 9/20/11 (8,583) Belo Corp. 1,190,000 0.650 6/20/11 6,650 Belo Corp. 655,000 0.670 6/20/11 3,109 Belo Corp. 1,325,000 0.675 6/20/11 6,011 Ford Motor Co. 990,000 5.300 12/20/08 (7,990) Ford Motor Co. 2,090,000 5.400 12/20/08 (21,652) General Motors Corp. 1,035,000 4.000 12/20/08 (2,909) General Motors Corp. 1,005,000 3.950 12/20/08 (1,734) --------------- $ (47,808) ===============
The Fund would take a long position in the credit default swap note (the "funded swap") to increase the exposure to specific high yield corporate issuers. As a seller of credit protection under a swap contract, the Fund receives a periodic interest fee on the notional amount from the counterparty. This interest fee is accrued daily as a component of unrealized appreciation (depreciation) and is recorded as realized gain upon receipt. Upon occurrence of a specific credit event with respect to the underlying referenced debt obligation, the Fund receives that security from the counterparty in exchange for payment of the notional amount to the counterparty. The difference between the value of the security received and the notional amount paid is recorded as realized loss and is included on the Statement of Operations. Credit default swaps are marked to market daily using different sources, including quotations from counterparties, pricing services, brokers or market makers. The unrealized appreciation (depreciation) related to the change in the valuation of the notional amount of the swap is combined with the amount due to (owed by) the 59 | OPPENHEIMER BALANCED FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 9. CREDIT DEFAULT SWAP CONTRACTS Continued Fund at termination or settlement and disclosed separately on the Statement of Assets and Liabilities. The net change in this amount is included on the Statement of Operations. Information regarding such credit default swaps as of September 30, 2006 is as follows:
ANNUAL NOTIONAL AMOUNT INTEREST RATE REFERENCED PAID BY THE RECEIVED UNREALIZED DEBT FUND UPON CREDIT BY THE TERMINATION APPRECIATION COUNTERPARTY OBLIGATION EVENT FUND DATES (DEPRECIATION) - -------------------------------------------------------------------------------------------------------------------- Deutsche Bank AG: Abitibi-Consolidated Co. of Canada 1,600,000 1.52% 9/20/07 $ 5,263 Allied Waste North America, Inc. 630,000 2.00 9/20/09 5,008 Allied Waste North America, Inc. 990,000 2.00 9/20/09 7,870 Bombardier, Inc. 500,000 0.90 9/20/07 48 Eastman Kodak Co. 1,395,000 1.00 12/20/08 117 General Motors Acceptance Corp. 510,000 2.30 6/20/07 4,207 General Motors Corp. 630,000 6.40 12/20/06 7,182 General Motors Corp. 380,000 6.40 12/20/06 4,307 - -------------------------------------------------------------------------------------------------------------------- Morgan Stanley Capital Services, Inc.: ArvinMeritor, Inc. 555,000 1.05 9/20/07 (3,494) ArvinMeritor, Inc. 460,000 1.10 9/20/07 (2,690) ArvinMeritor, Inc. 40,000 1.20 9/20/07 (207) Bombardier, Inc. 560,000 1.00 9/20/07 672 Bombardier, Inc. 555,000 1.05 9/20/07 1,083 Ford Motor Co. 990,000 7.05 12/20/16 14,121 Ford Motor Co. 2,090,000 7.15 12/20/16 40,841 General Motors Acceptance Corp. 1,290,000 3.15 6/20/07 21,631 General Motors Corp. 1,035,000 5.80 12/20/16 2,884 General Motors Corp. 1,005,000 5.75 12/20/16 22 Hyundai Motor Manufacturing Alabama LLC 865,000 0.40 6/20/07 798 J.C. Penney Corp., Inc. 1,990,000 0.61 6/20/13 (12,744) --------------- $ 96,919 ===============
- -------------------------------------------------------------------------------- 10. ILLIQUID SECURITIES As of September 30, 2006, investments in securities included issues that are illiquid. A security may be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. The Fund will not invest more than 10% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid 60 | OPPENHEIMER BALANCED FUND securities. Securities that are illiquid are marked with the applicable footnote on the Statement of Investments. - -------------------------------------------------------------------------------- 11. SECURITIES LENDING The Fund lends portfolio securities from time to time in order to earn additional income. In return, the Fund receives collateral in the form of securities, letters of credit or cash, against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business each day. If the Fund is undercollateralized at the close of business due to an increase in market value of securities on loan, additional collateral is requested from the borrowing counterparty and is delivered to the Fund on the next business day. Cash collateral may be invested in approved investments and the Fund bears the risk of any loss in value of these investments. The Fund retains a portion of the interest earned from the collateral. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, the Fund could experience delays and cost in recovering the securities loaned or in gaining access to the collateral. The Fund continues to receive the economic benefit of interest or dividends paid on the securities loaned in the form of a substitute payment received from the borrower. As of September 30, 2006, the Fund had on loan securities valued at $92,494,428, which are included in the Statement of Assets and Liabilities as "Investments, at value" and, when applicable, as "Receivable for Investments sold." Collateral of $94,428,646 was received for the loans, of which $89,473,262 was received in cash and subsequently invested in approved investments or held as cash. - -------------------------------------------------------------------------------- 12. RECENT ACCOUNTING PRONOUNCEMENTS In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with FASB Statement No. 109, ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions taken in the course of preparing the Fund's tax returns to determine whether it is "more-likely-than-not" that tax positions taken in the Fund's tax return will be ultimately sustained. A tax liability and expense must be recorded in respect of any tax position that, in Management's judgment, will not be fully realized. FIN 48 is effective for fiscal years beginning after December 15, 2006. As of September 30, 2006, the Manager is evaluating the implications of FIN 48. Its impact in the Fund's financial statements has not yet been determined. In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 157, FAIR VALUE MEASUREMENTS. This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. 61 | OPPENHEIMER BALANCED FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12. RECENT ACCOUNTING PRONOUNCEMENTS Continued SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. As of September 30, 2006, the Manager does not believe the adoption of SFAS No. 157 will materially impact the financial statement amounts; however, additional disclosures may be required about the inputs used to develop the measurements and the effect of certain of the measurements on changes in net assets for the period. - -------------------------------------------------------------------------------- 13. LITIGATION A consolidated amended complaint was filed as a putative class action against the Manager and the Transfer Agent and other defendants (including 51 of the Oppenheimer funds including the Fund) in the U.S. District Court for the Southern District of New York on January 10, 2005 and was amended on March 4, 2005. The complaint alleged, among other things, that the Manager charged excessive fees for distribution and other costs, and that by permitting and/or participating in those actions, the Directors/Trustees and the Officers of the funds breached their fiduciary duties to fund shareholders under the Investment Company Act of 1940 and at common law. The plaintiffs sought unspecified damages, an accounting of all fees paid, and an award of attorneys' fees and litigation expenses. In response to the defendants' motions to dismiss the suit, seven of the eight counts in the complaint, including the claims against certain of the Oppenheimer funds, as nominal defendants, and against certain present and former Directors, Trustees and Officers of the funds, and the Distributor, as defendants, were dismissed with prejudice, by court order dated March 10, 2006, and the remaining count against the Manager and the Transfer Agent was dismissed with prejudice by court order dated April 5, 2006. The plaintiffs filed an appeal of those dismissals on May 11, 2006. The Manager believes that the allegations contained in the complaint are without merit and that there are substantial grounds to sustain the district court's rulings. The Manager also believes that it is premature to render any opinion as to the likelihood of an outcome unfavorable to it, the funds, the Directors/Trustees or the Officers on the appeal of the decisions of the district court, and that no estimate can yet be made with any degree of certainty as to the amount or range of any potential loss. - -------------------------------------------------------------------------------- 14. ACQUISITION OF OPPENHEIMER DISCIPLINED ALLOCATION FUND On May 11, 2006, the Fund acquired all of the net assets of Oppenheimer Disciplined Allocation Fund, pursuant to an Agreement and Plan of Reorganization approved by the Oppenheimer Disciplined Allocation Fund shareholders on April 20, 2006. The Fund issued (at an exchange ratio of 1.082920 for Class A, 1.125484 for Class B, 1.087721 for Class C and 1.090241 for Class N of the Fund) to one share of Oppenheimer Disciplined Allocation Fund 7,679,053; 852,361; 622,399 and 134,474 shares of beneficial interest for Class A, Class B, Class C and Class N, respectively, valued at $105,279,820, $11,421,633, $8,383,715 and $1,824,806 in exchange for the net assets, resulting in combined Class A net assets of 62 | OPPENHEIMER BALANCED FUND $811,983,024, Class B net assets of $101,954,869, Class C net assets of $95,423,574 and Class N net assets of $14,874,615 on May 11, 2006. The net assets acquired included net unrealized appreciation of $7,913,564 and an unused capital loss carryforward of $2,329,209 potential utilization subject to tax limitations. The exchange qualified as a tax-free reorganization for federal income tax purposes. 63 | OPPENHEIMER BALANCED FUND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER BALANCED FUND: We have audited the accompanying statement of assets and liabilities of Oppenheimer Balanced Fund, including the statement of investments, as of September 30, 2006, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2006, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Balanced Fund as of September 30, 2006, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles. KPMG LLP Denver, Colorado November 15, 2006 64 | OPPENHEIMER BALANCED FUND FEDERAL INCOME TAX INFORMATION Unaudited - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- In early 2007, if applicable, shareholders of record will receive information regarding all dividends and distributions paid to them by the Fund during calendar year 2006. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service. Capital gain distributions of $0.6500 per share were paid to Class A, Class B, Class C and Class N shareholders, respectively, on December 14, 2005. Whether received in stock or in cash, the capital gain distribution should be treated by shareholders as a gain from the sale of the capital assets held for more than one year (long-term capital gains). Dividends, if any, paid by the Fund during the fiscal year ended September 30, 2006 which are not designated as capital gain distributions should be multiplied by 21.81% to arrive at the amount eligible for the corporate dividend-received deduction. A portion, if any, of the dividends paid by the Fund during the fiscal year ended September 30, 2006 which are not designated as capital gain distributions are eligible for lower individual income tax rates to the extent that the Fund has received qualified dividend income as stipulated by recent tax legislation. $6,341,143 of the Fund's fiscal year taxable income may be eligible for the lower individual income tax rates. In early 2007, shareholders of record will receive information regarding the percentage of distributions that are eligible for lower individual income tax rates. Recent tax legislation allows a regulated investment company to designate distributions not designated as capital gain distributions, as either interest related dividends or short-term capital gain dividends, both of which are exempt from the U.S. withholding tax applicable to non U.S. taxpayers. For the fiscal year ended September 30, 2006, $15,840,371 or 85.12% of the ordinary distributions paid by the Fund qualifies as an interest related dividend. The foregoing information is presented to assist shareholders in reporting distributions received from the Fund to the Internal Revenue Service. Because of the complexity of the federal regulations which may affect your individual tax return and the many variations in state and local tax regulations, we recommend that you consult your tax advisor for specific guidance. 65 | OPPENHEIMER BALANCED FUND PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities ("portfolio proxies") held by the Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and (iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund's voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at www.sec.gov. The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund's Form N-Q filings are available on the SEC's website at http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 66 | OPPENHEIMER BALANCED FUND TRUSTEES AND OFFICERS Unaudited - --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------- NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER FUND, LENGTH OF SERVICE, AGE TRUSTEESHIPS/DIRECTORSHIPS HELD; NUMBER OF PORTFOLIOS IN THE FUND COMPLEX CURRENTLY OVERSEEN INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, TRUSTEES CENTENNIAL, COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL. CLAYTON K. YEUTTER, Director of American Commercial Lines (barge company) (since January Chairman of the Board 2005); Attorney at Hogan & Hartson (law firm) (since June 1993); of Trustees (since 2003), Director of Covanta Holding Corp. (waste-to-energy company) (since Trustee (since 1993) 2002); Director of Weyerhaeuser Corp. (1999-April 2004); Director of Age: 75 Caterpillar, Inc. (1993-December 2002); Director of ConAgra Foods (1993-2001); Director of Texas Instruments (1993-2001); Director of FMC Corporation (1993-2001). Oversees 45 portfolios in the OppenheimerFunds complex. MATTHEW P. FINK, Trustee of the Committee for Economic Development (policy research Trustee (since 2005) foundation) (since 2005); Director of ICI Education Foundation Age: 65 (education foundation) (October 1991-August 2006); President of the Investment Company Institute (trade association) (October 1991-June 2004); Director of ICI Mutual Insurance Company (insurance company) (October 1991-June 2004). Oversees 45 portfolios in the OppenheimerFunds complex. ROBERT G. GALLI, A director or trustee of other Oppenheimer funds. Oversees 55 Trustee (since 1993) portfolios in the OppenheimerFunds complex. Age: 73 PHILLIP A. GRIFFITHS, Distinguished Presidential Fellow for International Affairs (since Trustee (since 1999) 2002) and Member (since 1979) of the National Academy of Sciences; Age: 68 Council on Foreign Relations (since 2002); Director of GSI Lumonics Inc. (precision medical equipment supplier) (since 2001); Senior Advisor of The Andrew W. Mellon Foundation (since 2001); Chair of Science Initiative Group (since 1999); Member of the American Philosophical Society (since 1996); Trustee of Woodward Academy (since 1983); Foreign Associate of Third World Academy of Sciences; Director of the Institute for Advanced Study (1991-2004); Director of Bankers Trust New York Corporation (1994-1999); Provost at Duke University (1983-1991). Oversees 45 portfolios in the OppenheimerFunds complex. MARY F. MILLER, Trustee of the American Symphony Orchestra (not-for-profit) (since Trustee (since 2004) October 1998); and Senior Vice President and General Auditor of Age: 64 American Express Company (financial services company) (July 1998-February 2003). Oversees 45 portfolios in the OppenheimerFunds complex. JOEL W. MOTLEY, Director of Columbia Equity Financial Corp. (privately-held financial Trustee (since 2002) adviser) (since 2002); Managing Director of Carmona Motley, Inc. Age: 54 (privately-held financial adviser) (since January 2002); Managing Director of Carmona Motley Hoffman Inc. (privately-held financial adviser) (January 1998-December 2001); Member of the Finance and Budget Committee of the Council on Foreign Relations, the Investment Committee of the Episcopal Church of America, the Investment Committee and Board of Human Rights Watch and the Investment Committee of Historic Hudson Valley. Oversees 45 portfolios in the OppenheimerFunds complex. KENNETH A. RANDALL, Director of Dominion Resources, Inc. (electric utility holding Trustee (since 1983) company) (February 1972-October 2005); Former Director of Prime Age: 79 Retail, Inc. (real estate investment trust), Dominion Energy Inc. (electric power and oil & gas producer), Lumberman's Mutual Casualty Company, American Motorists Insurance Company and American Manufacturers Mutual Insurance Company; Former President and Chief Executive
67 | OPPENHEIMER BALANCED FUND TRUSTEES AND OFFICERS Unaudited / Continued - -------------------------------------------------------------------------------- KENNETH A. RANDALL, Officer of The Conference Board, Inc. (international economic and Continued business research). Oversees 45 portfolios in the OppenheimerFunds complex. RUSSELL S. REYNOLDS, JR., Chairman of The Directorship Search Group, Inc. (corporate governance Trustee (since 1989) consulting and executive recruiting) (since 1993); Life Trustee of Age: 74 International House (non-profit educational organization); Founder, Chairman and Chief Executive Officer of Russell Reynolds Associates, Inc. (1969-1993); Banker at J.P. Morgan & Co. (1958-1966); 1st Lt. Strategic Air Command, U.S. Air Force (1954-1958). Oversees 45 portfolios in the OppenheimerFunds complex. JOSEPH M. WIKLER, Director of the following medical device companies: Medintec (since Trustee (since 2005) 1992) and Cathco (since 1996); Director of Lakes Environmental Age: 65 Association (since 1996); Member of the Investment Committee of the Associated Jewish Charities of Baltimore (since 1994); Director of Fortis/Hartford mutual funds (1994-December 2001). Oversees 45 portfolios in the OppenheimerFunds complex. PETER I. WOLD, President of Wold Oil Properties, Inc. (oil and gas exploration and Trustee (since 2005) production company) (since 1994); Vice President, Secretary and Age: 58 Treasurer of Wold Trona Company, Inc. (soda ash processing and production) (since 1996); Vice President of Wold Talc Company, Inc. (talc mining) (since 1999); Managing Member of Hole-in-the-Wall Ranch (cattle ranching) (since 1979); Director and Chairman of the Denver Branch of the Federal Reserve Bank of Kansas City (1993-1999); and Director of PacifiCorp. (electric utility) (1995-1999). Oversees 45 portfolios in the OppenheimerFunds complex. BRIAN F. WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since Trustee (since 2005) September 1995); Director of Special Value Opportunities Fund, LLC Age: 63 (registered investment company) (since September 2004); Member of Zurich Financial Investment Advisory Board (insurance) (since October 2004); Board of Governing Trustees of The Jackson Laboratory (non-profit) (since August 1990); Trustee of the Institute for Advanced Study (non-profit educational institute) (since May 1992); Special Limited Partner of Odyssey Investment Partners, LLC (private equity investment) (January 1999-September 2004); Trustee of Research Foundation of AIMR (2000-2002) (investment research, non-profit); Governor, Jerome Levy Economics Institute of Bard College (August 1990-September 2001) (economics research); Director of Ray & Berendtson, Inc. (May 2000-April 2002) (executive search firm). Oversees 55 portfolios in the OppenheimerFunds complex. - --------------------------------------------------------------------------------------------------------- INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY AND OFFICER STREET, 11TH FLOOR, NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN ANNUAL TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES. JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and Trustee, President and President (since September 2000) of the Manager; President and a Principal Executive Officer director or trustee of other Oppenheimer funds; President and Director (since 2001) of Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent holding Age: 57 company) and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since November 2001); Chairman and Director of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager) (since July 2001); President and Director of OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since July 2001);
68 | OPPENHEIMER BALANCED FUND JOHN V. MURPHY, Director of the following investment advisory subsidiaries of the Continued Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment Management Corporation and Tremont Capital Management, Inc. (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 1, 2001) and Director (since July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President of Massachusetts Mutual Life Insurance Company (OAC's parent company) (since February 1997); Director of DLB Acquisition Corporation (holding company parent of Babson Capital Management LLC) (since June 1995); Member of the Investment Company Institute's Board of Governors (since October 3, 2003); Chief Operating Officer of the Manager (September 2000-June 2001); President and Trustee of MML Series Investment Fund and MassMutual Select Funds (open-end investment companies) (November 1999-November 2001); Director of C.M. Life Insurance Company (September 1999-August 2000); President, Chief Executive Officer and Director of MML Bay State Life Insurance Company (September 1999-August 2000); Director of Emerald Isle Bancorp and Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June 1998). Oversees 92 portfolios in the OppenheimerFunds complex. - --------------------------------------------------------------------------------------------------------- OTHER OFFICERS THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR OF THE FUND MESSRS. LEAVY, FERREIRA, ZACK, GILLESPIE AND MS. BLOOMBERG, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY, WIXTED, PETERSEN, SZILAGYI AND MS. IVES, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924; FOR MESSRS. MANIOUDAKIS, BOMFIM, CAAN, GORD AND SWANEY, 470 ATLANTIC AVENUE, 11TH FLOOR, BOSTON, MA 02210. EACH OFFICER SERVES FOR AN ANNUAL TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL. CHRISTOPHER LEAVY, Senior Vice President of the Manager (since September 2000); portfolio Vice President and Portfolio manager of Morgan Stanley Dean Witter Investment Management Manager (since 2003) (1997-September 2000). An officer of 7 portfolios in the Age: 35 OppenheimerFunds complex. EMMANUEL FERREIRA, Vice President of the Manager (since January 2003); Portfolio Manager Vice President and Portfolio at Lashire Investments (July 1999-December 2002). An officer of 3 Manager (since 2003) portfolios in the OppenheimerFunds complex. Age: 39 ANGELO G. MANIOUDAKIS, Senior Vice President of the Manager (since April 2002), of Vice President and Portfolio HarbourView Asset Management Corporation (since April, 2002 and of OFI Manager (since 2002) Institutional Asset Management, Inc. (since June 2002); Executive Age: 40 Director and portfolio manager for Miller, Anderson & Sherrerd, a division of Morgan Stanley Investment Management (August 1993-April 2002). An officer of 15 portfolios in the OppenheimerFunds complex. ANTULIO N. BOMFIM, Vice President of the Manager (since October 2003); Senior Economist Vice President and Portfolio at the Board of Governors of the Federal Reserve System from June 1992 Manager (since 2006) to October 2003. A portfolio manager of 12 portfolios in the Age: 39 OppenheimerFunds complex. GEOFFREY CAAN, Vice President and Portfolio Manager of the Manager (since August Vice President and Portfolio 2003); Vice President of ABN AMRO NA, Inc. (June 2002-August 2003); Manager (since 2006) Vice President of Zurich Scudder Investments (January 1999-June 2002). Age: 37 A portfolio manager of 12 portfolios in the OppenheimerFunds complex.
69 | OPPENHEIMER BALANCED FUND TRUSTEES AND OFFICERS Unaudited / Continued - -------------------------------------------------------------------------------- BENJAMIN J. GORD, Vice President of the Manager (since April 2002), of HarbourView Asset Vice President and Portfolio Management Corporation (since April 2002) and of OFI Institutional Manager (since 2006) Asset Management, Inc. (as of June 2002); Executive Director and Age: 44 senior fixed income analyst at Miller Anderson & Sherrerd, a division of Morgan Stanley Investment Management (April 1992-March 2002). A portfolio manager of 12 portfolios in the OppenheimerFunds complex. THOMAS SWANEY, Vice President of the Manager (since April 2006); senior analyst, high Vice President and Portfolio grade investment team (June 2002-March 2006); senior fixed income Manager (since 2006) analyst at Miller Anderson & Sherrerd, a division of Morgan Stanley Age: 33 Investment Management (May 1998-May 2002). A portfolio manager of 12 portfolios in the OppenheimerFunds complex. MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager Vice President and (since March 2004); Vice President of OppenheimerFunds Distributor, Chief Compliance Officer Inc., Centennial Asset Management Corporation and Shareholder (since 2004) Services, Inc. (since June 1983). Former Vice President and Director Age: 56 of Internal Audit of the Manager (1997-February 2004). An officer of 92 portfolios in the OppenheimerFunds complex. BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer and Treasurer of the following: HarbourView Asset Management Corporation, Principal Financial and Shareholder Financial Services, Inc., Shareholder Services, Inc., Accounting Officer Oppenheimer Real Asset Management Corporation, and Oppenheimer (since 1999) Partnership Holdings, Inc. (since March 1999), OFI Private Age: 47 Investments, Inc. (since March 2000), OppenheimerFunds International Ltd. (since May 2000), OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since March 1999), Centennial Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March 1995-March 1999). An officer of 92 portfolios in the OppenheimerFunds complex. BRIAN S. PETERSEN, Assistant Vice President of the Manager (since August 2002); Assistant Treasurer Manager/Financial Product Accounting of the Manager (November (since 2004) 1998-July 2002). An officer of 92 portfolios in the OppenheimerFunds Age: 36 complex. BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Assistant Treasurer Financial Reporting and Compliance of First Data Corporation (April (since 2005) 2003-July 2004); Manager of Compliance of Berger Financial Group LLC Age: 36 (May 2001-March 2003); Director of Mutual Fund Operations at American Data Services, Inc. (September 2000-May 2001). An officer of 92 portfolios in the OppenheimerFunds complex. ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel Secretary (since 2001) (since March 2002) of the Manager; General Counsel and Director of the Age: 58 Distributor (since December 2001); General Counsel of Centennial Asset Management Corporation (since December 2001); Senior Vice President and General Counsel of Harbour-View Asset Management Corporation (since December 2001); Secretary and General Counsel of OAC (since November 2001); Assistant Secretary (since September 1997) and Director (since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since December 2002); Director of Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice President, General Counsel and Director of Shareholder Financial Services, Inc. and
70 | OPPENHEIMER BALANCED FUND ROBERT G. ZACK, Shareholder Services, Inc. (since December 2001); Senior Vice Continued President, General Counsel and Director of OFI Private Investments, Inc. and OFI Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since November 2001); Director of OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President (May 1985-December 2003), Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of the following: Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001), and OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of 92 portfolios in the OppenheimerFunds complex. LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); Assistant Secretary First Vice President (April 2001-April 2004), Associate General (since 2004) Counsel (December 2000-April 2004), Corporate Vice President (May Age: 38 1999-April 2001) and Assistant General Counsel (May 1999-December 2000) of UBS Financial Services Inc. (formerly, PaineWebber Incorporated). An officer of 92 portfolios in the OppenheimerFunds complex. KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Assistant Secretary Secretary (since October 2003) of the Manager; Vice President (since (since 2001) 1999) and Assistant Secretary (since October 2003) of the Distributor; Age: 41 Assistant Secretary of Centennial Asset Management Corporation (since October 2003); Vice President and Assistant Secretary of Shareholder Services, Inc. (since 1999); Assistant Secretary of OppenheimerFunds Legacy Program and Shareholder Financial Services, Inc. (since December 2001); Assistant Counsel of the Manager (August 1994-October 2003). An officer of 92 portfolios in the OppenheimerFunds complex. PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since Assistant Secretary September 2004); First Vice President (2000-September 2004), Director (since 2004) (2000-September 2004) and Vice President (1998-2000) of Merrill Lynch Age: 42 Investment Management. An officer of 92 portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE UPON REQUEST, BY CALLING 1.800.525.7048. 71 | OPPENHEIMER BALANCED FUND ITEM 2. CODE OF ETHICS. The registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Board of Trustees of the registrant has determined that the registrant does not have an audit committee financial expert serving on its Audit Committee. In this regard, no member of the Audit Committee was identified as having all of the technical attributes identified in Instruction 2(b) to Item 3 of Form N-CSR to qualify as an "audit committee financial expert," whether through the type of specialized education or experience described in that Instruction. The Board has concluded that while the members of the Audit Committee collectively have the necessary attributes and experience required to serve effectively as an Audit Committee, no single member possesses all of the required technical attributes through the particular methods of education or experience set forth in the Instructions to be designated as an audit committee financial expert. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Audit Fees The principal accountant for the audit of the registrant's annual financial statements billed $45,000 in fiscal 2006 and $45,000 in fiscal 2005. (b) Audit-Related Fees The principal accountant for the audit of the registrant's annual financial statements billed no such fees during the last two fiscal years. The principal accountant for the audit of the registrant's annual financial statements billed $169,654 in fiscal 2006 and $156,805 in fiscal 2005 to the registrant's investment adviser or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant. Such services include: Internal control reviews (c) Tax Fees The principal accountant for the audit of the registrant's annual financial statements billed no such fees during to the registrant during the last two fiscal years. The principal accountant for the audit of the registrant's annual financial statements billed $1,536 in fiscal 2006 and $5,000 in fiscal 2005 to the registrant's investment adviser or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant. Such services include: preparation of form 5500. (d) All Other Fees The principal accountant for the audit of the registrant's annual financial statements billed no such fees in during to the registrant during the last two fiscal years. The principal accountant for the audit of the registrant's annual financial statements billed no such fees during the last two fiscal years to the registrant's investment adviser or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant. (e) (1) During its regularly scheduled periodic meetings, the registrant's audit committee will pre-approve all audit, audit-related, tax and other services to be provided by the principal accountants of the registrant. The audit committee has delegated pre-approval authority to its Chairman for any subsequent new engagements that arise between regularly scheduled meeting dates provided that any fees such pre-approved are presented to the audit committee at its next regularly scheduled meeting. Under applicable laws, pre-approval of non-audit services maybe waived provided that: 1) the aggregate amount of all such services provided constitutes no more than five percent of the total amount of fees paid by the registrant to it principal accountant during the fiscal year in which services are provided 2) such services were not recognized by the registrant at the time of engagement as non-audit services and 3) such services are promptly brought to the attention of the audit committee of the registrant and approved prior to the completion of the audit. (2) 100% (f) Not applicable as less than 50%. (g) The principal accountant for the audit of the registrant's annual financial statements billed $155,336 in fiscal 2006 and $161,805 in fiscal 2005 to the registrant and the registrant's investment adviser or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant related to non-audit fees. Those billings did not include any prohibited non-audit services as defined by the Securities Exchange Act of 1934. (h) No such services were rendered. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. THE FUND'S GOVERNANCE COMMITTEE PROVISIONS WITH RESPECT TO NOMINATIONS OF DIRECTORS/TRUSTEES TO THE RESPECTIVE BOARDS 1. The Fund's Governance Committee (the "Committee") will evaluate potential Board candidates to assess their qualifications. The Committee shall have the authority, upon approval of the Board, to retain an executive search firm to assist in this effort. The Committee may consider recommendations by business and personal contacts of current Board members and by executive search firms which the Committee may engage from time to time and may also consider shareholder recommendations. The Committee may consider the advice and recommendation of the Funds' investment manager and its affiliates in making the selection. 2. The Committee shall screen candidates for Board membership. The Committee has not established specific qualifications that it believes must be met by a trustee nominee. In evaluating trustee nominees, the Committee considers, among other things, an individual's background, skills, and experience; whether the individual is an "interested person" as defined in the Investment Company Act of 1940; and whether the individual would be deemed an "audit committee financial expert" within the meaning of applicable SEC rules. The Committee also considers whether the individual's background, skills, and experience will complement the background, skills, and experience of other nominees and will contribute to the Board. There are no differences in the manner in which the Committee evaluates nominees for trustees based on whether the nominee is recommended by a shareholder. 3. The Committee may consider nominations from shareholders for the Board at such times as the Committee meets to consider new nominees for the Board. The Committee shall have the sole discretion to determine the candidates to present to the Board and, in such cases where required, to shareholders. Recommendations for trustee nominees should, at a minimum, be accompanied by the following: o the name, address, and business, educational, and/or other pertinent background of the person being recommended; o a statement concerning whether the person is an "interested person" as defined in the Investment Company Act of 1940; o any other information that the Funds would be required to include in a proxy statement concerning the person if he or she was nominated; and o the name and address of the person submitting the recommendation and, if that person is a shareholder, the period for which that person held Fund shares. The recommendation also can include any additional information which the person submitting it believes would assist the Committee in evaluating the recommendation. 4. Shareholders should note that a person who owns securities issued by Massachusetts Mutual Life Insurance Company (the parent company of the Funds' investment adviser) would be deemed an "interested person" under the Investment Company Act of 1940. In addition, certain other relationships with Massachusetts Mutual Life Insurance Company or its subsidiaries, with registered broker-dealers, or with the Funds' outside legal counsel may cause a person to be deemed an "interested person." 5. Before the Committee decides to nominate an individual as a trustee, Committee members and other directors customarily interview the individual in person. In addition, the individual customarily is asked to complete a detailed questionnaire which is designed to elicit information which must be disclosed under SEC and stock exchange rules and to determine whether the individual is subject to any statutory disqualification from serving as a trustee of a registered investment company. ITEM 11. CONTROLS AND PROCEDURES. Based on their evaluation of the registrant's disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR 270.30a-3(c)) as of 08/31/2006, the registrant's principal executive officer and principal financial officer found the registrant's disclosure controls and procedures to provide reasonable assurances that information required to be disclosed by the registrant in the reports that it files under the Securities Exchange Act of 1934 (a) is accumulated and communicated to registrant's management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure, and (b) is recorded, processed, summarized and reported, within the time periods specified in the rules and forms adopted by the U.S. Securities and Exchange Commission. There have been no changes in the registrant's internal controls over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a) (1) Exhibit attached hereto. (2) Exhibits attached hereto. (3) Not applicable. (b) Exhibit attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Oppenheimer Balanced Fund By: /s/ John V. Murphy ---------------------------- John V. Murphy Principal Executive Officer Date: 11/15/2006 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ John V. Murphy ---------------------------- John V. Murphy Principal Executive Officer Date: 11/15/2006 By: /s/ Brian W. Wixted ---------------------------- Brian W. Wixted Principal Financial Officer Date: 11/15/2006 EX-99.CERT 2 ra240_35564ex302.txt RA240_35564EX302 Exhibit 99.CERT Section 302 Certifications CERTIFICATIONS I, John V. Murphy, certify that: 1. I have reviewed this report on Form N-CSR of Oppenheimer Balanced Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of Trustees (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: 11/15/2006 /S/ JOHN V. MURPHY - ------------------------------ John V. Murphy Principal Executive Officer Exhibit 99.CERT Section 302 Certifications CERTIFICATIONS I, Brian W. Wixted, certify that: 1. I have reviewed this report on Form N-CSR of Oppenheimer Balanced Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of Trustees (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: 11/15/2006 /S/ BRIAN W. WIXTED - ----------------------------- Brian W. Wixted Principal Financial Officer EX-99.906CERT 3 ra240_35564ex906.txt RA240_35564EX906 EX-99.906CERT Section 906 Certifications CERTIFICATION PURSUANT TO 18 U.S.C SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 John V. Murphy, Principal Executive Officer, and Brian W. Wixted, Principal Financial Officer, of Oppenheimer Balanced Fund (the "Registrant"), each certify to the best of his knowledge that: 1. The Registrant's periodic report on Form N-CSR for the period ended 08/31/2006 (the "Form N-CSR") fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. ss. 1350 and is not being filed as part of the Form N-CSR filed with the Commission. Principal Executive Officer Principal Financial Officer Oppenheimer Balanced Fund Oppenheimer Balanced Fund /S/ JOHN V. MURPHY /S/ BRIAN W. WIXTED - --------------------------------- ----------------------------------- John V. Murphy Brian W. Wixted Date: 11/15/2006 Date: 11/15/2006 EX-99.CODE ETH 4 ra240_35564ex99codeeth.txt RA240_35564EX99CODEETH EX-99.CODE ETH CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS OF THE OPPENHEIMER FUNDS AND OF OPPENHEIMERFUNDS, INC. This Code of Ethics for Principal Executive and Senior Financial Officers (referred to in this document as the "Code") has been adopted by each of the investment companies for which OppenheimerFunds, Inc. or one of its subsidiaries or affiliates (referred to collectively in this document as "OFI") acts as investment adviser (individually, a "Fund" and collectively, the "Funds"), and by OFI to effectuate compliance with Section 406 under the Sarbanes-Oxley Act of 2002 and the rules adopted to implement Section 406. This Code applies to OFI's and each Fund's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions ("Covered Officers"). A listing of positions currently within the ambit of Covered Officers is attached as EXHIBIT A. 1 1. PURPOSE OF THE CODE This Code sets forth standards and procedures that are reasonably designed to deter wrongdoing and promote: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely, and understandable disclosure in reports and documents that a Fund files with, or submits to, the U.S. Securities and Exchange Commission ("SEC") and in other public communications made by the Fund; o compliance with applicable governmental laws, rules and regulations; o the prompt internal reporting of violations of this Code to the Code Administrator identified below; and o accountability for adherence to this Code. In general, the principles that govern honest and ethical conduct, including the avoidance of conflicts of interest between personal and professional relationships, reflect, - ---------- 1 The obligations imposed by this Code on Covered Officers are separate from and in addition to any obligations that may be imposed on such persons as Covered Persons under the Code of Ethics adopted by OFI and the Funds under Rule 17j-1 of the Investment Company Act of 1940, as amended and any other code of conduct applicable to Covered Officers in whatever capacity they serve. This Code does not incorporate by reference any provisions of the Rule 17j-1 Code of Ethics and accordingly, any violations or waivers granted under the Rule 17j-1 Code of Ethics will not be considered a violation or waiver under this Code. at the minimum, the following: (1) the duty at all times in performing any responsibilities as a Fund financial officer, controller, accountant or principal executive officer to place the interests of the Funds ahead of personal interests; (2) the fundamental standard that Covered Officers should not take inappropriate advantage of their positions; (3) the duty to assure that a Fund's financial statements and reports to its shareholders are prepared honestly and accurately in accordance with applicable rules, regulations and accounting standards; and (4) the duty to conduct the Funds' business and affairs in an honest and ethical manner. Each Covered Officer should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. It is acknowledged that, as a result of the contractual relationship between each Fund and OFI, of which the Covered Officers are also officers or employees, and subject to OFI's fiduciary duties to each Fund, the Covered Officers will, in the normal course of their duties, be involved in establishing policies and implementing decisions that will have different effects on OFI and the Funds. It is further acknowledged that the participation of the Covered Officers in such activities is inherent in the contractual relationship between each Fund and OFI and is consistent with the expectations of the Board of Trustees/Directors of the performance by the Covered Officers of their duties as officers of the Funds. 1. PROHIBITIONS The specific provisions and reporting requirements of this Code are concerned primarily with promoting honest and ethical conduct and avoiding conflicts of interest in personal and professional relationships. No Covered Officer may use information concerning the business and affairs of a Fund, including the investment intentions of a Fund, or use his or her ability to influence such investment intentions, for personal gain to himself or herself, his or her family or friends or any other person or in a manner detrimental to the interests of a Fund or its shareholders. No Covered Officer may use his or her personal influence or personal relationships to influence the preparation and issuance of financial reports of a Fund whereby the Covered Officer would benefit personally to the detriment of the Fund and its shareholders. No Covered Officer shall intentionally for any reason take any action or fail to take any action in connection with his or her official acts on behalf of a Fund that causes the Fund to violate applicable laws, rules and regulations. No Covered Officer shall, in connection with carrying out his or her official duties and responsibilities on behalf of a Fund: (i) employ any device, scheme or artifice to defraud a Fund or its shareholders; (ii) intentionally cause a Fund to make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading in its official documents, regulatory filings, financial statements or communications to the public; (iii) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any Fund or its shareholders; (iv) engage in any manipulative practice with respect to any Fund; (v) use his or her personal influence or personal relationships to influence any business decision, investment decisions, or financial reporting by a Fund whereby the Covered Officer would benefit personally to the detriment of the Fund or its shareholders; (vi) intentionally cause a Fund to fail to comply with applicable laws, rules and regulations, including failure to comply with the requirement of full, fair, accurate, understandable and timely disclosure in reports and documents that a Fund files with, or submits to, the SEC and in other public communications made by the Fund; (vii) intentionally mislead or omit to provide material information to the Fund's independent auditors or to the Board of Trustees/Directors or the officers of the Fund or its investment adviser in connection with financial reporting matters; (viii) fail to notify the Code Administrator or the Chief Executive Officer of the Fund or its investment adviser promptly if he or she becomes aware of any existing or potential violations of this Code or applicable laws; (ix) retaliate against others for, or otherwise discourage the reporting of, actual or apparent violations of this Code; or (x) fails to acknowledge or certify compliance with this Code if requested to do so. 3. REPORTS OF CONFLICTS OF INTERESTS If a Covered Officer becomes aware of a conflict of interest under this Code or, to the Covered Officer's reasonable belief, the appearance of one, he or she must immediately report the matter to the Code's Administrator. If the Code Administrator is involved or believed to be involved in the conflict of interest or appearance of conflict of interest, the Covered Officer shall report the matter directly to the OFI's Chief Executive Officer. Upon receipt of a report of a conflict, the Code Administrator will take prompt steps to determine whether a conflict of interest exists. If the Code Administrator determines that an actual conflict of interest exists, the Code Administrator will take steps to resolve the conflict. If the Code Administrator determines that the appearance of a conflict exists, the Code Administrator will take appropriate steps to remedy such appearance. If the Code Administrator determines that no conflict or appearance of a conflict exists, the Code Administrator shall meet with the Covered Officer to advise him or her of such finding and of his or her reason for taking no action. In lieu of determining whether a conflict or appearance of conflict exists, the Code Administrator may in his or her discretion refer the matter to the Fund's Board of Trustees/Directors. 4. WAIVERS Any Covered Officer requesting a waiver of any of the provisions of this Code must submit a written request for such waiver to the Code Administrator, setting forth the basis of such request and all necessary facts upon which such request can be evaluated. The Code Administrator shall review such request and make a written determination thereon, which shall be binding. The Code Administrator may in reviewing such request, consult at his discretion with legal counsel to OFI or to the Fund. In determining whether to waive any of the provisions of this Code, the Code Administrator shall consider whether the proposed waiver: (i) is prohibited by this Code; (ii) is consistent with honest and ethical conduct; and (iii) will result in a conflict of interest between the Covered Officer's personal and professional obligations to a Fund. In lieu of determining whether to grant a waiver, the Code Administrator in his or her discretion may refer the matter to the appropriate Fund's Board of Trustees/Directors. 5. REPORTING REQUIREMENTS (a) Each Covered Officer shall, upon becoming subject to this Code, be provided with a copy of this Code and shall affirm in writing that he or she has received, read, understands and shall adhere to this Code. (b) At least annually, all Covered Officers shall be provided with a copy of this Code and shall certify that they have read and understand this Code and recognize that they are subject thereto. (c) At least annually, all Covered Officers shall certify that they have complied with the requirements of this Code and that they have disclosed or reported any violations of this Code to the Code Administrator or the Chief Executive Officer of the Fund or its investment adviser. (d) The Code Administrator shall submit a quarterly report to the Board of Trustees/Directors of each Fund containing (i) a description of any report of a conflict of interest or apparent conflict and the disposition thereof; (ii) a description of any request for a waiver from this Code and the disposition thereof; (iii) any violation of the Code that has been reported or found and the sanction imposed; (iv) interpretations issued under the Code by the Code Administrator; and (v) any other significant information arising under the Code including any proposed amendments. (e) Each Covered Officer shall notify the Code Administrator promptly if he or she knows of or has a reasonable belief that any violation of this Code has occurred or is likely to occur. Failure to do so is itself a violation of this Code. (f) Any changes to or waivers of this Code, including "implicit" waivers as defined in applicable SEC rules, will, to the extent required, be disclosed by the Code Administrator or his or her designee as provided by applicable SEC rules. 2 6. ANNUAL RENEWAL At least annually, the Board of Trustees/Directors of each Fund shall review the Code and determine whether any amendments (including any amendments that may be recommended by OFI or the Fund's legal counsel) are necessary or desirable, and shall consider whether to renew and/or amend the Code. 7. SANCTIONS Any violation of this Code of Ethics shall be subject to the imposition of such sanctions by OFI as may be deemed appropriate under the circumstances to achieve the purposes of this Code and may include, without limitation, a letter of censure, suspension from employment or termination of employment, in the sole discretion of OFI. 8. ADMINISTRATION AND CONSTRUCTION (a) The administration of this Code of Ethics shall be the responsibility of OFI's General Counsel or his designee as the "Code Administrator" of this Code, acting under the terms of this Code and the oversight of the Trustees/Directors of the Funds. (b) The duties of such Code Administrator will include: (i) Continuous maintenance of a current list of the names of all Covered Officers; (ii) Furnishing all Covered Officers a copy of this Code and initially and periodically informing them of their duties and obligations thereunder; (iii) Maintaining or supervising the maintenance of all records required by this Code, including records of waivers granted hereunder; - ---------- 2 An "implicit waiver" is the failure to take action within a reasonable period of time regarding a material departure from a provision of this Code that has been made known to the General Counsel, the Code Administrator, an executive officer of the Fund or OFI. (iv) Issuing interpretations of this Code which appear to the Code Administrator to be consistent with the objectives of this Code and any applicable laws or regulations; (v) Conducting such inspections or investigations as shall reasonably be required to detect and report any violations of this Code, with his or her recommendations, to the Chief Executive Officer of OFI and to the Trustees/Directors of the affected Fund(s) or any committee appointed by them to deal with such information; and (vi) Periodically conducting educational training programs as needed to explain and reinforce the terms of this Code. (c) In carrying out the duties and responsibilities described under this Code, the Code Administrator may consult with legal counsel, who may include legal counsel to the applicable Funds, and such other persons as the Administrator shall deem necessary or desirable. The Code Administrator shall be protected from any liability hereunder or under any applicable law, rule or regulation, for decisions made in good faith based upon his or her reasonable judgment. 9. REQUIRED RECORDS The Administrator shall maintain and cause to be maintained in an easily accessible place, the following records for the period required by applicable SEC rules (currently six years following the end of the fiscal year of OFI in which the applicable event or report occurred): (a) A copy of any Code which has been in effect during the period; (b) A record of any violation of any such Code and of any action taken as a result of such violation, during the period; (c) A copy of each annual report pursuant to the Code made by a Covered Officer during the period; (d) A copy of each report made by the Code Administrator pursuant to this Code during the period; (e) A list of all Covered Officers who are or have been required to make reports pursuant to this Code during the period, plus those person(s) who are or were responsible for reviewing these reports; (f) A record of any request to waive any requirement of this Code, the decision thereon and the reasons supporting the decision; and (g) A record of any report of any conflict of interest or appearance of a conflict of interest received by the Code Administrator or discovered by the Code Administrator during the period, the decision thereon and the reasons supporting the decision. 10. AMENDMENTS AND MODIFICATIONS Other than non-substantive or administrative changes, this Code may not be amended or modified unless approved or ratified by the Board of Trustees/Directors of each Fund. 11. CONFIDENTIALITY. This Code is identified for the internal use of the Funds and OFI. Reports and records prepared or maintained under this Code are considered confidential and shall be maintained and protected accordingly to the extent permitted by applicable laws, rules and regulations. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Trustees/Directors of the affected Fund(s) and their counsel, the independent auditors of the affected Funds and/or OFI, and to OFI, except as such disclosure may be required pursuant to applicable judicial or regulatory process. Dated as of: June 25, 2003, as revised July 31, 2006 Adopted by Board I of the Oppenheimer Funds June 13, 2003, revisions approved August 10, 2006 /S/ ROBERT G. ZACK - ------------------ Robert G. Zack, Secretary Adopted by Board II of the Oppenheimer/Centennial Funds June 24, 2003, revisions approved August 30, 2006 /S/ ROBERT G. ZACK - ------------------ Robert G. Zack, Secretary Adopted by Board III of the Oppenheimer Funds June 9, 2003, revisions approved July 31, 2006 /S/ ROBERT G. ZACK - ------------------ Robert G. Zack, Secretary Robert G. Zack, Secretary Adopted by the Boards of Directors of OppenheimerFunds, Inc. and its subsidiaries and affiliates that act as investment adviser to the Oppenheimer or Centennial funds June 1, 2003 /S/ ROBERT G. ZACK - ------------------ Robert G. Zack, Senior Vice President and General Counsel Exhibit A Positions Covered by this Code of Ethics for Senior Officers EACH OPPENHEIMER OR CENTENNIAL FUND Principal Executive Officer Principal Financial Officer Treasurer Assistant Treasurer PERSONNEL OF OFI WHO BY VIRTUE OF THEIR JOBS PERFORM CRITICAL FINANCIAL AND ACCOUNTING FUNCTIONS FOR OFI ON BEHALF OF A FUND, INCLUDING: Chief Financial Officer Treasurer Senior Vice President/Fund Accounting Vice President/Fund Accounting -----END PRIVACY-ENHANCED MESSAGE-----