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 811-5225
Oppenheimer Quest 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
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(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 768-3200
--------------
Date of fiscal year end: October 31
Date of reporting period: November 1, 2003 - April 30, 2004
Item 1. Reports to Stockholders.
STATEMENT OF INVESTMENTS April 30, 2004 / Unaudited
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MARKET VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMON STOCKS--69.0%
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CONSUMER DISCRETIONARY--12.3%
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HOTELS, RESTAURANTS & LEISURE--3.7%
Royal Caribbean Cruises Ltd. 6,250,000 $253,312,500
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MEDIA--4.0%
DirecTV Group, Inc. (The) 1 15,000,000 268,500,000
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MULTILINE RETAIL--1.8%
Dollar General Corp. 6,500,000 121,940,000
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SPECIALTY RETAIL--2.8%
Office Depot, Inc. 1 11,000,000 192,610,000
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CONSUMER STAPLES--4.6%
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FOOD & STAPLES RETAILING--4.6%
Wal-Mart Stores, Inc. 5,500,000 313,500,000
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ENERGY--1.6%
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ENERGY EQUIPMENT & SERVICES--1.6%
Nabors Industries Ltd. 1 2,500,000 110,900,000
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FINANCIALS--13.5%
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DIVERSIFIED FINANCIAL SERVICES--2.9%
American Express Co. 4,000,000 195,800,000
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INSURANCE--2.1%
UnumProvident Corp. 9,000,000 139,950,000
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THRIFTS & MORTGAGE FINANCE--8.5%
Fannie Mae 4,200,000 288,624,000
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Freddie Mac 5,000,000 292,000,000
-------------
580,624,000
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HEALTH CARE--10.5%
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BIOTECHNOLOGY--2.2%
Amgen, Inc. 1 1,000,000 56,270,000
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Wyeth 2,500,000 95,175,000
-------------
151,445,000
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HEALTH CARE PROVIDERS & SERVICES--4.2%
Quest Diagnostics, Inc. 1,000,000 84,350,000
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WellPoint Health Networks, Inc. 1 1,800,000 201,042,000
-------------
285,392,000
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PHARMACEUTICALS--4.1%
Pfizer, Inc. 2,500,000 89,400,000
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Sanofi-Synthelabo SA, ADR 6,000,000 186,600,000
------------
276,000,000
11 | OPPENHEIMER QUEST BALANCED FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
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MARKET VALUE
SHARES SEE NOTE 1
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INDUSTRIALS--3.0%
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COMMERCIAL SERVICES & SUPPLIES--0.9%
ChoicePoint, Inc. 1 1,500,000 $ 65,880,000
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INDUSTRIAL CONGLOMERATES--2.1%
Textron, Inc. 563,700 31,104,966
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Tyco International Ltd. 4,000,000 109,800,000
---------------
140,904,966
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INFORMATION TECHNOLOGY--13.4%
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COMMUNICATIONS EQUIPMENT--0.6%
JDS Uniphase Corp. 1 14,000,000 42,560,000
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COMPUTERS & PERIPHERALS--4.8%
Dell, Inc. 1 9,500,000 329,745,000
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ELECTRONIC EQUIPMENT & INSTRUMENTS--1.3%
Flextronics International Ltd. 1 5,500,000 88,550,000
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IT SERVICES--1.1%
Electronic Data Systems Corp. 4,000,000 73,160,000
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SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--4.4%
Intel Corp. 11,500,000 295,895,000
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SOFTWARE--1.2%
Dassault Systemes SA, ADR 2,000,000 80,000,000
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MATERIALS--10.1%
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CHEMICALS--1.4%
E.I. DuPont de Nemours & Co. 2,250,000 96,637,500
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METALS & MINING--5.4%
Alcan, Inc. 2,250,000 90,517,500
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Inco Ltd. 1 5,500,000 158,125,000
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Nucor Corp. 2,000,000 118,800,000
---------------
367,442,500
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PAPER & FOREST PRODUCTS--3.3%
International Paper Co. 5,584,400 225,163,008
---------------
Total Common Stocks (Cost $4,348,935,261) 4,695,911,474
UNITS
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RIGHTS, WARRANTS AND CERTIFICATES--0.0%
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Conseco, Inc. Wts., Exp. 9/10/08 1
(Cost $1,375,000) 275,000 1,498,750
12 | OPPENHEIMER QUEST BALANCED FUND
PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
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U.S. GOVERNMENT OBLIGATIONS--10.2%
- ---------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
1.875%, 9/30/04 $625,704,000 $627,903,975
2.625%, 3/15/09 65,155,000 62,373,207
-------------
Total U.S. Government Obligations (Cost $687,981,879) 690,277,182
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NON-CONVERTIBLE CORPORATE BONDS AND NOTES--16.6%
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Alcoa, Inc., 4.25% Sr. Unsec. Nts., 8/15/07 34,985,000 35,970,073
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American Express Co., 5.50% Nts., 9/12/06 14,600,000 15,490,089
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AT&T Corp.:
7.25% Sr. Nts., 11/15/06 3 15,000,000 16,375,140
7.80% Sr. Nts., 11/15/11 3 3,000,000 3,296,484
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AT&T Wireless Services, Inc., 7.35% Sr. Unsec. Nts., 3/1/06 15,000,000 16,238,010
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Bear Stearns Cos., Inc. (The), 6.25% Sr. Unsec. Nts., 7/15/05 24,860,000 26,100,091
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Boeing Capital Corp., 6.50% Nts., 2/15/12 10,000,000 10,883,570
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Bristol-Myers Squibb Co., 4.75% Nts., 10/1/06 38,950,000 40,606,933
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Cendant Corp., 6.875% Sr. Unsec. Nts., 8/15/06 15,100,000 16,370,846
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Chevron Texaco Capital Co., 3.50% Nts., 9/17/07 43,790,000 44,214,019
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CIT Group, Inc.:
7.125% Sr. Nts., 10/15/04 12,175,000 12,487,995
7.75% Sr. Unsec. Unsub. Nts., 4/2/12 15,000,000 17,347,605
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Citigroup, Inc.:
5% Nts., 3/6/07 16,686,000 17,520,634
6% Nts., 2/21/12 15,000,000 16,155,360
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Coca-Cola Enterprises, Inc., 5.25% Unsec. Unsub. Nts., 5/15/07 21,029,000 22,317,279
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ConocoPhillips, 3.625% Sr. Unsec. Nts., 10/15/07 9,720,000 9,798,314
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Conseco Financing Trust II, Escrow Shares, 11/15/26 2 51,155,000 --
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Conseco Financing Trust III, Escrow Shares, 4/1/27 2 41,990,000 --
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Conseco, Inc., Escrow Shares, 6/15/07 2 8,000,000 --
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Credit Suisse First Boston, Inc., (USA), 5.75% Nts., 4/15/07 32,620,000 34,806,160
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DaimlerChrysler North America Holding Corp., 3.40% Nts.,
Series D, 12/15/04 19,480,000 19,618,250
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Dominion Resources, Inc., 7.625% Sr. Unsec. Unsub. Nts.,
Series B, 7/15/05 14,440,000 15,361,359
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Ford Motor Co., 7.45% Bonds, 7/16/31 7,610,000 7,439,848
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Ford Motor Credit Co., 6.125% Unsec. Nts., 1/9/06 20,060,000 20,917,705
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General Dynamics Corp., 2.125% Nts., 5/15/06 21,450,000 21,206,092
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General Electric Capital Corp.:
5.35% Nts., Series A, 3/30/06 24,340,000 25,601,615
6% Nts., 6/15/12 19,700,000 21,039,620
13 | OPPENHEIMER QUEST BALANCED FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
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NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- -----------------------------------------------------------------------------------------------
General Mills, Inc., 2.625% Unsec. Unsub. Nts., 10/24/06 $ 38,940,000 $ 38,378,875
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General Motors Acceptance Corp., 6.75% Nts., 1/15/06 38,505,000 40,789,540
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Goldman Sachs Group, Inc. (The), 5.70% Sr. Unsec. Nts., 9/1/12 25,000,000 25,817,800
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Household Finance Corp., 7% Nts., 5/15/12 20,000,000 22,442,540
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International Lease Finance Corp.:
4% Nts., Series O, 1/17/06 27,060,000 27,745,917
5.54% Nts., Series M, 3/21/05 9,725,000 10,036,112
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J.P. Morgan Chase & Co., 5.25% Nts., 5/30/07 46,725,000 49,263,009
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John Deere Capital Corp., 3.125% Sr. Nts., Series D, 12/15/05 19,480,000 19,751,395
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Kraft Foods, Inc., 4.625% Nts., 11/1/06 36,610,000 37,886,298
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Merrill Lynch & Co., Inc., 6.15% Nts., Series B, 1/26/06 31,390,000 33,517,708
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News America Holdings, Inc., 9.25% Sr. Debs., 2/1/13 8,500,000 10,807,079
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Proctor & Gamble Co. (The), 3.50% Nts., 12/15/08 14,600,000 14,451,445
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Safeway, Inc., 7.25% Nts., 9/15/04 15,842,000 16,150,016
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SBC Communications, Inc., 5.75% Sr. Nts., 5/2/06 39,450,000 41,763,861
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Tenet Healthcare Corp., 5% Sr. Nts., 7/1/07 32,275,000 29,854,375
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Time Warner, Inc., 5.625% Sr. Unsec. Nts., 5/1/05 29,270,000 30,339,497
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US Bank NA, 2.85% Nts., 11/15/06 40,300,000 40,554,817
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Verizon Global Funding Corp.:
6.75% Sr. Unsec. Unsub. Nts., 12/1/05 24,350,000 25,991,726
7.375% Sr. Nts., 9/1/12 15,000,000 17,184,120
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Wachovia Corp., 4.95% Nts., 11/1/06 35,810,000 37,500,733
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Walt Disney Co. (The), 7.30% Nts., 2/8/05 24,340,000 25,329,932
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Waste Management, Inc., 6.50% Sr. Unsub. Nts., 11/15/08 8,740,000 9,536,467
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Weyerhaeuser Co., 5.50% Unsec. Unsub. Nts., 3/15/05 37,500,000 38,650,238
---------------
Total Non-Convertible Corporate Bonds and Notes
(Cost $1,118,003,931) 1,130,906,591
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SHORT-TERM NOTES--3.8%
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Canadian Imperial Holdings, Inc., 1.02%, 5/26/04 15,000,000 14,989,375
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Federal Home Loan Bank:
0.93%, 5/25/04 17,000,000 16,989,507
0.93%, 5/26/04 30,000,000 29,980,625
0.95%, 5/3/04 21,585,000 21,583,866
0.96%, 5/17/04 125,129,000 125,076,057
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General Electric Capital Services, 1.02%, 5/26/04 50,609,000 50,573,150
---------------
Total Short-Term Notes (Cost $259,192,582) 259,192,580
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TOTAL INVESTMENTS, AT VALUE (COST $6,415,488,653) 99.6% 6,777,786,577
- -----------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.4 26,043,242
------------------------------
NET ASSETS 100.0% $6,803,829,819
==============================
14 | OPPENHEIMER QUEST BALANCED FUND
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Received as the result of issuer reorganization. Currently has minimal market
value.
3. Represents the current interest rate for a variable or increasing rate
security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15 | OPPENHEIMER QUEST BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES Unaudited
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April 30, 2004
- ---------------------------------------------------------------------------------------------------
ASSETS
- ---------------------------------------------------------------------------------------------------
Investments, at value (including securities loaned of approximately $740,857,000)
(cost $6,415,488,653)--see accompanying statement of investments $6,777,786,577
- ---------------------------------------------------------------------------------------------------
Cash 1,530,422
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Collateral for securities loaned 756,919,886
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Receivables and other assets:
Investments sold 35,389,213
Interest and dividends 24,024,921
Shares of beneficial interest sold 16,831,237
Other 169,165
---------------
Total assets 7,612,651,421
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LIABILITIES
- ---------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 756,919,886
- ---------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 36,435,330
Shares of beneficial interest redeemed 11,810,207
Distribution and service plan fees 1,374,222
Transfer and shareholder servicing agent fees 1,116,100
Shareholder communications 580,400
Trustees' compensation 469,574
Other 115,883
---------------
Total liabilities 808,821,602
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NET ASSETS $6,803,829,819
===============
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COMPOSITION OF NET ASSETS
- ---------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 4,127,636
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Additional paid-in capital 6,863,033,299
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Accumulated net investment income 33,345
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Accumulated net realized loss on investments (425,662,385)
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Net unrealized appreciation on investments 362,297,924
---------------
NET ASSETS $6,803,829,819
===============
16 | OPPENHEIMER QUEST BALANCED FUND
- -------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- -------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $2,775,829,196 and 167,662,413 shares of beneficial interest outstanding) $16.56
Maximum offering price per share (net asset value plus sales charge of
5.75% of offering price) $17.57
- -------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $2,501,203,465
and 152,230,878 shares of beneficial interest outstanding) $16.43
- -------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $1,135,640,877
and 69,115,816 shares of beneficial interest outstanding) $16.43
- -------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $176,799,748
and 10,757,800 shares of beneficial interest outstanding) $16.43
- -------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $214,356,533 and 12,996,654 shares of beneficial interest outstanding) $16.49
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
17 | OPPENHEIMER QUEST BALANCED FUND
STATEMENT OF OPERATIONS Unaudited
- --------------------------------------------------------------------------------
For the Six Months Ended April 30, 2004
- ----------------------------------------------------------------------------------------
INVESTMENT INCOME
- ----------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $654,880) $ 28,029,186
- ----------------------------------------------------------------------------------------
Interest 26,272,029
- ----------------------------------------------------------------------------------------
Portfolio lending fees 442,448
- ----------------------------------------------------------------------------------------
Other income 43,981
--------------
Total investment income 54,787,644
- ----------------------------------------------------------------------------------------
EXPENSES
- ----------------------------------------------------------------------------------------
Management fees 24,426,012
- ----------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 3,218,467
Class B 12,306,493
Class C 5,415,199
Class N 409,235
- ----------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 2,666,442
Class B 2,867,009
Class C 945,104
Class N 240,501
Class Y 150,638
- ----------------------------------------------------------------------------------------
Shareholder communications:
Class A 146,025
Class B 186,153
Class C 56,715
Class N 4,967
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Trustees' compensation 107,297
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Custodian fees and expenses 41,785
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Other 33,680
--------------
Total expenses 53,221,722
Less reduction to custodian expenses (10,511)
Less voluntary waiver of transfer and shareholder servicing agent fees:
Class A (7,944)
Class B (11,955)
Class C (2,356)
--------------
Net expenses 53,188,956
- ----------------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,598,688
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ----------------------------------------------------------------------------------------
Net realized gain on investments 633,123,001
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments (314,517,926)
- ----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 320,203,763
==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18 | OPPENHEIMER QUEST BALANCED FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 2004 OCTOBER 31,
(UNAUDITED) 2003
- ---------------------------------------------------------------------------------------
OPERATIONS
- ---------------------------------------------------------------------------------------
Net investment income $ 1,598,688 $ 37,392,073
- ---------------------------------------------------------------------------------------
Net realized gain 633,123,001 76,105,001
- ---------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (314,517,926) 1,233,709,607
--------------------------------
Net increase in net assets resulting from operations 320,203,763 1,347,206,681
- ---------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (3,075,170) (18,094,923)
Class B -- (8,058,436)
Class C -- (3,846,362)
Class N (36,618) (766,994)
Class Y (433,234) (1,843,901)
- ---------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ---------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A 363,092,751 116,535,156
Class B 72,891,920 24,803,540
Class C 101,624,719 (900,239)
Class N 26,106,200 27,405,091
Class Y 21,819,916 25,736,832
- ---------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------
Total increase 902,194,247 1,508,176,445
- ---------------------------------------------------------------------------------------
Beginning of period 5,901,635,572 4,393,459,127
--------------------------------
End of period (including accumulated net investment
income of $33,345 and $1,979,679, respectively) $6,803,829,819 $5,901,635,572
================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19 | OPPENHEIMER QUEST BALANCED FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS
YEAR YEAR
ENDED ENDED
APRIL 30, 2004 OCT. 31,
CLASS A (UNAUDITED) 2003 2002 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.69 $ 12.02 $ 16.09 $ 16.66 $ 16.41 $ 15.50
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .04 .16 .17 .46 .36 .21
Net realized and unrealized gain
(loss) .85 3.64 (3.53) (.20) .55 2.88
-------------------------------------------------------------------------------------------
Total from investment operations .89 3.80 (3.36) .26 .91 3.09
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income (.02) (.13) (.27) (.53) (.28) (.26)
Distributions from net realized gain -- -- (.44) (.30) (.38) (1.92)
-------------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.02) (.13) (.71) (.83) (.66) (2.18)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 16.56 $ 15.69 $ 12.02 $ 16.09 $ 16.66 $ 16.41
===========================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 5.68% 31.87% (21.88)% 1.64% 5.78% 21.48%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,775,829 $2,287,707 $1,667,143 $1,763,404 $1,027,560 $899,084
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $2,602,306 $1,902,499 $1,960,568 $1,353,860 $1,020,483 $454,409
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 0.47% 1.60% 1.20% 2.61% 2.24% 1.81%
Total expenses 1.23% 3,4 1.38% 3,4 1.51% 3,4 1.47% 3 1.45% 3 1.51% 3
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 65% 92% 108% 88% 105% 58%
1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.
4. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20 | OPPENHEIMER QUEST BALANCED FUND
SIX MONTHS
YEAR YEAR
ENDED ENDED
APRIL 30, 2004 OCT. 31,
CLASS B (UNAUDITED) 2003 2002 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.61 $ 11.98 $ 16.00 $ 16.52 $ 16.28 $ 15.40
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income (loss) (.03) .06 .07 .35 .25 .14
Net realized and unrealized gain
(loss) .85 3.63 (3.52) (.19) .55 2.84
--------------------------------------------------------------------------------------------
Total from investment operations .82 3.69 (3.45) .16 .80 2.98
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income -- (.06) (.13) (.38) (.18) (.18)
Distributions from net realized gain -- -- (.44) (.30) (.38) (1.92)
--------------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders -- (.06) (.57) (.68) (.56) (2.10)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 16.43 $ 15.61 $ 11.98 $ 16.00 $ 16.52 $ 16.28
============================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 5.25% 30.89% (22.38)% 1.03% 5.10% 20.84%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,501,203 $2,306,366 $1,759,167 $1,836,130 $925,476 $801,485
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $2,474,443 $1,985,215 $2,068,300 $1,307,367 $873,470 $355,797
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income (loss) (0.32)% 0.84% 0.56% 2.00% 1.64% 1.21%
Total expenses 2.01% 3,4 2.15% 3,4 2.15% 3,4 2.07% 3 2.06% 3 2.10% 3
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 65% 92% 108% 88% 105% 58%
1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.
4. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21 | OPPENHEIMER QUEST BALANCED FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 2004 OCT. 31,
CLASS C (UNAUDITED) 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.60 $ 11.97 $ 16.00 $ 16.51 $ 16.27 $ 15.40
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income (loss) (.02) .07 .07 .34 .25 .15
Net realized and unrealized gain
(loss) .85 3.62 (3.52) (.18) .55 2.83
---------------------------------------------------------------------------------------
Total from investment operations .83 3.69 (3.45) .16 .80 2.98
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income -- (.06) (.14) (.37) (.18) (.19)
Distributions from net realized gain -- -- (.44) (.30) (.38) (1.92)
---------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders -- (.06) (.58) (.67) (.56) (2.11)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 16.43 $ 15.60 $ 11.97 $ 16.00 $ 16.51 $ 16.27
=======================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 5.32% 30.99% (22.40)% 1.05% 5.10% 20.80%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,135,641 $982,288 $763,338 $751,229 $341,824 $313,506
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $1,089,120 $835,198 $903,426 $502,037 $336,336 $139,356
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income (loss) (0.25)% 0.92% 0.58% 2.00% 1.64% 1.21%
Total expenses 1.94% 3,4 2.08% 3,4 2.13% 3,4 2.07% 3 2.06% 3 2.10% 3
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 65% 92% 108% 88% 105% 58%
1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.
4. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 | OPPENHEIMER QUEST BALANCED FUND
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 2004 OCT. 31,
CLASS N (UNAUDITED) 2003 2002 2001 1
- ------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.58 $ 11.94 $ 16.05 $ 16.84
- ------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .01 .11 .20 .22
Net realized and unrealized gain (loss) .85 3.63 (3.56) (.83)
----------------------------------------------
Total from investment operations .86 3.74 (3.36) (.61)
- ------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.01) (.10) (.31) (.18)
Distributions from net realized gain -- -- (.44) --
----------------------------------------------
Total dividends and/or distributions to
shareholders-- (.01) (.10) (.75) (.18)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 16.43 $ 15.58 $ 11.94 $ 16.05
==============================================
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 5.48% 31.50% (21.99)% (3.71)%
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $176,800 $142,866 $85,744 $19,649
- ------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $165,109 $112,416 $70,477 $ 4,977
- ------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 0.13% 1.23% 1.07% 2.75%
Total expenses 1.56% 1.74% 1.67% 1.58%
Expenses after expense reimbursement or fee
waiver and reduction to custodian expenses N/A 4 1.70% N/A 4,5 N/A 4
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 65% 92% 108% 88%
1. For the period from March 1, 2001 (inception of offering) to October 31,
2001.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23 | OPPENHEIMER QUEST BALANCED FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 2004 OCT. 31,
CLASS Y (UNAUDITED) 2003 2002 2001 2000 1
- -------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.62 $ 11.96 $ 16.05 $ 16.67 $15.65
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .06 .20 .25 .74 .15
Net realized and unrealized gain (loss) .85 3.64 (3.52) (.40) .99
-----------------------------------------------------------------
Total from investment operations .91 3.84 (3.27) .34 1.14
- -------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.04) (.18) (.38) (.66) (.12)
Distributions from net realized gain -- -- (.44) (.30) --
-----------------------------------------------------------------
Total dividends and/or distributions to
shareholders (.04) (.18) (.82) (.96) (.12)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 16.49 $ 15.62 $ 11.96 $ 16.05 $16.67
=================================================================
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 5.81% 32.40% (21.48)% 2.14% 7.32%
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $214,357 $182,409 $118,068 $134,654 $ 144
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $204,600 $145,793 $137,322 $ 77,394 $ 32
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 0.79% 1.89% 1.75% 2.97% 2.46%
Total expenses 0.91% 4 1.05% 4 0.96% 4,5 1.00% 4 0.98% 4
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 65% 92% 108% 88% 105%
1. For the period from May 1, 2000 (inception of offering) to October 31, 2000.
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%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | OPPENHEIMER QUEST BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Quest Balanced Fund (the Fund), formerly Oppenheimer Quest Balanced
Value Fund, a series of Oppenheimer Quest For Value Funds, is an open-end
management investment company registered under the Investment Company Act of
1940, as amended. The Fund's investment objective is to seek a combination of
growth of capital and investment income. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager). The Manager has entered into a subadvisory
agreement with OpCap Advisors.
The Fund offers Class A, Class B, Class C, Class N and Class Y 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. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC. 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 by minor amounts due to each class having
its own expenses directly attributable to that class. Classes A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. 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 listed
or traded on National Stock Exchanges or other domestic or foreign exchanges are
valued based on the last sale price of the security traded on that exchange
prior to the time when the Fund's assets are valued. Securities traded on NASDAQ
are valued based on the closing price provided by NASDAQ prior to the time when
the Fund's assets are valued. In the absence of a sale, the security is valued
at the last sale price on the prior trading day, if it is within the spread of
the closing bid and asked prices, and if not, at the closing bid price.
Securities may be valued primarily using dealer-supplied valuations or a
portfolio pricing service authorized by the Board of Trustees. Securities
(including restricted securities) for which market quotations are not readily
available are valued at their fair value. Foreign securities whose values have
been materially affected by what the Manager identifies as a significant event
occurring before the Fund's assets are valued but after the close of their
respective foreign 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).
25 | OPPENHEIMER QUEST BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund.
As of April 30, 2004, the Fund had available for federal income tax
purposes an estimated unused capital loss carryforward of $425,662,381 expiring
by 2012. This estimated capital loss carryforward represents carryforward as of
the end of the last fiscal year, increased for losses deferred under tax
accounting rules to the current fiscal year and is increased or decreased by
capital losses or gains realized in the first six months of the current fiscal
year. During the six months ended April 30, 2004 and the year ended October 31,
2003, the Fund used $633,123,001 and $28,726,716, respectively, of carryforward
to offset capital gains realized.
26 | OPPENHEIMER QUEST BALANCED FUND
As of October 31, 2003, the Fund had available for federal income tax purposes
an unused capital loss carryforward as follows:
EXPIRING
-------------------------
2010 $1,058,785,382
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for the
Fund's independent trustees. Benefits are based on years of service and fees
paid to each trustee during the years of service. During the six months ended
April 30, 2004, the Fund's projected benefit obligations were increased by
$50,862 and payments of $8,643 were made to retired trustees, resulting in an
accumulated liability of $438,812 as of April 30, 2004.
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 does purchase 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.
- --------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable,
represents earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
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.
27 | OPPENHEIMER QUEST BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
In the ordinary course of business, the Fund enters into contracts that
contain a variety of indemnifications. The Fund's maximum exposure under these
arrangements is unknown. However, the Fund has not had prior claims or losses
pursuant to these contracts and expects the risk of loss to be remote.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $.01 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
SIX MONTHS ENDED APRIL 30, 2004 YEAR ENDED OCTOBER 31, 2003
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------
CLASS A
Sold 36,815,862 $ 612,363,587 44,599,273 $ 625,350,191
Dividends and/or
distributions reinvested 171,201 2,708,370 1,211,270 15,682,192
Redeemed (15,171,687) (251,979,206) (38,714,556) (524,497,227)
----------------------------------------------------------
Net increase 21,815,376 $ 363,092,751 7,095,987 $ 116,535,156
==========================================================
- ------------------------------------------------------------------------------------------
CLASS B
Sold 15,997,497 $ 263,963,832 26,928,476 $ 374,945,073
Dividends and/or
distributions reinvested -- -- 526,821 6,544,923
Redeemed (11,545,044) (191,071,912) (26,540,590) (356,686,456)
----------------------------------------------------------
Net increase 4,452,453 $ 72,891,920 914,707 $ 24,803,540
==========================================================
- ------------------------------------------------------------------------------------------
CLASS C
Sold 11,563,501 $ 190,717,636 13,717,232 $ 193,481,707
Dividends and/or
distributions reinvested -- -- 237,055 2,946,014
Redeemed (5,404,231) (89,092,917) (14,751,471) (197,327,960)
----------------------------------------------------------
Net increase (decrease) 6,159,270 $ 101,624,719 (797,184) $ (900,239)
==========================================================
- ------------------------------------------------------------------------------------------
CLASS N
Sold 3,422,878 $ 56,557,547 4,959,184 $ 68,509,566
Dividends and/or
distributions reinvested 2,269 35,678 59,656 756,892
Redeemed (1,837,217) (30,487,025) (3,028,836) (41,861,367)
----------------------------------------------------------
Net increase 1,587,930 $ 26,106,200 1,990,004 $ 27,405,091
==========================================================
- ------------------------------------------------------------------------------------------
CLASS Y
Sold 2,801,978 $ 46,515,492 3,864,165 $ 53,749,796
Dividends and/or
distributions reinvested 27,524 433,231 141,014 1,843,889
Redeemed (1,513,408) (25,128,807) (2,193,394) (29,856,853)
----------------------------------------------------------
Net increase 1,316,094 $ 21,819,916 1,811,785 $ 25,736,832
==========================================================
28 | OPPENHEIMER QUEST BALANCED FUND
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than U.S. government obligations and short-term obligations, for the six months
ended April 30, 2004, were $2,840,317,035 and $2,492,158,380, respectively.
There were purchases of $1,138,302,777 and sales of $1,209,501,343 of U.S.
government and government agency obligations for the six months ended April 30,
2004.
- --------------------------------------------------------------------------------
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. Effective January 1, 2004, the
agreement provides for a fee at an annual rate of 0.85% of the first $1 billion
of average annual net assets of the Fund, 0.81% of the next $2 billion, 0.76% of
the next $1 billion, 0.71% of the next $1 billion, 0.65% of the next $1 billion,
0.60% of the next $1 billion, 0.55% of the next $1 billion and 0.50% of average
annual net assets in excess of $8 billion. From June 15, 2003 through December
31, 2003, the annual advisory fee rate was: 0.85% of the first $1 billion of
average annual net assets of the Fund, 0.81% of the next $2 billion, 0.76% of
the next $1 billion, 0.71% of the next $1 billion, 0.65% of the next $1 billion
and 0.60% of average annual net assets in excess of $6 billion.
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICES. The Fund pays the Manager a fee of $1,500 per year for
preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
SUB-ADVISOR FEES. The Manager retains OpCap Advisors (the Sub-Advisor) to
provide the day-to-day portfolio management of the Fund. The Manager pays the
Sub-Advisor a monthly fee based on the fee schedule set forth in the Fund's
prospectus. For the six months ended April 30, 2004, the Manager paid $7,218,520
to the Sub-Advisor for its services to the Fund.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the six months ended April 30, 2004, the Fund paid
$6,957,103 to OFS for services to the Fund.
Additionally, Class Y shares are subject to minimum fees of $10,000 for
assets of $10 million or more. The Class Y shares are subject to the minimum
fees in the event that the per account fee does not equal or exceed the
applicable minimum fees. OFS may voluntarily waive the minimum fees.
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.
- --------------------------------------------------------------------------------
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.
29 | OPPENHEIMER QUEST BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A
shares. Under the Plan, the Fund pays a service fee to the Distributor of 0.25%
of the average annual net assets of Class A shares. The Distributor currently
uses all of those fees to pay dealers, brokers, banks and other financial
institutions quarterly for providing personal services and maintenance of
accounts of their customers that hold Class A shares. Under the Plan, the Fund
may also pay an asset-based sales charge to the Distributor. The Board of
Trustees has set the annual asset-based sales charge rate at zero. 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% per year on
Class B shares and on Class C shares and 0.25% per year on Class N shares. The
Distributor also receives a service fee of up to 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 April 30, 2004
for Class B, Class C and Class N shares were $69,525,045, $19,979,199 and
$3,213,033, 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 table below for the period indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
SIX MONTHS RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- ----------------------------------------------------------------------------------------------
April 30, 2004 $1,932,724 $25,132 $2,349,511 $59,148 $104,438
30 | OPPENHEIMER QUEST BALANCED FUND
- --------------------------------------------------------------------------------
5. 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 US
Treasury obligations or cash, against the loaned securities and maintains
collateral in an amount not less than 100% of the market value of the loaned
securities during the period of the loan. The market value of the loaned
securities is determined at the close of business of the funds and any
additional required collateral is delivered to the Fund on the next business
day. If the borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the Fund could experience delays and
cost in recovering the securities loaned or in gaining access to the collateral.
Cash collateral is invested in cash equivalents. The Fund retains a portion of
the interest earned from the collateral. The Fund also continues to receive
interest or dividends paid on the securities loaned. As of April 30, 2004, the
Fund had on loan securities valued at approximately $740,857,000. Cash of
$756,919,886 was received as collateral for the loans, and has been invested in
approved instruments.
- --------------------------------------------------------------------------------
6. BORROWING AND LENDING ARRANGEMENTS
The Fund entered into an "interfund borrowing and lending arrangement" with
other funds in the Oppenheimer funds complex, to allow funds to borrow for
liquidity purposes. The arrangement was initiated pursuant to exemptive relief
granted by the Securities and Exchange Commission (the SEC) to allow these
affiliated funds to lend money to, and borrow money from, each other, in an
attempt to reduce borrowing costs below those of bank loan facilities. The SEC's
order requires the fund's Board of Trustees to adopt operating policies and
procedures to administer interfund borrowing and lending. Under the arrangement
the Fund may lend money to other Oppenheimer funds and may borrow from other
Oppenheimer funds at a rate set by the Fund's Board of Trustees, based upon a
recommendation by the Manager. The Fund's borrowings, if any, are subject to
asset coverage requirements under the Investment Company Act and the provisions
of the SEC order and other applicable regulations. If the Fund borrows money,
there is a risk that the loan could be called on one day's notice, in which case
the Fund might have to borrow from a bank at higher rates if a loan were not
available from another Oppenheimer fund. If the Fund lends money to another
fund, it will be subject to the risk that the other fund might not repay the
loan in a timely manner, or at all.
The Fund had no interfund borrowings or loans outstanding during the six
months ended or at April 30, 2004.
31 | OPPENHEIMER QUEST BALANCED FUND
PORTFOLIO PROXY VOTING
POLICIES AND PROCEDURES Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.225.5677, (ii) on the website at www.oppenheimerfunds.com, and (iii) on
the SEC's website at www.sec.gov. In addition, the Fund will be required to file
new Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The first such filing is due
no later than August 31, 2004, for the twelve months ended June 30, 2004. Once
filed, the Fund's Form N-PX filing will be available (i) without charge, upon
request, by calling the Fund toll-free at 1.800.225.5677, and (ii) on the SEC's
website at www.sec.gov.
32 | OPPENHEIMER QUEST 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
Not applicable to semiannual reports.
Item 5. Not applicable
Item 6. Schedule of Investments
Not applicable
Item 7. Not applicable
Item 8. Not applicable
Item 9. Submission of Matters to a Vote of Security Holders
The Board is responsible for approving nominees for election as
trustees. To assist in this task, the Board has designated the Audit Committee
as the nominating committee for the Board. It reviews and recommends nominees to
the Board. The Committee is comprised entirely of disinterested trustees as
defined in Section 2(a)(19) of the Investment Company Act of 1940.
The Audit Committee charter describes the responsibilities of the
Committee in nominating candidates for election as independent Trustees of the
Registrant. The Registrant's Board has adopted a written charter for the
Committee. A current copy of the Audit Committee charter is available to
shareholders on the OppenheimerFunds website at www.oppenheimerfunds.com.
Under the current policy, if the Board determines that a vacancy
exists or is likely to exist on the Board, the Audit Committee of the Board will
consider candidates for Board membership including recommended by Registrant
shareholders. The Audit Committee will consider nominees recommended by
independent Board members or recommended by any other Board members including
Board members affiliated with the Registrant's investment advisors. The
Committee may, upon Board approval, retain an executive search firm to assist in
screening potential candidates. Upon Board approval, the Audit Committee may
also use the services of legal, financial, or other external counsel that it
deems necessary or desirable in the screening process. Shareholders wishing to
submit a nominee for election to the Board may do so by mailing their submission
to the offices of OppenheimerFunds, Inc., 6803 South Tucson Way, Centennial, CO
80112, to the attention of the Board of Trustees of the named Registrant, c/o
the Secretary of the Registrant.
The Committee's process for identifying and evaluating nominees for
trustees includes a number of factors. In screening candidates for board
membership, whether the candidate is suggested by Board members, shareholders or
others, the Committee considers the candidate's professional experience,
soundness of judgment, integrity, ability to make independent, analytical
inquiries, collegiality, willingness and ability to devote the time required to
perform Board activities adequately, ability to represent the interests of all
shareholders of the Registrant, and diversity relative to the board's
composition. Candidates are expected to provide a mix of attributes, experience,
perspective and skills necessary to effectively advance the interests of
shareholders.
Item 10. Controls and Procedures
(a) Based on their evaluation of registrant's disclosure controls and
procedures (as defined in rule 30a-2(c) under the Investment
Company Act of 1940 (17 CFR 270.30a-2(c)) as of April 30, 2004,
registrant's principal executive officer and principal financial
officer found registrant's disclosure controls and procedures to
provide reasonable assurances that information required to be
disclosed by registrant in the reports that it files under the
Securities Exchange Act of 1934 (a) is accumulated and
communicated to registrant's management, including its principal
executive officer and principal financial officer, to allow timely
decisions regarding required disclosure, and (b) is recorded,
processed, summarized and reported, within the time periods
specified in the rules and forms adopted by the U.S. Securities
and Exchange Commission.
(b) There have been no significant changes in registrant's internal
controls over financial reporting that occurred during the
registrant's last fiscal half-year that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
Item 11. Exhibits.
(a) Exhibit attached hereto. (Attach code of ethics as exhibit)
(b) Exhibits attached hereto. (Attach certifications as exhibits)