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
(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 - October 31, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
TOP HOLDINGS AND ALLOCATIONS
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TOP TEN COMMON STOCK HOLDINGS
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ConocoPhillips 4.9%
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Sanofi-Aventis SA, ADR 4.5
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Wal-Mart Stores, Inc. 4.5
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Royal Caribbean Cruises Ltd. 3.8
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DirecTV Group, Inc. (The) 3.7
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Hartford Financial Services Group, Inc. (The) 3.6
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Texas Instruments, Inc. 3.4
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Alcan, Inc. 3.0
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Inco Ltd. 2.9
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Intel Corp. 2.6
Portfolio holdings and allocations are subject to change. Percentages are as of
October 31, 2004, and are based on net assets.
For more current Fund holdings, please visit www.oppenheimerfunds.com.
TOP TEN COMMON STOCK INDUSTRIES
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Insurance 10.0%
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Oil & Gas 8.8
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Semiconductors & Semiconductor Equipment 6.9
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Pharmaceuticals 6.5
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Metals & Mining 5.9
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Food & Staples Retailing 4.5
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Hotels, Restaurants & Leisure 3.7
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Media 3.7
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Communications Equipment 3.5
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Specialty Retail 3.1
Portfolio holdings and allocations are subject to change. Percentages are as of
October 31, 2004, and are based on net assets.
7 | OPPENHEIMER QUEST BALANCED FUND
TOP HOLDINGS AND ALLOCATIONS
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PORTFOLIO ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Stocks 72.5%
Bonds and Notes 26.3
Cash Equivalents 1.2
Portfolio holdings and allocations are subject to change. Percentages are as of
October 31, 2004, and are based on total investments (excluding investments
purchased with cash collateral from securities loaned).
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8 | OPPENHEIMER QUEST BALANCED FUND
FUND PERFORMANCE DISCUSSION
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HOW HAS THE FUND PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS, INC., OF
THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR ENDED OCTOBER 31, 2004, FOLLOWED
BY A GRAPHICAL COMPARISON OF THE FUND'S PERFORMANCE TO AN APPROPRIATE
BROAD-BASED MARKET INDEX.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. In the 12 months ended October 31,
2004, Oppenheimer Quest Balanced Fund outperformed the U.S. equity market and
its Lipper Inc. peer group of balanced funds. The Fund's solid performance was
due to strong results for a wide variety of individual stocks in the portfolio.
As always, we emphasized undervalued or out-of-favor stocks that, in our
view, had been oversold and stood to appreciate once investor sentiment factored
in the corporate environment and/or the company's underappreciated strengths. As
a result, our weighting in financials decreased, while our energy and technology
weightings increased.
The top contributors to performance were AT&T Wireless Services, Inc. and
Royal Caribbean Cruises Ltd. In anticipation of consolidation within their
respective industries, we had purchased these stocks at prices well below their
intrinsic values during periods when their industries were suffering from
overcapacity and/or excessive competition. AT&T Wireless was strategically
positioned to be acquired, and the Fund benefited when AT&T Wireless was, as
expected, acquired at a higher share price than our cost. We have since exited
the position. As for Royal Caribbean, our expectations of consolidation and,
consequently, better operating margins were on target, and Royal Caribbean's
stock price has climbed sharply in the past year. We have maintained our
investment.
Also making sizable contributions were British Petroleum plc, which
benefited from rising oil prices, and mortgage lender Freddie Mac. Freddie Mac's
stock had suffered previously from news of accounting restatements and the
dismissal of its senior management team. Yet, the operations were intact and the
financial risk was relatively small. Over the course of this fiscal year, many
of Freddie Mac's issues were resolved, the stock rebounded, and we sold our
holdings.
Detracting from results were the technology giant Intel Corp., where
management has done a poor job, in our opinion; Dollar General Corp., a discount
retailer that suffered from a falloff in consumer spending during the summer
months; and UnumProvident Corp., a disability insurance company, held back by
weak profits and ratings problems. In addition, performance would have been
stronger had we assumed a more aggressive position in the bond portfolio. Early
on, we reduced the bond portfolio's sensitivity to rising interest rates,
emphasizing short-term, primarily investment-grade Treasury and corporate bonds.
As short-term rates rose and long-term rates remained unchanged, our cautious
positioning resulted in modest underperformance for the bond portfolio.
9 | OPPENHEIMER QUEST BALANCED FUND
FUND PERFORMANCE DISCUSSION
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COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each class of shares of the
Fund held until October 31, 2004. 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. In the case of Class Y shares performance is measured from the inception
of the Class on May 1, 2000. 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. 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.
10 | OPPENHEIMER QUEST BALANCED FUND
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Quest Balanced Fund SM (Class A)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Quest
Balanced Fund SM
Date (Class A) S&P 500 Index
10/31/1994 9,425 10,000
01/31/1995 9,177 10,032
04/30/1995 10,284 11,046
07/31/1995 11,471 12,142
10/31/1995 10,966 12,641
01/31/1996 11,942 13,907
04/30/1996 12,466 14,380
07/31/1996 12,188 14,152
10/31/1996 13,362 15,685
01/31/1997 14,452 17,568
04/30/1997 14,133 17,992
07/31/1997 16,439 21,527
10/31/1997 16,727 20,720
01/31/1998 18,140 22,294
04/30/1998 20,219 25,381
07/31/1998 19,637 25,683
10/31/1998 21,394 25,280
01/31/1999 24,486 29,541
04/30/1999 25,714 30,921
07/31/1999 25,799 30,872
10/31/1999 25,990 31,768
01/31/2000 25,447 32,596
04/30/2000 25,779 34,050
07/31/2000 25,120 33,640
10/31/2000 27,493 33,699
01/31/2001 29,370 32,303
04/30/2001 29,992 29,636
07/31/2001 29,799 28,822
10/31/2001 27,945 25,312
01/31/2002 28,100 27,091
04/30/2002 26,639 25,897
07/31/2002 22,104 22,015
10/31/2002 21,830 21,490
01/31/2003 23,017 20,858
04/30/2003 24,759 22,451
07/31/2003 26,831 24,357
10/31/2003 28,787 25,958
01/31/2004 31,158 28,064
04/30/2004 30,423 27,585
07/31/2004 30,852 27,563
10/31/2004 31,605 28,401
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE FUND AT
10/31/04
1-Year 3.48% 5-Year 2.77% 10-Year 12.20%
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.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 16 FOR FURTHER
INFORMATION.
11 | OPPENHEIMER QUEST BALANCED FUND
FUND PERFORMANCE DISCUSSION
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CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Quest Balanced Fund SM (Class B)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Quest
Balanced Fund SM
Date (Class B) S&P 500 Index
10/31/1994 10,000 10,000
01/31/1995 9,724 10,032
04/30/1995 10,879 11,046
07/31/1995 12,114 12,142
10/31/1995 11,566 12,641
01/31/1996 12,580 13,907
04/30/1996 13,106 14,380
07/31/1996 12,795 14,152
10/31/1996 14,002 15,685
01/31/1997 15,126 17,568
04/30/1997 14,773 17,992
07/31/1997 17,163 21,527
10/31/1997 17,440 20,720
01/31/1998 18,887 22,294
04/30/1998 21,010 25,381
07/31/1998 20,372 25,683
10/31/1998 22,163 25,280
01/31/1999 25,333 29,541
04/30/1999 26,570 30,921
07/31/1999 26,614 30,872
10/31/1999 26,781 31,768
01/31/2000 26,171 32,596
04/30/2000 26,487 34,050
07/31/2000 25,752 33,640
10/31/2000 28,156 33,699
01/31/2001 30,078 32,303
04/30/2001 30,715 29,636
07/31/2001 30,518 28,822
10/31/2001 28,618 25,312
01/31/2002 28,777 27,091
04/30/2002 27,281 25,897
07/31/2002 22,636 22,015
10/31/2002 22,356 21,490
01/31/2003 23,572 20,858
04/30/2003 25,356 22,451
07/31/2003 27,478 24,357
10/31/2003 29,481 25,958
01/31/2004 31,909 28,064
04/30/2004 31,157 27,585
07/31/2004 31,595 27,563
10/31/2004 32,367 28,401
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE FUND AT
10/31/04
1-Year 3.97% 5-Year 2.93% 10-Year 12.46%
12 | OPPENHEIMER QUEST BALANCED FUND
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Quest Balanced Fund SM (Class C)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Quest
Balanced Fund SM
Date (Class C) S&P 500 Index
10/31/1994 10,000 10,000
01/31/1995 9,717 10,032
04/30/1995 10,867 11,046
07/31/1995 12,091 12,142
10/31/1995 11,538 12,641
01/31/1996 12,541 13,907
04/30/1996 13,064 14,380
07/31/1996 12,755 14,152
10/31/1996 13,957 15,685
01/31/1997 15,069 17,568
04/30/1997 14,718 17,992
07/31/1997 17,099 21,527
10/31/1997 17,378 20,720
01/31/1998 18,823 22,294
04/30/1998 20,938 25,381
07/31/1998 20,306 25,683
10/31/1998 22,090 25,280
01/31/1999 25,240 29,541
04/30/1999 26,475 30,921
07/31/1999 26,535 30,872
10/31/1999 26,685 31,768
01/31/2000 26,077 32,596
04/30/2000 26,392 34,050
07/31/2000 25,675 33,640
10/31/2000 28,046 33,699
01/31/2001 29,926 32,303
04/30/2001 30,524 29,636
07/31/2001 30,272 28,822
10/31/2001 28,342 25,312
01/31/2002 28,469 27,091
04/30/2002 26,957 25,897
07/31/2002 22,332 22,015
10/31/2002 21,995 21,490
01/31/2003 23,167 20,858
04/30/2003 24,895 22,451
07/31/2003 26,908 24,357
10/31/2003 28,810 25,958
01/31/2004 31,137 28,064
04/30/2004 30,343 27,585
07/31/2004 30,731 27,563
10/31/2004 31,432 28,401
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE FUND AT
10/31/04
1-Year 8.10% 5-Year 3.33% 10-Year 12.13%
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.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. 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. SEE PAGE 16 FOR FURTHER
INFORMATION.
13 | OPPENHEIMER QUEST BALANCED FUND
FUND PERFORMANCE DISCUSSION
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CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Quest Balanced Fund SM (Class N)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Quest
Balanced Fund SM
Date (Class N) S&P 500 Index
03/01/2001 10,000 10,000
04/30/2001 10,345 10,094
07/31/2001 10,271 9,817
10/31/2001 9,630 8,621
01/31/2002 9,690 9,227
04/30/2002 9,183 8,821
07/31/2002 7,616 7,499
10/31/2002 7,512 7,320
01/31/2003 7,920 7,104
04/30/2003 8,514 7,647
07/31/2003 9,219 8,296
10/31/2003 9,879 8,841
01/31/2004 10,686 9,559
04/30/2004 10,420 9,396
07/31/2004 10,567 9,388
10/31/2004 10,814 9,674
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE FUND AT
10/31/04
1-Year 8.47% 5-Year N/A Since Inception(3/1/01) 2.16%
14 | OPPENHEIMER QUEST BALANCED FUND
CLASS Y SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Quest Balanced Fund SM (Class Y)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Quest
Balanced Fund SM
Date (Class Y) S&P 500 Index
05/01/2000 10,000 10,000
07/31/2000 9,795 9,879
10/31/2000 10,732 9,897
01/31/2001 11,482 9,487
04/30/2001 11,740 8,703
07/31/2001 11,677 8,464
10/31/2001 10,962 7,434
01/31/2002 11,046 7,956
04/30/2002 10,484 7,605
07/31/2002 8,712 6,466
10/31/2002 8,607 6,311
01/31/2003 9,089 6,126
04/30/2003 9,787 6,594
07/31/2003 10,611 7,153
10/31/2003 11,396 7,623
01/31/2004 12,344 8,242
04/30/2004 12,058 8,101
07/31/2004 12,247 8,095
10/31/2004 12,555 8,341
AVERAGE ANNUAL TOTAL RETURNS OF CLASS Y SHARES OF THE FUND AT 10/31/04
1-Year 10.17% 5-Year N/A Since Inception(5/1/00) 5.19%
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.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 16 FOR FURTHER
INFORMATION.
15 | OPPENHEIMER QUEST BALANCED FUND
NOTES
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Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. The Fund's total returns shown do
not reflect the deduction of income taxes on an individual's investment. Taxes
may reduce your actual investment returns on income or gains paid by the Fund or
any gains you may realize if you sell your shares.
Investors should consider the Fund's investment objectives, risks, and other
charges and expenses carefully before investing. The Fund's prospectus contains
this and other information about the Fund, and may be obtained by asking your
financial advisor, calling us at 1.800.525.7048 or visiting our website at
www.oppenheimerfunds.com. Read the prospectus carefully before investing.
The Fund's investment strategy and focus can change over time. The mention of
specific fund holdings does not constitute a recommendation by OppenheimerFunds,
Inc.
OppenheimerFunds, Inc. became the Fund's advisor on 11/22/95. The Fund's
subadvisor during the period was OpCap Advisors, which was the Fund's advisor
prior to 11/22/95. The portfolio manager during the period was employed by the
Fund's subadvisor.
CLASS A shares of the Fund were first publicly offered on 11/1/91. 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 11/24/95, so actual performance may have been higher. Class A shares
are subject to a maximum annual 0.15% asset-based sales charge. There is a
voluntary waiver of a portion of the Class A asset-based sales charge as
described in the Prospectus.
CLASS B shares of the Fund were first publicly offered on 9/1/93. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charges 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 does not
include any contingent deferred sales charge on redemptions and 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 9/1/93. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the one-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
CLASS N shares of the Fund were first publicly offered on 3/1/01. Class N shares
are offered only through retirement plans. Unless otherwise noted, Class N
returns include the contingent deferred sales charge of 1% for the one-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
CLASS Y shares of the Fund were first publicly offered on 5/1/00. Class Y shares
are offered only to certain institutional investors under special agreement with
the Distributor.
An explanation of the calculation of performance is in the Fund's Statement of
Additional Information.
16 | OPPENHEIMER QUEST 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 October 31, 2004.
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
17 | OPPENHEIMER QUEST BALANCED FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
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
(5/1/04) (10/31/04) OCTOBER 31, 2004
- ------------------------------------------------------------------------
Class A Actual $ 1,000.00 $ 1,038.90 $ 6.17
- ------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,019.10 6.11
- ------------------------------------------------------------------------
Class B Actual 1,000.00 1,035.30 10.23
- ------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,015.13 10.13
- ------------------------------------------------------------------------
Class C Actual 1,000.00 1,035.90 9.92
- ------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,015.43 9.82
- ------------------------------------------------------------------------
Class N Actual 1,000.00 1,037.80 7.92
- ------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,017.39 7.84
- ------------------------------------------------------------------------
Class Y Actual 1,000.00 1,041.20 4.63
- ------------------------------------------------------------------------
Class Y Hypothetical 1,000.00 1,020.61 4.58
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 184/366
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended October 31, 2004 are as follows:
CLASS EXPENSE RATIOS
- ------------------------
Class A 1.20%
- ------------------------
Class B 1.99
- ------------------------
Class C 1.93
- ------------------------
Class N 1.54
- ------------------------
Class Y 0.90
18 | OPPENHEIMER QUEST BALANCED FUND
STATEMENT OF INVESTMENTS October 31, 2004
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMON STOCKS--72.5%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--11.9%
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--3.8%
Royal Caribbean Cruises Ltd. 5,845,400 $ 272,395,640
- --------------------------------------------------------------------------------
MEDIA--3.7%
DirecTV Group, Inc. (The) 1 16,000,000 268,320,000
- --------------------------------------------------------------------------------
MULTILINE RETAIL--1.3%
Dollar General Corp. 5,200,000 100,100,000
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--3.1%
Abercrombie & Fitch Co., Cl. A 1,344,600 52,681,428
- --------------------------------------------------------------------------------
Office Depot, Inc. 1 10,098,500 163,494,715
- --------------------------------------------------------------------------------
Tiffany & Co. 294,800 8,646,484
-------------
224,822,627
- --------------------------------------------------------------------------------
CONSUMER STAPLES--4.5%
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--4.5%
Wal-Mart Stores, Inc. 6,000,000 323,520,000
- --------------------------------------------------------------------------------
ENERGY--9.1%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.3%
Nabors Industries Ltd. 1 500,000 24,560,000
- --------------------------------------------------------------------------------
OIL & GAS--8.8%
BP plc, ADR 3,000,000 174,750,000
- --------------------------------------------------------------------------------
ChevronTexaco Corp. 2,000,000 106,120,000
- --------------------------------------------------------------------------------
ConocoPhillips 4,250,000 358,317,500
-------------
639,187,500
- --------------------------------------------------------------------------------
FINANCIALS--12.2%
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--2.2%
American Express Co. 3,000,000 159,210,000
- --------------------------------------------------------------------------------
INSURANCE--10.0%
AMBAC Financial Group, Inc. 2,000,000 156,120,000
- --------------------------------------------------------------------------------
American International Group, Inc. 3,000,000 182,130,000
- --------------------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The) 4,500,000 263,160,000
- --------------------------------------------------------------------------------
UnumProvident Corp. 9,000,000 122,940,000
-------------
724,350,000
- --------------------------------------------------------------------------------
HEALTH CARE--10.7%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--2.8%
Amgen, Inc. 1 2,000,000 113,600,000
- --------------------------------------------------------------------------------
Wyeth 2,206,400 87,483,760
-------------
201,083,760
19 | OPPENHEIMER QUEST BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--1.4%
Anthem, Inc. 1 1,300,000 $ 104,520,000
- --------------------------------------------------------------------------------
PHARMACEUTICALS--6.5%
Pfizer, Inc. 5,000,000 144,750,000
- --------------------------------------------------------------------------------
Sanofi-Aventis SA, ADR 9,000,000 328,500,000
-------------
473,250,000
- --------------------------------------------------------------------------------
INDUSTRIALS--2.4%
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--1.3%
ChoicePoint, Inc. 1 2,200,000 91,586,000
- --------------------------------------------------------------------------------
MACHINERY--1.1%
SPX Corp. 2,157,700 82,747,795
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--13.3%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--3.5%
Cisco Systems, Inc. 1 9,624,400 184,884,724
- --------------------------------------------------------------------------------
JDS Uniphase Corp. 1 22,000,000 69,740,000
-------------
254,624,724
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--2.1%
Flextronics International Ltd. 1 12,400,000 149,420,000
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--6.9%
Freescale Semiconductor, Inc., Cl. A 1 4,500,000 69,930,000
- --------------------------------------------------------------------------------
Intel Corp. 8,500,000 189,210,000
- --------------------------------------------------------------------------------
Texas Instruments, Inc. 10,000,000 244,500,000
-------------
503,640,000
- --------------------------------------------------------------------------------
SOFTWARE--0.8%
Cadence Design Systems, Inc. 1 4,394,400 54,666,336
- --------------------------------------------------------------------------------
MATERIALS--8.4%
- --------------------------------------------------------------------------------
METALS & MINING--5.9%
Alcan, Inc. 4,700,000 217,704,000
- --------------------------------------------------------------------------------
Inco Ltd. 1 5,900,000 208,860,000
-------------
426,564,000
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--2.5%
International Paper Co. 4,800,000 184,848,000
-------------
Total Common Stocks (Cost $4,906,569,793) 5,263,416,382
UNITS
- --------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- --------------------------------------------------------------------------------
Conseco, Inc. Wts., Exp. 9/10/08 1 (Cost $1,000,000) 200,000 472,000
20 | OPPENHEIMER QUEST BALANCED FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--3.9%
- --------------------------------------------------------------------------------
U.S. Treasury Nts.:
1.625%, 3/31/05 $221,200,000 $ 220,871,739
2.625%, 3/15/09 65,155,000 63,724,652
-------------
Total U.S. Government Obligations
(Cost $280,949,359) 284,596,391
- --------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--22.4%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--2.9%
- --------------------------------------------------------------------------------
AUTOMOBILES--1.4%
DaimlerChrysler North America Holding Corp.:
3.40% Nts., Series D, 12/15/04 19,480,000 19,493,227
7.40% Unsec. Nts., 1/20/05 14,600,000 14,755,329
- --------------------------------------------------------------------------------
Ford Motor Co., 7.45% Bonds, 7/16/31 7,610,000 7,432,337
- --------------------------------------------------------------------------------
Ford Motor Credit Co., 6.125% Unsec. Nts., 1/9/06 20,060,000 20,732,792
- --------------------------------------------------------------------------------
General Motors Acceptance Corp., 6.75% Nts., 1/15/06 38,505,000 39,861,570
-------------
102,275,255
- --------------------------------------------------------------------------------
MEDIA--1.5%
News America Holdings, Inc., 9.25% Sr. Debs., 2/1/13 8,500,000 11,016,697
- --------------------------------------------------------------------------------
Time Warner, Inc., 5.625% Sr. Unsec. Nts., 5/1/05 29,270,000 29,715,606
- --------------------------------------------------------------------------------
Viacom, Inc., 6.40% Sr. Nts., 1/30/06 38,950,000 40,730,171
- --------------------------------------------------------------------------------
Walt Disney Co. (The), 7.30% Nts., 2/8/05 24,340,000 24,660,655
-------------
106,123,129
- --------------------------------------------------------------------------------
CONSUMER STAPLES--3.9%
- --------------------------------------------------------------------------------
BEVERAGES--0.6%
Coca-Cola Enterprises, Inc., 5.25% Unsec. Unsub.
Nts., 5/15/07 41,139,000 43,297,399
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--0.9%
CVS Corp., 3.875% Unsec. Nts., 11/1/07 24,360,000 24,786,032
- --------------------------------------------------------------------------------
Safeway, Inc., 6.15% Sr. Unsec. Nts., 3/1/06 40,125,000 41,805,555
-------------
66,591,587
- --------------------------------------------------------------------------------
FOOD PRODUCTS--1.9%
General Mills, Inc., 2.625% Unsec. Unsub.
Nts., 10/24/06 43,810,000 43,398,142
- --------------------------------------------------------------------------------
Kellogg Co., 2.875% Nts., 6/1/08 33,760,000 33,117,277
- --------------------------------------------------------------------------------
Kraft Foods, Inc., 4.625% Nts., 11/1/06 36,610,000 37,698,598
- --------------------------------------------------------------------------------
Tyson Foods, Inc., 7.25% Sr. Unsec. Nts., 10/1/06 24,350,000 26,145,545
-------------
140,359,562
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--0.5%
Proctor & Gamble Co. (The), 3.50% Nts., 12/15/08 33,490,000 33,685,180
21 | OPPENHEIMER QUEST BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
ENERGY--1.2%
- --------------------------------------------------------------------------------
OIL & GAS--1.2%
ChevronTexaco Capital Co., 3.50% Nts., 9/17/07 $ 43,790,000 $ 44,357,037
- --------------------------------------------------------------------------------
ConocoPhillips, 3.625% Sr. Unsec. Nts., 10/15/07 40,890,000 41,329,731
-------------
85,686,768
- --------------------------------------------------------------------------------
FINANCIALS--6.8%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--0.5%
Credit Suisse First Boston, Inc. (USA), 5.75%
Nts., 4/15/07 32,620,000 34,638,982
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--2.0%
Household Finance Corp., 7% Nts., 5/15/12 20,000,000 23,140,420
- --------------------------------------------------------------------------------
KeyCorp, 2.75% Sr. Nts., Series G, 2/27/07 43,615,000 43,262,329
- --------------------------------------------------------------------------------
US Bank NA, 2.85% Nts., 11/15/06 40,300,000 40,295,325
- --------------------------------------------------------------------------------
Wachovia Corp., 4.95% Nts., 11/1/06 40,680,000 42,303,010
-------------
149,001,084
- --------------------------------------------------------------------------------
CONSUMER FINANCE--0.3%
American Express Credit Corp., 3% Nts., 5/16/08 19,460,000 19,196,434
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--3.4%
American Express Co., 5.50% Nts., 9/12/06 41,100,000 43,062,607
- --------------------------------------------------------------------------------
Bear Stearns Cos., Inc. (The), 6.25% Sr. Unsec.
Nts., 7/15/05 24,860,000 25,513,122
- --------------------------------------------------------------------------------
CIT Group, Inc., 7.75% Sr. Unsec. Unsub.
Nts., 4/2/12 15,000,000 17,881,845
- --------------------------------------------------------------------------------
Citigroup, Inc.:
5% Nts., 3/6/07 26,426,000 27,587,978
6% Nts., 2/21/12 15,000,000 16,667,625
- --------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The), 5.70%
Sr. Unsec. Nts., 9/1/12 25,000,000 26,670,525
- --------------------------------------------------------------------------------
JPMorgan Chase & Co., 5.25% Nts., 5/30/07 46,725,000 49,033,589
- --------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 6.15% Nts.,
Series B, 1/26/06 38,390,000 40,016,815
-------------
246,434,106
- --------------------------------------------------------------------------------
INSURANCE--0.6%
International Lease Finance Corp., 4% Nts.,
Series O, 1/17/06 41,660,000 42,272,027
- --------------------------------------------------------------------------------
HEALTH CARE--1.0%
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--0.4%
Tenet Healthcare Corp., 5% Sr. Nts., 7/1/07 32,275,000 32,275,000
- --------------------------------------------------------------------------------
PHARMACEUTICALS--0.6%
Bristol-Myers Squibb Co., 4.75% Nts., 10/1/06 38,950,000 40,260,668
- --------------------------------------------------------------------------------
INDUSTRIALS--3.2%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--1.2%
Boeing Capital Corp., 6.50% Nts., 2/15/12 10,000,000 11,270,740
- --------------------------------------------------------------------------------
General Dynamics Corp., 2.125% Nts., 5/15/06 40,930,000 40,578,207
- --------------------------------------------------------------------------------
Northrop Grumman Corp., 4.079% Nts., 11/16/06 34,100,000 34,721,166
-------------
86,570,113
22 | OPPENHEIMER QUEST BALANCED FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS--0.6%
FedEx Corp., 2.65% Unsec. Nts., 4/1/07 $ 43,830,000 $ 43,315,260
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.4%
Cendant Corp., 6.875% Sr. Unsec. Nts., 8/15/06 15,100,000 16,095,135
- --------------------------------------------------------------------------------
Waste Management, Inc., 6.50% Sr.
Unsub. Nts., 11/15/08 8,740,000 9,647,256
-------------
25,742,391
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--0.6%
General Electric Capital Corp.:
5.35% Nts., Series A, 3/30/06 24,340,000 25,243,744
6% Nts., 6/15/12 19,700,000 21,663,046
-------------
46,906,790
- --------------------------------------------------------------------------------
MACHINERY--0.4%
John Deere Capital Corp., 3.125% Sr. Nts.,
Series D, 12/15/05 29,200,000 29,314,084
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--0.5%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--0.5%
Motorola, Inc., 4.608% Nts., 11/16/07 38,960,000 40,145,748
- --------------------------------------------------------------------------------
MATERIALS--0.8%
- --------------------------------------------------------------------------------
METALS & MINING--0.6%
Alcoa, Inc., 4.25% Sr. Unsec. Nts., 8/15/07 44,705,000 45,996,662
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.2%
Weyerhaeuser Co., 5.50% Unsec. Unsub. Nts., 3/15/05 11,091,000 11,207,866
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--1.5%
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.2%
SBC Communications, Inc., 5.75% Sr. Nts., 5/2/06 39,450,000 41,186,786
- --------------------------------------------------------------------------------
Verizon Global Funding Corp.:
6.75% Sr. Unsec. Unsub. Nts., 12/1/05 24,350,000 25,438,007
7.375% Sr. Nts., 9/1/12 15,000,000 17,845,860
-------------
84,470,653
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.3%
AT&T Wireless Services, Inc., 7.35%
Sr. Unsec. Nts., 3/1/06 24,740,000 26,212,822
- --------------------------------------------------------------------------------
UTILITIES--0.6%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.2%
Dominion Resources, Inc., 7.625% Sr. Unsec.
Unsub. Nts., Series B, 7/15/05 14,440,000 14,942,859
- --------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--0.4%
Duke Capital LLC, 4.302% Sr. Unsec. Nts., 5/18/06 28,130,000 28,624,216
-------------
Total Non-Convertible Corporate Bonds and Notes
(Cost $1,606,757,969) 1,625,546,645
23 | OPPENHEIMER QUEST BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
SHORT-TERM NOTES--1.2%
- --------------------------------------------------------------------------------
American Express Credit Corp., 1.70%, 11/2/04 $ 13,000,000 $ 12,999,381
- --------------------------------------------------------------------------------
Canadian Imperial Holdings, Inc., 1.89%, 12/1/04 25,000,000 24,960,624
- --------------------------------------------------------------------------------
Federal Home Loan Bank, 1.69%, 11/1/04 48,003,000 48,003,000
---------------
Total Short-Term Notes (Cost $85,963,005) 85,963,005
- --------------------------------------------------------------------------------
Total Investments, at Value (excluding investments
purchased with cash collateral from securities
loaned) (Cost $6,881,240,126) 7,259,994,423
- --------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED--5.1%
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--0.3%
Trust Money Market Securities 2 10,000,000 10,000,000
White Hawk CDO Funding Corp. 2 12,000,000 12,000,000
---------------
22,000,000
- --------------------------------------------------------------------------------
FUNDING AGREEMENT/GIC--0.0%
Protective Life Insurance Co. 2 2,000,000 2,000,000
- --------------------------------------------------------------------------------
MEDIUM-TERM NOTES--0.9%
Deutsche Bank AG (GE) 2 25,000,000 25,000,000
International Lease Finance Corp. 2 40,127,968 40,127,968
---------------
65,127,968
- --------------------------------------------------------------------------------
TIME DEPOSITS--0.5%
Bank Nederlandse Gemeenten BNG 2 25,000,000 25,000,000
Caja de Madrid 2 14,000,000 14,000,000
---------------
39,000,000
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--3.4%
Greenwich Capital 2 8,291,990 8,291,990
UBS Securities LLC 2 30,764,400 30,764,400
UBS Securities LLC 2 203,860,000 203,860,000
---------------
242,916,390
Total Investments Purchased with Cash Collateral
from Securities Loaned (Cost $371,044,358) 371,044,358
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $7,252,284,484) 105.1% 7,631,038,781
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (5.1) (373,255,491)
-----------------------------
NET ASSETS 100.0% $7,257,783,290
=============================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. The security has 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 5 of Notes to Financial
Statements.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | OPPENHEIMER QUEST BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES October 31, 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------------------------------
Investments, at value (including securities loaned of $391,744,555)
(cost $7,252,284,484)--see accompanying statement of investments $ 7,631,038,781
- --------------------------------------------------------------------------------------------------------
Cash 1,354,443
- --------------------------------------------------------------------------------------------------------
Collateral for securities loaned 27,744,753
- --------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 49,309,329
Interest and dividends 25,505,722
Shares of beneficial interest sold 7,927,456
Other 151,094
-----------------
Total assets 7,743,031,578
- --------------------------------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 398,789,111
- --------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 70,294,980
Shares of beneficial interest redeemed 12,334,325
Distribution and service plan fees 1,471,082
Transfer and shareholder servicing agent fees 1,262,383
Trustees' compensation 530,289
Shareholder communications 394,914
Other 171,204
-----------------
Total liabilities 485,248,288
- --------------------------------------------------------------------------------------------------------
NET ASSETS $ 7,257,783,290
=================
- --------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- --------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 4,245,788
- --------------------------------------------------------------------------------------------------------
Additional paid-in capital 7,058,641,728
- --------------------------------------------------------------------------------------------------------
Accumulated net investment loss (518,804)
- --------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (183,339,719)
- --------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 378,754,297
-----------------
NET ASSETS $ 7,257,783,290
=================
25 | OPPENHEIMER QUEST BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES Continued
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- -------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of $3,054,761,474 and
177,656,623 shares of beneficial interest outstanding) $ 17.19
Maximum offering price per share (net asset value plus sales charge of
5.75% of offering price) $ 18.24
- -------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $2,549,068,929 and 149,851,508
shares of beneficial interest outstanding) $ 17.01
- -------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $1,207,728,547 and 70,974,694
shares of beneficial interest outstanding) $ 17.02
- -------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $207,449,822 and 12,165,656
shares of beneficial interest outstanding) $ 17.05
- -------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net assets of
$238,774,518 and 13,930,350 shares of beneficial interest outstanding) $ 17.14
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | OPPENHEIMER QUEST BALANCED FUND
STATEMENT OF OPERATIONS For the Year Ended October 31, 2004
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
INVESTMENT INCOME
- ------------------------------------------------------------------------------
Interest $ 53,905,201
- ------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $1,056,744) 52,980,496
- ------------------------------------------------------------------------------
Portfolio lending fees 1,244,910
-----------------
Total investment income 108,130,607
- ------------------------------------------------------------------------------
EXPENSES
- ------------------------------------------------------------------------------
Management fees 50,570,841
- ------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 6,845,930
Class B 24,952,922
Class C 11,290,179
Class N 898,689
- ------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 5,581,622
Class B 5,660,443
Class C 1,936,187
Class N 525,000
Class Y 323,294
- ------------------------------------------------------------------------------
Shareholder communications:
Class A 271,924
Class B 486,354
Class C 136,633
Class N 5,120
- ------------------------------------------------------------------------------
Trustees' compensation 234,490
- ------------------------------------------------------------------------------
Custodian fees and expenses 89,533
- ------------------------------------------------------------------------------
Other 184,452
-----------------
Total expenses 109,993,613
Less reduction to custodian expenses (18,426)
Less payments and waivers of expenses (22,255)
-----------------
Net expenses 109,952,932
- ------------------------------------------------------------------------------
NET INVESTMENT LOSS (1,822,325)
- ------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ------------------------------------------------------------------------------
Net realized gain on:
Investments 875,445,667
Net increase from payment by affiliate 2,628,259
-----------------
Net realized gain 878,073,926
- ------------------------------------------------------------------------------
Net change in unrealized appreciation on investments (298,061,553)
- ------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 578,190,048
=================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | OPPENHEIMER QUEST BALANCED FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 2004 2003
- -------------------------------------------------------------------------------------------------
OPERATIONS
- -------------------------------------------------------------------------------------------------
Net investment income (loss) $ (1,822,325) $ 37,392,073
- -------------------------------------------------------------------------------------------------
Net realized gain 878,073,926 76,105,001
- -------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (298,061,553) 1,233,709,607
------------------------------------
Net increase in net assets resulting from operations 578,190,048 1,347,206,681
- -------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (5,329,694) (18,094,923)
Class B -- (8,058,436)
Class C -- (3,846,362)
Class N (50,738) (766,994)
Class Y (811,934) (1,843,901)
- -------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A 531,512,099 116,535,156
Class B 33,158,209 24,803,540
Class C 132,642,652 (900,239)
Class N 49,356,993 27,405,091
Class Y 37,480,083 25,736,832
- -------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------
Total increase 1,356,147,718 1,508,176,445
- -------------------------------------------------------------------------------------------------
Beginning of period 5,901,635,572 4,393,459,127
------------------------------------
End of period (including accumulated net investment income
(loss) of $(518,804) and $1,979,679, respectively) $ 7,257,783,290 $ 5,901,635,572
====================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | OPPENHEIMER QUEST BALANCED FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED OCTOBER 31, 2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.69 $ 12.02 $ 16.09 $ 16.66 $ 16.41
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .07 .16 .17 .46 .36
Net realized and unrealized gain (loss) 1.46 3.64 (3.53) (.20) .55
-----------------------------------------------------------------------------------
Total from investment operations 1.53 3.80 (3.36) .26 .91
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.03) (.13) (.27) (.53) (.28)
Distributions from net realized gain -- -- (.44) (.30) (.38)
-----------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.03) (.13) (.71) (.83) (.66)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 17.19 $ 15.69 $ 12.02 $ 16.09 $ 16.66
===================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 9.79% 31.87% (21.88)% 1.64% 5.78%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $3,054,761 $ 2,287,707 $1,667,143 $1,763,404 $ 1,027,560
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $2,759,594 $ 1,902,499 $1,960,568 $1,353,860 $ 1,020,483
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 0.38% 1.60% 1.20% 2.61% 2.24%
Total expenses 1.21% 3,4 1.38% 3,4 1.51% 3,4 1.47% 3 1.45% 3
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 106% 92% 108% 88% 105%
1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.
4. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | OPPENHEIMER QUEST BALANCED FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS B YEAR ENDED OCTOBER 31, 2004 2003 2002 2001 2000
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.61 $ 11.98 $ 16.00 $ 16.52 $ 16.28
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.07) .06 .07 .35 .25
Net realized and unrealized gain (loss) 1.47 3.63 (3.52) (.19) .55
---------------------------------------------------------------------------------
Total from investment operations 1.40 3.69 (3.45) .16 .80
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- (.06) (.13) (.38) (.18)
Distributions from net realized gain -- -- (.44) (.30) (.38)
---------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders -- (.06) (.57) (.68) (.56)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 17.01 $ 15.61 $ 11.98 $ 16.00 $ 16.52
=================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 8.97% 30.89% (22.38)% 1.03% 5.10%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $2,549,069 $ 2,306,366 $1,759,167 $1,836,130 $ 925,476
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $2,495,872 $ 1,985,215 $2,068,300 $1,307,367 $ 873,470
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income (loss) (0.40)% 0.84% 0.56% 2.00% 1.64%
Total expenses 2.00% 3,4 2.15% 3,4 2.15% 3,4 2.07% 3 2.06% 3
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 106% 92% 108% 88% 105%
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.
30 | OPPENHEIMER QUEST BALANCED FUND
CLASS C YEAR ENDED OCTOBER 31, 2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.60 $ 11.97 $ 16.00 $ 16.51 $ 16.27
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.06) .07 .07 .34 .25
Net realized and unrealized gain (loss) 1.48 3.62 (3.52) (.18) .55
-----------------------------------------------------------------------------------
Total from investment operations 1.42 3.69 (3.45) .16 .80
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- (.06) (.14) (.37) (.18)
Distributions from net realized gain -- -- (.44) (.30) (.38)
-----------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders -- (.06) (.58) (.67) (.56)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 17.02 $ 15.60 $ 11.97 $ 16.00 $ 16.51
===================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 9.10% 30.99% (22.40)% 1.05% 5.10%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $1,207,729 $ 982,288 $ 763,338 $ 751,229 $ 341,824
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $1,129,522 $ 835,198 $ 903,426 $ 502,037 $ 336,336
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income (loss) (0.34)% 0.92% 0.58% 2.00% 1.64%
Total expenses 1.94% 3,4 2.08% 3,4 2.13% 3,4 2.07% 3 2.06% 3
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 106% 92% 108% 88% 105%
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.
31 | OPPENHEIMER QUEST BALANCED FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS N YEAR ENDED OCTOBER 31, 2004 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 .03 .11 .20 .22
Net realized and unrealized gain (loss) 1.45 3.63 (3.56) (.83)
------------------------------------------------------
Total from investment operations 1.48 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 $ 17.05 $ 15.58 $ 11.94 $ 16.05
======================================================
- -----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 9.47% 31.50% (21.99)% (3.71)%
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 207,450 $ 142,866 $ 85,744 $ 19,649
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 180,201 $ 112,416 $ 70,477 $ 4,977
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 0.04% 1.23% 1.07% 2.75%
Total expenses 1.55% 1.74% 1.67% 1.58%
Expenses after payments and waivers and
reduction to custodian expenses N/A 4 1.70% N/A 4,5 N/A 4
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 106% 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.
32 | OPPENHEIMER QUEST BALANCED FUND
CLASS Y YEAR ENDED OCTOBER 31, 2004 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 .12 .20 .25 .74 .15
Net realized and unrealized gain (loss) 1.46 3.64 (3.52) (.40) .99
-----------------------------------------------------------------------------------
Total from investment operations 1.58 3.84 (3.27) .34 1.14
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.06) (.18) (.38) (.66) (.12)
Distributions from net realized gain -- -- (.44) (.30) --
-----------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.06) (.18) (.82) (.96) (.12)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 17.14 $ 15.62 $ 11.96 $ 16.05 $ 16.67
===================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 10.17% 32.40% (21.48)% 2.14% 7.32%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 238,775 $ 182,409 $ 118,068 $ 134,654 $ 144
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 216,973 $ 145,793 $ 137,322 $ 77,394 $ 32
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 0.70% 1.89% 1.75% 2.97% 2.46%
Total expenses 0.90% 4 1.05% 4 0.96% 4,5 1.00% 4 0.98% 4
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 106% 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.
33 | OPPENHEIMER QUEST BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, however, the institutional investor
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. 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.
Corporate, government and municipal debt instruments having a remaining maturity
in excess of 60 days and all mortgage-backed securities will be valued at the
mean between the "bid" and "asked" prices. 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 and domestic 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 exchanges will be fair
valued. Fair
34 | OPPENHEIMER QUEST BALANCED FUND
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).
- --------------------------------------------------------------------------------
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 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. 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. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
35 | OPPENHEIMER QUEST BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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 TAX PURPOSES
------------------------------------------------------------------------
$ -- $ -- $ 181,820,457 $ 377,235,039
1. As of October 31, 2004, the Fund had $181,820,457 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of October 31, 2004,
details of the capital loss carryforward were as follows:
EXPIRING
------------------------
2010 $ 181,820,457
2. During the fiscal year ended October 31, 2004, the Fund utilized
$876,964,925 of capital loss carryforward to offset capital gains realized in
that fiscal year.
3. During the fiscal year ended October 31, 2003, the Fund utilized $28,726,716
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 October 31, 2004. Net assets
of the Fund were unaffected by the reclassifications.
INCREASE TO
REDUCTION TO ACCUMULATED NET
REDUCTION TO ACCUMULATED NET REALIZED LOSS
PAID-IN CAPITAL INVESTMENT LOSS ON INVESTMENTS
-------------------------------------------------------
$ 2,887,949 $ 5,516,208 $ 2,628,259
The tax character of distributions paid during the years ended October 31, 2004
and October 31, 2003 was as follows:
YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003
-----------------------------------------------------------------
Distributions paid from:
Ordinary income $ 6,192,366 $ 32,610,616
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments
for federal income tax purposes as of October 31, 2004 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.
36 | OPPENHEIMER QUEST BALANCED FUND
Federal tax cost of securities $ 7,253,803,742
=================
Gross unrealized appreciation $ 489,766,765
Gross unrealized depreciation (112,531,726)
-----------------
Net unrealized appreciation $ 377,235,039
=================
- --------------------------------------------------------------------------------
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
October 31, 2004, the Fund's projected benefit obligations were increased by
$105,807 and payments of $8,643 were made to retired trustees, resulting in an
accumulated liability of $493,757 as of October 31, 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 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. The Fund pays interest to its custodian on
such cash overdrafts 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.
37 | OPPENHEIMER QUEST BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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 $.01 par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
YEAR ENDED OCTOBER 31, 2004 YEAR ENDED OCTOBER 31, 2003
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------
CLASS A
Sold 63,546,703 $1,061,970,225 44,599,273 $ 625,350,191
Dividends and/or
distributions reinvested 289,741 4,693,898 1,211,270 15,682,192
Redeemed (32,026,858) (535,152,024) (38,714,556) (524,497,227)
-----------------------------------------------------------------
Net increase 31,809,586 $531,512,099 7,095,987 $ 116,535,156
=================================================================
- ---------------------------------------------------------------------------------------------
CLASS B
Sold 25,825,685 $ 427,597,730 26,928,476 $ 374,945,073
Dividends and/or
distributions reinvested -- -- 526,821 6,544,923
Redeemed (23,752,602) (394,439,521) (26,540,590) (356,686,456)
-----------------------------------------------------------------
Net increase 2,073,083 $ 33,158,209 914,707 $ 24,803,540
=================================================================
- ---------------------------------------------------------------------------------------------
CLASS C
Sold 18,943,131 $ 313,720,431 13,717,232 $ 193,481,707
Dividends and/or
distributions reinvested -- -- 237,055 2,946,014
Redeemed (10,924,983) (181,077,779) (14,751,471) (197,327,960)
-----------------------------------------------------------------
Net increase (decrease) 8,018,148 $ 132,642,652 (797,184) $ (900,239)
=================================================================
- ---------------------------------------------------------------------------------------------
CLASS N
Sold 6,779,800 $ 112,445,795 4,959,184 $ 68,509,566
Dividends and/or
distributions reinvested 3,094 49,396 59,656 756,892
Redeemed (3,787,108) (63,138,198) (3,028,836) (41,861,367)
-----------------------------------------------------------------
Net increase 2,995,786 $ 49,356,993 1,990,004 $ 27,405,091
=================================================================
- ---------------------------------------------------------------------------------------------
CLASS Y
Sold 5,092,722 $ 84,840,588 3,864,165 $ 53,749,796
Dividends and/or
distributions reinvested 50,227 811,929 141,014 1,843,889
Redeemed (2,893,159) (48,172,434) (2,193,394) (29,856,853)
-----------------------------------------------------------------
Net increase 2,249,790 $ 37,480,083 1,811,785 $ 25,736,832
=================================================================
38 | 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 year ended
October 31, 2004, were $5,989,574,445 and $4,418,554,146, respectively. There
were purchases of $1,497,698,090 and sales of $1,974,055,866 of U.S. government
and government agency obligations for the year ended October 31, 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 year ended October 31, 2004, the Manager paid $15,004,710 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 year ended October 31, 2004, the Fund paid
$13,967,672 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.
- --------------------------------------------------------------------------------
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. Under the Plan, the Fund pays a service fee to the Distributor of up to
0.25% of the average annual net assets of Class A shares. The Distributor
currently uses all of those fees to
39 | OPPENHEIMER QUEST BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
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. Beginning January 1, 2003, the Board of Trustees 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 and 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 October 31,
2004 for Class B, Class C and Class N shares were $60,959,378, $20,556,604 and
$3,804,005, 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
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- -------------------------------------------------------------------------------------------------
October 31, 2004 $ 3,479,343 $ 55,427 $ 4,944,985 $ 146,159 $ 276,218
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PAYMENTS AND WAIVERS OF EXPENSES. Following a review of its use of brokerage
commissions for sales that is permitted under its investment advisory
agreement, the Fund's Manager terminated that practice in July 2003.
Subsequently, the Manager paid the Fund $2,628,259, an amount equivalent to
certain of such commissions incurred in prior years.
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.
During the year ended October 31, 2004, OFS waived $7,944, $11,955 and $2,356
for Class A, Class B and Class C shares, respectively. This undertaking may be
amended or withdrawn at any time.
40 | OPPENHEIMER QUEST BALANCED FUND
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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 October 31, 2004, the
Fund had on loan securities valued at $391,744,555. Cash of $398,789,111 was
received as collateral for the loans, of which $371,044,358 has been invested in
approved instruments.
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6. LITIGATION
Six complaints have been filed as putative derivative and class actions against
the Manager, OFS and the Distributor (collectively, "OppenheimerFunds"), as well
as 51 of the Oppenheimer funds (collectively, the "Funds") including this Fund,
and nine Directors/ Trustees of certain of the Funds other than this Fund
(collectively, the "Directors/Trustees"). The complaints allege that the Manager
charged excessive fees for distribution and other costs, improperly used assets
of the Funds in the form of directed brokerage commissions and 12b-1 fees to pay
brokers to promote sales of the Funds, and failed to properly disclose the use
of Fund assets to make those payments in violation of the Investment Company Act
of 1940 and the Investment Advisers Act of 1940. The complaints further allege
that by permitting and/or participating in those actions, the Directors/Trustees
breached their fiduciary duties to Fund shareholders under the Investment
Company Act of 1940 and at common law. By order dated October 27, 2004, these
six actions, and future related actions, were consolidated by the U.S. District
Court for the Southern District of New York into a single consolidated
proceeding in contemplation of the filing of a superseding consolidated and
amended complaint.
OppenheimerFunds believes that it is premature to render any opinion as to
the likelihood of an outcome unfavorable to them, the Funds or the
Directors/Trustees and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss. However,
OppenheimerFunds, the Funds and the Directors/Trustees believe that the
allegations contained in the complaints are without merit and intend to defend
these lawsuits vigorously.
41 | OPPENHEIMER QUEST BALANCED FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER QUEST FOR VALUE FUNDS:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Quest Balanced Fund formerly Oppenheimer Quest Balanced Value Fund
(one of the portfolios constituting the Oppenheimer Quest For Value Funds),
including the statement of investments, as of October 31, 2004, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with 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 October 31, 2004, 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 Quest Balanced Fund as of October 31, 2004, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
KPMG LLP
Denver, Colorado
December 16, 2004
42 | OPPENHEIMER QUEST BALANCED FUND
FEDERAL INCOME TAX INFORMATION Unaudited
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In early 2005, if applicable, shareholders of record will receive information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2004. Regulations of the U.S. Treasury Department require the
Fund to report this information to the Internal Revenue Service.
Dividends, if any, paid by the Fund during the fiscal year ended October
31, 2004 which are not designated as capital gain distributions should be
multiplied by 100% to arrive at the amount eligible for the corporate
dividend-received deduction.
A portion, if any, of the dividends paid by the Fund during the fiscal
year ended October 31, 2004 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. $48,972,638 of the Fund's fiscal year taxable income may be
eligible for the lower individual income tax rates. In early 2005, shareholders
of record will receive information regarding the percentage of distributions
that are eligible for lower individual income tax rates.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
43 | OPPENHEIMER QUEST BALANCED FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
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- --------------------------------------------------------------------------------
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 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 Fund's Form N-PX
filing is available (i) without charge, upon request, by calling the Fund
toll-free at 1.800.525.7048, and (ii) 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 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.
44 | OPPENHEIMER QUEST BALANCED FUND
TRUSTEES AND OFFICERS Unaudited
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NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD
FUND, LENGTH OF SERVICE, AGE BY TRUSTEE; NUMBER OF PORTFOLIOS IN FUND COMPLEX CURRENTLY OVERSEEN BY TRUSTEE
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL,
TRUSTEES CO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, UNTIL HIS
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
THOMAS W. COURTNEY, Principal of Courtney Associates, Inc. (venture capital firm); former General
Chairman of the Board of Partner of Trivest Venture Fund (private venture capital fund); former President
Trustees, of Investment Counseling Federated Investors, Inc.; Trustee of the following
Trustee (since 1987) open-end investment companies: Cash Assets Trust, PIMCO ADVISORS VIT, Tax Free
Age: 71 Trust of Arizona and 4 funds for the Hawaiian Tax Free Trust. Oversees 11
portfolios in the OppenheimerFunds complex.
PAUL Y. CLINTON, Principal of Clinton Management Associates, a financial and venture capital
Trustee (since 1987) consulting firm; Trustee of the following open-end investment companies:
Age: 72 Trustee of Capital Cash Management Trust, Prime Cash Fund, PIMCO ADVISORS VIT and
Narragansett Insured Tax-Free Income Fund. Formerly a director of OCC Cash
Reserves, Inc. (open-end investment company) (1989-December 2002). Oversees 11
portfolios in the OppenheimerFunds complex.
ROBERT G. GALLI, A trustee or director of other Oppenheimer funds. Oversees 35 portfolios in the
Trustee (since 1998) OppenheimerFunds complex.
Age: 71
LACY B. HERRMANN, Chairman and Chief Executive Officer of Aquila Management Corporation,
Trustee (since 1987) the sponsoring organization and manager, administrator and/or sub-adviser to
Age: 75 the following open-end investment companies, and Chairman of the Board of
Trustees and President of each: Churchill Cash Reserves Trust, Aquila-Cascadia
Equity Fund, Cash Assets Trust, Prime Cash Fund, Narragansett Insured Tax-Free
Income Fund, Tax-Free Fund For Utah, Churchill Tax-Free Fund of Kentucky,
Tax-Free Fund of Colorado, Tax-Free Trust of Oregon, Tax-Free Trust of Arizona,
and Aquila Rocky Mountain Equity Fund and PIMCO ADVISORS VIT; Vice President,
Director, Secretary, and formerly Treasurer of Aquila Distributors, Inc.,
distributor of the above funds; President and Chairman of the Board of Trustees of
Capital Cash Management Trust ("CCMT"), and an Officer and Trustee/Director of its
predecessors; President and Director of STCM Management Company, Inc., sponsor and
adviser to CCMT; Chairman, President and a Director of InCap Management
Corporation, formerly sub-adviser and administrator of Prime Cash Fund and Short
Term Asset Reserves; Trustee Emeritus of Brown University. Formerly Chairman of
the Board of Trustees and President of Hawaiian Tax-Free Trust. Oversees 11
portfolios in the OppenheimerFunds complex.
BRIAN WRUBLE, General Partner (since September 1995) of Odyssey Partners, L.P. (hedge funds
Trustee (since 2001) in distribution since 1/1/97); Director (since September 2004) of Special Value
Age: 61 Opportunities Fund, LLC; Investment Advisory Board (since October 2004) of Zurich
Financial Services; Board of Governing Trustees (since August 1990) of The
Jackson Laboratory (genetics laboratory, non profit); Trustee (since May 1992) of
Institute for Advanced Study (educational institute); Formerly Special Limited
Partner (1999-2004) and Managing Principal (through December 1998) of Odyssey
Investment Partners, LLC (private equity investment); Trustee (2000-2002) of
Research Foundation of AIMR (investment research, non-profit); Governor, Jerome
Levy Economics Institute of Bard College (economics research) (August
1990-September 2001); Director of Ray & Berendtson, Inc. (executive search firm)
(May 2000-April 2002). Oversees 10 portfolios in the OppenheimerFunds complex.
45 | OPPENHEIMER QUEST BALANCED FUND
TRUSTEES AND OFFICERS Unaudited / Continued
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OFFICERS THE ADDRESS OF THE OFFICERS IN THE CHART BELOW IS AS FOLLOWS: FOR MESSRS. MURPHY
AND ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW YORK, NY
10281-1008, AND FOR MR. WIXTED AND MR. VANDEHEY, 6803 S. TUCSON WAY, CENTENNIAL,
CO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS RESIGNATION,
DEATH OR REMOVAL.
JOHN V. MURPHY, Chairman, Chief Executive Officer and director (since June 2001) and President
President (since 2001) (since September 2000) of the Manager; President and a director or trustee of
Age: 55 other Oppenheimer funds; President and a director (since July 2001) of Oppenheimer
Acquisition Corp. (the Manager's parent holding company) and of Oppenheimer
Partnership Holdings, Inc. (a holding company subsidiary of the Manager); a
director (since November 2001) of OppenheimerFunds Distributor, Inc. (a subsidiary
of the Manager); Chairman and a director (since July 2001) of Shareholder
Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent
subsidiaries of the Manager); President and a director (since July 2001) of
OppenheimerFunds Legacy Program (a charitable trust program established by the
Manager); a director of the following investment advisory subsidiaries of the
Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management
Corporation, Trinity Investment Management Corporation and Tremont Capital
Management, Inc. (since November 2001), HarbourView Asset Management Corporation
and OFI Private Investments, Inc. (since July 2001); President (since November 1,
2001) and a director (since July 2001) of Oppenheimer Real Asset Management, Inc.;
Executive Vice President (since February 1997) of Massachusetts Mutual Life
Insurance Company (the Manager's parent company); a director (since June 1995)
of DLB Acquisition Corporation (a holding company that owns the shares of Babson
Capital Management LLC); a member of the Investment Company Institute's Board of
Governors (elected to serve from October 3, 2003 through September 30, 2006).
Formerly, Chief Operating Officer (September 2000-June 2001) of the Manager;
President and trustee (November 1999-November 2001) of MML Series Investment Fund
and MassMutual Institutional Funds (open-end investment companies); a director
(September 1999-August 2000) of C.M. Life Insurance Company; President, Chief
Executive Officer and director (September 1999-August 2000) of MML Bay State Life
Insurance Company; a director (June 1989-June 1998) of Emerald Isle Bancorp and
Hibernia Savings Bank (a wholly-owned subsidiary of Emerald Isle Bancorp).
Oversees 60 portfolios as Trustee/Director and 24 additional port- folios as
Officer in the OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer (since March 1999) of the Manager; Treasurer
Treasurer (since 1999) of HarbourView Asset Management Corporation, Shareholder Financial Services, Inc.,
Age: 45 Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and
Oppenheimer Partnership Holdings, Inc. (since March 1999), of OFI Private
Investments, Inc. (since March 2000), of OppenheimerFunds International Ltd. and
OppenheimerFunds plc (since May 2000), of OFI Institutional Asset Management, Inc.
(since November 2000), and of OppenheimerFunds Legacy Program (a Colorado
non-profit corporation) (since June 2003); Treasurer and Chief Financial Officer
(since May 2000) of OFI Trust Company (a trust company subsidiary of the Manager);
Assistant Treasurer (since March 1999) of Oppenheimer Acquisition Corp. Formerly
Assistant Treasurer of Centennial Asset Management Corporation (March 1999-October
2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and
Chief Operating Officer (March 1995-March 1999) at Bankers Trust Company-Mutual
Fund Services Division. An officer of 84 portfolios in the OppenheimerFunds
complex.
46 | OPPENHEIMER QUEST BALANCED FUND
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since February
Secretary (since 2001) 2002) of the Manager; General Counsel and a director (since November 2001) of the
Age: 56 Distributor; General Counsel (since November 2001) of Centennial Asset Management
Corporation; Senior Vice President and General Counsel (since November 2001) of
HarbourView Asset Management Corporation; Secretary and General Counsel (since
November 2001) of Oppenheimer Acquisition Corp.; Assistant Secretary and a
director (since October 1997) of OppenheimerFunds International Ltd. and
OppenheimerFunds plc; Vice President and a director (since November 2001) of
Oppenheimer Partnership Holdings, Inc.; a director (since November 2001) of
Oppenheimer Real Asset Management, Inc.; Senior Vice President, General Counsel
and a director (since November 2001) of Shareholder Financial Services, Inc.,
Shareholder Services, Inc., OFI Private Investments, Inc. and OFI Trust Company;
Vice President (since November 2001) of OppenheimerFunds Legacy Program; Senior
Vice President and General Counsel (since November 2001) of OFI Institutional
Asset Management, Inc.; a director (since June 2003) of OppenheimerFunds (Asia)
Limited. Formerly 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 Shareholder Services,
Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November
1989-November 2001); and OppenheimerFunds International Ltd. (October
1997-November 2001). An officer of 84 portfolios in the OppenheimerFunds complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer (since March 2004) of the
Vice President and Manager; Vice President (since June 1983) of OppenheimerFunds Distributor, Inc.,
Chief Compliance Officer Centennial Asset Management Corporation and Shareholder Services, Inc. Formerly
(since 2004) (until February 2004) Vice President and Director of Internal Audit of the
Age: 54 Manager. An officer of 84 portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND IS AVAILABLE WITHOUT CHARGE UPON REQUEST, BY
CALLING 1.800.525.7048.
47 | 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
(a) Audit Fees
The principal accountant for the audit of the registrant's annual
financial statements billed $35,000 in fiscal 2004 and $30,000 in
fiscal 2003.
(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
year.
The principal accountant for the audit of the registrant's annual
financial statements billed $39,500 in fiscal year 2004 and no such
fees in fiscal 2003 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 fees include, among others: internal control reviews.
(c) Tax Fees
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees to the registrant during
the last two fiscal years.
The principal accountant for the audit of the registrant's annual
financial statements billed $6,000 in fiscal 2004 and $5,000 in
fiscal 2003 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 fees include, among others: tax compliance, tax planning and
tax advice. Tax compliance generally involves preparation of
original and amended tax returns, claims for a refund and tax
payment-planning services. Tax planning and tax advice includes
assistance with tax audits and appeals, tax advice related to
mergers and acquisitions and requests for rulings or technical
advice from taxing authorities.
(d) All Other Fees
The principal accountant for the audit of the registrant's annual
financial statements billed $791 in fiscal 2004 and $795 in fiscal
2003.
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.
Such fees include the cost to the principal accountant of attending
audit committee meetings.
(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.
Pre-approval of non-audit services is 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 $46,291 in fiscal 2004 and $5,795 in
fiscal 2003 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) The registrant's audit committee of the board of trustees has
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser, and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
account's independence. No such services were rendered.
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 October 31, 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)(NOT
APPLICABLE TO SEMIANNUAL REPORTS)
(B) EXHIBITS ATTACHED HERETO. (ATTACH CERTIFICATIONS AS EXHIBITS)