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 811-21686
OPPENHEIMER PORTFOLIO SERIES
(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: JANUARY 31
Date of reporting period: APRIL 5, 2005 (COMMENCEMENT OF OPERATIONS)
THROUGH JULY 31, 2005
ITEM 1. REPORTS TO STOCKHOLDERS.
NOTES
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ACTIVE ALLOCATION FUND
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
Cumulative returns are not annualized. The Portfolio'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
Portfolio or any gains you may realize if you sell your shares.
Investors should consider the Portfolio's investment objectives, risks, and
other charges and expenses carefully before investing. The Portfolio's
prospectus contains this and other information about the Portfolio, 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 Portfolio's investment strategy and focus can change over time. The mention
of specific fund holdings does not constitute a recommendation by
OppenheimerFunds, Inc.
CLASS A shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class A returns include the current maximum initial sales
charge of 5.75%.
CLASS B shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 3% (since inception). Class B shares are subject
to an annual 0.75% asset-based sales charge.
CLASS C shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
CLASS N shares of the Portfolio were first publicly offered on 4/5/05. Class N
shares are offered only through retirement plans. Unless otherwise noted, Class
N returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
8 | ACTIVE ALLOCATION FUND
CLASS Y shares of the Portfolio were first publicly offered on 4/5/05. 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 Portfolio's Statement
of Additional Information.
9 | ACTIVE ALLOCATION FUND
FUND EXPENSES
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FUND EXPENSES. As a shareholder of the Portfolio, 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 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 Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The examples for Actual Expenses are based on an investment of $1,000.00
invested at the beginning of the period, April 5, 2005 (commencement of
operations) and held for the period ended July 31, 2005.
The Hypothetical Examples for Comparison Purposes are based on an investment of
$1,000.00 invested on February 1, 2005 and held for the six months ended July
31, 2005.
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 Portfolio'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
Portfolio'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 Portfolio 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.
10 | ACTIVE ALLOCATION FUND
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 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.
11 | ACTIVE ALLOCATION FUND
FUND EXPENSES
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ENDING EXPENSES
BEGINNING ACCOUNT PAID DURING
ACCOUNT VALUE 6 MONTHS ENDED
VALUE (7/31/05) July 31, 2005 1,2
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Class A Actual $1,000.00 $1,047.00 $2.35
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Class A Hypothetical 1,000.00 1,013.87 2.31
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Class B Actual 1,000.00 1,045.00 4.84
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Class B Hypothetical 1,000.00 1,011.44 4.76
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Class C Actual 1,000.00 1,044.00 4.83
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Class C Hypothetical 1,000.00 1,011.44 4.76
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Class N Actual 1,000.00 1,046.00 3.15
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Class N Hypothetical 1,000.00 1,013.09 3.10
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Class Y Actual 1,000.00 1,049.00 1.46
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Class Y Hypothetical 1,000.00 1,014.74 1.43
Hypothetical assumes 5% annual return before expenses.
1. Actual expenses paid are equal to the Portfolio's annualized expense ratio
for that class, multiplied by the average account value over the period,
multiplied by 118/365 [to reflect the period from April 5, 2005 (commencement of
operations) to July 31, 2005].
2. Hypothetical expenses paid are equal to the Portfolio's annualized expense
ratio for that class, multiplied by the average account value over the period,
multiplied by 181/365 (to reflect the one-half year period). Those expense
ratios for the period from April 5, 2005 (commencement of operations) to July
31, 2005 are as follows:
CLASS EXPENSE RATIOS
- --------------------------------
Class A 0.71%
- --------------------------------
Class B 1.46
- --------------------------------
Class C 1.46
- --------------------------------
Class N 0.95
- --------------------------------
Class Y 0.44
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Portfolio's Manager and Transfer Agent that can be terminated at any time,
without advance notice. The "Financial Highlights" tables in the Portfolio's
financial statements, included in this report, also show the gross expense
ratios, without such waivers or reimbursements.
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12 | ACTIVE ALLOCATION FUND
STATEMENT OF INVESTMENTS July 31, 2005 / Unaudited
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VALUE
SHARES SEE NOTE 1
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INVESTMENTS IN AFFILIATED COMPANIES--95.9%
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EQUITY FUNDS--67.7%
Oppenheimer Capital Appreciation Fund, Cl. Y 281,756 $ 12,090,154
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Oppenheimer Developing Markets Fund, Cl. A 198,964 6,118,131
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Oppenheimer Global Fund, Cl. Y 193,436 12,362,435
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Oppenheimer Global Opportunities Fund, Cl. Y 181,194 6,151,515
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Oppenheimer Main Street Fund, Cl. Y 330,797 12,110,486
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Oppenheimer Main Street Opportunity Fund, Cl. Y 442,212 6,084,845
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Oppenheimer Main Street Small Cap Fund, Cl. Y 285,261 6,272,906
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Oppenheimer Real Estate Fund, Cl. Y 321,007 6,432,967
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Oppenheimer Value Fund, Cl. Y 747,291 18,323,588
------------
85,947,027
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FIXED INCOME FUNDS--28.2%
Oppenheimer Core Bond Fund, Cl. Y 1,139,211 11,802,221
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Oppenheimer Real Asset Fund, Cl. Y 1,444,808 12,064,141
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Oppenheimer Strategic Income Fund, Cl. Y 2,769,633 11,909,421
------------
35,775,783
------------
Total Investments in Affiliated Companies (Cost $118,042,079) 121,722,810
PRINCIPAL
AMOUNT
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JOINT REPURCHASE AGREEMENTS--2.1%
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Undivided interest of 0.35% in joint repurchase agreement (Principal Amount/
Value $765,696,000, with a maturity value of $765,904,652) with UBS Warburg
LLC, 3.27%, dated 7/29/05, to be repurchased at $2,687,732 on 8/1/05,
collateralized by Federal National Mortgage Assn., 5%, 3/1/35, with
a value of $782,601,759 (Cost $2,687,000) $2,687,000 2,687,000
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TOTAL INVESTMENTS, AT VALUE (COST $120,729,079) 98.0% 124,409,810
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OTHER ASSETS NET OF LIABILITIES 2.0 2,508,976
-----------------------------
NET ASSETS 100.0% $126,918,786
=============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13 | ACTIVE ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES Unaudited
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July 31, 2005
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ASSETS
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Investments, at value (cost $120,729,079)--see accompanying statement of investments $124,409,810
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Cash 17,982
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Receivables and other assets:
Shares of beneficial interest sold 5,364,841
Interest 40,990
Other 1,052
------------
Total assets 129,834,675
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LIABILITIES
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Payables and other liabilities:
Investments purchased 2,793,426
Shares of beneficial interest redeemed 35,243
Distribution and service plan fees 20,359
Transfer and shareholder servicing agent fees 14,272
Shareholder communications 6,300
Trustees' compensation 2,000
Other 44,289
------------
Total liabilities 2,918,889
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NET ASSETS $126,918,786
============
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COMPOSITION OF NET ASSETS
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Par value of shares of beneficial interest $ 12,135
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Additional paid-in capital 123,160,635
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Accumulated net investment income 4,545
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Accumulated net realized gain on investments 60,740
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Net unrealized appreciation on investments 3,680,731
------------
NET ASSETS $126,918,786
============
14 | ACTIVE ALLOCATION FUND
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NET ASSET VALUE PER SHARE
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Class A Shares:
Net asset value and redemption price per share (based on net assets of $65,913,819 and
6,296,045 shares of beneficial interest outstanding) $10.47
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $11.11
- ---------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $30,050,812 and 2,875,662 shares
of beneficial interest outstanding) $10.45
- ---------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $26,697,974 and 2,556,378 shares
of beneficial interest outstanding) $10.44
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Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $4,045,081 and 386,689 shares of
beneficial interest outstanding) $10.46
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Class Y Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $211,100 and 20,132 shares of beneficial interest outstanding) $10.49
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15 | ACTIVE ALLOCATION FUND
STATEMENT OF OPERATIONS Unaudited
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For the Period Ended July 31, 2005 1
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INVESTMENT INCOME
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Dividends $ 148,705
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Interest 14,785
-----------
Total investment income 163,490
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EXPENSES
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Distribution and service plan fees:
Class A 18,261
Class B 34,867
Class C 32,754
Class N 1,922
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Transfer and shareholder servicing agent fees:
Class A 13,284
Class B 7,834
Class C 5,805
Class N 639
Class Y 118
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Shareholder communications:
Class A 3,611
Class B 2,773
Class C 1,904
Class N 230
Class Y 100
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Legal, auditing and other professional fees 37,724
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Registration and filing fees 11,265
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Trustees' compensation 4,036
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Custodian fees and expenses 2,250
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Other 10,379
-----------
Total expenses 189,756
Less reduction to custodian expenses (193)
Less waivers and reimbursements of expenses (30,618)
-----------
Net expenses 158,945
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NET INVESTMENT INCOME 4,545
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REALIZED AND UNREALIZED GAIN
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Net realized gain on investments 60,740
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Net change in unrealized appreciation on investments 3,680,731
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,746,016
===========
1. For the period from April 5, 2005 (commencement of operations) to July 31,
2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16 | ACTIVE ALLOCATION FUND
STATEMENTS OF CHANGES IN NET ASSETS
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PERIOD
ENDED
JULY 31,
2005 1
(UNAUDITED)
- ---------------------------------------------------------------------------------------
OPERATIONS
- ---------------------------------------------------------------------------------------
Net investment income $ 4,545
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Net realized gain 60,740
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Net change in unrealized appreciation 3,680,731
--------------
Net increase in net assets resulting from operations 3,746,016
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BENEFICIAL INTEREST TRANSACTIONS
- ---------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest
transactions:
Class A 63,881,694
Class B 29,176,593
Class C 25,862,621
Class N 3,943,468
Class Y 204,394
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NET ASSETS
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Total increase 126,814,786
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Beginning of period 104,000 2
--------------
End of period (including accumulated net investment income of $4,545) $126,918,786
==============
1. For the period from April 5, 2005 (commencement of operations) to July 31,
2005.
2. Reflects the value of the Manager's initial seed money investment on March
15, 2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17 | ACTIVE ALLOCATION FUND
FINANCIAL HIGHLIGHTS Unaudited
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CLASS A CLASS B CLASS C
PERIOD ENDED JULY 31, 2005 1 2005 1 2005 1
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PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00
- --------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .01 2 (.01) 2 (.01) 2
Net realized and unrealized gain .46 .46 .45
-------------------------------------------
Total from investment operations .47 .45 .44
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Net asset value, end of period $ 10.47 $ 10.45 $ 10.44
===========================================
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TOTAL RETURN, AT NET ASSET VALUE 3 4.70% 4.50% 4.40%
- --------------------------------------------------------------------------------------------
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RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $65,914 $30,051 $26,698
- --------------------------------------------------------------------------------------------
Average net assets (in thousands) $23,909 $11,034 $10,351
- --------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income (loss) 0.38% (0.37)% (0.36)%
Total expenses 0.90% 5 1.70% 6 1.64% 7
Expenses after waivers and reimbursements and
reduction to custodian expenses 0.71% 1.46% 1.46%
- --------------------------------------------------------------------------------------------
Portfolio turnover rate 20% 20% 20%
1. For the period from April 5, 2005 (commencement of operations) to July 31,
2005.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. 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 Portfolio distributions or the redemption of Portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were 1.64% for July 31, 2005.
6. Expenses including all underlying fund expenses were 2.44% for July 31, 2005.
7. Expenses including all underlying fund expenses were 2.38% for July 31, 2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18 | ACTIVE ALLOCATION FUND
CLASS N CLASS Y
PERIOD ENDED JULY 31, 2005 1 2005 1
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PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.00 $10.00
- -----------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income -- 2,3 .02 2
Net realized and unrealized gain .46 .47
-----------------------
Total from investment operations .46 .49
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Net asset value, end of period $10.46 $10.49
=======================
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TOTAL RETURN, AT NET ASSET VALUE 4 4.60% 4.90%
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RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $4,045 $ 211
- -----------------------------------------------------------------------------------------------
Average net assets (in thousands) $1,223 $ 73
- -----------------------------------------------------------------------------------------------
Ratios to average net assets: 5
Net investment income 0.09% 0.64%
Total expenses 1.09% 6 1.03% 7
Expenses after waivers and reimbursements and reduction to custodian
expenses 0.95% 0.44%
- -----------------------------------------------------------------------------------------------
Portfolio turnover rate 20% 20%
1. For the period from April 5, 2005 (commencement of operations) to July 31,
2005.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Less than $0.005 per share.
4. 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 Portfolio distributions or the redemption of Portfolio shares.
5. Annualized for periods of less than one full year.
6. Expenses including all underlying fund expenses were 1.84% for July 31, 2005.
7. Expenses including all underlying fund expenses were 1.79% for July 31, 2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19 | ACTIVE ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Unaudited
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1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Portfolio Series (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
Active Allocation Fund (the "Portfolio") is a series of the Fund whose
investment objective is to seek long term growth of capital with a secondary
objective of current income. The Portfolio is a special type of mutual fund
known as a "fund of funds" because it invests in other mutual funds. The
Portfolio normally invests in a portfolio consisting of a target-weighted
allocation in Class A or Class Y shares of other Oppenheimer funds. The Fund's
investment advisor is OppenheimerFunds Inc. (the "Manager").
The Portfolio 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 Portfolio 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.
Under normal market conditions, the Manager will invest the Portfolio's
assets in shares of Oppenheimer Core Bond Fund, Oppenheimer Capital Appreciation
Fund, Oppenheimer Global Fund, Oppenheimer Global Opportunities Fund,
Oppenheimer Main Street Fund(R), Oppenheimer Main Street Opportunity Fund(R),
Oppenheimer Main Street Small Cap Fund(R), Oppenheimer Real Estate Fund,
Oppenheimer Strategic Income Fund and Oppenheimer Value Fund (individually, an
"Underlying Fund" and collectively, the "Underlying Funds"). In addition, up to
20% of the Portfolio's net assets may be invested according to a tactical
allocation among up to four Oppenheimer funds or money market securities based
on recommendations made by the Manager.
20 | ACTIVE ALLOCATION FUND
Up to 20% of the net assets of the Portfolio may be invested in the
following Oppenheimer Funds:
Oppenheimer Core Bond Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer High Yield Fund
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer MidCap Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Quest International Value Fund, Inc.
Oppenheimer Real Asset Fund
Oppenheimer Small- & Mid- Cap Value Fund
Oppenheimer U.S. Government Trust
Oppenheimer Value Fund
The following is a summary of significant accounting policies consistently
followed by the Portfolio.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Portfolio calculates the net asset value of each class
of shares based upon the net asset value of the applicable Underlying Funds' 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 trading.
For each Underlying Fund, the net asset value per share for a class of
shares on a "regular business day" is determined by dividing the value of the
Underlying Fund's net assets attributable to that class by the number of shares
of that class outstanding on day. To determine net asset values, the Underlying
Fund assets are valued primarily on the basis of current market quotations. If
market quotations are not readily available or do not accurately reflect fair
value for a security (in the Manager's judgment) or if a security's value has
been materially affected by events occurring after the close of the exchange or
market on which the security is principally traded, that security may be valued
by another method that the Underlying Fund's Board of Trustees/Directors
believes accurately reflects the fair value. Because some foreign securities
trade in markets and on exchanges that operate on weekends and U.S. holidays,
the values of some of the Underlying Fund's foreign investments may change on
days when investors cannot buy or redeem Underlying Fund shares.
Short-term "money market type" debt securities with remaining maturities
of sixty days or less are valued at amortized cost (which approximates market
value).
21 | ACTIVE ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
RISKS OF INVESTING IN THE UNDERLYING FUNDS. Each of the Underlying Funds in
which the Portfolio invests has its own investment risks, and those risks can
affect the value of the Portfolio's investments and therefore the value of the
Portfolio's shares. To the extent that the Portfolio invests more of its assets
in one Underlying Fund than in another, the Portfolio will have greater exposure
to the risks of that Underlying Fund.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Portfolio, along with other affiliated
funds advised by the Manager, may transfer uninvested cash balances into joint
trading accounts on a daily basis. These balances are invested in one or more
repurchase agreements. Securities pledged as collateral for repurchase
agreements are held by a custodian bank until the agreements mature. Each
agreement requires that the market value of the collateral be sufficient to
cover payments of interest and principal. In the event of default by the other
party to the agreement, retention of the collateral may be subject to legal
proceedings.
- --------------------------------------------------------------------------------
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 Portfolio intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Portfolio.
- --------------------------------------------------------------------------------
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 and 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 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.
22 | ACTIVE ALLOCATION FUND
- --------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Portfolio on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Portfolio 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 Portfolio
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.
- --------------------------------------------------------------------------------
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 $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
PERIOD ENDED JULY 31, 2005 1,2
SHARES AMOUNT
- --------------------------------------------------------------------------------
CLASS A
Sold 6,424,708 $65,276,469
Redeemed (138,663) (1,394,775)
---------------------------
Net increase 6,286,045 $63,881,694
===========================
- --------------------------------------------------------------------------------
CLASS B
Sold 2,895,859 $29,381,745
Redeemed (20,297) (205,152)
---------------------------
Net increase 2,875,562 $29,176,593
===========================
- --------------------------------------------------------------------------------
CLASS C
Sold 2,626,198 $26,554,336
Redeemed (69,920) (691,715)
---------------------------
Net increase 2,556,278 $25,862,621
===========================
- --------------------------------------------------------------------------------
CLASS N
Sold 386,697 $ 3,944,582
Redeemed (108) (1,114)
---------------------------
Net increase 386,589 $ 3,943,468
===========================
23 | ACTIVE ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST Continued
PERIOD ENDED JULY 31, 2005 1,2
SHARES AMOUNT
- ---------------------------------------------------------
CLASS Y
Sold 20,032 $ 204,394
Redeemed -- --
------------------------------
Net increase 20,032 $ 204,394
------------------------------
1. For the period from April 5, 2005 (commencement of operations) to July 31,
2005.
2. The Portfolio sold 10,000 Class A shares at a value of $100,000 and 100
shares of each Class B, Class C, Class N and Class Y at a value of $1,000,
$1,000, $1,000 and $1,000, respectively, to the Manager upon seeding of the
Portfolio on March 15, 2005.
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the period ended July 31, 2005, were as
follows:
PURCHASES SALES
------------------------------------------------------------
Investment securities $129,518,734 $11,540,395
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the investment advisory agreement, the Manager does not
charge a management fee, but rather collects indirect management fees from
investments in the Underlying Funds. The weighted indirect management fees
collected from the Underlying Funds, as a percent of average daily net assets of
the Portfolio for the period ended July 31, 2005 was 0.75%.
The Portfolio pays the Manager an asset allocation fee equal to an annual
rate of 0.10% of the average daily net assets of the Portfolio.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Portfolio. The
Portfolio pays OFS a per account fee. For the period ended July 31, 2005, the
Portfolio paid $12,831 to OFS for services to the Portfolio.
Additionally, Class Y shares are subject to minimum fees of $10,000 per
annum 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.
- --------------------------------------------------------------------------------
INITIAL OFFERING AND ORGANIZATIONAL COSTS. The Manager assumed all initial
offering and organizational costs associated with the registration and seeding
of the Fund.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Portfolio, OppenheimerFunds Distributor, Inc. (the
Distributor) acts as the Portfolio's principal underwriter in the continuous
public offering of the Portfolio's classes of shares.
24 | ACTIVE ALLOCATION FUND
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Portfolio has adopted a Service Plan for
Class A shares. It reimburses the Distributor for a portion of its costs
incurred for services provided to accounts that hold Class A shares.
Reimbursement is made quarterly at an annual rate of up to 0.25% of the average
annual net assets of Class A shares of the Portfolio. The Distributor currently
uses all of those fees to pay dealers, brokers, banks and other financial
institutions quarterly for providing personal services and maintenance of
accounts of their customers that hold Class A shares. Any unreimbursed expenses
the Distributor incurs with respect to Class A shares in any fiscal year cannot
be recovered in subsequent years. Fees incurred by the Portfolio under the Plan
are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The
Portfolio has adopted Distribution and Service Plans for Class B, Class C and
Class N shares to compensate the Distributor for its services and costs in
connection with the distribution of those shares and servicing accounts. Under
the plans, the Portfolio pays the Distributor an annual asset-based sales charge
of 0.75% on Class B and Class C shares and 0.25% on Class N shares. The
Distributor also receives a service fee of 0.25% per year under each plan. If
either the Class B, Class C or Class N plan is terminated by the Portfolio 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
Portfolio 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 July 31, 2005
for Class B, Class C and Class N shares were $319,932, $170,085 and $52,565,
respectively. Fees incurred by the Portfolio 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 Portfolio. They are deducted from the
proceeds of sales of Portfolio 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
PERIOD ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- -------------------------------------------------------------------------------------------------
July 31, 2005 $280,759 $-- $2,071 $6,240 $2,619
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees paid directly by the Portfolio to
0.35% of average annual net assets for each class. During the period ended July
31, 2005, OFS waived $364, $186, $15 and $12 for Class B, Class C, Class N and
Class Y shares, respectively. This undertaking may be amended or withdrawn at
any time.
25 | ACTIVE ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
The Manager has voluntarily agreed to a total expense limitation on the
aggregate amount of combined direct (fund-of-funds level) and indirect expense
so that Combined Total Annual and Underlying Fund Operating Expenses as a
percentage of average daily net assets will not exceed the following annual
rates: 1.45%, 2.20%, 2.20%, 1.70% and 1.20%, for Class A, Class B, Class C,
Class N and Class Y, respectively. During the period ended July 31, 2005, the
Manager reimbursed the Portfolio $15,053, $8,241, $6,070, $550 and $127, for the
Class A, Class B, Class C, Class N and Class Y shares, respectively. The Manager
may modify or terminate this undertaking at any time without notice to
shareholders. These expense limitations do not include Extraordinary Expenses
and other expenses not incurred in the ordinary course of the Portfolio's
business. Notwithstanding the foregoing limits, the Manager is not required to
waive or reimburse Portfolio expenses in excess of indirect management fees
earned from investments in Underlying Funds to assure that expenses do not
exceed those limits.
- --------------------------------------------------------------------------------
5. LITIGATION
A consolidated amended complaint has been filed as putative derivative and class
actions against the Manager, OFS and the Distributor, as well as 51 of the
Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and
former Directors or Trustees and 8 present and former officers of the funds.
This complaint, initially filed in the U.S. District Court for the Southern
District of New York on January 10, 2005 and amended on March 4, 2005,
consolidates into a single action and amends six individual previously filed
putative derivative and class action complaints. Like those prior complaints,
the complaint alleges 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 assets of the funds to make
those payments in violation of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940. Also, like those prior complaints, the
complaint further alleges that by permitting and/or participating in those
actions, the Directors/Trustees and the Officers breached their fiduciary duties
to shareholders of the funds under the Investment Company Act of 1940 and at
common law. The complaint seeks unspecified compensatory and punitive damages,
rescission of the funds' investment advisory agreements, an accounting of all
fees paid, and an award of attorneys' fees and litigation expenses.
The defendants believe that the allegations contained in the Complaints
are without merit and that they have meritorious defenses against the claims
asserted. The defendants intend to defend these lawsuits vigorously and to
contest any claimed liability. The defendants believe that it is premature to
render any opinion as to the likelihood of an outcome unfavorable to them and
that no estimate can yet be made with any degree of certainty as to the amount
or range of any potential loss.
26 | ACTIVE ALLOCATION FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
27 | ACTIVE ALLOCATION FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Investment Company Act requires that the Board request and evaluate, and
that the Manager provide, such information as may be reasonably necessary to
evaluate the terms of the advisory agreement.
NATURE AND EXTENT OF SERVICES. In considering the initial approval of the
Portfolio's advisory agreement, the Board evaluated the nature and extent of the
services to be provided by the Manager and its affiliates. The investment
advisory agreement requires the Manager, at its expense, to provide the
Portfolio with office space, facilities and equipment; administrative, clerical,
legal and compliance personnel; marketing and sales support; securities trading
services; oversight of third party service providers and the services of the
Manager's Asset Allocation Team, who will provide advisory services in regard to
the Portfolio's investments. The Manager selects securities for the Portfolio
and handles its day-to-day business. The portfolio managers are employed by the
Manager and are principally responsible for the day-to-day management of the
Portfolio. Other members of the Manager's Equity and Fixed Income Portfolio Team
provide the portfolio managers with counsel and support in managing the
Portfolios. The Portfolio pays expenses not expressly assumed by the Manager
under the investment advisory agreement.
QUALITY OF SERVICES. The Board also considered the quality of the services
to be provided and the quality of the Manager's resources that will be available
to the Portfolio. The Board noted that the Manager has had over forty years of
experience as an investment adviser and that its assets under management rank it
among the top mutual fund managers in the United States. The Board evaluated the
Manager's administrative, accounting, legal and compliance services based on
information it has received regarding the experience and professional
qualifications of the Manager's personnel and the size and functions of its
staff. The Board also considered their own experiences as directors or trustees
of other funds advised by the Manager. The Board has also received and reviewed
information regarding the quality of services provided by affiliates of the
Manager at other times during the year, in connection with the renewal of those
affiliates' service agreements with other funds. The Board considered that the
relatively low redemption rate for funds advised by the Manager provided an
indication of shareholder satisfaction with the overall level of services
provided by the Manager.
PORTFOLIO MANAGEMENT SERVICES AND PERFORMANCE. In its evaluation of the
quality of the portfolio management services to be provided, the Board
considered the experience of Rudi Schadt, Jerry Webman, William L. Wilby, Kurt
Wolfgruber and Caleb Wong, the members of the Portfolio's Asset Allocation Team.
The Portfolio is managed by Messrs.
28 | ACTIVE ALLOCATION FUND
Schadt, Webman, Wilby, Wolfgruber and Wong who are Vice Presidents of the
Portfolio and are primarily responsible for the day-to-day management of the
Portfolio's investments.
Mr. Schadt is a Vice President, Director of Research in Product Design and
Risk Management of the Manager. Mr. Webman has been a Senior Vice President of
the Manager since February 1996, a Senior Investment Officer and Director of the
Manager's Fixed Income Investments since 1999 and a Senior Vice President of
HarbourView Asset Management Corporation since May 1999. Mr. Wilby has been a
Senior Vice President of the Manager since July 1994 and Senior Investment
Officer, Director of Equities of the Manager since July 2004. Mr. Wolfgruber has
been an Executive Vice President of the Manager since March 2003, Chief
Investment Officer and Director of the Manager since July 2003, Director of
HarbourView Asset Management Corporation and of OFI Institutional Asset
Management, Inc. since June 2003 and of Tremont Capital Management, Inc. since
October 2001. Mr. Wong has been a Vice President of the Manager since June 1999
and has worked in fixed-income quantitative research and risk management for the
Manager since July 1996. Messrs. Schadt, Webman, Wilby, Wolfgruber and Wong each
oversee other portfolios in the OppenheimerFunds complex. The Board also
considered the historical performance of other funds advised by the Manager.
MANAGEMENT FEES AND EXPENSES. The Board considered information regarding
the fees to be paid to the Manager and its affiliates both directly from the
Portfolio and indirectly from the Underlying Funds. The Board also considered
the other expenses that will be borne both directly and indirectly by the
Portfolio and the comparability of the fees and services of the Portfolio to the
fees and services of other types of entities advised by the Manager.
PROFITABILITY OF THE MANAGER AND AFFILIATES. The Board also considered the
cost of services to be provided by the Manager and its affiliates. The Board
considered that the Manager must be able to pay and retain experienced
professional personnel at competitive rates to provide services to the Portfolio
and that maintaining the financial viability of the Manager is important in
order for the Manager to continue to provide significant services to the
Portfolio and its shareholders. In addition the Board considered the potential
direct and indirect benefits the Manager may receive as a result of its
relationship with the Portfolio, including compensation to be paid to the
Manager's affiliates and research that may be provided to the Manager in
connection with permissible brokerage arrangements (soft dollar arrangements).
ECONOMIES OF SCALE. The Board reviewed the extent to which the Manager may
realize economies of scale in managing and supporting the Portfolio and the
Manager's voluntary expense limitations.
29 | ACTIVE ALLOCATION FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board. Based on its review and
evaluations described above, the Board, including a majority of the independent
Trustees, concluded that the nature, extent and quality of the services to be
provided to the Portfolio by the Manager were a benefit to the Portfolio and
would be in the best interest of the Portfolio's shareholders and that the
amount and structure of the compensation to be received by the Manager and its
affiliates are reasonable in relation to the services to be provided.
Accordingly, the Board approved the Portfolio's investment advisory agreement.
The Board judged the terms and conditions of the advisory agreement, including
the management fee, in light of all of the surrounding circumstances.
30 | ACTIVE ALLOCATION FUND
NOTES
- --------------------------------------------------------------------------------
AGGRESSIVE INVESTOR FUND
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
Cumulative returns are not annualized. The Portfolio'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
Portfolio or any gains you may realize if you sell your shares.
Investors should consider the Portfolio's investment objectives, risks, and
other charges and expenses carefully before investing. The Portfolio's
prospectus contains this and other information about the Portfolio, 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 Portfolio's investment strategy and focus can change over time. The mention
of specific fund holdings does not constitute a recommendation by
OppenheimerFunds, Inc.
CLASS A shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class A returns include the current maximum initial sales
charge of 5.75%.
CLASS B shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 3% (since inception). Class B shares are subject
to an annual 0.75% asset-based sales charge.
CLASS C shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
CLASS N shares of the Portfolio were first publicly offered on 4/5/05. Class N
shares are offered only through retirement plans. Unless otherwise noted, Class
N returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
CLASS Y shares of the Portfolio were first publicly offered on 4/5/05. 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 Portfolio's Statement
of Additional Information.
7 | AGGRESSIVE INVESTOR FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Portfolio, 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 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 Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The examples for Actual Expenses are based on an investment of $1,000.00
invested at the beginning of the period, April 5, 2005 (commencement of
operations) and held for the period ended July 31, 2005.
The Hypothetical Examples for Comparison Purposes are based on an investment of
$1,000.00 invested on February 1, 2005 and held for the six months ended July
31, 2005.
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 Portfolio'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
Portfolio'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 Portfolio 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.
8 | AGGRESSIVE INVESTOR FUND
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 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.
9 | AGGRESSIVE INVESTOR FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ENDING EXPENSES
BEGINNING ACCOUNT PAID DURING
ACCOUNT VALUE 6 MONTHS ENDED
VALUE (7/31/05) JULY 31, 2005 1,2
- -------------------------------------------------------------------------------
Class A Actual $1,000.00 $1,060.00 $2.43
- -------------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,013.80 2.38
- -------------------------------------------------------------------------------
Class B Actual 1,000.00 1,058.00 4.93
- -------------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,011.38 4.82
- -------------------------------------------------------------------------------
Class C Actual 1,000.00 1,057.00 4.93
- -------------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,011.38 4.82
- -------------------------------------------------------------------------------
Class N Actual 1,000.00 1,060.00 3.13
- -------------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,013.13 3.06
- -------------------------------------------------------------------------------
Class Y Actual 1,000.00 1,060.00 1.50
- -------------------------------------------------------------------------------
Class Y Hypothetical 1,000.00 1,014.71 1.47
Hypothetical assumes 5% annual return before expenses.
1. Actual expenses paid are equal to the Portfolio's annualized expense ratio
for that class, multiplied by the average account value over the period,
multiplied by 118/365 [to reflect the period from April 5, 2005 (commencement of
operations) to July 31, 2005].
2. Hypothetical expenses paid are equal to the Portfolio's annualized expense
ratio for that class, multiplied by the average account value over the period,
multiplied by 181/365 (to reflect the one-half year period). Those expense
ratios for the period from April 5, 2005 (commencement of operations) to July
31, 2005 are as follows:
CLASS EXPENSE RATIOS
- --------------------------------
Class A 0.73%
- --------------------------------
Class B 1.48
- --------------------------------
Class C 1.48
- --------------------------------
Class N 0.94
- --------------------------------
Class Y 0.45
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Portfolio's Manager and Transfer Agent that can be terminated at any time,
without advance notice. The "Financial Highlights" tables in the Portfolio's
financial statements, included in this report, also show the gross expense
ratios, without such waivers or reimbursements.
- --------------------------------------------------------------------------------
10 | AGGRESSIVE INVESTOR FUND
STATEMENT OF INVESTMENTS July 31, 2005 / Unaudited
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------
INVESTMENTS IN AFFILIATED COMPANIES--96.6%
- ------------------------------------------------------------------------------------------------------------
EQUITY FUNDS--96.6%
Oppenheimer Capital Appreciation Fund, Cl. Y 88,634 $ 3,803,279
- ------------------------------------------------------------------------------------------------------------
Oppenheimer Developing Markets Fund, Cl. A 32,342 994,522
- ------------------------------------------------------------------------------------------------------------
Oppenheimer Global Fund, Cl. Y 60,974 3,896,832
- ------------------------------------------------------------------------------------------------------------
Oppenheimer Global Opportunities Fund, Cl. Y 28,602 971,043
- ------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Fund, Cl. Y 78,103 2,859,335
- ------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Opportunity Fund, Cl. Y 139,289 1,916,616
- ------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Small Cap Fund, Cl. Y 90,078 1,980,808
- ------------------------------------------------------------------------------------------------------------
Oppenheimer Value Fund, Cl. Y 116,787 2,863,623
------------
Total Investments in Affiliated Companies (Cost $18,493,537) 19,286,058
PRINCIPAL
AMOUNT
- ------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--2.3%
- ------------------------------------------------------------------------------------------------------------
Undivided interest of 0.06% in joint repurchase agreement (Principal Amount/
Value $765,696,000, with a maturity value of $765,904,652) with UBS Warburg
LLC, 3.27%, dated 7/29/05, to be repurchased at $460,125 on 8/1/05,
collateralized by Federal National Mortgage Assn., 5%, 3/1/35,
with a value of $782,601,759 (Cost $460,000) $ 460,000 460,000
- ------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $18,953,537) 98.9% 19,746,058
- ------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 1.1 227,913
----------------------------
NET ASSETS 100.0% $19,973,971
============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11 | AGGRESSIVE INVESTOR FUND
STATEMENT OF ASSETS AND LIABILITIES Unaudited
- --------------------------------------------------------------------------------
July 31, 2005
- ----------------------------------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------------
Investments, at value (cost $18,953,537)--see accompanying statement of investments $ 19,746,058
- ----------------------------------------------------------------------------------------------------
Cash 3,533
- ----------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 714,710
Interest 125
Other 1,052
-------------
Total assets 20,465,478
- ----------------------------------------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 475,431
Distribution and service plan fees 3,023
Transfer and shareholder servicing agent fees 2,205
Shares of beneficial interest redeemed 1,215
Shareholder communications 765
Trustees' compensation 200
Other 8,668
-------------
Total liabilities 491,507
- ----------------------------------------------------------------------------------------------------
NET ASSETS $ 19,973,971
=============
- ----------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ----------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 1,886
- ----------------------------------------------------------------------------------------------------
Additional paid-in capital 19,205,405
- ----------------------------------------------------------------------------------------------------
Accumulated net investment loss (25,841)
- ----------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 792,521
-------------
NET ASSETS $ 19,973,971
=============
12 | AGGRESSIVE INVESTOR FUND
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- -----------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of $11,063,946 and
1,043,881 shares of beneficial interest outstanding) $10.60
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $11.25
- ----------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $4,157,020 and 393,039 shares of
beneficial interest outstanding) $10.58
- ----------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $3,216,811 and 304,257 shares of
beneficial interest outstanding) $10.57
- ----------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $1,192,173 and 112,497 shares of
beneficial interest outstanding) $10.60
- ----------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $344,021 and 32,448 shares of beneficial interest outstanding) $10.60
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13 | AGGRESSIVE INVESTOR FUND
STATEMENT OF OPERATIONS Unaudited
- --------------------------------------------------------------------------------
For the Period Ended July 31, 2005 1
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Interest $ 2,159
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 3,082
Class B 5,496
Class C 4,531
Class N 364
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 2,997
Class B 1,490
Class C 1,110
Class N 51
Class Y 29
- --------------------------------------------------------------------------------
Shareholder communications:
Class A 693
Class B 379
Class C 246
Class N 11
Class Y 10
- --------------------------------------------------------------------------------
Legal, auditing and other professional fees 7,085
- --------------------------------------------------------------------------------
Trustees' compensation 2,236
- --------------------------------------------------------------------------------
Registration and filing fees 1,821
- --------------------------------------------------------------------------------
Custodian fees and expenses 105
- --------------------------------------------------------------------------------
Other 570
----------
Total expenses 32,306
Less reduction to custodian expenses (2)
Less waivers and reimbursements of expenses (4,304)
----------
Net expenses 28,000
- --------------------------------------------------------------------------------
NET INVESTMENT LOSS (25,841)
- --------------------------------------------------------------------------------
UNREALIZED GAIN
- --------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 792,521
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 766,680
==========
1. For the period from April 5, 2005 (commencement of operations) to July 31,
2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14 | AGGRESSIVE INVESTOR FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
PERIOD
ENDED
JULY 31,
2005 1
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------
OPERATIONS
- -------------------------------------------------------------------------------------------------------
Net investment loss $ (25,841)
- -------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 792,521
--------------
Net increase in net assets resulting from operations 766,680
- -------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest transactions:
Class A 10,516,339
Class B 3,993,088
Class C 3,093,325
Class N 1,170,283
Class Y 330,256
- -------------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------------
Total increase 19,869,971
- -------------------------------------------------------------------------------------------------------
Beginning of period 104,000 2
--------------
End of period (including accumulated net investment loss of $25,841 at July 31, 2005) $ 19,973,971
==============
1. For the period from April 5, 2005 (commencement of operations) to July 31,
2005.
2. Reflects the value of the Manager's initial seed money investment on March
15, 2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15 | AGGRESSIVE INVESTOR FUND
FINANCIAL HIGHLIGHTS Unaudited
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
PERIOD ENDED JULY 31, 2005 1 2005 1 2005 1
- -------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00
- -------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.02) 2 (.05) 2 (.05) 2
Net realized and unrealized gain .62 .63 .62
------------------------------------------
Total from investment operations .60 .58 .57
- -------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.60 $ 10.58 $ 10.57
==========================================
- -------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 6.00% 5.80% 5.70%
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $11,064 $ 4,157 $ 3,217
- -------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 5,061 $ 1,736 $ 1,428
- -------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment loss (0.65)% (1.41)% (1.40)%
Total expenses 0.84% 5 1.73% 6 1.70% 7
Expenses after waivers and reimbursements and
reduction to custodian expenses 0.73% 1.48% 1.48%
- -------------------------------------------------------------------------------------------
Portfolio turnover rate 0% 0% 0%
1. For the period from April 5, 2005 (commencement of operations) to July 31,
2005.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. 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 Portfolio distributions or the redemption of Portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were 1.56% for July 31, 2005.
6. Expenses including all underlying fund expenses were 2.45% for July 31, 2005.
7. Expenses including all underlying fund expenses were 2.42% for July 31, 2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16 | AGGRESSIVE INVESTOR FUND
CLASS N CLASS Y
PERIOD ENDED JULY 31, 2005 1 2005 1
- ------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.00 $10.00
- ------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.03) 2 (.01) 2
Net realized and unrealized gain .63 .61
---------------------
Total from investment operations .60 .60
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.60 $10.60
=====================
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 6.00% 6.00%
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $1,192 $ 344
- ------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 235 $ 130
- ------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment loss (0.87)% (0.38)%
Total expenses 1.01% 5 0.53% 6
Expenses after waivers and reimbursements and reduction to custodian expenses 0.94% 0.45%
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 0% 0%
1. For the period from April 5, 2005 (commencement of operations) to July 31,
2005.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. 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 Portfolio distributions or the redemption of Portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were 1.77% for July 31, 2005.
6. Expenses including all underlying fund expenses were 1.28% for July 31, 2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17 | AGGRESSIVE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Portfolio Series (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
Aggressive Investor Fund (the "Portfolio") is a series of the Fund whose
investment objective is to seek current income with a secondary objective of
long-term growth of capital. The Portfolio is a special type of mutual fund
known as a "fund of funds" because it invests in other mutual funds. The
Portfolio normally invests in a portfolio consisting of a target-weighted
allocation in Class A or Class Y shares of other Oppenheimer funds. The Fund's
investment advisor is OppenheimerFunds Inc. (the "Manager").
The Portfolio 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 Portfolio 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.
Under normal market conditions, the Manager will invest the Portfolio's
assets in shares of Oppenheimer Capital Appreciation Fund, Oppenheimer
Developing Markets Fund, Oppenheimer Global Fund, Oppenheimer Global
Opportunities Fund, Oppenheimer Main Street Fund(R), Oppenheimer Main Street
Opportunity Fund(R), Oppenheimer Main Street Small Cap Fund(R), and Oppenheimer
Value Fund (individually, an "Underlying Fund" and collectively, the "Underlying
Funds").
The following is a summary of significant accounting policies consistently
followed by the Portfolio.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Portfolio calculates the net asset value of each class
of shares based upon the net asset value of the applicable Underlying Funds' 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 trading.
For each Underlying Fund, the net asset value per share for a class of
shares on a "regular business day" is determined by dividing the value of the
Underlying Fund's net assets attributable to that class by the number of shares
of that class outstanding on that day. To determine net asset values, the
Underlying Fund assets are valued primarily on the basis of current market
quotations. If market quotations are not readily available or do
18 | AGGRESSIVE INVESTOR FUND
not accurately reflect fair value for a security (in the Manager's judgment) or
if a security's value has been materially affected by events occurring after the
close of the exchange or market on which the security is principally traded,
that security may be valued by another method that the Underlying Fund's Board
of Trustees/Directors believes accurately reflects the fair value. Because some
foreign securities trade in markets and on exchanges that operate on weekends
and U.S. holidays, the values of some of the Underlying Fund's foreign
investments may change on days when investors cannot buy or redeem Underlying
Fund shares.
Short-term "money market type" debt securities with remaining maturities
of sixty days or less are valued at amortized cost (which approximates market
value).
- --------------------------------------------------------------------------------
RISKS OF INVESTING IN THE UNDERLYING FUNDS. Each of the Underlying Funds in
which the Portfolio invests has its own investment risks, and those risks can
affect the value of the Portfolio's investments and therefore the value of the
Portfolio's shares. To the extent that the Portfolio invests more of its assets
in one Underlying Fund than in another, the Portfolio will have greater exposure
to the risks of that Underlying Fund.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Portfolio, along with other affiliated
funds advised by the Manager, may transfer uninvested cash balances into joint
trading accounts on a daily basis. These balances are invested in one or more
repurchase agreements. Securities pledged as collateral for repurchase
agreements are held by a custodian bank until the agreements mature. Each
agreement requires that the market value of the collateral be sufficient to
cover payments of interest and principal. In the event of default by the other
party to the agreement, retention of the collateral may be subject to legal
proceedings.
- --------------------------------------------------------------------------------
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 Portfolio intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Portfolio.
19 | AGGRESSIVE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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 and 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 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 Portfolio on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Portfolio 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 Portfolio
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.
- --------------------------------------------------------------------------------
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 $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
PERIOD ENDED JULY 31, 2005 1,2
SHARES AMOUNT
- --------------------------------------------------------------
CLASS A
Sold 1,041,060 $10,589,891
Redeemed (7,179) (73,552)
-----------------------------
Net increase 1,033,881 $10,516,339
=============================
20 | AGGRESSIVE INVESTOR FUND
PERIOD ENDED JULY 31, 2005 1,2
SHARES AMOUNT
- ----------------------------------------------------------------
CLASS B
Sold 400,379 $4,068,127
Redeemed (7,440) (75,039)
-----------------------------
Net increase 392,939 $3,993,088
=============================
- ----------------------------------------------------------------
CLASS C
Sold 316,651 $3,222,578
Redeemed (12,494) (129,253)
-----------------------------
Net increase 304,157 $3,093,325
=============================
- ----------------------------------------------------------------
CLASS N
Sold 112,397 $1,170,283
Redeemed -- --
-----------------------------
Net increase 112,397 $1,170,283
=============================
- ----------------------------------------------------------------
CLASS Y
Sold 32,452 $ 331,371
Redeemed (104) (1,115)
-----------------------------
Net increase 32,348 $ 330,256
=============================
1. For the period from April 5, 2005 (commencement of operations) to July 31,
2005.
2. The Portfolio sold 10,000 Class A shares at a value of $100,000 and 100
shares of each Class B, Class C, Class N and Class Y at a value of $1,000,
$1,000, $1,000 and $1,000, respectively, to the Manager upon seeding of the
Portfolio on March 15, 2005.
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the period ended July 31, 2005, were as
follows:
PURCHASES SALES
------------------------------------------------------
Investment securities $18,493,537 $--
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the investment advisory agreement, the Manager does not
charge a management fee, but rather collects indirect management fees from
investments in the Underlying Funds. The weighted indirect management fees
collected from the Underlying Funds, as a percent of average daily net assets of
the Portfolio for the period ended July 31, 2005 was 0.72%.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Portfolio. The
Portfolio pays OFS a per account fee. For the period ended July 31, 2005, the
Portfolio paid $3,403 to OFS for services to the Portfolio.
21 | AGGRESSIVE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
Additionally, Class Y shares are subject to minimum fees of $10,000 per
annum 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.
- --------------------------------------------------------------------------------
INITIAL OFFERING AND ORGANIZATIONAL COSTS. The Manager assumed all initial
offering and organizational costs associated with the registration and seeding
of the Fund.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Portfolio, OppenheimerFunds Distributor, Inc. (the
Distributor) acts as the Portfolio's principal underwriter in the continuous
public offering of the Portfolio's classes of shares.
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Portfolio has adopted a Service Plan for
Class A shares. It reimburses the Distributor for a portion of its costs
incurred for services provided to accounts that hold Class A shares.
Reimbursement is made quarterly at an annual rate of up to 0.25% of the average
annual net assets of Class A shares of the Portfolio. The Distributor currently
uses all of those fees to pay dealers, brokers, banks and other financial
institutions quarterly for providing personal services and maintenance of
accounts of their customers that hold Class A shares. Any unreimbursed expenses
the Distributor incurs with respect to Class A shares in any fiscal year cannot
be recovered in subsequent years. Fees incurred by the Portfolio under the Plan
are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The
Portfolio has adopted Distribution and Service Plans for Class B, Class C and
Class N shares to compensate the Distributor for its services and costs in
connection with the distribution of those shares and servicing accounts. Under
the plans, the Portfolio pays the Distributor an annual asset-based sales charge
of 0.75% on Class B and Class C shares and 0.25% on Class N shares. The
Distributor also receives a service fee of 0.25% per year under each plan. If
either the Class B, Class C or Class N plan is terminated by the Portfolio 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
Portfolio 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 July 31, 2005
for Class B, Class C and Class N shares were $40,250, $25,795 and $3,775,
respectively. Fees incurred by the Portfolio 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 Portfolio. They are deducted from the
proceeds of sales of Portfolio 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
22 | AGGRESSIVE INVESTOR FUND
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
PERIOD ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- -------------------------------------------------------------------------------------------------------------
July 31, 2005 $48,477 $-- $17 $741 $5,459
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees paid directly by the Portfolio to
0.35% of average annual net assets for each class. During the period ended July
31, 2005, OFS waived $113, $3 and $4 for Class B, Class N and Class Y shares,
respectively. This undertaking may be amended or withdrawn at any time.
The Manager has voluntarily agreed to a total expense limitation on the
aggregate amount of combined direct (fund-of-funds level) and indirect expense
so that Combined Total Annual and Underlying Fund Operating Expenses as a
percentage of average daily net assets will not exceed the following annual
rates: 1.45%, 2.20%, 2.20%, 1.70% and 1.20%, for Class A, Class B, Class C,
Class N, and Class Y, respectively. During the period ended July 31, 2005, the
Manager reimbursed the Portfolio $1,838, $1,281, $984, $49 and $32, for the
Class A, Class B, Class C, Class N and Class Y shares, respectively. The Manager
may modify or terminate this undertaking at any time without notice to
shareholders. These expense limitations do not include Extraordinary Expenses
and other expenses not incurred in the ordinary course of the Portfolio's
business. Notwithstanding the foregoing limits, the Manager is not required to
waive or reimburse Portfolio expenses in excess of indirect management fees
earned from investments in Underlying Funds to assure that expenses do not
exceed those limits.
- --------------------------------------------------------------------------------
5. LITIGATION
A consolidated amended complaint has been filed as putative derivative and class
actions against the Manager, OFS and the Distributor, as well as 51 of the
Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and
former Directors or Trustees and 8 present and former officers of the funds.
This complaint, initially filed in the U.S. District Court for the Southern
District of New York on January 10, 2005, and amended on March 4, 2005,
consolidates into a single action and amends six individual previously filed
putative derivative and class action complaints. Like those prior complaints,
the complaint alleges 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 assets of the funds to make
those payments in violation of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940. Also, like those prior complaints, the
complaint further alleges that by permitting and/or
23 | AGGRESSIVE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. LITIGATION Continued
participating in those actions, the Directors/Trustees and the Officers breached
their fiduciary duties to shareholders of the funds under the Investment Company
Act of 1940 and at common law. The complaint seeks unspecified compensatory and
punitive damages, rescission of the funds' investment advisory agreements, an
accounting of all fees paid, and an award of attorneys' fees and litigation
expenses.
The defendants believe that the allegations contained in the Complaints
are without merit and that they have meritorious defenses against the claims
asserted. The defendants intend to defend these lawsuits vigorously and to
contest any claimed liability. The defendants believe that it is premature to
render any opinion as to the likelihood of an outcome unfavorable to them and
that no estimate can yet be made with any degree of certainty as to the amount
or range of any potential loss.
24 | AGGRESSIVE INVESTOR FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
25 | AGGRESSIVE INVESTOR FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Investment Company Act requires that the Board request and evaluate, and
that the Manager provide, such information as may be reasonably necessary to
evaluate the terms of the advisory agreement.
NATURE AND EXTENT OF SERVICES. In considering the initial approval of the
Portfolio's advisory agreement, the Board evaluated the nature and extent of the
services to be provided by the Manager and its affiliates. The investment
advisory agreement requires the Manager, at its expense, to provide the
Portfolio with office space, facilities and equipment; administrative, clerical,
legal and compliance personnel; marketing and sales support; securities trading
services; oversight of third party service providers and the services of the
Manager's Asset Allocation Team, who will provide advisory services in regard to
the Portfolio's investments. The Manager selects securities for the Portfolio
and handles its day-to-day business. The portfolio managers are employed by the
Manager and are principally responsible for the day-to-day management of the
Portfolio. Other members of the Manager's Equity and Fixed Income Portfolio Team
provide the portfolio managers with counsel and support in managing the
Portfolios. The Portfolio pays expenses not expressly assumed by the Manager
under the investment advisory agreement.
QUALITY OF SERVICES. The Board also considered the quality of the services
to be provided and the quality of the Manager's resources that will be available
to the Portfolio. The Board noted that the Manager has had over forty years of
experience as an investment adviser and that its assets under management rank it
among the top mutual fund managers in the United States. The Board evaluated the
Manager's administrative, accounting, legal and compliance services based on
information it has received regarding the experience and professional
qualifications of the Manager's personnel and the size and functions of its
staff. The Board also considered their own experiences as directors or trustees
of other funds advised by the Manager. The Board has also received and reviewed
information regarding the quality of services provided by affiliates of the
Manager at other times during the year, in connection with the renewal of those
affiliates' service agreements with other funds. The Board considered that the
relatively low redemption rate for funds advised by the Manager provided an
indication of shareholder satisfaction with the overall level of services
provided by the Manager.
PORTFOLIO MANAGEMENT SERVICES AND PERFORMANCE. In its evaluation of the
quality of the portfolio management services to be provided, the Board
considered the experience of Rudi Schadt, Jerry Webman, William L. Wilby and
Kurt Wolfgruber, the members of the Portfolio's Asset Allocation Team. The
Portfolio is managed by Messrs. Schadt,
26 | AGGRESSIVE INVESTOR FUND
Webman, Wilby and Wolfgruber, who are Vice Presidents of thePortfolio and are
primarily responsible for the day-to-day management of the Portfolio's
investments.
Mr. Schadt is a Vice President, Director of Research in Product Design and
Risk Management of the Manager. Mr. Webman has been a Senior Vice President of
the Manager since February 1996, a Senior Investment Officer and Director of the
Manager's Fixed Income Investments since 1999 and a Senior Vice President of
HarbourView Asset Management Corporation since May 1999. Mr. Wilby has been a
Senior Vice President of the Manager since July 1994 and Senior Investment
Officer, Director of Equities of the Manager since July 2004. Mr. Wolfgruber has
been an Executive Vice President of the Manager since March 2003, Chief
Investment Officer and Director of the Manager since July 2003, Director of
HarbourView Asset Management Corporation and of OFI Institutional Asset
Management, Inc. since June 2003 and of Tremont Capital Management, Inc. since
October 2001. Messrs. Schadt, Webman, Wilby and Wolfgruber each oversee other
portfolios in the OppenheimerFunds complex. The Board also considered the
historical performance of other funds advised by the Manager.
MANAGEMENT FEES AND EXPENSES. The Board considered information regarding
the fees to be paid to the Manager and its affiliates both directly from the
Portfolio and indirectly from the Underlying Funds. The Board also considered
the other expenses that will be borne both directly and indirectly by the
Portfolio and the comparability of the fees and services of the Portfolio to the
fees and services of other types of entities advised by the Manager.
PROFITABILITY OF THE MANAGER AND AFFILIATES. The Board also considered the
cost of services to be provided by the Manager and its affiliates. The Board
considered that the Manager must be able to pay and retain experienced
professional personnel at competitive rates to provide services to the Fund and
that maintaining the financial viability of the Manager is important in order
for the Manager to continue to provide significant services to the Portfolio and
its shareholders. In addition the Board considered the potential direct and
indirect benefits the Manager may receive as a result of its relationship with
the Portfolio, including compensation to be paid to the Manager's affiliates and
research that may be provided to the Manager in connection with permissible
brokerage arrangements (soft dollar arrangements).
ECONOMIES OF SCALE. The Board reviewed the extent to which the Manager may
realize economies of scale in managing and supporting the Portfolio and the
Manager's voluntary expense limitations.
27 | AGGRESSIVE INVESTOR FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board. Based on its review and
evaluations described above, the Board, including a majority of the independent
Trustees, concluded that the nature, extent and quality of the services to be
provided to the Portfolio by the Manager were a benefit to the Portfolio and
would be in the best interest of the Portfolio's shareholders and that the
amount and structure of the compensation to be received by the Manager and its
affiliates are reasonable in relation to the services to be provided.
Accordingly, the Board approved the Portfolio's investment advisory agreement.
The Board judged the terms and conditions of the advisory agreement, including
the management fee, in light of all of the surrounding circumstances.
28 | AGGRESSIVE INVESTOR FUND
NOTES
- --------------------------------------------------------------------------------
CONSERVATIVE INVESTOR FUND
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
Cumulative returns are not annualized. Portfolio'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 Portfolio
or any gains you may realize if you sell your shares.
Investors should consider the Portfolio's investment objectives, risks, and
other charges and expenses carefully before investing. The Portfolio's
prospectus contains this and other information about the Portfolio, 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 Portfolio's investment strategy and focus can change over time. The mention
of specific fund holdings does not constitute a recommendation by
OppenheimerFunds, Inc.
CLASS A shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class A returns include the current maximum initial sales
charge of 5.75%.
CLASS B shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 3% (since inception). Class B shares are subject
to an annual 0.75% asset-based sales charge.
CLASS C shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
CLASS N shares of the Portfolio were first publicly offered on 4/5/05. Class N
shares are offered only through retirement plans. Unless otherwise noted, Class
N returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
7 | CONSERVATIVE INVESTOR FUND
NOTES
- --------------------------------------------------------------------------------
CLASS Y shares of the Portfolio were first publicly offered on 4/5/05. 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 Portfolio's Statement
of Additional Information.
8 | CONSERVATIVE INVESTOR FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Portfolio, 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 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 Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The examples for Actual Expenses are based on an investment of $1,000.00
invested at the beginning of the period, April 5, 2005 (commencement of
operations) and held for the period ended July 31, 2005.
The Hypothetical Examples for Comparison Purposes are based on an investment of
$1,000.00 invested on February 1, 2005 and held for the six months ended July
31, 2005.
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 Portfolio'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
Portfolio'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 Portfolio 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.
9 | CONSERVATIVE INVESTOR FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
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 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.
10 | CONSERVATIVE INVESTOR FUND
- --------------------------------------------------------------------------------
ENDING EXPENSES
BEGINNING ACCOUNT PAID DURING
ACCOUNT VALUE 6 MONTHS ENDED
VALUE (7/31/05) 7/31/2005 1,2
- --------------------------------------------------------------------------------
Class A Actual $1,000.00 $1,034.00 $1.94
- --------------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,014.26 1.92
- --------------------------------------------------------------------------------
Class B Actual 1,000.00 1,032.00 4.41
- --------------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,011.83 4.37
- --------------------------------------------------------------------------------
Class C Actual 1,000.00 1,031.00 4.41
- --------------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,011.83 4.37
- --------------------------------------------------------------------------------
Class N Actual 1,000.00 1,034.00 2.77
- --------------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,013.45 2.74
- --------------------------------------------------------------------------------
Class Y Actual 1,000.00 1,035.00 1.09
- --------------------------------------------------------------------------------
Class Y Hypothetical 1,000.00 1,015.10 1.08
Hypothetical assumes 5% annual return before expenses.
1. Actual expenses paid are equal to the Portfolio's annualized expense ratio
for that class, multiplied by the average account value over the period,
multiplied by 118/365 [to reflect the period from April 5, 2005 (commencement of
operations) to July 31, 2005].
2. Hypothetical expenses paid are equal to the Portfolio's annualized expense
ratio for that class, multiplied by the average account value over the period,
multiplied by 181/365 (to reflect the one-half year period). Those expense
ratios for the period from April 5, 2005 (commencement of operations) to July
31, 2005 are as follows:
CLASS EXPENSE RATIOS
- -------------------------------
Class A 0.59%
- -------------------------------
Class B 1.34
- -------------------------------
Class C 1.34
- -------------------------------
Class N 0.84
- -------------------------------
Class Y 0.33
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Portfolio's Manager and Transfer Agent that can be terminated at any time,
without advance notice. The "Financial Highlights" tables in the Portfolio's
financial statements, included in this report, also show the gross expense
ratios, without such waivers or reimbursements.
- --------------------------------------------------------------------------------
11 | CONSERVATIVE INVESTOR FUND
STATEMENT OF INVESTMENTS July 31, 2005
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------
INVESTMENTS IN AFFILIATED COMPANIES--93.9%
- ----------------------------------------------------------------------------------------------------------------
EQUITY FUNDS--24.2%
Oppenheimer Capital Appreciation Fund, Cl. Y 29,453 $ 1,263,827
- ----------------------------------------------------------------------------------------------------------------
Oppenheimer Global Fund, Cl. Y 20,309 1,297,971
- ----------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Fund, Cl. Y 34,635 1,267,964
- ----------------------------------------------------------------------------------------------------------------
Oppenheimer Real Estate Fund, Cl. Y 68,214 1,367,008
- ----------------------------------------------------------------------------------------------------------------
Oppenheimer Value Fund, Cl. Y 51,807 1,270,298
------------
6,467,068
- ----------------------------------------------------------------------------------------------------------------
FIXED INCOME FUNDS--69.7%
Oppenheimer Core Bond Fund, Cl. Y 950,444 9,846,607
- ----------------------------------------------------------------------------------------------------------------
Oppenheimer High Yield Fund, Cl. Y 265,757 2,516,721
- ----------------------------------------------------------------------------------------------------------------
Oppenheimer International Bond Fund, Cl. Y 209,982 1,236,795
- ----------------------------------------------------------------------------------------------------------------
Oppenheimer Limited-Term Government Fund, Cl. Y 367,335 3,684,372
- ----------------------------------------------------------------------------------------------------------------
Oppenheimer Real Asset Fund, Cl. Y 155,857 1,301,408
-------------
18,585,903
-------------
Total Investments in Affiliated Companies (Cost $24,643,852) 25,052,971
PRINCIPAL
AMOUNT
- ----------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--0.3%
- ----------------------------------------------------------------------------------------------------------------
Undivided interest of 0.01% in joint repurchase agreement (Principal Amount/
Value $765,696,000, with a maturity value of $765,904,652) with UBS Warburg
LLC, 3.27%, dated 7/29/05, to be repurchased at $77,021 on 8/1/05, collateralized
by Federal National Mortgage Assn., 5%, 3/1/35, with a value of $782,601,759
(Cost $77,000) $ 77,000 77,000
- ----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $24,720,852) 94.2% 25,129,971
- ----------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 5.8 1,539,701
----------------------------
NET ASSETS 100.0% $ 26,669,672
============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12 | CONSERVATIVE INVESTOR FUND
STATEMENT OF ASSETS AND LIABILITIES Unaudited
- --------------------------------------------------------------------------------
July 31, 2005
- --------------------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $24,720,852)--see accompanying statement of investments $25,129,971
- --------------------------------------------------------------------------------------------------
Cash 4,104
- --------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 1,674,669
Interest 55,379
Other 1,052
------------
Total assets 26,865,175
- --------------------------------------------------------------------------------------------------
LIABILITIES
Payables and other liabilities:
Investments purchased 137,075
Shares of beneficial interest redeemed 37,959
Legal, auditing and other professional fees 10,917
Distribution and service plan fees 4,390
Transfer and shareholder servicing agent fees 1,097
Shareholder communications 606
Trustees' compensation 500
Custodian fees 400
Other 2,559
------------
Total liabilities 195,503
- --------------------------------------------------------------------------------------------------
NET ASSETS $26,669,672
============
- --------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Par value of shares of beneficial interest $ 2,581
- --------------------------------------------------------------------------------------------------
Additional paid-in capital 26,162,903
- --------------------------------------------------------------------------------------------------
Accumulated net investment income 95,069
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 409,119
------------
NET ASSETS $26,669,672
============
13 | CONSERVATIVE INVESTOR FUND
STATEMENT OF ASSETS AND LIABILITIES Unaudited / Continued
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets of $17,629,611 and
1,705,108 shares of beneficial interest outstanding) $10.34
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $10.97
- ----------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $3,094,785 and 299,949 shares of
beneficial interest outstanding) $10.32
- ----------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $5,455,016 and 528,930 shares of
beneficial interest outstanding) $10.31
- ----------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $412,618 and 39,919 shares of
beneficial interest outstanding) $10.34
- ----------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $77,642 and 7,500 shares of beneficial interest outstanding) $10.35
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14 | CONSERVATIVE INVESTOR FUND
STATEMENT OF OPERATIONS Unaudited
- --------------------------------------------------------------------------------
For the Period Ended July 31, 2005 1
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 115,377
- -------------------------------------------------------------------------------
Interest 11,297
----------
Total investment income 126,674
- -------------------------------------------------------------------------------
EXPENSES
Distribution and service plan fees:
Class A 5,936
Class B 3,446
Class C 7,609
Class N 138
- -------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 1,482
Class B 550
Class C 706
Class N 37
Class Y 13
- -------------------------------------------------------------------------------
Shareholder communications:
Class A 451
Class B 252
Class C 163
Class N 9
Class Y 1
- -------------------------------------------------------------------------------
Legal, auditing and other professional fees 10,917
- -------------------------------------------------------------------------------
Registration and filing fees 2,541
- -------------------------------------------------------------------------------
Trustees' compensation 2,536
- -------------------------------------------------------------------------------
Custodian fees and expenses 410
- -------------------------------------------------------------------------------
Other 564
----------
Total expenses 37,761
Less reduction to custodian expenses (5)
Less waivers and reimbursements of expenses (6,151)
----------
Net expenses 31,605
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME 95,069
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
Net change in unrealized appreciation on investments 409,119
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 504,188
==========
1. For the period from April 5, 2005 (commencement of operations) to July 31,
2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15 | CONSERVATIVE INVESTOR FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
PERIOD
ENDED
JULY 31,
2005 1
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 95,069
- -------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 409,119
-------------
Net increase in net assets resulting from operations 504,188
- -------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets resulting from beneficial interest transactions:
Class A 17,167,472
Class B 3,050,601
Class C 5,360,198
Class N 407,936
Class Y 75,277
- -------------------------------------------------------------------------------------------------------
NET ASSETS
Total increase 26,565,672
- -------------------------------------------------------------------------------------------------------
Beginning of period 104,000 2
-------------
End of period (including accumulated net investment income of $95,069 at July 31, 2005) $26,669,672
=============
1. For the period from April 5, 2005 (commencement of operations) to July 31,
2005.
2. Reflects the value of the Manager's initial seed money investment on March
15, 2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16 | CONSERVATIVE INVESTOR FUND
FINANCIAL HIGHLIGHTS Unaudited
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
PERIOD ENDED JULY 31, 2005 1 2005 1 2005 1
- --------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00
- --------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .09 2 .06 2 .06 2
Net realized and unrealized gain .25 .26 .25
--------------------------------------
Total from investment operations .34 .32 .31
- --------------------------------------------------------------------------------------
Net asset value, end of period $ 10.34 $ 10.32 $ 10.31
======================================
- --------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 3.40% 3.20% 3.10%
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $17,629 $ 3,095 $ 5,455
- --------------------------------------------------------------------------------------
Average net assets (in thousands) $ 8,568 $ 1,087 $ 2,399
- --------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.64% 1.86% 1.86%
Total expenses 0.72% 5 1.62% 6 1.53% 7
Expenses after waivers and reimbursements and
reduction to custodian expenses 0.59% 1.34% 1.34%
- --------------------------------------------------------------------------------------
Portfolio turnover rate 0% 0% 0%
1. For the period from April 5, 2005 (commencement of operations) to July 31,
2005.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. 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 Portfolio distributions or the redemption of Portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were 1.38% for July 31, 2005.
6. Expenses including all underlying fund expenses were 2.28% for July 31, 2005.
7. Expenses including all underlying fund expenses were 2.19% for July 31, 2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17 | CONSERVATIVE INVESTOR FUND
FINANCIAL HIGHLIGHTS Unaudited/Continued
- --------------------------------------------------------------------------------
CLASS N CLASS Y
PERIOD ENDED JULY 31, 2005 1 2005 1
- -----------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
Net asset value, beginning of period $10.00 $10.00
- -----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .07 2 .10 2
Net realized and unrealized gain .27 .25
--------------------
Total from investment operations .34 .35
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period $10.34 $10.35
====================
- -----------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 3.40% 3.50%
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 413 $ 78
- -----------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 88 $ 34
- -----------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.22% 2.92%
Total expenses 1.08% 5 0.53% 6
Expenses after waivers and reimbursements and reduction to custodian expenses 0.84% 0.33%
- -----------------------------------------------------------------------------------------------------
Portfolio turnover rate 0% 0%
1. For the period from April 5, 2005 (commencement of operations) to July 31,
2005.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. 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 Portfolio distributions or the redemption of Portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were 1.74% for July 31, 2005.
6. Expenses including all underlying fund expenses were 1.20% for July 31, 2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18 | CONSERVATIVE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Portfolio Series (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
Conservative Investor Fund (the "Portfolio") is a series of the Fund whose
investment objective is to seek current income with a secondary objective of
long-term growth of capital. The Portfolio is a special type of mutual fund
known as a "fund of funds" because it invests in other mutual funds. The
Portfolio normally invests in a portfolio consisting of a target-weighted
allocation in Class A or Class Y shares of other Oppenheimer funds. The Fund's
investment advisor is OppenheimerFunds Inc. (the "Manager").
The Portfolio 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 Portfolio 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.
Under normal market conditions, the Manager will invest the Portfolio's
assets in shares of Oppenheimer Core Bond Fund, Oppenheimer Capital Appreciation
Fund, Oppenheimer Global Fund, Oppenheimer High Yield Fund, Oppenheimer
International Bond Fund, Oppenheimer Limited-Term Government Fund, Oppenheimer
Main Street Fund(R), Oppenheimer Real Asset Fund(R), Oppenheimer Real Estate
Fund and Oppenheimer Value Fund (individually, an "Underlying Fund" and
collectively, the "Underlying Funds").
The following is a summary of significant accounting policies consistently
followed by the Portfolio.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Portfolio calculates the net asset value of each class
of shares based upon the net asset value of the applicable Underlying Funds' 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 trading.
For each Underlying Fund, the net asset value per share for a class of
shares on a "regular business day" is determined by dividing the value of the
Underlying Fund's net assets attributable to that class by the number of shares
of that class outstanding on that day. To determine net asset values, the
Underlying Fund assets are valued primarily on the basis of current market
quotations. If market quotations are not readily available or do
19 | CONSERVATIVE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
not accurately reflect fair value for a security (in the Manager's judgment) or
if a security's value has been materially affected by events occurring after the
close of the exchange or market on which the security is principally traded,
that security may be valued by another method that the Underlying Fund's Board
of Trustees/Directors believes accurately reflects the fair value. Because some
foreign securities trade in markets and on exchanges that operate on weekends
and U.S. holidays, the values of some of the Underlying Fund's foreign
investments may change on days when investors cannot buy or redeem Underlying
Fund shares.
Short-term "money market type" debt securities with remaining maturities
of sixty days or less are valued at amortized cost (which approximates market
value).
- --------------------------------------------------------------------------------
RISKS OF INVESTING IN THE UNDERLYING FUNDS. Each of the Underlying Funds in
which the Portfolio invests has its own investment risks, and those risks can
affect the value of the Portfolio's investments and therefore the value of the
Portfolio's shares. To the extent that the Portfolio invests more of its assets
in one Underlying Fund than in another, the Portfolio will have greater exposure
to the risks of that Underlying Fund.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Portfolio, along with other affiliated
funds advised by the Manager, may transfer uninvested cash balances into joint
trading accounts on a daily basis. These balances are invested in one or more
repurchase agreements. Securities pledged as collateral for repurchase
agreements are held by a custodian bank until the agreements mature. Each
agreement requires that the market value of the collateral be sufficient to
cover payments of interest and principal. In the event of default by the other
party to the agreement, retention of the collateral may be subject to legal
proceedings.
- --------------------------------------------------------------------------------
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 Portfolio intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Portfolio.
20 | CONSERVATIVE INVESTOR FUND
- --------------------------------------------------------------------------------
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 and 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 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 Portfolio on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Portfolio 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 Portfolio
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.
- --------------------------------------------------------------------------------
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 $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
PERIOD ENDED JULY 31, 2005 1,2
SHARES AMOUNT
- -------------------------------------------
CLASS A
Sold 1,715,290 $ 17,373,945
Redeemed (20,182) (206,473)
---------------------------
Net increase 1,695,108 $ 17,167,472
===========================
21 | CONSERVATIVE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST Continued
PERIOD ENDED JULY 31, 2005 1,2
SHARES AMOUNT
- ------------------------------------------------
CLASS B
Sold 301,189 $ 3,064,240
Redeemed (1,340) (13,639)
------------------------
Net increase 299,849 $ 3,050,601
========================
- ------------------------------------------------
CLASS C
Sold 535,182 $ 5,425,315
Redeemed (6,352) (65,117)
------------------------
Net increase 528,830 $ 5,360,198
========================
- ------------------------------------------------
CLASS N
Sold 39,819 $ 407,936
Redeemed -- --
------------------------
Net increase 39,819 $ 407,936
========================
- ------------------------------------------------
CLASS Y
Sold 8,381 $ 85,445
Redeemed (981) (10,168)
------------------------
Net increase 7,400 $ 75,277
========================
1. For the period from April 5, 2005 (commencement of operations) to July 31,
2005.
2. The Portfolio sold 10,000 Class A shares at a value of $100,000 and 100
shares of each Class B, Class C, Class N and Class Y at a value of $1,000,
$1,000, $1,000, $1,000, respectively, to the Manager upon seeding of the
Portfolio on March 15, 2005.
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the period ended July 31, 2005, were as
follows:
PURCHASES SALES
---------------------------------------------------
Investment securities $24,643,852 $ --
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the investment advisory agreement, the Manager does not
charge a management fee, but rather collects indirect management fees from
investments in the Underlying Funds. The weighted indirect management fees
collected from the Underlying Funds, as a percent of average daily net assets of
the Portfolio for the period ended July 31, 2005 was 0.66%.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Portfolio. The
Portfolio pays OFS a per account fee. For the period ended July 31, 2005, the
Portfolio paid $1,621 to OFS for services to the Portfolio.
22 | CONSERVATIVE INVESTOR FUND
Additionally, Class Y shares are subject to minimum fees of $10,000 per
annum 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.
- --------------------------------------------------------------------------------
INITIAL OFFERING AND ORGANIZATIONAL COSTS. The Manager assumed all initial
offering and organizational costs associated with the registration and seeding
of the Portfolio.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Portfolio, OppenheimerFunds Distributor, Inc. (the
Distributor) acts as the Portfolio's principal underwriter in the continuous
public offering of the Portfolio's classes of shares.
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Portfolio has adopted a Service Plan for
Class A shares. It reimburses the Distributor for a portion of its costs
incurred for services provided to accounts that hold Class A shares.
Reimbursement is made quarterly at an annual rate of up to 0.25% of the average
annual net assets of Class A shares of the Portfolio. The Distributor currently
uses all of those fees to pay dealers, brokers, banks and other financial
institutions quarterly for providing personal services and maintenance of
accounts of their customers that hold Class A shares. Any unreimbursed expenses
the Distributor incurs with respect to Class A shares in any fiscal year cannot
be recovered in subsequent years. Fees incurred by the Portfolio under the Plan
are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The
Portfolio has adopted Distribution and Service Plans for Class B, Class C and
Class N shares to compensate the Distributor for its services and costs in
connection with the distribution of those shares and servicing accounts. Under
the plans, the Portfolio pays the Distributor an annual asset-based sales charge
of 0.75% on Class B and Class C shares and 0.25% on Class N shares. The
Distributor also receives a service fee of 0.25% per year under each plan. If
either the Class B, Class C or Class N plan is terminated by the Portfolio 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
Portfolio 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 July 31, 2005
for Class B, Class C and Class N shares were $30,263, $43,008 and $2,244,
respectively. Fees incurred by the Portfolio 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 Portfolio. They are deducted from the
proceeds of sales of Portfolio 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.
23 | CONSERVATIVE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
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
PERIOD ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- -----------------------------------------------------------------------------------------------------------
July 31, 2005 $65,673 $-- $124 $125 $1,555
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees paid directly by the Portfolio to
0.35% of average annual net assets for each class. During the period ended July
31, 2005, OFS waived $60, $3 and $7 for Class B, Class N and Class Y shares,
respectively. This undertaking may be amended or withdrawn at any time.
The Manager has voluntarily agreed to a total expense limitation on the
aggregate amount of combined direct (fund-of-funds level) and indirect expense
so that Combined Total Annual and Underlying Fund Operating Expenses as a
percentage of average daily net assets will not exceed the following annual
rates: 1.25%, 2.00%, 2.00%, 1.50% and 1.00%, for Class A, Class B, Class C,
Class N and Class Y, respectively. During the period ended July 31, 2005, the
Manager reimbursed the Portfolio $3,594, $911, $1,495, $66 and $15, for the
Class A, Class B, Class C, Class N and Class Y shares, respectively. The Manager
may modify or terminate this undertaking at any time without notice to
shareholders. These expense limitations do not include Extraordinary Expenses
and other expenses not incurred in the ordinary course of the Portfolio's
business. Notwithstanding the foregoing limits, the Manager is not required to
waive or reimburse Portfolio expenses in excess of indirect management fees
earned from investments in Underlying Funds to assure that expenses do not
exceed those limits.
- --------------------------------------------------------------------------------
5. LITIGATION
A consolidated amended complaint has been filed as putative derivative and class
actions against the Manager, OFS and the Distributor, as well as 51 of the
Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and
former Directors or Trustees and 8 present and former officers of the funds.
This complaint, initially filed in the U.S. District Court for the Southern
District of New York on January 10, 2005, and amended on March 4, 2005,
consolidates into a single action and amends six individual previously filed
putative derivative and class action complaints. Like those prior complaints,
the complaint alleges 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 assets of the funds to make
those payments in violation of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940. Also, like those prior complaints, the
complaint further alleges that by permitting and/or participating in those
actions, the Directors/Trustees and the Officers breached their fiduciary
24 | CONSERVATIVE INVESTOR FUND
duties to shareholders of the funds under the Investment Company Act of 1940 and
at common law. The complaint seeks unspecified compensatory and punitive
damages, rescission of the funds' investment advisory agreements, an accounting
of all fees paid, and an award of attorneys' fees and litigation expenses.
The defendants believe that the allegations contained in the Complaints
are without merit and that they have meritorious defenses against the claims
asserted. The defendants intend to defend these lawsuits vigorously and to
contest any claimed liability. The defendants believe that it is premature to
render any opinion as to the likelihood of an outcome unfavorable to them and
that no estimate can yet be made with any degree of certainty as to the amount
or range of any potential loss.
25 | CONSERVATIVE INVESTOR FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
26 | CONSERVATIVE INVESTOR FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Investment Company Act requires that the Board request and evaluate, and
that the Manager provide, such information as may be reasonably necessary to
evaluate the terms of the advisory agreement.
NATURE AND EXTENT OF SERVICES. In considering the initial approval of the
Portfolio's advisory agreement, the Board evaluated the nature and extent of the
services to be provided by the Manager and its affiliates. The investment
advisory agreement requires the Manager, at its expense, to provide the
Portfolio with office space, facilities and equipment; administrative, clerical,
legal and compliance personnel; marketing and sales support; securities trading
services; oversight of third party service providers and the services of the
Manager's Asset Allocation Team, who will provide advisory services in regard to
the Portfolio's investments. The Manager selects securities for the Portfolio
and handles its day-to-day business. The portfolio managers are employed by the
Manager and are principally responsible for the day-to-day management of the
Portfolio. Other members of the Manager's Equity and Fixed Income Portfolio Team
provide the portfolio managers with counsel and support in managing the
Portfolios. The Portfolio pays expenses not expressly assumed by the Manager
under the investment advisory agreement.
QUALITY OF SERVICES. The Board also considered the quality of the services
to be provided and the quality of the Manager's resources that will be available
to the Portfolio. The Board noted that the Manager has had over forty years of
experience as an investment adviser and that its assets under management rank it
among the top mutual fund managers in the United States. The Board evaluated the
Manager's administrative, accounting, legal and compliance services based on
information it has received regarding the experience and professional
qualifications of the Manager's personnel and the size and functions of its
staff. The Board also considered their own experiences as directors or trustees
of other funds advised by the Manager. The Board has also received and reviewed
information regarding the quality of services provided by affiliates of the
Manager at other times during the year, in connection with the renewal of those
affiliates' service agreements with other funds. The Board considered that the
relatively low redemption rate for funds advised by the Manager provided an
indication of shareholder satisfaction with the overall level of services
provided by the Manager.
PORTFOLIO MANAGEMENT SERVICES AND PERFORMANCE. In its evaluation of the
quality of the portfolio management services to be provided, the Board
considered the experience of Rudi Schadt, Jerry Webman, William L. Wilby and
Kurt Wolfgruber, the members of the Portfolio's Asset Allocation Team. The
Portfolio is managed by Messrs. Schadt, Webman,
27 | CONSERVATIVE INVESTOR FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
Wilby and Wolfgruber, who are Vice Presidents of the Portfolio and are primarily
responsible for the day-to-day management of the Portfolio's investments.
Mr. Schadt is a Vice President, Director of Research in Product Design and
Risk Management of the Manager. Mr. Webman has been a Senior Vice President of
the Manager since February 1996, a Senior Investment Officer and Director of the
Manager's Fixed Income Investments since 1999 and a Senior Vice President of
HarbourView Asset Management Corporation since May 1999. Mr. Wilby has been a
Senior Vice President of the Manager since July 1994 and Senior Investment
Officer, Director of Equities of the Manager since July 2004. Mr. Wolfgruber has
been an Executive Vice President of the Manager since March 2003, Chief
Investment Officer and Director of the Manager since July 2003, Director of
HarbourView Asset Management Corporation and of OFI Institutional Asset
Management, Inc. since June 2003 and of Tremont Capital Management, Inc. since
October 2001. Messrs. Schadt, Webman, Wilby and Wolfgruber each oversee other
portfolios in the OppenheimerFunds complex. The Board also considered the
historical performance of other funds advised by the Manager.
MANAGEMENT FEES AND EXPENSES. The Board considered information regarding
the fees to be paid to the Manager and its affiliates both directly from the
Portfolio and indirectly from the Underlying Funds. The Board also considered
the other expenses that will be borne both directly and indirectly by the
Portfolio and the comparability of the fees and services of the Portfolio to the
fees and services of other types of entities advised by the Manager.
PROFITABILITY OF THE MANAGER AND AFFILIATES. The Board also considered the
cost of services to be provided by the Manager and its affiliates. The Board
considered that the Manager must be able to pay and retain experienced
professional personnel at competitive rates to provide services to the Portfolio
and that maintaining the financial viability of the Manager is important in
order for the Manager to continue to provide significant services to the
Portfolio and its shareholders. In addition the Board considered the potential
direct and indirect benefits the Manager may receive as a result of its
relationship with the Portfolio, including compensation to be paid to the
Manager's affiliates and research that may be provided to the Manager in
connection with permissible brokerage arrangements (soft dollar arrangements).
ECONOMIES OF SCALE. The Board reviewed the extent to which the Manager may
realize economies of scale in managing and supporting the Portfolio and the
Manager's voluntary expense limitations.
28 | CONSERVATIVE INVESTOR FUND
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board. Based on its review and
evaluations described above, the Board, including a majority of the independent
Trustees, concluded that the nature, extent and quality of the services to be
provided to the Portfolio by the Manager were a benefit to the Portfolio and
would be in the best interest of the Portfolio's shareholders and that the
amount and structure of the compensation to be received by the Manager and its
affiliates are reasonable in relation to the services to be provided.
Accordingly, the Board approved the Portfolio's investment advisory agreement.
The Board judged the terms and conditions of the advisory agreement, including
the management fee, in light of all of the surrounding circumstances.
29 | CONSERVATIVE INVESTOR FUND
NOTES
- --------------------------------------------------------------------------------
MODERATE INVESTOR FUND
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
Cumulative returns are not annualized. The Portfolio'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
Portfolio or any gains you may realize if you sell your shares.
Investors should consider the Portfolio's investment objectives, risks, and
other charges and expenses carefully before investing. The Portfolio's
prospectus contains this and other information about the Portfolio, 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 Portfolio's investment strategy and focus can change over time. The mention
of specific fund holdings does not constitute a recommendation by
OppenheimerFunds, Inc.
CLASS A shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class A returns include the current maximum initial sales
charge of 5.75%.
CLASS B shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 3% (since inception). Class B shares are subject
to an annual 0.75% asset-based sales charge.
CLASS C shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
CLASS N shares of the Portfolio were first publicly offered on 4/5/05. Class N
shares are offered only through retirement plans. Unless otherwise noted, Class
N returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
CLASS Y shares of the Portfolio were first publicly offered on 4/5/05. 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 Portfolio's Statement
of Additional Information.
7 | MODERATE INVESTOR FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Portfolio, 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 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 Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
The examples for Actual Expenses are based on an investment of $1,000.00
invested at the beginning of the period, April 5, 2005 (commencement of
operations) and held for the period ended July 31, 2005.
The Hypothetical Examples for Comparison Purposes are based on an investment of
$1,000.00 invested on February 1, 2005 and held for the six months ended July
31, 2005.
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 Portfolio'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
Portfolio'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 Portfolio 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.
8 | MODERATE INVESTOR FUND
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 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.
9 | MODERATE INVESTOR FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ENDING EXPENSES
BEGINNING ACCOUNT PAID DURING
ACCOUNT VALUE 6 MONTHS ENDED
VALUE (7/31/05) 7/31/2005 1,2
- --------------------------------------------------------------------------------
Class A Actual $1,000.00 $1,042.00 $2.05
- --------------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,014.16 2.02
- --------------------------------------------------------------------------------
Class B Actual 1,000.00 1,039.00 4.53
- --------------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,011.74 4.46
- --------------------------------------------------------------------------------
Class C Actual 1,000.00 1,038.00 4.52
- --------------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,011.74 4.46
- --------------------------------------------------------------------------------
Class N Actual 1,000.00 1,041.00 2.87
- --------------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,013.35 2.84
- --------------------------------------------------------------------------------
Class Y Actual 1,000.00 1,042.00 1.19
- --------------------------------------------------------------------------------
Class Y Hypothetical 1,000.00 1,015.00 1.17
Hypothetical assumes 5% annual return before expenses.
1. Actual expenses paid are equal to the Portfolio's annualized expense ratio
for that class, multiplied by the average account value over the period,
multiplied by 118/365 [to reflect the period from April 5, 2005 (commencement of
operations) to July 31, 2005].
2. Hypothetical expenses paid are equal to the Portfolio's annualized expense
ratio for that class, multiplied by the average account value over the period,
multiplied by 181/365 (to reflect the one-half year period). Those expense
ratios for the period from April 5, 2005 (commencement of operations) to July
31, 2005 are as follows:
CLASS EXPENSE RATIOS
- ----------------------------
Class A 0.62%
- ----------------------------
Class B 1.37
- ----------------------------
Class C 1.37
- ----------------------------
Class N 0.87
- ----------------------------
Class Y 0.36
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Portfolio's Manager and Transfer Agent that can be terminated at any time,
without advance notice. The "Financial Highlights" tables in the Portfolio's
financial statements, included in this report, also show the gross expense
ratios, without such waivers or reimbursements.
- --------------------------------------------------------------------------------
10 | MODERATE INVESTOR FUND
STATEMENT OF INVESTMENTS July 31, 2005 / Unaudited
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------
INVESTMENTS IN AFFILIATED COMPANIES--96.0%
- --------------------------------------------------------------------------------------------------------------
EQUITY FUNDS--48.7%
Oppenheimer Capital Appreciation Fund, Cl. Y 122,215 $ 5,244,236
- --------------------------------------------------------------------------------------------------------------
Oppenheimer Global Fund, Cl. Y 84,002 5,368,602
- --------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Fund, Cl. Y 143,531 5,254,683
- --------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Opportunity Fund, Cl. Y 191,924 2,640,868
- --------------------------------------------------------------------------------------------------------------
Oppenheimer Real Estate Fund, Cl. Y 140,090 2,807,421
- --------------------------------------------------------------------------------------------------------------
Oppenheimer Value Fund, Cl. Y 214,581 5,261,533
------------
26,577,343
- --------------------------------------------------------------------------------------------------------------
FIXED INCOME FUNDS--47.3%
Oppenheimer Core Bond Fund, Cl. Y 987,106 10,226,422
- --------------------------------------------------------------------------------------------------------------
Oppenheimer High Yield Fund, Cl. Y 550,673 5,214,870
- --------------------------------------------------------------------------------------------------------------
Oppenheimer International Bond Fund, Cl. Y 436,312 2,569,876
- --------------------------------------------------------------------------------------------------------------
Oppenheimer Limited-Term Government Fund, Cl. Y 509,234 5,107,617
- --------------------------------------------------------------------------------------------------------------
Oppenheimer Real Asset Fund, Cl. Y 321,840 2,687,371
------------
25,806,156
------------
Total Investments in Affiliated Companies (Cost $51,171,880) 52,383,499
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--2.8%
- --------------------------------------------------------------------------------------------------------------
Undivided interest of 0.20% in joint repurchase agreement (Principal Amount/
Value $765,696,000, with a maturity value of $765,904,652) with UBS Warburg
LLC, 3.27%, dated 7/29/05, to be repurchased at $1,499,408 on 8/1/05,
collateralized by Federal National Mortgage Assn., 5%, 3/1/35, with
a value of $782,601,759 (Cost $1,499,000) $ 1,499,000 1,499,000
- --------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $52,670,880) 98.8% 53,882,499
- --------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 1.2 644,202
------------------------------
NET ASSETS 100.0% $54,526,701
==============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11 | MODERATE INVESTOR FUND
STATEMENT OF ASSETS AND LIABILITIES Unaudited
- --------------------------------------------------------------------------------
July 31, 2005
- ----------------------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $52,670,880)--see accompanying statement of investments $ 53,882,499
- ----------------------------------------------------------------------------------------------------
Cash 2,911
- ----------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 2,282,670
Interest 72,598
Other 1,052
-------------
Total assets 56,241,730
- ----------------------------------------------------------------------------------------------------
LIABILITIES
Payables and other liabilities:
Investments purchased 1,594,206
Shares of beneficial interest redeemed 81,259
Distribution and service plan fees 8,723
Transfer and shareholder servicing agent fees 3,031
Trustees' compensation 824
Shareholder communications 130
Other 26,856
-------------
Total liabilities 1,715,029
- ----------------------------------------------------------------------------------------------------
NET ASSETS $ 54,526,701
=============
- ----------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Par value of shares of beneficial interest $ 5,241
- ----------------------------------------------------------------------------------------------------
Additional paid-in capital 53,224,150
- ----------------------------------------------------------------------------------------------------
Accumulated net investment income 89,386
- ----------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (3,695)
- ----------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 1,211,619
-------------
NET ASSETS $ 54,526,701
=============
12 | MODERATE INVESTOR FUND
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets of $28,457,138 and
2,731,424 shares of beneficial interest outstanding) $10.42
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $11.06
- ----------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $10,735,681 and 1,032,918 shares
of beneficial interest outstanding) $10.39
- ----------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $13,606,430 and 1,310,437 shares
of beneficial interest outstanding) $10.38
- ----------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $1,486,950 and 142,870 shares of
beneficial interest outstanding) $10.41
- ----------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $240,502 and 23,074 shares of beneficial interest outstanding) $10.42
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13 | MODERATE INVESTOR FUND
STATEMENT OF OPERATIONS Unaudited
- --------------------------------------------------------------------------------
For the Period Ended July 31, 2005 1
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 135,391
- --------------------------------------------------------------------------------
Interest 20,741
------------
Total investment income 156,132
- --------------------------------------------------------------------------------
EXPENSES
Distribution and service plan fees:
Class A 8,584
Class B 13,381
Class C 16,229
Class N 588
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 5,465
Class B 2,762
Class C 2,455
Class N 317
Class Y 203
- --------------------------------------------------------------------------------
Shareholder communications:
Class A 1,356
Class B 964
Class C 641
Class N 214
Class Y 100
- --------------------------------------------------------------------------------
Legal, auditing and other professional fees 14,500
- --------------------------------------------------------------------------------
Registration and filing fees 5,059
- --------------------------------------------------------------------------------
Trustees' compensation 2,686
- --------------------------------------------------------------------------------
Custodian fees and expenses 1,017
- --------------------------------------------------------------------------------
Other 837
------------
Total expenses 77,358
Less reduction to custodian expenses (9)
Less waivers and reimbursements of expenses (10,603)
------------
Net expenses 66,746
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 89,386
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on investments (3,695)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 1,211,619
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,297,310
============
1. For the period from April 5, 2005 (commencement of operations) to July 31,
2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14 | MODERATE INVESTOR FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
PERIOD
ENDED
JULY 31,
2005 1
(UNAUDITED)
- ---------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 89,386
- ---------------------------------------------------------------------------------------------
Net realized loss (3,695)
- ---------------------------------------------------------------------------------------------
Net change in unrealized appreciation 1,211,619
--------------
Net increase in net assets resulting from operations 1,297,310
- ---------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets resulting from beneficial interest transactions:
Class A 27,641,959
Class B 10,485,526
Class C 13,303,042
Class N 1,461,305
Class Y 233,559
- ---------------------------------------------------------------------------------------------
NET ASSETS
Total increase 54,422,701
- ---------------------------------------------------------------------------------------------
Beginning of period 104,000 2
--------------
End of period (including accumulated net investment income of $89,386) $ 54,526,701
==============
1. For the period from April 5, 2005 (commencement of operations) to July 31,
2005.
2. Reflects the value of the Manager's initial seed money investment on March
15, 2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15 | MODERATE INVESTOR FUND
FINANCIAL HIGHLIGHTS Unaudited
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
PERIOD ENDED JULY 31, 2005 1 2005 1 2005 1
- -----------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00
- -----------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .05 2 .03 2 .03 2
Net realized and unrealized gain .37 .36 .35
----------------------------------------
Total from investment operations .42 .39 .38
- -----------------------------------------------------------------------------------------
Net asset value, end of period $ 10.42 $ 10.39 $ 10.38
========================================
- ----------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 4.20% 3.90% 3.80%
- -----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $28,457 $10,736 $13,606
- -----------------------------------------------------------------------------------------
Average net assets (in thousands) $11,949 $ 4,226 $ 5,130
- -----------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 1.60% 0.84% 0.83%
Total expenses 0.75% 5 1.58% 6 1.52% 7
Expenses after waivers and reimbursements and
reduction to custodian expenses 0.62% 1.37% 1.37%
- -----------------------------------------------------------------------------------------
Portfolio turnover rate 1% 1% 1%
1. For the period from April 5, 2005 (commencement of operations) to July 31,
2005.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. 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 Portfolio distributions or the redemption of Portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were 1.43% for July 31, 2005.
6. Expenses including all underlying fund expenses were 2.26% for July 31, 2005.
7. Expenses including all underlying fund expenses were 2.20% for July 31, 2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16 | MODERATE INVESTOR FUND
CLASS N CLASS Y
PERIOD ENDED JULY 31, 2005 1 2005 1
- --------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
Net asset value, beginning of period $10.00 $10.00
- --------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .04 2 .06 2
Net realized and unrealized gain .37 .36
----------------------
Total from investment operations .41 .42
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.41 $10.42
=======================
- --------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 4.10% 4.20%
- --------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $1,487 $ 241
- --------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 377 $ 105
- --------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 1.30% 1.95%
Total expenses 1.03% 5 0.57% 6
Expenses after waivers and reimbursements and reduction to custodian expenses 0.87% 0.36%
- --------------------------------------------------------------------------------------------------------
Portfolio turnover rate 1% 1%
1. For the period from April 5, 2005 (commencement of operations) to July 31,
2005.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. 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 Portfolio distributions or the redemption of Portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were 1.71% for July 31, 2005.
6. Expenses including all underlying fund expenses were 1.26% for July 31, 2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17 | MODERATE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Portfolio Series (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
Moderate Investor Fund (the "Portfolio") is a series of the Fund whose
investment objective is to seek long term growth of capital and current income.
The Portfolio is a special type of mutual fund known as a "fund of funds"
because it invests in other mutual funds. The Portfolio normally invests in a
portfolio consisting of a target-weighted allocation in Class A or Class Y
shares of other Oppenheimer funds. The Fund's investment advisor is
OppenheimerFunds Inc. (the "Manager").
The Portfolio 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 Portfolio 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.
Under normal market conditions, the Manager will invest the Portfolio's
assets in shares of Oppenheimer Core Bond Fund, Oppenheimer Capital Appreciation
Fund, Oppenheimer Global Fund, Oppenheimer High Yield Fund, Oppenheimer
International Bond Fund, Oppenheimer Limited-Term Government Fund, Oppenheimer
Main Street Fund(R), Oppenheimer Main Street Opportunity Fund(R), Oppenheimer
Real Asset Fund(R), Oppenheimer Real Estate Fund and Oppenheimer Value Fund
(individually, an "Underlying Fund" and collectively, the "Underlying Funds").
The following is a summary of significant accounting policies consistently
followed by the Portfolio.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Portfolio calculates the net asset value of each class
of shares based upon the net asset value of the applicable Underlying Funds' 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 trading.
For each Underlying Fund, the net asset value per share for a class of
shares on a "regular business day" is determined by dividing the value of the
Underlying Fund's net assets attributable to that class by the number of shares
of that class outstanding on that day. To determine net asset values, the
Underlying Fund assets are valued primarily on the
18 | MODERATE INVESTOR FUND
basis of current market quotations. If market quotations are not readily
available or do not accurately reflect fair value for a security (in the
Manager's judgment) or if a security's value has been materially affected by
events occurring after the close of the exchange or market on which the security
is principally traded, that security may be valued by another method that the
Underlying Fund's Board of Trustees/Directors believes accurately reflects the
fair value. Because some foreign securities trade in markets and on exchanges
that operate on weekends and U.S. holidays, the values of some of the Underlying
Fund's foreign investments may change on days when investors cannot buy or
redeem Underlying Fund shares.
Short-term "money market type" debt securities with remaining maturities
of sixty days or less are valued at amortized cost (which approximates market
value).
- --------------------------------------------------------------------------------
RISKS OF INVESTING IN THE UNDERLYING FUNDS. Each of the Underlying Funds in
which the Portfolio invests has its own investment risks, and those risks can
affect the value of the Portfolio's investments and therefore the value of the
Portfolio's shares. To the extent that the Portfolio invests more of its assets
in one Underlying Fund than in another, the Portfolio will have greater exposure
to the risks of that Underlying Fund.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Portfolio, along with other affiliated
funds advised by the Manager, may transfer uninvested cash balances into joint
trading accounts on a daily basis. These balances are invested in one or more
repurchase agreements. Securities pledged as collateral for repurchase
agreements are held by a custodian bank until the agreements mature. Each
agreement requires that the market value of the collateral be sufficient to
cover payments of interest and principal. In the event of default by the other
party to the agreement, retention of the collateral may be subject to legal
proceedings.
- --------------------------------------------------------------------------------
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 Portfolio intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Portfolio.
19 | MODERATE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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 and 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 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 Portfolio on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Portfolio 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 Portfolio
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.
- --------------------------------------------------------------------------------
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 $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
PERIOD ENDED JULY 31, 2005 1,2
SHARES AMOUNT
- ------------------------------------------------
CLASS A
Sold 2,835,819 $ 28,813,393
Redeemed (114,395) (1,171,434)
---------------------------
Net increase 2,721,424 $ 27,641,959
===========================
20 | MODERATE INVESTOR FUND
PERIOD ENDED JULY 31, 2005 1,2
SHARES AMOUNT
- ---------------------------------------------------
CLASS B
Sold 1,062,961 $ 10,787,162
Redeemed (30,143) (301,636)
---------------------------
Net increase 1,032,818 $ 10,485,526
===========================
- ---------------------------------------------------
CLASS C
Sold 1,322,152 $ 13,424,677
Redeemed (11,815) (121,635)
---------------------------
Net increase 1,310,337 $ 13,303,042
===========================
- ---------------------------------------------------
CLASS N
Sold 142,770 $ 1,461,305
Redeemed -- --
---------------------------
Net increase 142,770 $ 1,461,305
===========================
- ---------------------------------------------------
CLASS Y
Sold 23,956 $ 243,823
Redeemed (982) (10,264)
---------------------------
Net increase 22,974 $ 233,559
===========================
1. For the period from April 5, 2005 (commencement of operations) to July 31,
2005.
2. The Portfolio sold 10,000 Class A shares at a value of $100,000 and 100
shares of each Class B, Class C, Class N and Class Y at a value of $1,000,
$1,000, $1,000 and $1,000, respectively, to the Manager upon seeding of the
Portfolio on March 15, 2005.
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the period ended July 31, 2005, were as
follows:
PURCHASES SALES
----------------------------------------------------
Investment securities $51,341,712 $166,137
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the investment advisory agreement, the Manager does not
charge a management fee, but rather collects indirect management fees from
investments in the Underlying Funds. The weighted indirect management fees
collected from the Underlying Funds, as a percent of average daily net assets of
the Portfolio for the period ended July 31, 2005 was 0.68%.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Portfolio. The
Portfolio pays OFS a per account fee. For the period ended July 31, 2005, the
Portfolio paid $8,152 to OFS for services to the Portfolio.
21 | MODERATE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
Additionally, Class Y shares are subject to minimum fees of $10,000 per
annum 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.
- --------------------------------------------------------------------------------
INITIAL OFFERING AND ORGANIZATIONAL COSTS. The Manager assumed all initial
offering and organizational costs associated with the registration and seeding
of the Fund.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Portfolio, OppenheimerFunds Distributor, Inc. (the
Distributor) acts as the Portfolio's principal underwriter in the continuous
public offering of the Portfolio's classes of shares.
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Portfolio has adopted a Service Plan for
Class A shares. It reimburses the Distributor for a portion of its costs
incurred for services provided to accounts that hold Class A shares.
Reimbursement is made quarterly at an annual rate of up to 0.25% of the average
annual net assets of Class A shares of the Portfolio. The Distributor currently
uses all of those fees to pay dealers, brokers, banks and other financial
institutions quarterly for providing personal services and maintenance of
accounts of their customers that hold Class A shares. Any unreimbursed expenses
the Distributor incurs with respect to Class A shares in any fiscal year cannot
be recovered in subsequent years. Fees incurred by the Portfolio under the Plan
are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The
Portfolio has adopted Distribution and Service Plans for Class B, Class C and
Class N shares to compensate the Distributor for its services and costs in
connection with the distribution of those shares and servicing accounts. Under
the plans, the Portfolio pays the Distributor an annual asset-based sales charge
of 0.75% on Class B and Class C shares and 0.25% on Class N shares. The
Distributor also receives a service fee of 0.25% per year under each plan. If
either the Class B, Class C or Class N plan is terminated by the Portfolio 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
Portfolio 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 July 31, 2005
for Class B, Class C and Class N shares were $144,785, $82,182 and $16,797,
respectively. Fees incurred by the Portfolio 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 Portfolio. They are deducted from the
proceeds of sales of Portfolio 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
22 | MODERATE INVESTOR FUND
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
PERIOD ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- --------------------------------------------------------------------------------------------------------------
July 31, 2005 $142,134 $-- $2,859 $67 $2,598
- --------------------------------------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees paid directly by the Portfolio to
0.35% of average annual net assets for each class. During the period ended July
31, 2005, OFS waived $19 for Class B shares. This undertaking may be amended or
withdrawn at any time.
The Manager has voluntarily agreed to a total expense limitation on the
aggregate amount of combined direct (fund-of-funds level) and indirect expense
so that Combined Total Annual and Underlying Fund Operating Expenses as a
percentage of average daily net assets will not exceed the following annual
rates: 1.30%, 2.05%, 2.05%, 1.55% and 1.05%, for Class A, Class B, Class C,
Class N, and Class Y, respectively. During the period ended July 31, 2005, the
Manager reimbursed the Portfolio $5,073, $2,792, $2,445, $201 and $73, for the
Class A, Class B, Class C, Class N and Class Y shares, respectively. The Manager
may modify or terminate this undertaking at any time without notice to
shareholders. These expense limitations do not include Extraordinary Expenses
and other expenses not incurred in the ordinary course of the Portfolio's
business. Notwithstanding the foregoing limits, the Manager is not required to
waive or reimburse Portfolio expenses in excess of indirect management fees
earned from investments in Underlying Funds to assure that expenses do not
exceed those limits.
- --------------------------------------------------------------------------------
5. LITIGATION
A consolidated amended complaint has been filed as putative derivative and class
actions against the Manager, OFS and the Distributor, as well as 51 of the
Oppenheimer funds (as "Nominal Defendants") excluding the Fund, 30 present and
former Directors or Trustees and 8 present and former officers of the funds.
This complaint, initially filed in the U.S. District Court for the Southern
District of New York on January 10, 2005 and amended on March 4, 2005,
consolidates into a single action and amends six individual previously filed
putative derivative and class action complaints. Like those prior complaints,
the complaint alleges 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 assets of the funds to make
those payments in violation of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940. Also, like those prior complaints, the
complaint further alleges that by permitting and/or participating in those
actions, the Directors/Trustees and the Officers breached their fiduciary
23 | MODERATE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. LITIGATION Continued
duties to shareholders of the funds under the Investment Company Act of 1940 and
at common law. The complaint seeks unspecified compensatory and punitive
damages, rescission of the funds' investment advisory agreements, an accounting
of all fees paid, and an award of attorneys' fees and litigation expenses.
The defendants believe that the allegations contained in the Complaints
are without merit and that they have meritorious defenses against the claims
asserted. The defendants intend to defend these lawsuits vigorously and to
contest any claimed liability. The defendants believe that it is premature to
render any opinion as to the likelihood of an outcome unfavorable to them and
that no estimate can yet be made with any degree of certainty as to the amount
or range of any potential loss.
24 | MODERATE INVESTOR FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
25 | MODERATE INVESTOR FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Investment Company Act requires that the Board request and evaluate, and
that the Manager provide, such information as may be reasonably necessary to
evaluate the terms of the advisory agreement.
NATURE AND EXTENT OF SERVICES. In considering the initial approval of the
Portfolio's advisory agreement, the Board evaluated the nature and extent of the
services to be provided by the Manager and its affiliates. The investment
advisory agreement requires the Manager, at its expense, to provide the
Portfolio with office space, facilities and equipment; administrative, clerical,
legal and compliance personnel; marketing and sales support; securities trading
services; oversight of third party service providers and the services of the
Manager's Asset Allocation Team, who will provide advisory services in regard to
the Portfolio's investments. The Manager selects securities for the Portfolio
and handles its day-to-day business. The portfolio managers are employed by the
Manager and are principally responsible for the day-to-day management of the
Portfolio. Other members of the Manager's Equity and Fixed Income Portfolio
Teams provide the portfolio managers with counsel and support in managing the
Portfolios. The Portfolio pays expenses not expressly assumed by the Manager
under the investment advisory agreement.
QUALITY OF SERVICES. The Board also considered the quality of the services
to be provided and the quality of the Manager's resources that will be available
to the Portfolio. The Board noted that the Manager has had over forty years of
experience as an investment adviser and that its assets under management rank it
among the top mutual fund managers in the United States. The Board evaluated the
Manager's administrative, accounting, legal and compliance services based on
information it has received regarding the experience and professional
qualifications of the Manager's personnel and the size and functions of its
staff. The Board also considered their own experiences as directors or trustees
of other funds advised by the Manager. The Board has also received and reviewed
information regarding the quality of services provided by affiliates of the
Manager at other times during the year, in connection with the renewal of those
affiliates' service agreements with other funds. The Board considered that the
relatively low redemption rate for funds advised by the Manager provided an
indication of shareholder satisfaction with the overall level of services
provided by the Manager.
PORTFOLIO MANAGEMENT SERVICES AND PERFORMANCE. In its evaluation of the
quality of the portfolio management services to be provided, the Board
considered the experience of Rudi Schadt, Jerry Webman, William L. Wilby and
Kurt Wolfgruber, the members of the Portfolio's Asset Allocation Team. The
Portfolio is managed by Messrs. Schadt, Webman,
26 | MODERATE INVESTOR FUND
Wilby and Wolfgruber, who are Vice Presidents of the Portfolio and are primarily
responsible for the day-to-day management of the Portfolio's investments.
Mr. Schadt is a Vice President, Director of Research in Product Design and
Risk Management of the Manager. Mr. Webman has been a Senior Vice President of
the Manager since February 1996, a Senior Investment Officer and Director of the
Manager's Fixed Income Investments since 1999 and a Senior Vice President of
HarbourView Asset Management Corporation since May 1999. Mr. Wilby has been a
Senior Vice President of the Manager since July 1994 and Senior Investment
Officer, Director of Equities of the Manager since July 2004. Mr. Wolfgruber has
been an Executive Vice President of the Manager since March 2003, Chief
Investment Officer and Director of the Manager since July 2003, Director of
HarbourView Asset Management Corporation and of OFI Institutional Asset
Management, Inc. since June 2003 and of Tremont Capital Management, Inc. since
October 2001. Messrs. Schadt, Webman, Wilby and Wolfgruber each oversee other
portfolios in the OppenheimerFunds complex. The Board also considered the
historical performance of other funds advised by the Manager.
MANAGEMENT FEES AND EXPENSES. The Board considered information regarding
the fees to be paid to the Manager and its affiliates both directly from the
Portfolio and indirectly from the Underlying Funds. The Board also considered
the other expenses that will be borne both directly and indirectly by the
Portfolio and the comparability of the fees and services of the Portfolio to the
fees and services of other types of entities advised by the Manager.
PROFITABILITY OF THE MANAGER AND AFFILIATES. The Board also considered the
cost of services to be provided by the Manager and its affiliates. The Board
considered that the Manager must be able to pay and retain experienced
professional personnel at competitive rates to provide services to the Portfolio
and that maintaining the financial viability of the Manager is important in
order for the Manager to continue to provide significant services to the
Portfolio and its shareholders. In addition the Board considered the potential
direct and indirect benefits the Manager may receive as a result of its
relationship with the Portfolio, including compensation to be paid to the
Manager's affiliates and research that may be provided to the Manager in
connection with permissible brokerage arrangements (soft dollar arrangements).
ECONOMIES OF SCALE. The Board reviewed the extent to which the Manager may
realize economies of scale in managing and supporting the Portfolio and the
Manager's voluntary expense limitations.
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board. Based on its review and
evaluations described above,
27 | MODERATE INVESTOR FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
the Board, including a majority of the independent
Trustees, concluded that the nature, extent and quality of the services to be
provided to the Portfolio by the Manager were a benefit to the Portfolio and
would be in the best interest of the Portfolio's shareholders and that the
amount and structure of the compensation to be received by the Manager and its
affiliates are reasonable in relation to the services to be provided.
Accordingly, the Board approved the Portfolio's investment advisory agreement.
The Board judged the terms and conditions of the advisory agreement, including
the management fee, in light of all of the surrounding circumstances.
28 | MODERATE INVESTOR FUND
ITEM 2. CODE OF ETHICS.
Not applicable to semiannual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to semiannual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to semiannual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to semiannual reports.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
THE FUNDS' AUDIT COMMITTEE PROVISIONS WITH RESPECT TO NOMINATIONS OF
DIRECTORS/TRUSTEES TO THE RESPECTIVE BOARDS
1. The Funds' Audit Committee (the "Committee") will evaluate potential Board
candidates to assess their qualifications. The Committee shall have the
authority, upon approval of the Board, to retain an executive search firm to
assist in this effort. The Committee may consider recommendations by business
and personal contacts of current Board members and by executive search firms
which the Committee may engage from time to time and may also consider
shareholder recommendations. The Committee may consider the advice and
recommendation of the Funds' investment manager and its affiliates in making the
selection.
2. The Committee shall screen candidates for Board membership. The Committee has
not established specific qualifications that it believes must be met by a
trustee nominee. In evaluating trustee nominees, the Committee considers, among
other things, an individual's background, skills, and experience; whether the
individual is an "interested person" as defined in the Investment Company Act of
1940; and whether the individual would be deemed an "audit
committee financial expert" within the meaning of applicable SEC rules. The
Committee also considers whether the individual's background, skills, and
experience will complement the background, skills, and experience of other
nominees and will contribute to the Board. There are no differences in the
manner in which the Committee evaluates nominees for trustees based on whether
the nominee is recommended by a shareholder.
3. The Committee may consider nominations from shareholders for the Board at
such times as the Committee meets to consider new nominees for the Board. The
Committee shall have the sole discretion to determine the candidates to present
to the Board and, in such cases where required, to shareholders. Recommendations
for trustee nominees should, at a minimum, be accompanied by the following:
o the name, address, and business, educational, and/or other pertinent
background of the person being recommended;
o a statement concerning whether the person is an "interested person"
as defined in the Investment Company Act of 1940;
o any other information that the Funds would be required to include in
a proxy statement concerning the person if he or she was nominated;
and
o the name and address of the person submitting the recommendation
and, if that person is a shareholder, the period for which that
person held Fund shares.
The recommendation also can include any additional information which the person
submitting it believes would assist the Committee in evaluating the
recommendation.
4. Shareholders should note that a person who owns securities issued by
Massachusetts Mutual Life Insurance Company (the parent company of the Funds'
investment adviser) would be deemed an "interested person" under the Investment
Company Act of 1940. In addition, certain other relationships with Massachusetts
Mutual Life Insurance Company or its subsidiaries, with registered
broker-dealers, or with the Funds' outside legal counsel may cause a person to
be deemed an "interested person."
5. Before the Committee decides to nominate an individual as a trustee,
Committee members and other directors customarily interview the individual in
person. In addition, the individual customarily is asked to complete a detailed
questionnaire which is designed to elicit information which must be disclosed
under SEC and stock exchange rules and to determine whether the individual is
subject to any statutory disqualification from serving as a trustee of a
registered investment company.
ITEM 11. CONTROLS AND PROCEDURES.
Based on their evaluation of the registrant's disclosure controls and procedures
(as defined in rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR
270.30a-3(c)) as of July 31,
2005, the registrant's principal executive officer and principal financial
officer found the registrant's disclosure controls and procedures to provide
reasonable assurances that information required to be disclosed by the
registrant in the reports that it files under the Securities Exchange Act of
1934 (a) is accumulated and communicated to registrant's management, including
its principal executive officer and principal financial officer, to allow timely
decisions regarding required disclosure, and (b) is recorded, processed,
summarized and reported, within the time periods specified in the rules and
forms adopted by the U.S. Securities and Exchange Commission.
There have been no changes in the registrant's internal controls over financial
reporting that occurred during the registrant's second fiscal quarter of the
period covered by this report that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a) (1) Not applicable to semiannual reports.
(2) Exhibits attached hereto.
(3) Not applicable.
(b) Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Oppenheimer Portfolio Series
By: /s/ John V. Murphy
------------------
John V. Murphy
Principal Executive Officer
Date: September 13, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ John V. Murphy
------------------
John V. Murphy
Principal Executive Officer
Date: September 13, 2005
By: /s/ Brian W. Wixted
-------------------
Brian W. Wixted
Principal Financial Officer
Date: September 13, 2005