UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-5225
OPPENHEIMER QUEST FOR VALUE FUNDS
(Exact name of registrant as specified in charter)
6803 SOUTH TUCSON WAY, CENTENNIAL, COLORADO 80112-3924
(Address of principal executive offices) (Zip code)
Robert G. Zack, Esq.
OppenheimerFunds, Inc.
TWO WORLD FINANCIAL CENTER, NEW YORK, NEW YORK 10281-1008
(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 768-3200
Date of fiscal year end: OCTOBER
Date of reporting period: APRIL 30, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
OPPENHEIMER QUEST BALANCED FUND
TOP HOLDINGS AND ALLOCATIONS
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TOP TEN COMMON STOCK INDUSTRIES
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Pharmaceuticals 10.5%
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Insurance 8.0
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Communications Equipment 7.4
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Diversified Financial Services 6.6
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Oil & Gas 5.0
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Thrifts & Mortgage Finance 4.6
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Hotels, Restaurants & Leisure 4.4
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Diversified Consumer Services 3.9
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Biotechnology 3.5
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Software 3.4
Portfolio holdings and allocations are subject to change. Percentages are as of
April 30, 2006, and are based on net assets.
TOP TEN COMMON STOCK HOLDINGS
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Motorola, Inc. 5.6%
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Pfizer, Inc. 5.4
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Sanofi-Aventis SA, ADR 5.0
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Citigroup, Inc. 5.0
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Countrywide Financial Corp. 4.6
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Royal Caribbean Cruises Ltd. 4.4
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Apollo Group, Inc., Cl. A 3.9
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ConocoPhillips 3.8
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Biogen Idec, Inc. 3.5
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Taiwan Semiconductor Manufacturing Co. Ltd., ADR 3.1
Portfolio holdings and allocations are subject to change. Percentages are as of
April 30, 2006, and are based on net assets.
For up-to-date Top 10 Fund Holdings, please visit www.oppenheimerfunds.com
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9 | OPPENHEIMER QUEST BALANCED FUND
TOP HOLDINGS AND ALLOCATIONS
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PORTFOLIO ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Stocks 71.6%
Bonds and Notes 25.5
Cash Equivalents 2.9
Portfolio holdings and allocations are subject to change. Percentages are as of
April 30, 2006, and are based on the total market value of investments.
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10 | OPPENHEIMER QUEST BALANCED FUND
NOTES
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Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
Cumulative total returns are not annualized. The Fund's total returns shown do
not reflect the deduction of income taxes on an individual's investment. Taxes
may reduce your actual investment returns on income or gains paid by the Fund or
any gains you may realize if you sell your shares. INVESTORS SHOULD CONSIDER THE
FUND'S INVESTMENT OBJECTIVES, RISKS, AND OTHER CHARGES AND EXPENSES CAREFULLY
BEFORE INVESTING. THE FUND'S PROSPECTUS CONTAINS THIS AND OTHER INFORMATION
ABOUT THE FUND, AND MAY BE OBTAINED BY ASKING YOUR FINANCIAL ADVISOR, CALLING US
AT 1.800.525.7048 OR VISITING OUR WEBSITE AT WWW.OPPENHEIMERFUNDS.COM. READ THE
PROSPECTUS CAREFULLY BEFORE INVESTING.
The Fund's investment strategy and focus can change over time. The mention of
specific fund holdings does not constitute a recommendation by OppenheimerFunds,
Inc.
CLASS A shares of the Fund were first publicly offered on 11/1/91. Unless
otherwise noted, Class A returns include the current maximum initial sales
charge of 5.75%. The Fund's maximum sales charge for Class A shares was lower
prior to 11/24/95, so actual performance may have been higher. Class A shares
are subject to a maximum annual 0.15% asset-based sales charge. There is a
voluntary waiver of a portion of the Class A asset-based sales charge as
described in the Prospectus.
CLASS B shares of the Fund were first publicly offered on 9/1/93. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charges of 5% (1-year) and 2% (5-year). Because Class B shares convert to
Class A shares 72 months after purchase, the 10-year return for Class B does not
include any contingent deferred sales charge on redemptions and uses Class A
performance for the period after conversion. Class B shares are subject to an
annual 0.75% asset-based sales charge.
CLASS C shares of the Fund were first publicly offered on 9/1/93. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
11 | OPPENHEIMER QUEST BALANCED FUND
NOTES
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CLASS N shares of the Fund were first publicly offered on 3/1/01. Class N shares
are offered only through retirement plans. Unless otherwise noted, Class N
returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
CLASS Y shares of the Fund were first publicly offered on 5/1/00. Class Y shares
are offered only to certain institutional investors under special agreement with
the Distributor.
An explanation of the calculation of performance is in the Fund's Statement of
Additional Information.
12 | OPPENHEIMER QUEST BALANCED FUND
FUND EXPENSES
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FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include sales charges (loads) on purchase payments,
contingent deferred sales charges on redemptions; and redemption fees, if any;
and (2) ongoing costs, including management fees; distribution and service fees;
and other Fund expenses. These examples are intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended April 30, 2006.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio for each class of shares, and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front-end
or contingent deferred sales charges (loads), or a $12.00 fee imposed annually
on accounts valued at less than $500.00 (subject to exceptions described in
13 | OPPENHEIMER QUEST BALANCED FUND
FUND EXPENSES
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the Statement of Additional Information). Therefore, the "hypothetical" lines of
the table are useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(11/1/05) (4/30/06) APRIL 30, 2006
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Class A Actual $1,000.00 $1,079.20 $ 6.00
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Class A Hypothetical 1,000.00 1,019.04 5.82
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Class B Actual 1,000.00 1,075.10 10.08
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Class B Hypothetical 1,000.00 1,015.12 9.79
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Class C Actual 1,000.00 1,074.90 9.77
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Class C Hypothetical 1,000.00 1,015.42 9.49
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Class N Actual 1,000.00 1,078.00 7.65
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Class N Hypothetical 1,000.00 1,017.46 7.43
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Class Y Actual 1,000.00 1,080.90 4.50
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Class Y Hypothetical 1,000.00 1,020.48 4.37
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 181/365
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended April 30, 2006 are as follows:
CLASS EXPENSE RATIOS
- ----------------------------
Class A 1.16%
- ----------------------------
Class B 1.95
- ----------------------------
Class C 1.89
- ----------------------------
Class N 1.48
- ----------------------------
Class Y 0.87
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14 | OPPENHEIMER QUEST BALANCED FUND
STATEMENT OF INVESTMENTS April 30, 2006 / Unaudited
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VALUE
SHARES SEE NOTE 1
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COMMON STOCKS--72.7%
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CONSUMER DISCRETIONARY--14.8%
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DIVERSIFIED CONSUMER SERVICES--3.9%
Apollo Group, Inc., Cl. A 1 5,002,860 $ 273,356,270
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HOTELS, RESTAURANTS & LEISURE--4.4%
Royal Caribbean Cruises Ltd. 2 7,300,000 305,067,000
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HOUSEHOLD DURABLES--0.7%
Centex Corp. 955,000 53,098,000
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MULTILINE RETAIL--3.4%
Family Dollar Stores, Inc. 4,000,000 100,000,000
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Federated Department Stores, Inc. 1,760,814 137,079,370
----------------
237,079,370
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SPECIALTY RETAIL--2.4%
Best Buy Co., Inc. 3,000,000 169,980,000
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ENERGY--5.1%
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ENERGY EQUIPMENT & SERVICES--0.1%
Hugoton Royalty Trust 119,200 3,295,880
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OIL & GAS--5.0%
ConocoPhillips 4,000,000 267,600,000
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XTO Energy, Inc. 2,000,000 84,700,000
----------------
352,300,000
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FINANCIALS--19.2%
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DIVERSIFIED FINANCIAL SERVICES--6.6%
Citigroup, Inc. 7,000,000 349,650,000
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JPMorgan Chase & Co. 2,500,000 113,450,000
----------------
463,100,000
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INSURANCE--8.0%
AMBAC Financial Group, Inc. 2,540,000 209,194,400
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American International Group, Inc. 2,700,000 176,175,000
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Hartford Financial Services Group, Inc. (The) 1,862,300 171,201,239
----------------
556,570,639
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THRIFTS & MORTGAGE FINANCE--4.6%
Countrywide Financial Corp. 8,000,000 325,280,000
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HEALTH CARE--14.5%
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BIOTECHNOLOGY--3.5%
Biogen Idec, Inc. 1 5,500,000 246,675,000
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HEALTH CARE PROVIDERS & SERVICES--0.5%
UnitedHealth Group, Inc. 734,900 36,553,926
15 | OPPENHEIMER QUEST BALANCED FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
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VALUE
SHARES SEE NOTE 1
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PHARMACEUTICALS--10.5%
Pfizer, Inc. 15,000,000 $ 379,950,000
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Sanofi-Aventis SA, ADR 2 7,500,000 352,800,000
----------------
732,750,000
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INDUSTRIALS--3.9%
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COMMERCIAL SERVICES & SUPPLIES--1.5%
ChoicePoint, Inc. 1 2,430,000 106,992,900
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MACHINERY--2.4%
Eaton Corp. 2,186,861 167,622,896
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INFORMATION TECHNOLOGY--14.0%
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COMMUNICATIONS EQUIPMENT--7.4%
Cisco Systems, Inc. 1 6,000,000 125,700,000
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Motorola, Inc. 18,500,000 394,975,000
----------------
520,675,000
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SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.2%
Taiwan Semiconductor Manufacturing Co. Ltd., ADR 21,000,000 220,080,000
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SOFTWARE--3.4%
Cadence Design Systems, Inc. 1 6,000,000 113,580,000
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McAfee, Inc. 1 4,750,000 123,927,500
----------------
237,507,500
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MATERIALS--1.2%
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METALS & MINING--1.2%
Inco Ltd. 1,418,200 80,085,754
----------------
Total Common Stocks (Cost $4,487,843,486) 5,088,070,135
PRINCIPAL
AMOUNT
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NON-CONVERTIBLE CORPORATE BONDS AND NOTES--26.0%
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CONSUMER DISCRETIONARY--1.9%
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AUTOMOBILES--0.5%
DaimlerChrysler North America Holding Corp., 6.40% Nts., 5/15/06 $ 34,100,000 34,110,742
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MEDIA--1.4%
CBS Corp., 5.625% Sr. Unsec. Nts., 5/1/07 19,560,000 19,541,770
- -----------------------------------------------------------------------------------------------------------------------
News America Holdings, Inc., 9.25% Sr. Debs., 2/1/13 8,500,000 9,940,980
- -----------------------------------------------------------------------------------------------------------------------
Time Warner Cos., Inc., 8.11% Nts., 8/15/06 28,200,000 28,405,409
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Walt Disney Co. (The), 5.375% Sr. Unsec. Nts., 6/1/07 40,980,000 40,968,321
----------------
98,856,480
16 | OPPENHEIMER QUEST BALANCED FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
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CONSUMER STAPLES--4.2%
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FOOD & STAPLES RETAILING--1.2%
CVS Corp., 3.875% Unsec. Nts., 11/1/07 $ 42,080,000 $ 41,167,748
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Safeway, Inc., 4.80% Sr. Unsec. Nts., 7/16/07 39,130,000 38,811,638
----------------
79,979,386
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FOOD PRODUCTS--2.4%
General Mills, Inc., 6% Unsec. Nts., 2/15/12 39,280,000 39,751,321
- -----------------------------------------------------------------------------------------------------------------------
Kellogg Co., 2.875% Nts., 6/1/08 43,500,000 41,348,273
- -----------------------------------------------------------------------------------------------------------------------
Kraft Foods, Inc., 4.625% Nts., 11/1/06 46,350,000 46,199,409
- -----------------------------------------------------------------------------------------------------------------------
Tyson Foods, Inc., 7.25% Sr. Unsec. Nts., 10/1/06 42,910,000 43,203,805
----------------
170,502,808
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HOUSEHOLD PRODUCTS--0.6%
Proctor & Gamble Co. (The), 3.50% Nts., 12/15/08 43,230,000 41,352,564
- -----------------------------------------------------------------------------------------------------------------------
ENERGY--1.6%
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OIL & GAS--1.6%
ChevronTexaco Capital Co., 3.50% Nts., 9/17/07 43,790,000 42,801,966
- -----------------------------------------------------------------------------------------------------------------------
Marathon Oil Corp., 5.375% Unsec. Nts., 6/1/07 40,515,000 40,544,090
- -----------------------------------------------------------------------------------------------------------------------
Valero Energy Corp., 6.125% Unsec. Nts., 4/15/07 28,750,000 28,916,693
----------------
112,262,749
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FINANCIALS--9.3%
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CAPITAL MARKETS--2.4%
Ameriprise Financial, Inc., 5.35% Sr. Unsec. Nts., 11/15/10 39,120,000 38,662,374
- -----------------------------------------------------------------------------------------------------------------------
Bear Stearns Cos., Inc. (The), 7.80% Nts., 8/15/07 39,130,000 40,310,904
- -----------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston, Inc. (USA), 5.75% Unsec. Nts., 4/15/07 47,410,000 47,602,722
- -----------------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 3.70% Nts., Series B, 4/21/08 43,990,000 42,758,808
----------------
169,334,808
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COMMERCIAL BANKS--2.5%
HSBC Finance Corp., 7% Nts., 5/15/12 20,000,000 21,304,920
- -----------------------------------------------------------------------------------------------------------------------
KeyCorp, 2.75% Sr. Nts., Series G, 2/27/07 43,615,000 42,548,003
- -----------------------------------------------------------------------------------------------------------------------
US Bank NA, 2.85% Nts., 11/15/06 40,300,000 39,802,053
- -----------------------------------------------------------------------------------------------------------------------
Wachovia Corp., 4.375% Nts., 6/1/10 39,280,000 37,744,780
- -----------------------------------------------------------------------------------------------------------------------
World Savings Bank FSB, 4.125% Sr. Nts., 3/10/08 30,080,000 29,438,724
----------------
170,838,480
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CONSUMER FINANCE--1.3%
American Express Credit Corp.:
3% Nts., 5/16/08 19,460,000 18,603,312
5% Nts., Series B, 12/2/10 34,230,000 33,649,048
17 | OPPENHEIMER QUEST BALANCED FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
CONSUMER FINANCE Continued
SLM Corp., 4.50% Nts., Series A, 7/26/10 $ 39,250,000 $ 37,648,365
----------------
89,900,725
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DIVERSIFIED FINANCIAL SERVICES--1.9%
CIT Group, Inc., 7.75% Sr. Unsec. Unsub. Nts., 4/2/12 15,000,000 16,450,125
- -----------------------------------------------------------------------------------------------------------------------
Citigroup, Inc.:
5% Nts., 3/6/07 26,426,000 26,361,309
6% Nts., 2/21/12 15,000,000 15,299,955
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Goldman Sachs Group, Inc. (The), 5.70% Sr. Unsec. Nts., 9/1/12 29,880,000 29,883,914
- -----------------------------------------------------------------------------------------------------------------------
JPMorgan Chase & Co., 5.25% Nts., 5/30/07 46,725,000 46,691,405
----------------
134,686,708
- -----------------------------------------------------------------------------------------------------------------------
INSURANCE--1.2%
Berkshire Hathaway Finance Corp., 3.375% Nts., 10/15/08 43,940,000 42,125,981
- -----------------------------------------------------------------------------------------------------------------------
International Lease Finance Corp., 5.625% Sr. Unsec. Unsub. Nts., 6/1/07 41,960,000 42,080,173
----------------
84,206,154
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INDUSTRIALS--5.0%
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AEROSPACE & DEFENSE--2.3%
Boeing Capital Corp., 6.50% Nts., 2/15/12 27,625,000 28,801,190
- -----------------------------------------------------------------------------------------------------------------------
General Dynamics Corp., 2.125% Nts., 5/15/06 40,930,000 40,889,970
- -----------------------------------------------------------------------------------------------------------------------
Northrop Grumman Corp., 4.079% Nts., 11/16/06 43,840,000 43,561,353
- -----------------------------------------------------------------------------------------------------------------------
Raytheon Co., 6.75% Nts., 8/15/07 43,810,000 44,398,105
----------------
157,650,618
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AIR FREIGHT & LOGISTICS--0.6%
FedEx Corp., 2.65% Unsec. Nts., 4/1/07 43,830,000 42,700,589
- -----------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.3%
Cendant Corp., 6.875% Sr. Unsec. Nts., 8/15/06 15,100,000 15,153,514
- -----------------------------------------------------------------------------------------------------------------------
Waste Management, Inc., 6.50% Sr. Unsub. Nts., 11/15/08 8,740,000 8,942,016
----------------
24,095,530
- -----------------------------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--1.2%
General Electric Capital Corp.:
4.875% Nts., Series A, 10/21/10 24,450,000 23,907,577
6% Nts., 6/15/12 19,700,000 20,170,515
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Tyco International Group SA, 5.80% Nts., 8/1/06 38,980,000 39,017,850
----------------
83,095,942
- -----------------------------------------------------------------------------------------------------------------------
MACHINERY--0.6%
John Deere Capital Corp., 3.875% Nts., Series D, 3/7/07 39,120,000 38,668,594
18 | OPPENHEIMER QUEST BALANCED FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--0.6%
- -----------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--0.6%
Motorola, Inc., 4.608% Nts., 11/16/07 $ 43,850,000 $ 43,376,025
- -----------------------------------------------------------------------------------------------------------------------
MATERIALS--1.1%
- -----------------------------------------------------------------------------------------------------------------------
CHEMICALS--0.5%
E.I. du Pont de Nemours & Co., 4.125% Nts., 4/30/10 34,225,000 32,564,574
- -----------------------------------------------------------------------------------------------------------------------
METALS & MINING--0.6%
Alcoa, Inc., 4.25% Sr. Unsec. Nts., 8/15/07 44,705,000 44,031,027
- -----------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--1.1%
- -----------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--0.7%
SBC Communications, Inc., 5.75% Sr. Nts., 5/2/06 5,150,000 5,150,000
- -----------------------------------------------------------------------------------------------------------------------
Verizon Global Funding Corp.:
7.25% Sr. Unsec. Unsub. Nts., 12/1/10 24,450,000 25,939,470
7.375% Sr. Nts., 9/1/12 15,000,000 16,141,125
----------------
47,230,595
- -----------------------------------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.4%
AT&T Wireless Services, Inc., 7.50% Sr. Unsec. Nts., 5/1/07 29,370,000 29,974,963
- -----------------------------------------------------------------------------------------------------------------------
UTILITIES--1.2%
- -----------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.6%
Dominion Resources, Inc., 3.66% Sr. Nts., Series A, 11/15/06 43,845,000 43,445,134
- -----------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--0.6%
Duke Capital LLC, 4.302% Sr. Unsec. Nts., 5/18/06 42,760,000 42,738,192
----------------
Total Non-Convertible Corporate Bonds and Notes (Cost $1,838,226,286) 1,815,603,387
- -----------------------------------------------------------------------------------------------------------------------
SHORT-TERM NOTES--1.3%
- -----------------------------------------------------------------------------------------------------------------------
American Express Credit Corp., 4.77%, 5/10/06 25,000,000 24,970,188
- -----------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 4.62%, 5/1/06 68,062,000 68,062,000
----------------
Total Short-Term Notes (Cost $93,032,188) 93,032,188
- -----------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (excluding Investments Purchased with
Cash Collateral from Securities Loaned) (Cost $6,419,101,960) 6,996,705,710
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED--1.6%
- -----------------------------------------------------------------------------------------------------------------------
ASSET BACKED FLOATING NOTE--0.3%
Trust Money Market Securities, Series A-2, 4.98%, 5/15/06 3 7,000,000 7,000,000
- -----------------------------------------------------------------------------------------------------------------------
Whitehawk Collateralized Debt Obligation Funding Corp., 4.98%, 6/15/06 3 10,000,000 10,000,000
----------------
17,000,000
- -----------------------------------------------------------------------------------------------------------------------
FUNDING AGREEMENT/GUARANTEED INVESTMENT CONTRACT--0.0%
Protective Life Insurance Co., 5.25%, 7/31/06 3 1,000,000 1,000,000
19 | OPPENHEIMER QUEST BALANCED FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--1.3%
Undivided interest of 0.65% in joint repurchase agreement (Principal Amount/
Value $3,100,000,000, with a maturity value of $3,101,234,833) with Nomura
Securities, 4.78%, dated 4/28/06, to be repurchased at $20,007,967 on
5/1/06, collateralized by U.S. Agency Mortgages, 3.06%--8.68%,
12/1/08--3/1/44, with a value of $3,162,000,000 3 $ 20,000,000 $ 20,000,000
- -----------------------------------------------------------------------------------------------------------------------
Undivided interest of 7.36% in joint repurchase agreement (Principal Amount/
Value $1,000,000,000, with a maturity value of $1,000,407,917) with Bank of
America NA, 4.895%, dated 4/28/06, to be repurchased at $73,657,834 on
5/1/06, collateralized by U.S. Agency Mortgages, 5%, 3/1/36, with a value
of $1,020,000,001 3 73,627,800 73,627,800
----------------
93,627,800
----------------
Total Investments Purchased with Cash Collateral from Securities Loaned
(Cost $111,627,800) 111,627,800
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $6,530,729,760) 101.6% 7,108,333,510
- -----------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (1.6) (111,113,227)
------------------------------------
NET ASSETS 100.0% $ 6,997,220,283
====================================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Partial or fully-loaned security. See Note 5 of accompanying Notes.
3. The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 5 of accompanying Notes.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20 | OPPENHEIMER QUEST BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES Unaudited
- --------------------------------------------------------------------------------
April 30, 2006
- -----------------------------------------------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------------------------------------------
Investments, at value (including securities loaned of $110,513,109)
(cost $6,530,729,760)--see accompanying statement of investments $ 7,108,333,510
- -----------------------------------------------------------------------------------------------------------------------
Cash 1,302,497
- -----------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 105,628,610
Interest and dividends 32,984,611
Shares of beneficial interest sold 1,646,277
Other 128,335
----------------
Total assets 7,250,023,840
- -----------------------------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 111,627,800
- -----------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 119,201,175
Shares of beneficial interest redeemed 17,588,121
Distribution and service plan fees 1,372,599
Transfer and shareholder servicing agent fees 1,232,301
Shareholder communications 874,760
Trustees' compensation 820,324
Other 86,477
----------------
Total liabilities 252,803,557
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 6,997,220,283
================
- -----------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 3,825,578
- -----------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 6,344,713,531
- -----------------------------------------------------------------------------------------------------------------------
Accumulated net investment income 10,324,398
- -----------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments 60,753,026
- -----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 577,603,750
----------------
NET ASSETS $ 6,997,220,283
================
21 | OPPENHEIMER QUEST BALANCED 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 $3,285,507,553 and
178,008,162 shares of beneficial interest outstanding) $ 18.46
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $ 19.59
- -----------------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $2,056,324,402 and 113,566,047 shares
of beneficial interest outstanding) $ 18.11
- -----------------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $1,148,572,359 and 63,378,827 shares
of beneficial interest outstanding) $ 18.12
- -----------------------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $219,899,026 and 12,058,227 shares
of beneficial interest outstanding) $ 18.24
- -----------------------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $286,916,943 and 15,546,487 shares of beneficial interest outstanding) $ 18.46
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 | OPPENHEIMER QUEST BALANCED FUND
STATEMENT OF OPERATIONS Unaudited
- --------------------------------------------------------------------------------
For the Six Months Ended April 30, 2006
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- -----------------------------------------------------------------------------------------------------------------------
Interest $ 38,682,464
- -----------------------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $71,591) 36,314,293
- -----------------------------------------------------------------------------------------------------------------------
Portfolio lending fees 83,536
----------------
Total investment income 75,080,293
- -----------------------------------------------------------------------------------------------------------------------
EXPENSES
- -----------------------------------------------------------------------------------------------------------------------
Management fees 24,477,797
- -----------------------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 4,111,043
Class B 10,641,111
Class C 5,904,911
Class N 549,625
- -----------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 3,237,320
Class B 2,326,728
Class C 984,720
Class N 294,542
Class Y 242,771
- -----------------------------------------------------------------------------------------------------------------------
Shareholder communications:
Class A 390,713
Class B 396,950
Class C 159,331
Class N 11,908
- -----------------------------------------------------------------------------------------------------------------------
Trustees' compensation 197,253
- -----------------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 60,744
- -----------------------------------------------------------------------------------------------------------------------
Administration service fees 750
- -----------------------------------------------------------------------------------------------------------------------
Other 169,948
----------------
Total expenses 54,158,165
Less reduction to custodian expenses (20,477)
----------------
Net expenses 54,137,688
- -----------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 20,942,605
- -----------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
- -----------------------------------------------------------------------------------------------------------------------
Net realized gain on investments 64,997,510
- -----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 449,590,496
- -----------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 535,530,611
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23 | OPPENHEIMER QUEST BALANCED FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 2006 OCTOBER 31,
(UNAUDITED) 2005
- -----------------------------------------------------------------------------------------------------------------------
OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------
Net investment income $ 20,942,605 $ 17,470,480
- -----------------------------------------------------------------------------------------------------------------------
Net realized gain 64,997,510 455,092,227
- -----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 449,590,496 (246,170,891)
------------------------------------
Net increase in net assets resulting from operations 535,530,611 226,391,816
- -----------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (19,733,719) --
Class B (4,051,466) --
Class C (2,774,539) --
Class N (991,337) --
Class Y (2,080,337) --
- -----------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (112,335,407) --
Class B (74,131,181) --
Class C (40,907,899) --
Class N (7,470,626) --
Class Y (9,186,316) --
- -----------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest
transactions:
Class A (113,906,880) 116,753,759
Class B (227,795,353) (416,333,424)
Class C (85,708,706) (49,767,516)
Class N (4,975,597) 2,797,923
Class Y 6,221,339 23,891,848
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
Total decrease (164,297,413) (96,265,594)
- -----------------------------------------------------------------------------------------------------------------------
Beginning of period 7,161,517,696 7,257,783,290
------------------------------------
End of period (including accumulated net investment income
of $10,324,398 and $19,013,191, respectively) $ 6,997,220,283 $ 7,161,517,696
====================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | OPPENHEIMER QUEST BALANCED FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 2006 OCT. 31,
CLASS A (UNAUDITED) 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 17.79 $ 17.19 $ 15.69 $ 12.02 $ 16.09 $ 16.66
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .08 1 .11 1 .07 .16 .17 .46
Net realized and unrealized gain (loss) 1.31 .49 1.46 3.64 (3.53) (.20)
-----------------------------------------------------------------------------------------
Total from investment operations 1.39 .60 1.53 3.80 (3.36) .26
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.11) -- (.03) (.13) (.27) (.53)
Distributions from net realized gain (.61) -- -- -- (.44) (.30)
-----------------------------------------------------------------------------------------
Total dividends and/or
distributions to shareholders (.72) -- (.03) (.13) (.71) (.83)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 18.46 $ 17.79 $ 17.19 $ 15.69 $ 12.02 $ 16.09
=========================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 7.92% 3.49% 9.79% 31.87% (21.88)% 1.64%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $3,285,508 $3,277,261 $3,054,761 $2,287,707 $1,667,143 $1,763,404
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $3,351,947 $3,285,181 $2,759,594 $1,902,499 $1,960,568 $1,353,860
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 0.94% 0.61% 0.38% 1.60% 1.20% 2.61%
Total expenses 1.16% 4 1.17% 4 1.21% 4,5 1.38% 4,5 1.51% 4,5 1.47% 4
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 23% 89% 106% 92% 108% 88%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | OPPENHEIMER QUEST BALANCED FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 2006 OCT. 31,
CLASS B (UNAUDITED) 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 17.46 $ 17.01 $ 15.61 $ 11.98 $ 16.00 $ 16.52
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .01 1 (.03) 1 (.07) .06 .07 .35
Net realized and unrealized gain (loss) 1.28 .48 1.47 3.63 (3.52) (.19)
-----------------------------------------------------------------------------------------
Total from investment operations 1.29 .45 1.40 3.69 (3.45) .16
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.03) -- -- (.06) (.13) (.38)
Distributions from net realized gain (.61) -- -- -- (.44) (.30)
-----------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.64) -- -- (.06) (.57) (.68)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 18.11 $ 17.46 $ 17.01 $ 15.61 $ 11.98 $ 16.00
=========================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 7.51% 2.65% 8.97% 30.89% (22.38)% 1.03%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $2,056,324 $2,205,679 $2,549,069 $2,306,366 $1,759,167 $1,836,130
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $2,146,111 $2,470,464 $2,495,872 $1,985,215 $2,068,300 $1,307,367
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss) 0.15% (0.17)% (0.40)% 0.84% 0.56% 2.00%
Total expenses 1.95% 4 1.96% 4 2.00% 4,5 2.15% 4,5 2.15% 4,5 2.07% 4
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 23% 89% 106% 92% 108% 88%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | OPPENHEIMER QUEST BALANCED FUND
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 2006 OCT. 31,
CLASS C (UNAUDITED) 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 17.48 $ 17.02 $ 15.60 $ 11.97 $ 16.00 $ 16.51
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .02 1 (.02) 1 (.06) .07 .07 .34
Net realized and unrealized gain (loss) 1.27 .48 1.48 3.62 (3.52) (.18)
-----------------------------------------------------------------------------------------
Total from investment operations 1.29 .46 1.42 3.69 (3.45) .16
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.04) -- -- (.06) (.14) (.37)
Distributions from net realized gain (.61) -- -- -- (.44) (.30)
-----------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.65) -- -- (.06) (.58) (.67)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 18.12 $ 17.48 $ 17.02 $ 15.60 $ 11.97 $ 16.00
=========================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 7.49% 2.70% 9.10% 30.99% (22.40)% 1.05%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $1,148,572 $1,191,400 $1,207,729 $ 982,288 $ 763,338 $ 751,229
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $1,191,152 $1,248,447 $1,129,522 $ 835,198 $ 903,426 $ 502,037
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss) 0.21% (0.11)% (0.34)% 0.92% 0.58% 2.00%
Total expenses 1.89% 4 1.89% 4 1.94% 4,5 2.08% 4,5 2.13% 4,5 2.07% 4
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 23% 89% 106% 92% 108% 88%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | OPPENHEIMER QUEST BALANCED FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 2006 OCT. 31,
CLASS N (UNAUDITED) 2005 2004 2003 2002 2001 1
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 17.58 $ 17.05 $ 15.58 $ 11.94 $ 16.05 $ 16.84
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .06 2 .05 2 .03 .11 .20 .22
Net realized and unrealized gain (loss) 1.29 .48 1.45 3.63 (3.56) (.83)
-----------------------------------------------------------------------------------------
Total from investment operations 1.35 .53 1.48 3.74 (3.36) (.61)
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.08) -- (.01) (.10) (.31) (.18)
Distributions from net realized gain (.61) -- -- -- (.44) --
-----------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.69) -- (.01) (.10) (.75) (.18)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 18.24 $ 17.58 $ 17.05 $ 15.58 $ 11.94 $ 16.05
=========================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 7.80% 3.11% 9.47% 31.50% (21.99)% (3.71)%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 219,899 $ 216,843 $ 207,450 $ 142,866 $ 85,744 $ 19,649
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 221,823 $ 219,040 $ 180,201 $ 112,416 $ 70,477 $ 4,977
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 0.63% 0.30% 0.04% 1.23% 1.07% 2.75%
Total expenses 1.48% 1.49% 1.55% 1.74% 1.67% 1.58%
Expenses after payments and waivers and
reduction to custodian expenses 1.48% 1.49% 1.55% 1.70% 1.67% 1.58%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 23% 89% 106% 92% 108% 88%
1. For the period from March 1, 2001 (inception of offering) to October 31,
2001.
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 Fund distributions or the redemption of Fund shares.
4. Annualized for periods of less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | OPPENHEIMER QUEST BALANCED FUND
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 2006 OCT. 31,
CLASS Y (UNAUDITED) 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 17.79 $ 17.14 $ 15.62 $ 11.96 $ 16.05 $ 16.67
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .11 1 .17 1 .12 .20 .25 .74
Net realized and unrealized gain (loss) 1.31 .48 1.46 3.64 (3.52) (.40)
-----------------------------------------------------------------------------------------
Total from investment operations 1.42 .65 1.58 3.84 (3.27) .34
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.14) -- (.06) (.18) (.38) (.66)
Distributions from net realized gain (.61) -- -- -- (.44) (.30)
-----------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.75) -- (.06) (.18) (.82) (.96)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 18.46 $ 17.79 $ 17.14 $ 15.62 $ 11.96 $ 16.05
=========================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 8.09% 3.79% 10.17% 32.40% (21.48)% 2.14%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 286,917 $ 270,335 $ 238,775 $ 182,409 $ 118,068 $ 134,654
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 280,634 $ 253,220 $ 216,973 $ 145,793 $ 137,322 $ 77,394
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.23% 0.93% 0.70% 1.89% 1.75% 2.97%
Total expenses 0.87% 4 0.85% 4 0.90% 4 1.05% 4 0.96% 4,5 1.00% 4
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 23% 89% 106% 92% 108% 88%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | OPPENHEIMER QUEST BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Quest Balanced Fund (the Fund), a series of Oppenheimer Quest For
Value Funds, is an open-end management investment company registered under the
Investment Company Act of 1940, as amended. The Fund's investment objective is
to seek a combination of growth of capital and investment income. The Fund's
primary objective is growth of capital. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager). The Manager has entered into a subadvisory
agreemment with Oppenheimer Capital LLC.
The Fund offers Class A, Class B, Class C, Class N and Class Y shares.
Class A shares are sold at their offering price, which is normally net asset
value plus a front-end sales charge. Class B, Class C and Class N shares are
sold without a front-end sales charge but may be subject to a contingent
deferred sales charge (CDSC). Class N shares are sold only through retirement
plans. Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC, however, the institutional investor
may impose charges on those accounts. All classes of shares have identical
rights and voting privileges with respect to the Fund in general and exclusive
voting rights on matters that affect that class alone. Earnings, net assets and
net asset value per share may differ due to each class having its own expenses,
such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares six
years after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ are valued based on the closing
price provided by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the closing "bid" and "asked"
prices, and if not, at the closing bid price. Securities traded on foreign
exchanges are valued based on the last sale price on the principal exchange on
which the security is traded, as identified by the portfolio pricing service,
prior to the time when the Fund's assets are valued. In the absence of a sale,
the security is valued at the official closing price on the principal exchange.
Corporate, government and municipal debt instruments having a remaining maturity
in excess of sixty days and all mortgage-backed securities will be valued at the
mean between the "bid" and "asked" prices. Futures contracts traded
30 | OPPENHEIMER QUEST BALANCED FUND
on a commodities or futures exchange will be valued at the final settlement
price or official closing price on the principal exchange as reported by such
principal exchange at its trading session ending at, or most recently prior to,
the time when the Fund's assets are valued. Securities (including restricted
securities) for which market quotations are not readily available are valued at
their fair value. Foreign and domestic securities whose values have been
materially affected by what the Manager identifies as a significant event
occurring before the Fund's assets are valued but after the close of their
respective exchanges will be fair valued. Fair value is determined in good faith
using consistently applied procedures under the supervision of the Board of
Trustees. Short-term "money market type" debt securities with remaining
maturities of sixty days or less are valued at amortized cost (which
approximates market value).
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of the New
York Stock Exchange (the "Exchange"), normally 4:00 P.M. Eastern time, on each
day the Exchange is open for business. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal. In the event of default by the other party to the agreement,
retention of the collateral may be subject to legal proceedings.
31 | OPPENHEIMER QUEST BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund.
During the year ended October 31, 2005, the Fund utilized $181,820,457 of
capital loss carryforward to offset realized capital gains in that fiscal year.
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for the
Fund's independent trustees. Benefits are based on years of service and fees
paid to each trustee during the years of service. During the six months ended
April 30, 2006, the Fund's projected benefit obligations were increased by
$152,141 and payments of $25,409 were made to retired trustees, resulting in an
accumulated liability of $842,181 as of April 30, 2006.
The Board of Trustees has adopted a deferred compensation plan for
independent trustees that enables trustees to elect to defer receipt of all or a
portion of the annual compensation they are entitled to receive from the Fund.
For purposes of determining the amount owed to the Trustee under the plan,
deferred amounts are treated as though equal dollar amounts had been invested in
shares of the Fund or in other Oppenheimer funds selected by the Trustee. The
Fund purchases shares of the funds selected for deferral by the Trustee in
amounts equal to his or her deemed investment, resulting in a Fund asset equal
to the deferred compensation liability. Such assets are included as a component
of "Other" within the asset section of the Statement of Assets and Liabilities.
Deferral of trustees' fees under the plan will not affect the net assets of the
Fund, and will not materially affect the Fund's assets, liabilities or net
investment income per share. Amounts will be deferred until distributed in
accordance to the Plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income distributions, if any, are declared
and paid quarterly. Capital gain distributions, if any, are declared and paid
annually.
32 | OPPENHEIMER QUEST BALANCED FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. At April 30, 2006, the Fund had $4,105 of such earnings on
cash balances available to offset future custodian fees or interest expenses
incurred during the next fiscal year.
- --------------------------------------------------------------------------------
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 $0.01 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
SIX MONTHS ENDED APRIL 30, 2006 YEAR ENDED OCTOBER 31, 2005
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------
CLASS A
Sold 19,450,745 $ 352,543,032 52,209,952 $ 933,780,734
Dividends and/or
distributions reinvested 6,636,832 119,107,972 -- --
Redeemed (32,318,065) (585,557,884) (45,627,925) (817,026,975)
-------------------------------------------------------------
Net increase (decrease) (6,230,488) $(113,906,880) 6,582,027 $ 116,753,759
=============================================================
- --------------------------------------------------------------------------------------------------
CLASS B
Sold 5,420,283 $ 96,407,697 14,527,626 $ 255,243,732
Dividends and/or
distributions reinvested 3,658,416 64,530,034 -- --
Redeemed (21,845,278) (388,733,084) (38,046,508) (671,577,156)
-------------------------------------------------------------
Net decrease (12,766,579) $(227,795,353) (23,518,882) $(416,333,424)
=============================================================
33 | OPPENHEIMER QUEST BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST Continued
SIX MONTHS ENDED APRIL 30, 2006 YEAR ENDED OCTOBER 31, 2005
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------
CLASS C
Sold 3,997,538 $ 71,176,804 11,673,588 $ 205,356,257
Dividends and/or
distributions reinvested 2,018,414 35,622,259 -- --
Redeemed (10,809,918) (192,507,769) (14,475,489) (255,123,773)
-------------------------------------------------------------
Net decrease (4,793,966) $ (85,708,706) (2,801,901) $ (49,767,516)
=============================================================
- --------------------------------------------------------------------------------------------------
CLASS N
Sold 1,697,661 $ 30,352,409 4,902,473 $ 86,592,098
Dividends and/or
distributions reinvested 457,314 8,115,973 -- --
Redeemed (2,428,144) (43,443,979) (4,736,733) (83,794,175)
-------------------------------------------------------------
Net increase (decrease) (273,169) $ (4,975,597) 165,740 $ 2,797,923
=============================================================
- --------------------------------------------------------------------------------------------------
CLASS Y
Sold 2,476,754 $ 44,815,578 6,145,175 $ 110,749,121
Dividends and/or
distributions reinvested 527,619 9,463,188 -- --
Redeemed (2,654,814) (48,057,427) (4,878,597) (86,857,273)
-------------------------------------------------------------
Net increase 349,559 $ 6,221,339 1,266,578 $ 23,891,848
=============================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the six months ended April 30, 2006, were as
follows:
PURCHASES SALES
---------------------------------------------------------------
Investment securities $1,616,628,083 $2,286,547,996
U.S. government and
government agency obligations -- 14,191,086
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
average annual rate as shown in the following table:
FEE SCHEDULE NOV. 1, 2005 TO APRIL 3, 2006
-------------------------------------------
Up to $1.0 billion of net assets 0.80%
Next $2.0 billion of net assets 0.76
Next $1.0 billion of net assets 0.71
Next $1.0 billion of net assets 0.66
Next $1.0 billion of net assets 0.60
Next $1.0 billion of net assets 0.55
Over $7.0 billion of net assets 0.50
FEE SCHEDULE EFFECTIVE APRIL 4, 2006
-------------------------------------------
Up to $1.0 billion of net assets 0.80%
Next $2.0 billion of net assets 0.76
Next $1.0 billion of net assets 0.71
Next $1.0 billion of net assets 0.66
Next $1.0 billion of net assets 0.60
Next $1.0 billion of net assets 0.55
Next $2.0 billion of net assets 0.50
Over $9.0 billion of net assets 0.48
34 | OPPENHEIMER QUEST BALANCED FUND
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
SUB-ADVISOR FEES. The Manager retains Oppenheimer Capital LLC (the
"Sub-Advisor") to provide the day-to-day portfolio management of the Fund. Under
the Sub-Advisory Agreement, the Manager, not the Fund, pays the Sub-Advisor an
annual fee in monthly installments, based on the average daily net assets of the
Fund. The fee is calculated as a percentage of the fee the Fund pays the
Manager. The rate is 40% of the advisory fee collected by the Manager based on
the net assets of the Fund as of November 22, 1995, and 30% of the fee collected
by the Manager on assets in excess of that amount. For the six months ended
April 30, 2006, the Manager paid $7,406,115 to the Sub-Advisor for its services
to the Fund.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the six months ended April 30, 2006, the Fund paid
$7,170,981 to OFS for services to the 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.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a
Distribution and Service Plan for Class A shares. Under the Plan, the Fund pays
a service fee to the Distributor of 0.25% of the average annual net assets of
Class A shares. The Distributor currently uses all of those fees to pay dealers,
brokers, banks and other financial institutions periodically for providing
personal services and maintenance of accounts of their customers that hold Class
A shares. Under the plan, the Fund may also pay an asset-based sales charge to
the Distributor. Beginning January 1, 2003, the Board of Trustees set the annual
asset-based sales charge rate at zero. Fees incurred by the Fund under the plan
are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class N
shares to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% on Class B and
Class C shares and 0.25% on Class N shares. The Distributor also receives a
service fee of 0.25% per year under each plan. If either the Class B, Class C or
Class N plan is terminated by the Fund or by the shareholders of a class, the
Board of Trustees and its independent trustees must determine whether the
35 | OPPENHEIMER QUEST BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
Distributor shall be entitled to payment from the Fund of all or a portion of
the service fee and/or asset-based sales charge in respect to shares sold prior
to the effective date of such termination. The Distributor's aggregate
uncompensated expenses under the plan at April 30, 2006 for Class B, Class C and
Class N shares were $45,703,077, $23,798,724 and $4,894,830, respectively. Fees
incurred by the Fund under the plans are detailed in the Statement of
Operations.
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption proceeds
prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the following table for the period
indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
SIX MONTHS RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- --------------------------------------------------------------------------------------------------------------
April 30, 2006 $1,089,828 $15,127 $2,279,991 $51,027 $44,851
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. This undertaking may be amended or
withdrawn at any time.
- --------------------------------------------------------------------------------
5. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of U.S.
Treasury obligations or cash, against the loaned securities and maintains
collateral in an amount not less than 100% of the market value of the loaned
securities during the period of the loan. The market value of the loaned
securities is determined at the close of business of the funds and any
additional required collateral is delivered to the Fund on the next business
day. If the borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the Fund could experience delays and
cost in recovering the securities loaned or in gaining access to the collateral.
Cash collateral is invested in cash equivalents. The Fund retains a portion of
the interest earned from the collateral. The Fund continues to receive the
economic benefit of interest or dividends paid on the securities loaned in the
form of a substitute payment received from the borrower. As of April 30, 2006,
the Fund had on loan securities valued at $110,513,109. Collateral of
$111,627,800 was received for the loans, all of which was received in cash and
subsequently invested in approved instruments.
36 | OPPENHEIMER QUEST BALANCED FUND
- --------------------------------------------------------------------------------
6. LITIGATION
A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds including the Fund) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that it is premature to render any opinion as to the
likelihood of an outcome unfavorable to it, the funds, the Directors/Trustees or
the Officers on the appeal of the decisions of the district court, and that no
estimate can yet be made with any degree of certainty as to the amount or range
of any potential loss. However, the Manager believes that the allegations
contained in the complaint are without merit and that there are substantial
grounds to sustain the district court's rulings.
37 | OPPENHEIMER QUEST BALANCED FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
38 | OPPENHEIMER QUEST BALANCED FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AND SUB-ADVISORY AGREEMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
advisory and sub-advisory agreements (the "Agreements"). The Investment Company
Act of 1940, as amended, requires that the Board request and evaluate, and that
the Manager and Oppenheimer Capital LLC (the "Sub-Adviser") provide, such
information as may be reasonably necessary to evaluate the terms of the
Agreements. The Board employs an independent consultant to prepare a report that
provides information, including comparative information that the Board requests
for that purpose. In addition, the Board receives information throughout the
year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's and Sub-Adviser's services, (ii) the investment performance of the
Fund, (iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates and the
Sub-Adviser, including an analysis of the cost of providing services by the
Manager and its affiliates, (v) the extent to which economies of scale are
realized as the Fund grows and whether fee levels reflect these economies of
scale for Fund investors and (vi) other benefits to the Manager and Sub-Adviser
from their relationship with the Fund. The Board was aware that there are
alternatives to retaining the Manager and the Sub-Adviser.
NATURE AND EXTENT OF SERVICES. The Board considered information on the
nature and extent of the services provided to the Fund by the Manager, the
Sub-Adviser and their affiliates and information regarding the personnel that
provide such services. The Manager's duties include providing and supervising
all administrative and clerical personnel that are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
The Sub-Adviser provides the Fund with the services of the portfolio manager and
the Sub-Adviser's investment team, who provide research, analysis and other
advisory services in regard to the Fund's investments, and securities trading
services.
QUALITY OF SERVICES. The Board also considered the quality of the services
provided and the quality of the Manager's and Sub-Adviser's resources that are
available to the Fund. The Board took account of the fact that the Manager has
had over forty years of
39 | OPPENHEIMER QUEST BALANCED FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AND SUB-ADVISORY AGREEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
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, and
information the Board has received regarding the experience and professional
qualifications of the Manager's personnel and the size and functions of its
staff. In its evaluation of the quality of the portfolio management services
provided by the Sub-Adviser, the Board considered the experience of Colin
Glinsman and the Sub-Adviser's large cap investment team and analysts. Mr.
Glinsman is employed by the Sub-Adviser and has had over 26 years of experience
managing equity and fixed income investments. The Board members also considered
their experiences with the Manager through their service as directors or
trustees of the Fund and other funds advised by the Manager. The Board
considered information regarding the quality of services provided by affiliates
of the Manager, which it also reviews at other times during the year in
connection with the renewal of the Fund's service agreements. In light of the
foregoing, the Board concluded that the Fund benefits from the services provided
under the Agreements as a result of the Manager's and Sub-Adviser's experience,
reputation, personnel, operations, and resources.
INVESTMENT PERFORMANCE OF THE FUND. During the year, the Manager provided
information on the investment performance of the Fund at each Board meeting,
including comparative performance information. The Board also reviewed
information, prepared by the Manager and by the independent consultant,
comparing the Fund's historical performance to relevant market indices and to
the performance of other balanced funds advised by the Manager and by other
investment advisers. The Board noted that the Fund's three-year, five-year and
ten-year performance were better than its peer group average. However its
one-year performance was below its peer group average.
MANAGEMENT FEES AND EXPENSES. The Board reviewed the fees paid to the
Manager and its affiliates and the other expenses borne by the Fund. The Board
also evaluated the comparability of the fees charged and the services provided
to the Fund to the fees and services for other clients or accounts advised by
the Manager. The independent consultant provided comparative data in regard to
the fees and expenses of the Fund, other balanced funds and other funds with
comparable asset levels and distribution features. The Board noted that the
Fund's contractual and actual management fees and total expenses were higher
than its peer group median and average. The Board noted that the Manager, not
the Fund, pays the Sub-Adviser's fee under the sub-advisory agreement.
ECONOMIES OF SCALE. The Board reviewed the extent to which the Manager may
realize economies of scale in managing and supporting the Fund, the extent to
which those economies of scale benefit the Fund shareholders and the current
level of Fund assets in
40 | OPPENHEIMER QUEST BALANCED FUND
relation to the Fund's breakpoint schedule for its management fees. The Board
noted that the Fund's breakpoints are intended to share economies of scale that
may exist as the Fund grows with its shareholders.
BENEFITS TO THE MANAGER AND SUB-ADVISER. The Board considered information
regarding the Manager's costs in serving as the Fund's investment adviser,
including the fee paid to the Sub-Adviser, the costs associated with the other
personnel and systems necessary to manage the Fund, and information regarding
the Manager's profitability from its relationship with the Fund. The Board
considered that the Manager and the Sub-Adviser 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 Fund and its shareholders. In addition to considering the profits
realized by the Manager and the Sub-Adviser, the Board considered information
regarding the direct and indirect benefits the Manager and the Sub-Adviser
receive as a result of their relationship with the Fund, including compensation
paid to the Manager's affiliates for services provided and research provided to
the Manager and Sub-Adviser in connection with permissible brokerage
arrangements (soft dollar arrangements).
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and the independent Trustees. Fund counsel is independent of the
Manager and the Sub-Adviser within the meaning and intent of the Securities and
Exchange Commission Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
concluded that the nature, extent and quality of the services provided to the
Fund by the Manager and the Sub-Adviser are a benefit to the Fund and in the
best interest of the Fund's shareholders and that the amount and structure of
the compensation received by the Manager and its affiliates are reasonable in
relation to the services provided. Accordingly, the Board elected to continue
the Agreements for another year. In arriving at this decision, the Board did not
single out any factor or factors as being more important than others, but
considered all of the factors together. The Board judged the terms and
conditions of the Agreements, including the management fee, in light of all of
the surrounding circumstances.
41 | OPPENHEIMER QUEST BALANCED FUND
OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
TOP HOLDINGS AND ALLOCATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOP TEN COMMON STOCK INDUSTRIES
- --------------------------------------------------------------------------------
Software 10.1%
- --------------------------------------------------------------------------------
Media 9.0
- --------------------------------------------------------------------------------
Aerospace & Defense 5.0
- --------------------------------------------------------------------------------
Insurance 4.4
- --------------------------------------------------------------------------------
Pharmaceuticals 4.3
- --------------------------------------------------------------------------------
Oil & Gas 3.6
- --------------------------------------------------------------------------------
Biotechnology 3.5
- --------------------------------------------------------------------------------
Tobacco 3.2
- --------------------------------------------------------------------------------
Commercial Banks 2.5
- --------------------------------------------------------------------------------
Capital Markets 2.4
Portfolio holdings and allocations are subject to change. Percentages are as of
April 30, 2006, and are based on net assets.
TOP TEN COMMON STOCK HOLDINGS
- --------------------------------------------------------------------------------
Take-Two Interactive Software, Inc. 4.2%
- --------------------------------------------------------------------------------
Liberty Media Corp., Cl. A 3.6
- --------------------------------------------------------------------------------
Altria Group, Inc. 3.2
- --------------------------------------------------------------------------------
Microsoft Corp. 2.6
- --------------------------------------------------------------------------------
UBS AG 2.4
- --------------------------------------------------------------------------------
Cendant Corp. 2.4
- --------------------------------------------------------------------------------
BP plc, ADR 2.3
- --------------------------------------------------------------------------------
Sanofi-Aventis SA, ADR 2.3
- --------------------------------------------------------------------------------
Liberty Global, Inc., Series A 2.2
- --------------------------------------------------------------------------------
Liberty Global, Inc., Series C 2.1
Portfolio holdings and allocations are subject to change. Percentages are as of
April 30, 2006, and are based on net assets.
For up-to-date Top 10 Fund Holdings, please visit www.oppenheimerfunds.com.
- --------------------------------------------------------------------------------
9 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
TOP HOLDINGS AND ALLOCATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Stocks 70.4%
Cash Equivalents 29.6
Portfolio holdings and allocations are subject to change. Percentages are as of
April 30, 2006, and are based on the total market value of investments.
- --------------------------------------------------------------------------------
10 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
NOTES
- --------------------------------------------------------------------------------
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
Cumulative total returns are not annualized. The Fund's total returns shown do
not reflect the deduction of income taxes on an individual's investment. Taxes
may reduce your actual investment returns on income or gains paid by the Fund or
any gains you may realize if you sell your shares. INVESTORS SHOULD CONSIDER THE
FUND'S INVESTMENT OBJECTIVES, RISKS, AND OTHER CHARGES AND EXPENSES CAREFULLY
BEFORE INVESTING. THE FUND'S PROSPECTUS CONTAINS THIS AND OTHER INFORMATION
ABOUT THE FUND, AND MAY BE OBTAINED BY ASKING YOUR FINANCIAL ADVISOR, CALLING US
AT 1.800.525.7048 OR VISITING OUR WEBSITE AT WWW.OPPENHEIMERFUNDS.COM. READ THE
PROSPECTUS CAREFULLY BEFORE INVESTING.
The Fund's investment strategy and focus can change over time. The mention of
specific fund holdings does not constitute a recommendation by OppenheimerFunds,
Inc.
CLASS A shares of the Fund were first publicly offered on 1/3/89. Unless
otherwise noted, Class A returns include the current maximum initial sales
charge of 5.75%. The Fund's maximum sales charge for Class A shares was lower
prior to 11/24/95, so actual performance may have been higher. Class A shares
are subject to a maximum annual 0.25% asset-based sales charge. There is a
voluntary waiver of a portion of the Class A asset-based sales charge as
described in the Prospectus.
CLASS B shares of the Fund were first publicly offered on 9/1/93. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charges of 5% (1-year) and 2% (5-year). Because Class B shares convert to
Class A shares 72 months after purchase, the 10-year return for Class B uses
Class A performance for the period after conversion. Class B shares are subject
to an annual 0.75% asset-based sales charge.
CLASS C shares of the Fund were first publicly offered on 9/1/93. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
11 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
NOTES
- --------------------------------------------------------------------------------
CLASS N shares of the Fund were first publicly offered on 3/1/01. Class N shares
are offered only through retirement plans. Unless otherwise noted, Class N
returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
CLASS Y shares of the Fund were first publicly offered on 12/16/96. Class Y
shares are offered only to certain institutional investors under special
agreement with the Distributor.
An explanation of the calculation of performance is in the Fund's Statement of
Additional Information.
12 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include sales charges (loads) on purchase payments,
contingent deferred sales charges on redemptions; and redemption fees, if any;
and (2) ongoing costs, including management fees; distribution and service fees;
and other Fund expenses. These examples are intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended April 30, 2006.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio for each class of shares, and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front-end
or contingent deferred sales charges (loads), or a $12.00 fee imposed annually
on accounts valued at less than $500.00 (subject to exceptions described in
13 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
the Statement of Additional Information). Therefore, the "hypothetical" lines of
the table are useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(11/1/05) (4/30/06) APRIL 30, 2006
- --------------------------------------------------------------------------------
Class A Actual $1,000.00 $1,035.50 $ 7.19
- --------------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,017.75 7.13
- --------------------------------------------------------------------------------
Class B Actual 1,000.00 1,031.40 11.19
- --------------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,013.84 11.10
- --------------------------------------------------------------------------------
Class C Actual 1,000.00 1,031.80 10.99
- --------------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,014.03 10.89
- --------------------------------------------------------------------------------
Class N Actual 1,000.00 1,033.70 8.86
- --------------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,016.12 8.79
- --------------------------------------------------------------------------------
Class Y Actual 1,000.00 1,036.30 6.13
- --------------------------------------------------------------------------------
Class Y Hypothetical 1,000.00 1,018.79 6.07
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 181/365
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended April 30, 2006 are as follows:
CLASS EXPENSE RATIOS
- ------------------------------
Class A 1.42%
- ------------------------------
Class B 2.21
- ------------------------------
Class C 2.17
- ------------------------------
Class N 1.75
- ------------------------------
Class Y 1.21
- --------------------------------------------------------------------------------
14 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
STATEMENT OF INVESTMENTS April 30, 2006 / Unaudited
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMON STOCKS--72.3%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--9.7%
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--0.7%
Marriott International,
Inc., Cl. A 164,900 $ 12,049,243
- --------------------------------------------------------------------------------
MEDIA--9.0%
Liberty Global, Inc.,
Series A 1 1,744,552 36,129,672
- --------------------------------------------------------------------------------
Liberty Global, Inc.,
Series C 1 1,744,552 34,838,703
- --------------------------------------------------------------------------------
Liberty Media Corp.,
Cl. A 1 7,010,200 58,535,170
- --------------------------------------------------------------------------------
Viacom, Inc., Cl. B 1 402,900 16,047,507
----------------
145,551,052
- --------------------------------------------------------------------------------
CONSUMER STAPLES--7.0%
- --------------------------------------------------------------------------------
BEVERAGES--1.3%
Constellation Brands,
Inc., Cl. A 1 422,800 10,443,160
- --------------------------------------------------------------------------------
Diageo plc, Sponsored
ADR 163,600 10,838,500
----------------
21,281,660
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--0.9%
Wal-Mart Stores, Inc. 327,300 14,738,319
- --------------------------------------------------------------------------------
FOOD PRODUCTS--1.6%
ConAgra Foods, Inc. 259,400 5,883,192
- --------------------------------------------------------------------------------
Nestle SA 64,931 19,803,379
----------------
25,686,571
- --------------------------------------------------------------------------------
TOBACCO--3.2%
Altria Group, Inc. 714,000 52,236,240
- --------------------------------------------------------------------------------
ENERGY--4.2%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.6%
Halliburton Co. 130,300 10,182,945
- --------------------------------------------------------------------------------
OIL & GAS--3.6%
BP plc, ADR 513,800 37,877,336
- --------------------------------------------------------------------------------
Kinder Morgan, Inc. 56,500 4,973,130
- --------------------------------------------------------------------------------
Petroleo Brasileiro SA,
ADR 2 153,300 15,150,639
----------------
58,001,105
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
FINANCIALS--15.4%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--2.4%
UBS AG 329,056 $ 39,002,767
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--2.5%
Wachovia Corp. 189,700 11,353,545
- --------------------------------------------------------------------------------
Wells Fargo & Co. 425,700 29,241,333
----------------
40,594,878
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--4.8%
Bank of America
Corp. 325,900 16,268,928
- --------------------------------------------------------------------------------
Bear Stearns Cos., Inc.
(The) 52,600 7,496,026
- --------------------------------------------------------------------------------
Capital One Financial
Corp. 239,400 20,741,616
- --------------------------------------------------------------------------------
Citigroup, Inc. 216,133 10,795,843
- --------------------------------------------------------------------------------
Groupe Bruxelles
Lambert SA 200,000 22,683,690
----------------
77,986,103
- --------------------------------------------------------------------------------
INSURANCE--4.4%
American International
Group, Inc. 109,600 7,151,400
- --------------------------------------------------------------------------------
Everest Re Group
Ltd. 120,300 10,947,300
- --------------------------------------------------------------------------------
Fidelity National
Financial, Inc. 563,000 23,634,740
- --------------------------------------------------------------------------------
Genworth Financial,
Inc., Cl. A 625,100 20,753,320
- --------------------------------------------------------------------------------
Platinum Underwriters
Holdings Ltd. 337,300 9,299,361
----------------
71,786,121
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--1.3%
Countrywide Financial
Corp. 330,800 13,450,328
- --------------------------------------------------------------------------------
Freddie Mac 127,500 7,785,150
----------------
21,235,478
- --------------------------------------------------------------------------------
HEALTH CARE--9.1%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--3.5%
Amgen, Inc. 1 297,200 20,120,440
15 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
BIOTECHNOLOGY Continued
Human Genome
Sciences, Inc. 1 483,600 $ 5,517,876
- --------------------------------------------------------------------------------
Medicines Co. (The) 1 261,600 5,027,952
- --------------------------------------------------------------------------------
MedImmune, Inc. 1,3 476,000 14,979,720
- --------------------------------------------------------------------------------
Myogen, Inc. 1 158,200 5,230,092
- --------------------------------------------------------------------------------
Vanda Pharmaceuticals,
Inc. 1 529,500 5,824,500
----------------
56,700,580
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.3%
Cooper Cos., Inc.
(The) 95,700 5,246,274
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--1.0%
WellPoint, Inc. 1 216,000 15,336,000
- --------------------------------------------------------------------------------
PHARMACEUTICALS--4.3%
MGI Pharma, Inc. 1 308,000 5,753,440
- --------------------------------------------------------------------------------
Pfizer, Inc. 1,069,300 27,085,369
- --------------------------------------------------------------------------------
Sanofi-Aventis SA,
ADR 797,900 37,533,216
----------------
70,372,025
- --------------------------------------------------------------------------------
INDUSTRIALS--7.9%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--5.0%
Empresa Brasileira
de Aeronautica SA,
ADR 2 180,500 7,008,815
- --------------------------------------------------------------------------------
Honeywell International,
Inc. 603,400 25,644,500
- --------------------------------------------------------------------------------
Orbital Sciences
Corp. 1 1,610,500 25,204,325
- --------------------------------------------------------------------------------
United Technologies
Corp. 372,600 23,403,006
----------------
81,260,646
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--2.4%
Cendant Corp. 2,236,200 38,976,966
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.5%
Gamesa Corporacion
Tecnologica SA 400,000 8,694,994
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--14.5%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--2.3%
Cisco Systems, Inc. 1 1,260,400 26,405,380
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT Continued
Juniper Networks,
Inc. 1 577,500 $ 10,672,200
----------------
37,077,580
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--1.6%
Hutchinson
Technology, Inc. 1 334,500 7,951,065
- --------------------------------------------------------------------------------
International Business
Machines Corp. 142,800 11,758,152
- --------------------------------------------------------------------------------
Palm, Inc. 1 284,400 6,427,440
----------------
26,136,657
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--0.5%
ATI Technologies,
Inc. 1 513,100 7,963,312
- --------------------------------------------------------------------------------
SOFTWARE--10.1%
Compuware Corp. 1 2,036,600 15,641,088
- --------------------------------------------------------------------------------
Microsoft Corp. 1,764,300 42,607,845
- --------------------------------------------------------------------------------
Novell, Inc. 1 2,036,300 16,738,386
- --------------------------------------------------------------------------------
Synopsys, Inc. 1 982,300 21,443,609
- --------------------------------------------------------------------------------
Take-Two Interactive
Software, Inc. 1,2,4 3,996,250 68,136,063
----------------
164,566,991
- --------------------------------------------------------------------------------
MATERIALS--1.2%
- --------------------------------------------------------------------------------
METALS & MINING--1.2%
Companhia Vale do
Rio Doce, Sponsored
ADR 2 432,700 19,246,496
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--1.0%
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.0%
IDT Corp., Cl. B 1 1,553,700 17,246,070
- --------------------------------------------------------------------------------
UTILITIES--2.3%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--2.3%
AES Corp. (The) 1 1,479,000 25,098,630
- --------------------------------------------------------------------------------
Reliant Energy, Inc. 1 1,106,800 12,562,181
----------------
37,660,811
----------------
Total Common Stocks
(Cost $1,107,316,952) 1,176,817,884
16 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--27.6% 5
- --------------------------------------------------------------------------------
Undivided interest of 23.97% in joint
repurchase agreement (Principal
Amount/Value $912,364,000,
with a maturity value of
$912,721,343) with UBS
Warburg LLC, 4.70%, dated
4/28/06, to be repurchased
at $218,750,644 on 5/1/06,
collateralized by Federal
National Mortgage Assn.,
5%, 3/1/34, with a value
of $933,734,744
(Cost $218,665,000) $ 218,665,000 $ 218,665,000
- --------------------------------------------------------------------------------
Undivided interest of 91.39% in joint
repurchase agreement (Principal Amount/Value
$251,900,000, with a maturity value
of $251,998,031) with Cantor
Fitzgerald & Co./Cantor Fitzgerald
Securities, 4.67%, dated 4/28/06,
to be repurchased at $230,300,590
on 5/1/06, collateralized by U.S.
Treasury Bonds, 8.125%, 8/15/19,
with a value of $257,232,000
(Cost $230,211,000) 230,211,000 230,211,000
----------------
Total Joint Repurchase Agreements
(Cost $448,876,000) 448,876,000
VALUE
SEE NOTE 1
- --------------------------------------------------------------------------------
Total Investments, at Value
(excluding Investments
Purchased with Cash
Collateral from Securities
Loaned) (Cost $1,556,192,952) $ 1,625,693,884
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED--2.9%
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--2.9%
Undivided interest of 4.65% in
joint repurchase agreement
(Principal Amount/Value
$1,000,000,000, with a maturity
value of $1,000,407,917) with Bank
of America NA, 4.895%, dated
4/28/06, to be repurchased at
$46,506,839 on 5/1/06,
collateralized by U.S. Agency
Mortgages, 5%, 3/1/36, with a value
of $1,020,000,001 6
(Cost $46,487,876) $ 46,487,876 46,487,876
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS,
AT VALUE
(COST $1,602,680,828) 102.8% 1,672,181,760
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS
OF OTHER ASSETS (2.8) (45,345,975)
----------------------------------
NET ASSETS 100.0% $ 1,626,835,785
==================================
17 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Partial or fully-loaned security. See Note 7 of accompanying Notes.
3. A sufficient amount of liquid assets has been designated to cover outstanding
written call options, as follows:
CONTRACTS EXPIRATION EXERCISE PREMIUM VALUE
SUBJECT TO CALL DATE PRICE RECEIVED SEE NOTE 5
- --------------------------------------------------------------------------------------------------------------
MedImmune, Inc. 1,587 6/19/06 $40.00 $149,269 $15,870
4. Represents ownership of at least 5% of the voting securities of the issuer,
and is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended April 30, 2006. Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES VALUE DIVIDEND
OCTOBER 31, 2005 ADDITIONS REDUCTIONS APRIL 30, 2006 SEE NOTE 1 INCOME
- --------------------------------------------------------------------------------------------------------------
Take-Two Interactive
Software, Inc. 3,996,250 -- -- 3,996,250 $68,136,063 $--
5. The Fund may have elements of risk due to concentrated investments. Such
concentrations may subject the Fund to additional risks.
6. The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 7 of accompanying Notes.
SHARES VALUE
SOLD SHORT SEE NOTE 1
- ------------------------------------------------------------------------------------------------
COMMON STOCK SECURITIES SOLD SHORT--(8.0)% 1
- ------------------------------------------------------------------------------------------------
Alcon, Inc. (37,660) $ (3,830,399)
- ------------------------------------------------------------------------------------------------
Eagle Materials, Inc. (95,100) (6,300,375)
- ------------------------------------------------------------------------------------------------
Electronic Arts, Inc. 2 (113,100) (6,424,080)
- ------------------------------------------------------------------------------------------------
Fidelity NASDAQ Composite Index Tracking Stock (903,600) (82,368,562)
- ------------------------------------------------------------------------------------------------
Fidelity National Information Services, Inc. (316,500) (12,027,000)
- ------------------------------------------------------------------------------------------------
Fidelity National Title Group, Inc., Cl. A (463,500) (10,039,410)
- ------------------------------------------------------------------------------------------------
Imerys SA (25,000) (2,147,886)
- ------------------------------------------------------------------------------------------------
Lafarge SA (16,600) (2,041,911)
- ------------------------------------------------------------------------------------------------
Suez SA (135,600) (5,335,793)
--------------
TOTAL COMMON STOCK SECURITIES SOLD SHORT (PROCEEDS $129,239,474) $(130,515,416)
==============
1. Collateral on short sales was segregated by the Fund in the amount of
$309,199,888, which represented 236.91% of the market value of securities sold
short. See Note 1 of accompanying Notes.
2. Non-income producing security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES Unaudited
- --------------------------------------------------------------------------------
April 30, 2006
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investments, at value (including cost and market value of $448,876,000 in
repurchase agreements) (including securities loaned of approximately
$46,075,024)--see accompanying statement of investments:
Unaffiliated companies (cost $1,510,169,750) $ 1,604,045,697
Affiliated companies (cost $92,511,078) 68,136,063
----------------
1,672,181,760
- ------------------------------------------------------------------------------------------------
Cash 1,061,754
- ------------------------------------------------------------------------------------------------
Deposits with broker for securities sold short 129,239,474
- ------------------------------------------------------------------------------------------------
Unrealized appreciation on swap contracts 3,224,256
- ------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 13,572,954
Interest and dividends 1,164,119
Other 74,722
----------------
Total assets 1,820,519,039
- ------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------
Short positions, at value (proceeds of $129,239,474)--
see accompanying statement of investments 130,515,416
- ------------------------------------------------------------------------------------------------
Options written, at value (premiums received $149,269)--
see accompanying statement of investments 15,870
- ------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 46,487,876
- ------------------------------------------------------------------------------------------------
Unrealized depreciation on swap contracts 2,827,853
- ------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 8,395,531
Shares of beneficial interest redeemed 4,136,467
Shareholder communications 363,995
Distribution and service plan fees 327,422
Transfer and shareholder servicing agent fees 320,226
Trustees' compensation 255,875
Other 36,723
----------------
Total liabilities 193,683,254
- ------------------------------------------------------------------------------------------------
NET ASSETS $ 1,626,835,785
================
- ------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 562,034
- ------------------------------------------------------------------------------------------------
Additional paid-in capital 1,529,665,503
- ------------------------------------------------------------------------------------------------
Accumulated net investment income 4,673,534
- ------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 23,168,116
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets
and liabilities denominated in foreign currencies 68,766,598
----------------
NET ASSETS $ 1,626,835,785
================
19 | OPPENHEIMER QUEST OPPORTUNITY VALUE 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 $1,244,316,802 and 42,649,122 shares of beneficial interest outstanding) $29.18
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $30.96
- ------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets
of $178,866,831 and 6,358,256 shares of beneficial interest outstanding) $28.13
- ------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $154,067,330 and 5,487,363 shares of beneficial interest outstanding) $28.08
- ------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets
of $24,801,410 and 862,079 shares of beneficial interest outstanding) $28.77
- ------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $24,783,412 and 846,592 shares of beneficial interest outstanding) $29.27
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
STATEMENT OF OPERATIONS Unaudited
- --------------------------------------------------------------------------------
For the Six Months Ended April 30, 2006
- ------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------
Interest $ 12,600,921
- ------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $305,774) 8,793,613
- ------------------------------------------------------------------------------------------------
Portfolio lending fees 667,525
----------------
Total investment income 22,062,059
- ------------------------------------------------------------------------------------------------
EXPENSES
- ------------------------------------------------------------------------------------------------
Management fees 7,040,291
- ------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 1,607,241
Class B 962,329
Class C 816,528
Class N 63,985
- ------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 1,433,454
Class B 197,731
Class C 175,598
Class N 40,339
Class Y 37,795
- ------------------------------------------------------------------------------------------------
Shareholder communications:
Class A 230,528
Class B 77,620
Class C 30,176
Class N 2,360
- ------------------------------------------------------------------------------------------------
Dividends on short sales 810,137
- ------------------------------------------------------------------------------------------------
Custodian fees and expenses 9,028
- ------------------------------------------------------------------------------------------------
Administration service fees 750
- ------------------------------------------------------------------------------------------------
Other 29,633
----------------
Total expenses 13,565,523
- ------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 8,496,536
21 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
STATEMENT OF OPERATIONS Unaudited / Continued
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ------------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments $ 26,284,469
Closing and expiration of option contracts written 8,793
Foreign currency transactions (9,894)
Short positions 1,276,626
Swap contracts 3,160
----------------
Net realized gain 27,563,154
- ------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments 20,541,126
Translation of assets and liabilities denominated in foreign currencies 2,816,913
Option contracts 133,399
Short positions (1,029,813)
Swap contracts 396,403
----------------
Net change in unrealized appreciation 22,858,028
- ------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 58,917,718
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 2006 OCTOBER 31,
(UNAUDITED) 2005
- ------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------
Net investment income $ 8,496,536 $ 6,952,511
- ------------------------------------------------------------------------------------------
Net realized gain 27,563,154 261,305,597
- ------------------------------------------------------------------------------------------
Net change in unrealized appreciation 22,858,028 (119,390,292)
-----------------------------------
Net increase in net assets resulting from operations 58,917,718 148,867,816
- ------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (10,046,622) (1,598,737)
Class B -- --
Class C -- --
Class N (100,954) --
Class Y (250,160) (86,357)
- ------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (175,983,560) (99,583,789)
Class B (27,064,680) (18,611,376)
Class C (22,974,645) (13,238,663)
Class N (3,378,288) (1,849,874)
Class Y (3,563,267) (2,105,804)
- ------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from beneficial interest transactions:
Class A 5,970,116 (92,065,432)
Class B (10,970,105) (67,412,741)
Class C (2,842,775) (15,626,986)
Class N 1,888,118 (967,139)
Class Y (469,701) (2,922,726)
- ------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------
Total decrease (190,868,805) (167,201,808)
- ------------------------------------------------------------------------------------------
Beginning of period 1,817,704,590 1,984,906,398
-----------------------------------
End of period (including accumulated net investment
income of $4,673,534 and $6,574,734, respectively) $ 1,626,835,785 $ 1,817,704,590
===================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 2006 OCT. 31,
CLASS A (UNAUDITED) 2005 2004 2003 2002 2001
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 32.58 $ 32.41 $ 30.00 $ 26.41 $ 31.30 $ 36.04
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .17 1 .17 1 .07 1 .14 .24 .33
Net realized and unrealized gain (loss) .89 2.27 2.41 3.71 (4.74) (1.19)
----------------------------------------------------------------------------------------
Total from investment operations 1.06 2.44 2.48 3.85 (4.50) (.86)
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or
distributions to shareholders:
Dividends from net investment income (.24) (.04) (.07) (.26) (.39) (.58)
Distributions from net realized gain (4.22) (2.23) -- -- -- (3.30)
----------------------------------------------------------------------------------------
Total dividends and/or
distributions to shareholders (4.46) (2.27) (.07) (.26) (.39) (3.88)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 29.18 $ 32.58 $ 32.41 $ 30.00 $ 26.41 $ 31.30
========================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 3.55% 7.79% 8.30% 14.70% (14.60)% (2.79)%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 1,244,317 $ 1,378,475 $ 1,459,053 $ 1,429,157 $ 1,181,014 $ 1,285,953
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 1,313,587 $ 1,465,797 $ 1,497,594 $ 1,292,117 $ 1,300,422 $ 1,348,895
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.15% 0.53% 0.23% 0.53% 0.82% 1.01%
Total expenses 1.42% 1.33% 1.32% 1.44% 1.52% 1.51%
Expenses after payments and waivers and
reduction to custodian expenses 1.42% 1.28% 1.32% 1.44% 1.52% 1.51%
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 13% 100% 64% 63% 73% 42%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 2006 OCT. 31,
CLASS B (UNAUDITED) 2005 2004 2003 2002 2001
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 31.44 $ 31.55 $ 29.36 $ 25.79 $ 30.56 $ 35.25
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .05 1 (.08) 1 (.17) 1 (.11) .03 .15
Net realized and unrealized gain (loss) .86 2.20 2.36 3.68 (4.63) (1.20)
----------------------------------------------------------------------------------------
Total from investment operations .91 2.12 2.19 3.57 (4.60) (1.05)
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income -- -- -- -- (.17) (.34)
Distributions from net realized gain (4.22) (2.23) -- -- -- (3.30)
----------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (4.22) (2.23) -- -- (.17) (3.64)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 28.13 $ 31.44 $ 31.55 $ 29.36 $ 25.79 $ 30.56
========================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 3.14% 6.94% 7.46% 13.84% (15.16)% (3.40)%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 178,867 $ 210,856 $ 278,215 $ 424,121 $ 693,380 $ 1,157,671
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 194,176 $ 247,951 $ 342,847 $ 527,653 $ 981,593 $ 1,326,222
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss) 0.37% (0.27)% (0.54)% (0.19)% 0.17% 0.42%
Total expenses 2.21% 2.12% 2.11% 2.20% 2.17% 2.11%
Expenses after payments and waivers and
reduction to custodian expenses 2.21% 2.07% 2.11% 2.20% 2.17% 2.11%
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 13% 100% 64% 63% 73% 42%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 2006 OCT. 31,
CLASS C (UNAUDITED) 2005 2004 2003 2002 2001
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 31.38 $ 31.48 $ 29.29 $ 25.77 $ 30.55 $ 35.24
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .06 1 (.07) 1 (.16) 1 (.06) .05 .14
Net realized and unrealized gain (loss) .86 2.20 2.35 3.63 (4.65) (1.18)
----------------------------------------------------------------------------------------
Total from investment operations .92 2.13 2.19 3.57 (4.60) (1.04)
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income -- -- -- (.05) (.18) (.35)
Distributions from net realized gain (4.22) (2.23) -- -- -- (3.30)
----------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (4.22) (2.23) -- (.05) (.18) (3.65)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 28.08 $ 31.38 $ 31.48 $ 29.29 $ 25.77 $ 30.55
========================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 3.18% 6.99% 7.48% 13.88% (15.16)% (3.37)%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 154,067 $ 174,735 $ 190,426 $ 205,336 $ 203,490 $ 257,556
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 164,760 $ 187,520 $ 203,073 $ 198,226 $ 245,055 $ 280,327
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss) 0.40% (0.22)% (0.51)% (0.19)% 0.18% 0.41%
Total expenses 2.17% 2.08% 2.06% 2.17% 2.16% 2.11%
Expenses after payments and waivers and
reduction to custodian expenses 2.17% 2.02% 2.06% 2.17% 2.16% 2.11%
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 13% 100% 64% 63% 73% 42%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 2006 OCT. 31,
CLASS N (UNAUDITED) 2005 2004 2003 2002 2001 1
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 32.12 $ 32.06 $ 29.72 $ 26.21 $ 31.26 $ 33.48
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .12 2 .05 2 (.05) 2 .09 .49 .03
Net realized and unrealized gain (loss) .88 2.24 2.39 3.65 (5.02) (2.25)
----------------------------------------------------------------------------------------
Total from investment operations 1.00 2.29 2.34 3.74 (4.53) (2.22)
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.13) -- -- 3 (.23) (.52) --
Distributions from net realized gain (4.22) (2.23) -- -- -- --
----------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (4.35) (2.23) -- (.23) (.52) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 28.77 $ 32.12 $ 32.06 $ 29.72 $ 26.21 $ 31.26
========================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 4 3.37% 7.39% 7.89% 14.39% (14.78)% (6.63)%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 24,801 $ 25,539 $ 26,382 $ 19,538 $ 14,843 $ 2,292
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 25,860 $ 27,162 $ 23,702 $ 17,677 $ 10,295 $ 646
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 5
Net investment income (loss) 0.82% 0.17% (0.15)% 0.23% 0.55% 0.47%
Total expenses 1.75% 1.69% 1.73% 2.14% 1.76% 1.63%
Expenses after payments and waivers and
reduction to custodian expenses 1.75% 1.64% 1.69% 1.73% 1.76% 1.63%
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 13% 100% 64% 63% 73% 42%
1. For the period from March 1, 2001 (inception of offering) to October 31,
2001.
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 Fund distributions or the redemption of Fund shares.
5. Annualized for periods of less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 2006 OCT. 31,
CLASS Y (UNAUDITED) 2005 2004 2003 2002 2001
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 32.70 $ 32.52 $ 30.11 $ 26.53 $ 31.40 $ 36.21
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .20 1 .22 1 .12 1 .20 .56 .45
Net realized and unrealized gain (loss) .89 2.28 2.41 3.72 (4.99) (1.21)
----------------------------------------------------------------------------------------
Total from investment operations 1.09 2.50 2.53 3.92 (4.43) (.76)
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.30) (.09) (.12) (.34) (.44) (.75)
Distributions from net realized gain (4.22) (2.23) -- -- -- (3.30)
----------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (4.52) (2.32) (.12) (.34) (.44) (4.05)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 29.27 $ 32.70 $ 32.52 $ 30.11 $ 26.53 $ 31.40
========================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 3.63% 7.98% 8.42% 14.97% (14.34)% (2.48)%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 24,784 $ 28,100 $ 30,831 $ 30,124 $ 24,458 $ 46,942
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 26,872 $ 29,815 $ 30,649 $ 27,078 $ 28,726 $ 45,797
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.37% 0.69% 0.38% 0.74% 1.17% 1.32%
Total expenses 1.21% 1.17% 1.16% 1.33% 1.34% 1.17%
Expenses after payments and waivers and
reduction to custodian expenses 1.21% 1.12% 1.16% 1.23% 1.23% 1.17%
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 13% 100% 64% 63% 73% 42%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
NOTES TO FINANCIAL STATEMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Quest Opportunity Value Fund (the Fund), a series of Oppenheimer
Quest For Value Funds, is an open-end management investment company registered
under the Investment Company Act of 1940, as amended. The Fund's investment
objective is to seek growth of capital. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B, Class C, Class N and Class Y shares.
Class A shares are sold at their offering price, which is normally net asset
value plus a front-end sales charge. Class B, Class C and Class N shares are
sold without a front-end sales charge but may be subject to a contingent
deferred sales charge (CDSC). Class N shares are sold only through retirement
plans. Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC, however, the institutional investor
may impose charges on those accounts. All classes of shares have identical
rights and voting privileges with respect to the Fund in general and exclusive
voting rights on matters that affect that class alone. Earnings, net assets and
net asset value per share may differ due to each class having its own expenses,
such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares six
years after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ are valued based on the closing
price provided by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the closing "bid" and "asked"
prices, and if not, at the closing bid price. Securities traded on foreign
exchanges are valued based on the last sale price on the principal exchange on
which the security is traded, as identified by the portfolio pricing service,
prior to the time when the Fund's assets are valued. In the absence of a sale,
the security is valued at the official closing price on the principal exchange.
Corporate, government and municipal debt instruments having a remaining maturity
in excess of sixty days and all mortgage-backed securities will be valued at the
mean between the "bid" and "asked" prices. Futures contracts traded on a
commodities or futures exchange will be valued at the final settlement price or
29 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
official closing price on the principal exchange as reported by such principal
exchange at its trading session ending at, or most recently prior to, the time
when the Fund's assets are valued. Securities (including restricted securities)
for which market quotations are not readily available are valued at their fair
value. Foreign and domestic securities whose values have been materially
affected by what the Manager identifies as a significant event occurring before
the Fund's assets are valued but after the close of their respective exchanges
will be fair valued. Fair value is determined in good faith using consistently
applied procedures under the supervision of the Board of Trustees. Short-term
"money market type" debt securities with remaining maturities of sixty days or
less are valued at amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
SECURITIES SOLD SHORT. The Fund sells securities that it does not own, and it
will therefore be obligated to purchase such securities at a future date. Upon
entering into a short position, the Fund records the proceeds as a deposit with
the broker in its Statement of Assets and Liabilities. The value of the open
short position is recorded as a liability, and the Fund records an unrealized
gain or loss to the extent of the difference between the proceeds received and
the value of the open short position. The Fund records a realized gain or loss
when the short position is closed out. By entering into short sales, the Fund
bears the market risk of increases in value of the security sold short in excess
of the proceeds received. Until the security is replaced, the Fund is required
to pay the lender any dividend or interest earned. Dividend expense on short
sales is treated as an expense in the Statement of Operations.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of the New
York Stock Exchange (the "Exchange"), normally 4:00 P.M. Eastern time, on each
day the Exchange is open for business. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
30 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal. In the event of default by the other party to the agreement,
retention of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund.
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for the
Fund's independent trustees. Benefits are based on years of service and fees
paid to each trustee during the years of service. During the six months ended
April 30, 2006, the Fund's projected benefit obligations were decreased by
$53,165 and payments of $13,907 were made to retired trustees, resulting in an
accumulated liability of $252,948 as of April 30, 2006.
The Board of Trustees has adopted a deferred compensation plan for
independent trustees that enables trustees to elect to defer receipt of all or a
portion of the annual compensation they are entitled to receive from the Fund.
For purposes of determining the amount owed to the Trustee under the plan,
deferred amounts are treated as though equal dollar amounts had been invested in
shares of the Fund or in other Oppenheimer funds selected by the Trustee. The
Fund purchases shares of the funds selected for deferral by the Trustee in
amounts equal to his or her deemed investment, resulting in a Fund asset equal
to the deferred compensation liability. Such assets are included as a component
of "Other" within the asset section of the Statement of Assets and Liabilities.
Deferral of trustees' fees under the plan will not affect the net assets of the
Fund, and will not
31 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
materially affect the Fund's assets, liabilities or net investment income per
share. Amounts will be deferred until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income 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 of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings. At April 30, 2006, the Fund had $2,204 of such earnings on
cash balances available to offset future custodian fees or interest expenses
incurred during the next fiscal year.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
32 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.01 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
SIX MONTHS ENDED APRIL 30, 2006 YEAR ENDED OCTOBER 31, 2005
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------
CLASS A
Sold 1,897,547 $ 56,179,502 4,917,724 $ 159,915,739
Dividends and/or
distributions reinvested 6,108,776 174,466,642 3,053,572 95,576,808
Redeemed (7,666,777) (224,676,028) (10,683,874) (347,557,979)
----------------------------------------------------------------
Net increase (decrease) 339,546 $ 5,970,116 (2,712,578) $ (92,065,432)
================================================================
- ----------------------------------------------------------------------------------------------------
CLASS B
Sold 353,191 $ 10,035,634 773,625 $ 24,343,742
Dividends and/or
distributions reinvested 939,521 25,949,579 576,702 17,549,037
Redeemed (1,640,312) (46,955,318) (3,462,406) (109,305,520)
----------------------------------------------------------------
Net decrease (347,600) $ (10,970,105) (2,112,079) $ (67,412,741)
================================================================
- ----------------------------------------------------------------------------------------------------
CLASS C
Sold 252,099 $ 7,124,212 523,791 $ 16,441,896
Dividends and/or
distributions reinvested 760,830 20,976,097 396,787 12,046,450
Redeemed (1,093,047) (30,943,084) (1,401,470) (44,115,332)
----------------------------------------------------------------
Net decrease (80,118) $ (2,842,775) (480,892) $ (15,626,986)
================================================================
- ----------------------------------------------------------------------------------------------------
CLASS N
Sold 100,512 $ 2,919,372 221,277 $ 7,121,994
Dividends and/or
distributions reinvested 122,955 3,467,323 59,403 1,839,109
Redeemed (156,485) (4,498,577) (308,571) (9,928,242)
----------------------------------------------------------------
Net increase (decrease) 66,982 $ 1,888,118 (27,891) $ (967,139)
================================================================
- ----------------------------------------------------------------------------------------------------
CLASS Y
Sold 97,733 $ 2,884,593 225,432 $ 7,354,369
Dividends and/or
distributions reinvested 133,197 3,813,427 69,881 2,192,161
Redeemed (243,678) (7,167,721) (383,956) (12,469,256)
----------------------------------------------------------------
Net decrease (12,748) $ (469,701) (88,643) $ (2,922,726)
================================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the six months ended April 30, 2006, were as
follows:
PURCHASES SALES
-------------------------------------------------------------
Investment securities $147,175,444 $303,486,320
33 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
average annual rate as shown in the following table:
FEE SCHEDULE
-------------------------------------------------
Up to $1.0 billion of net assets 0.85%
Next $500 million of net assets 0.80
Next $500 million of net assets 0.75
Next $500 million of net assets 0.70
Next $500 million of net assets 0.65
Next $500 million of net assets 0.60
Next $500 million of net assets 0.55
Over $4.0 billion of net assets 0.50
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the six months ended April 30, 2006, the Fund paid
$1,932,727 to OFS for services to the 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.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A
shares. Under the Plan, the Fund pays a service fee to the Distributor of 0.25%
of the average annual net assets of Class A shares. The Distributor currently
uses all of those fees to pay dealers, brokers, banks and other financial
institutions periodically for providing personal services and maintenance of
accounts of their customers that hold Class A shares. Under the plan, the Fund
may also pay an asset-based sales charge to the Distributor. Beginning January
1, 2003, the Board of Trustees set the annual asset-based sales charge rate at
zero. Fees incurred by the Fund under the plan are detailed in the Statement of
Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class N
shares to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% on Class B and
Class C shares and 0.25% on Class N shares.
34 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
The Distributor also receives a service fee of 0.25% per year under each plan.
If either the Class B, Class C or Class N plan is terminated by the Fund or by
the shareholders of a class, the Board of Trustees and its independent trustees
must determine whether the Distributor shall be entitled to payment from the
Fund of all or a portion of the service fee and/or asset-based sales charge in
respect to shares sold prior to the effective date of such termination. The
Distributor's aggregate uncompensated expenses under the plan at April 30, 2006
for Class C and Class N shares were $7,279,606 and $596,687, respectively. Fees
incurred by the Fund under the plans are detailed in the Statement of
Operations.
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption proceeds
prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the following table for the period
indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
SIX MONTHS RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- ---------------------------------------------------------------------------------------------------
April 30, 2006 $148,364 $3,673 $213,305 $4,341 $3,285
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. This undertaking may be amended or
withdrawn at any time.
- --------------------------------------------------------------------------------
5. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call options to
hedge against adverse movements in the value of portfolio holdings. When an
option is written, the Fund receives a premium and becomes obligated to sell or
purchase the underlying security at a fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are noted in the
Statement of Investments where applicable. Contracts subject to call, expiration
date, exercise price,
35 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. OPTION ACTIVITY Continued
premium received and market value are detailed in a note to the Statement of
Investments. Options written are reported as a liability in the Statement of
Assets and Liabilities. Realized gains and losses are reported in the Statement
of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur
a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. The Fund also has the additional risk of not
being able to enter into a closing transaction if a liquid secondary market does
not exist.
Written option activity for the six months ended April 30, 2006 was as follows:
CALL OPTIONS
---------------------------
NUMBER OF AMOUNT OF
CONTRACTS PREMIUMS
- -------------------------------------------------------------
Options outstanding as of
October 31, 2005 -- $ --
Options written 4,587 1,468,148
Options closed or expired (3,000) (1,318,879)
---------------------------
Options outstanding as of
April 30, 2006 1,587 $ 149,269
===========================
- --------------------------------------------------------------------------------
6. CREDIT DEFAULT SWAP CONTRACTS
The Fund may enter into a credit default swap contract to seek to maintain a
total return on a particular investment or portion of its portfolio, or for
other non-speculative purposes. Credit default swap contracts are subject to
credit risks (for example if the counterparty fails to meet its obligations).
As a purchaser of a credit default swap contract, the Fund pays a periodic
interest fee on the notional amount to the counterparty. This interest fee is
accrued daily as a component of unrealized appreciation (depreciation) and is
recorded as realized loss upon payment. The Fund also records an increase or
decrease to unrealized gain (loss) in an amount equal to the daily valuation.
Upon occurrence of a specific credit event with respect to the underlying
referenced debt obligation, the Fund is obligated to deliver that security to
the counterparty in exchange for receipt of the notional amount from the
counterparty. The difference between the value of the security delivered and the
notional amount received is recorded as realized gain.
Information regarding such credit default swaps as of April 30, 2006 is as
follows:
NOTIONAL ANNUAL
AMOUNT INTEREST
RECEIVED BY THE RATE
REFERENCED FUND UPON PAID BY UNREALIZED
COUNTERPARTY DEBT OBLIGATION CREDIT EVENT THE FUND DEPRECIATION
- ------------------------------------------------------------------------------------------
Deutsche Bank AG Static ABS $125,000,000 3.15% $2,827,853
36 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
As a seller of a credit default swap contract, the Fund receives a periodic
interest fee on the notional amount from the counterparty. This interest fee is
accrued daily as a component of unrealized appreciation (depreciation) and is
recorded as realized gain upon receipt. The Fund also records an increase or
decrease to unrealized gain (loss) in an amount equal to the daily valuation.
Upon occurrence of a specific credit event with respect to the underlying
referenced debt obligation, the Fund receives that security from the
counterparty in exchange for payment of the notional amount to the counterparty.
The difference between the value of the security received and the notional
amount paid is recorded as realized loss.
Information regarding such credit default swaps as of April 30, 2006 is as
follows:
NOTIONAL ANNUAL
AMOUNT INTEREST
PAID BY THE RATE
REFERENCED FUND UPON RECEIVED UNREALIZED
COUNTERPARTY DEBT OBLIGATION CREDIT EVENT BY THE FUND APPRECIATION
- ------------------------------------------------------------------------------------------
Deutsche Bank AG Static ABS $20,500,000 19.25% $3,224,256
- --------------------------------------------------------------------------------
7. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of U.S.
Treasury obligations or cash, against the loaned securities and maintains
collateral in an amount not less than 100% of the market value of the loaned
securities during the period of the loan. The market value of the loaned
securities is determined at the close of business of the funds and any
additional required collateral is delivered to the Fund on the next business
day. If the borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the Fund could experience delays and
cost in recovering the securities loaned or in gaining access to the collateral.
Cash collateral is invested in cash equivalents. The Fund retains a portion of
the interest earned from the collateral. The Fund continues to receive the
economic benefit of interest or dividends paid on the securities loaned in the
form of a substitute payment received from the borrower. As of April 30, 2006,
the Fund had on loan securities valued at $46,075,024. Collateral of $46,487,876
was received for the loans, all of which was received in cash and subsequently
invested in approved instruments.
- --------------------------------------------------------------------------------
8. LITIGATION
A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds including the Fund) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
37 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. LITIGATION Continued
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that it is premature to render any opinion as to the
likelihood of an outcome unfavorable to it, the funds, the Directors/Trustees or
the Officers on the appeal of the decisions of the district court, and that no
estimate can yet be made with any degree of certainty as to the amount or range
of any potential loss. However, the Manager believes that the allegations
contained in the complaint are without merit and that there are substantial
grounds to sustain the district court's rulings.
38 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
39 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, 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 Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services by the Manager and its affiliates,
(v) the extent to which economies of scale are realized as the Fund grows and
whether fee levels reflect these economies of scale for Fund investors and (vi)
other benefits to the Manager from its relationship with the Fund. The Board was
aware that there are alternatives to retaining the Manager.
NATURE AND EXTENT OF SERVICES. The Board considered information on the
nature and extent of the services provided to the Fund and information regarding
the Manager's key personnel that provide such services. The Manager's duties
include providing the Fund with the services of the portfolio manager and the
Manager's investment team, who provide research, analysis and other advisory
services in regard to the Fund's investments; securities trading services;
oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing, and supervising
the activities of, all administrative and clerical personnel that are necessary
in order to provide effective corporate administration for the Fund; compiling
and maintaining records with respect to the Fund's operations; preparing and
filing reports required by the Securities and Exchange Commission; preparing
periodic reports regarding the operations of the Fund for its shareholders;
preparing proxy materials for shareholder meetings; and preparing the
registration statements required by Federal and state securities laws for the
sale of the Fund's shares. The Manager also provides the Fund with office space,
facilities and equipment.
QUALITY OF SERVICES. The Board also considered the quality of the services
provided and the quality of the Manager's resources that are available to the
Fund. The Board took
40 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
account of the facts 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, and information the
Board has received regarding the experience and professional qualifications of
the Manager's personnel and the size and functions of its staff. In its
evaluation of the quality of the portfolio management services provided, the
Board considered the experience of Emmanuel Ferreira and the Manager's value
investment team and analysts. Mr. Ferreira has had over 12 years of experience
managing equity investments. The Board members also considered their experiences
with the Manager and its officers and other personnel through their service as
directors or trustees of the Fund and other funds advised by the Manager. The
Board considered information regarding the quality of services provided by
affiliates of the Manager, which it also reviews at other times during the year
in connection with the renewal of the Fund's service agreements. In light of the
foregoing, the Board concluded that the Fund benefits from the services provided
under the Agreement as a result of the Manager's experience, reputation,
personnel, operations, and resources.
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the investment performance of the Fund and the
Manager at each Board meeting, including comparative performance information.
The Board also reviewed information, prepared by the Manager and by the
independent consultant, comparing the Fund's historical performance to relevant
market indices and to the performance of other flexible portfolio funds advised
by the Manager and by other investment advisers. The Board noted that the Fund's
one-year, three-year and ten-year performance were below its peer group average.
However its five-year performance was better than its peer group average.
MANAGEMENT FEES AND EXPENSES. The Board reviewed the fees paid to the
Manager and its affiliates and the other expenses borne by the Fund. The Board
also evaluated the comparability of the fees charged and the services provided
to the Fund to those of other clients or accounts advised by the Manager. The
independent consultant provided comparative data in regard to the fees and
expenses of the Fund, other flexible portfolio funds and other funds with
comparable asset levels and distribution features. The Board noted that the
Fund's contractual and actual management fees and total expenses were higher
than its peer group median and average.
ECONOMIES OF SCALE. The Board reviewed the extent to which the Manager may
realize economies of scale in managing and supporting the Fund, to what extent
those economies of scale benefit the Fund shareholders and the current level of
Fund assets in
41 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
relation to the Fund's breakpoint schedule for its management fees. The Board
noted that the Fund's breakpoints are intended to share economies of scale that
may exist as the Fund grows with its shareholders.
PROFITS AND OTHER BENEFITS TO THE MANAGER. The Board considered
information regarding the Manager's costs in serving as the Fund's investment
adviser, including the costs associated with the personnel and systems necessary
to manage the Fund, and information regarding the Manager's profitability from
its relationship with the Fund. 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 Fund and its shareholders. In addition to
considering the profits realized by the Manager, the Board considered
information regarding the direct and indirect benefits the Manager receives as a
result of its relationship with the Fund, including compensation paid to the
Manager's affiliates for services provided and research provided to the Manager
in connection with permissible brokerage arrangements (soft dollar
arrangements).
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and the independent Trustees. Fund counsel is independent of the
Manager within the meaning and intent of the Securities and Exchange Commission
Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
concluded that the nature, extent and quality of the services provided to the
Fund by the Manager are a benefit to the Fund and in the best interest of the
Fund's shareholders and that the amount and structure of the compensation
received by the Manager and its affiliates are reasonable in relation to the
services provided. Accordingly, the Board elected to continue the Agreement for
another year. In arriving at this decision, the Board did not single out any
factor or factors as being more important than others, but considered all of the
factors together. The Board judged the terms and conditions of the Agreement,
including the management fee, in light of all of the surrounding circumstances.
42 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
OPPENHEIMER SMALL- & MID- CAP VALUE FUND
TOP HOLDINGS AND ALLOCATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOP TEN COMMON STOCK INDUSTRIES
- --------------------------------------------------------------------------------
Health Care Providers & Services 6.5%
- --------------------------------------------------------------------------------
Software 6.4
- --------------------------------------------------------------------------------
Oil & Gas 5.0
- --------------------------------------------------------------------------------
Hotels, Restaurants & Leisure 5.0
- --------------------------------------------------------------------------------
Insurance 5.0
- --------------------------------------------------------------------------------
Machinery 4.3
- --------------------------------------------------------------------------------
Diversified Financial Services 4.3
- --------------------------------------------------------------------------------
Electric Utilities 4.1
- --------------------------------------------------------------------------------
Media 3.9
- --------------------------------------------------------------------------------
Commercial Banks 3.3
Portfolio holdings and allocations are subject to change. Percentages are as of
April 30, 2006, and are based on net assets.
TOP TEN COMMON STOCK HOLDINGS
- --------------------------------------------------------------------------------
Synopsys, Inc. 2.1%
- --------------------------------------------------------------------------------
Scientific Games Corp., Cl. A 1.9
- --------------------------------------------------------------------------------
Coventry Health Care, Inc. 1.9
- --------------------------------------------------------------------------------
CMS Energy Corp. 1.7
- --------------------------------------------------------------------------------
Hunt (J.B.) Transport Services, Inc. 1.6
- --------------------------------------------------------------------------------
Omnicare, Inc. 1.6
- --------------------------------------------------------------------------------
AES Corp. (The) 1.6
- --------------------------------------------------------------------------------
Compuware Corp. 1.5
- --------------------------------------------------------------------------------
Oshkosh Truck Corp. 1.5
- --------------------------------------------------------------------------------
AMETEK, Inc. 1.5
Portfolio holdings and allocations are subject to change. Percentages are as of
April 30, 2006, and are based on net assets.
For more current Fund holdings, please visit www.oppenheimerfunds.com
- --------------------------------------------------------------------------------
9 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
TOP HOLDINGS AND ALLOCATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECTOR ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Financials 17.0%
Industrials 16.7
Consumer Discretionary 14.9
Information Technology 13.4
Health Care 10.9
Energy 8.0
Utilities 6.9
Materials 6.6
Consumer Staples 4.8
Telecommunication Services 0.8
Portfolio holdings and allocations are subject to change. Percentages are as of
April 30, 2006, and are based on the total market value of common stocks.
- --------------------------------------------------------------------------------
10 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
NOTES
- --------------------------------------------------------------------------------
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
Cumulative total returns are not annualized. The Fund's total returns shown do
not reflect the deduction of income taxes on an individual's investment. Taxes
may reduce your actual investment returns on income or gains paid by the Fund or
any gains you may realize if you sell your shares. INVESTORS SHOULD CONSIDER THE
FUND'S INVESTMENT OBJECTIVES, RISKS, AND OTHER CHARGES AND EXPENSES CAREFULLY
BEFORE INVESTING. THE FUND'S PROSPECTUS CONTAINS THIS AND OTHER INFORMATION
ABOUT THE FUND, AND MAY BE OBTAINED BY ASKING YOUR FINANCIAL ADVISOR, CALLING US
AT 1.800.525.7048 OR VISITING OUR WEBSITE AT WWW.OPPENHEIMERFUNDS.COM. READ THE
PROSPECTUS CAREFULLY BEFORE INVESTING.
The Fund's investment strategy and focus can change over time. The mention of
specific fund holdings does not constitute a recommendation by OppenheimerFunds,
Inc.
CLASS A shares of the Fund were first publicly offered on 1/3/89. Unless
otherwise noted, Class A returns include the current maximum initial sales
charge of 5.75%. Class A shares are subject to a maximum annual 0.25%
asset-based sales charge. The asset-based sales charge is subject to a voluntary
waiver of a portion or all of the charge as described in the Prospectus, and the
Board of Trustees has set the rate at zero.
CLASS B shares of the Fund were first publicly offered on 9/1/93. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charges of 5% (1-year) and 2% (5-year). Because Class B shares convert to
Class A shares 72 months after purchase, the "10-year" return for Class B does
not include any contingent deferred sales charges on redemption and uses Class A
performance for the period after conversion. Class B shares are subject to an
annual 0.75% asset-based sales charge.
CLASS C shares of the Fund were first publicly offered on 9/1/93. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
11 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
NOTES
- --------------------------------------------------------------------------------
CLASS N shares of the Fund were first publicly offered on 3/1/01. Class N shares
are offered only through retirement plans. Unless otherwise noted, Class N
returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
CLASS Y shares of the Fund were first publicly offered on 10/24/05. 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 Fund's Statement of
Additional Information.
12 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include sales charges (loads) on purchase payments,
contingent deferred sales charges on redemptions; and redemption fees, if any;
and (2) ongoing costs, including management fees; distribution and service fees;
and other Fund expenses. These examples are intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended April 30, 2006.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio for each class of shares, and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front-end
or contingent deferred sales charges (loads), redemption fees, or a $12.00 fee
imposed annually on accounts valued at less than $500.00 (subject to exceptions
13 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(11/1/05) (4/30/06) APRIL 30, 2006
- --------------------------------------------------------------------------------
Class A Actual $1,000.00 $1,151.30 $ 6.10
- --------------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,019.14 5.72
- --------------------------------------------------------------------------------
Class B Actual 1,000.00 1,146.60 10.69
- --------------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,014.88 10.04
- --------------------------------------------------------------------------------
Class C Actual 1,000.00 1,147.10 10.32
- --------------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,015.22 9.69
- --------------------------------------------------------------------------------
Class N Actual 1,000.00 1,149.60 8.02
- --------------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,017.36 7.53
- --------------------------------------------------------------------------------
Class Y Actual 1,000.00 1,154.20 3.64
- --------------------------------------------------------------------------------
Class Y Hypothetical 1,000.00 1,021.42 3.41
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 181/365
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended April 30, 2006 are as follows:
CLASS EXPENSE RATIOS
- --------------------------
Class A 1.14%
- --------------------------
Class B 2.00
- --------------------------
Class C 1.93
- --------------------------
Class N 1.50
- --------------------------
Class Y 0.68
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Fund's Transfer Agent that can be terminated at any time, without advance
notice. The "Financial Highlights" tables in the Fund's financial statements,
included in this report, also show the gross expense ratios, without such
waivers or reimbursements.
- --------------------------------------------------------------------------------
14 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
STATEMENT OF INVESTMENTS April 30, 2006 / Unaudited
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMON STOCKS--96.8%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--14.4%
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--5.0%
Boyd Gaming Corp. 600,000 $ 29,892,000
- --------------------------------------------------------------------------------
Hilton Hotels Corp. 1,200,000 32,328,000
- --------------------------------------------------------------------------------
Scientific Games
Corp., Cl. A 1 1,500,000 57,135,000
- --------------------------------------------------------------------------------
Starwood Hotels &
Resorts Worldwide,
Inc. 550,000 31,559,000
----------------
150,914,000
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES--0.8%
Toll Brothers, Inc. 1 725,000 23,308,750
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--1.0%
ValueVision Media,
Inc., Cl. A 1,2 2,500,000 31,250,000
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.6%
Marvel Entertainment,
Inc. 1 1,000,000 19,510,000
- --------------------------------------------------------------------------------
MEDIA--3.9%
Cablevision Systems
Corp. New York
Group, Cl. A 1,650,000 33,445,500
- --------------------------------------------------------------------------------
Clear Channel
Outdoor Holdings,
Inc., Cl. A 1 1,200,000 28,320,000
- --------------------------------------------------------------------------------
Liberty Global, Inc.,
Series A 1 1,350,000 27,958,500
- --------------------------------------------------------------------------------
Liberty Global, Inc.,
Series C 1 1,350,000 26,959,500
----------------
116,683,500
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--0.9%
Foot Locker, Inc. 1,200,000 27,816,000
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--2.2%
Polo Ralph Lauren
Corp. 200,000 12,144,000
- --------------------------------------------------------------------------------
Quicksilver, Inc. 1 2,250,000 30,757,500
- --------------------------------------------------------------------------------
Warnaco Group,
Inc. (The) 1 1,000,000 22,280,000
----------------
65,181,500
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
CONSUMER STAPLES--4.6%
- --------------------------------------------------------------------------------
BEVERAGES--1.9%
Constellation Brands,
Inc., Cl. A 1 1,600,000 $ 39,520,000
- --------------------------------------------------------------------------------
Molson Coors
Brewing Co., Cl. B 225,000 16,618,500
----------------
56,138,500
- --------------------------------------------------------------------------------
FOOD PRODUCTS--2.7%
Bunge Ltd. 700,000 37,345,000
- --------------------------------------------------------------------------------
ConAgra Foods, Inc. 2,000,000 45,360,000
----------------
82,705,000
- --------------------------------------------------------------------------------
ENERGY--7.7%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--2.7%
Complete Production
Services, Inc. 1 386,700 10,220,481
- --------------------------------------------------------------------------------
Dresser-Rand
Group, Inc. 1 1,300,000 32,461,000
- --------------------------------------------------------------------------------
FMC Technologies,
Inc. 1 275,000 15,009,500
- --------------------------------------------------------------------------------
National Oilwell
Varco, Inc. 1 100,000 6,897,000
- --------------------------------------------------------------------------------
Pride International,
Inc. 1 400,000 13,956,000
- --------------------------------------------------------------------------------
Warrior Energy Service
Corp. 1 89,500 2,685,000
----------------
81,228,981
- --------------------------------------------------------------------------------
OIL & GAS--5.0%
El Paso Corp. 2,200,000 28,402,000
- --------------------------------------------------------------------------------
Energy Partners Ltd. 1 800,000 20,632,000
- --------------------------------------------------------------------------------
International Coal
Group, Inc. 1 3,000,001 30,900,030
- --------------------------------------------------------------------------------
Murphy Oil Corp. 500,000 25,090,000
- --------------------------------------------------------------------------------
Peabody Energy
Corp. 450,000 28,737,000
- --------------------------------------------------------------------------------
Range Resources
Corp. 650,000 17,244,500
---------------
151,005,530
15 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
FINANCIALS--16.6%
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--3.3%
Cullen/Frost Bankers,
Inc. 300,000 $ 17,364,000
- --------------------------------------------------------------------------------
Marshall & Ilsley
Corp. 825,000 37,719,000
- --------------------------------------------------------------------------------
Zions Bancorp 525,000 43,590,750
----------------
98,673,750
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--4.3%
Affiliated Managers
Group, Inc. 1 425,000 43,052,500
- --------------------------------------------------------------------------------
Apollo Investment
Corp. 1,500,000 28,050,000
- --------------------------------------------------------------------------------
Bear Stearns Cos.,
Inc. (The) 200,000 28,502,000
- --------------------------------------------------------------------------------
CIT Group, Inc. 550,000 29,705,500
----------------
129,310,000
- --------------------------------------------------------------------------------
INSURANCE--5.0%
Everest Re Group
Ltd. 410,000 37,310,000
- --------------------------------------------------------------------------------
Fidelity National
Financial, Inc. 1,000,000 41,980,000
- --------------------------------------------------------------------------------
Genworth Financial,
Inc., Cl. A 1,275,000 42,330,000
- --------------------------------------------------------------------------------
Platinum
Underwriters
Holdings Ltd. 1,050,000 28,948,500
----------------
150,568,500
- --------------------------------------------------------------------------------
REAL ESTATE--2.2%
BioMed Realty
Trust, Inc. 1,050,000 29,064,000
- --------------------------------------------------------------------------------
Newcastle Investment
Corp. 600,000 13,446,000
- --------------------------------------------------------------------------------
NorthStar Realty
Finance Corp. 2 2,000,000 22,420,000
----------------
64,930,000
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--1.8%
Commercial Capital
Bancorp, Inc. 450,000 7,051,500
- --------------------------------------------------------------------------------
NewAlliance
Bancshares, Inc. 1,350,000 19,494,000
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE Continued
PMI Group, Inc.
(The) 625,000 $ 28,843,750
----------------
55,389,250
- --------------------------------------------------------------------------------
HEALTH CARE--10.6%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--2.3%
Invitrogen Corp. 1 204,000 13,466,040
- --------------------------------------------------------------------------------
MedImmune, Inc. 1 800,000 25,176,000
- --------------------------------------------------------------------------------
Sepracor, Inc. 1 700,000 31,248,000
----------------
69,890,040
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--1.8%
Fisher Scientific
International, Inc. 1 550,000 38,802,500
- --------------------------------------------------------------------------------
Thermo Electron
Corp. 1 400,000 15,416,000
----------------
54,218,500
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--6.5%
Coventry Health
Care, Inc. 1 1,150,000 57,120,500
- --------------------------------------------------------------------------------
Manor Care, Inc. 700,000 30,695,000
- --------------------------------------------------------------------------------
Omnicare, Inc. 850,000 48,203,500
- --------------------------------------------------------------------------------
Triad Hospitals, Inc. 1 1,000,000 41,200,000
- --------------------------------------------------------------------------------
WellCare Health
Plans, Inc. 1 400,000 16,752,000
----------------
193,971,000
- --------------------------------------------------------------------------------
INDUSTRIALS--16.2%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--3.2%
Empresa Brasileira de
Aeronautica SA, ADR 825,000 32,034,750
- --------------------------------------------------------------------------------
Goodrich Corp. 800,000 35,600,000
- --------------------------------------------------------------------------------
Orbital Sciences
Corp. 1 1,750,000 27,387,500
----------------
95,022,250
- --------------------------------------------------------------------------------
BUILDING PRODUCTS--0.0%
Goodman Global,
Inc. 1 65,400 1,294,920
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--1.7%
Avery-Dennison
Corp. 300,000 18,750,000
16 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES Continued
Manpower, Inc. 500,000 $ 32,575,000
----------------
51,325,000
- --------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING--1.0%
Foster Wheeler Ltd. 1 650,000 28,964,000
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--2.6%
AMETEK, Inc. 925,000 45,574,750
- --------------------------------------------------------------------------------
Cooper Industries Ltd.,
Cl. A 350,000 32,007,500
----------------
77,582,250
- --------------------------------------------------------------------------------
MACHINERY--4.3%
Actuant Corp., Cl. A 600,000 38,370,000
- --------------------------------------------------------------------------------
IDEX Corp. 350,000 17,780,000
- --------------------------------------------------------------------------------
Oshkosh Truck Corp. 750,000 45,900,000
- --------------------------------------------------------------------------------
Regal-Beloit Corp. 600,000 27,996,000
----------------
130,046,000
- --------------------------------------------------------------------------------
MARINE--1.8%
Alexander &
Baldwin, Inc. 600,000 29,922,000
- --------------------------------------------------------------------------------
Double Hull
Tankers, Inc. 1,153,700 14,767,360
- --------------------------------------------------------------------------------
Horizon Lines, Inc.,
Cl. A 800,000 10,952,000
----------------
55,641,360
- --------------------------------------------------------------------------------
ROAD & RAIL--1.6%
Hunt (J.B.) Transport
Services, Inc. 2,050,000 48,851,500
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--12.9%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--1.1%
ADTRAN, Inc. 125,000 3,142,500
- --------------------------------------------------------------------------------
Juniper Networks,
Inc. 1 1,625,000 30,030,000
----------------
33,172,500
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--0.8%
Hutchinson
Technology, Inc. 1 1,000,000 23,770,000
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--1.8%
Agilent Technologies,
Inc. 1 800,000 30,736,000
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS Continued
Amphenol Corp.,
Cl. A 375,000 $ 21,675,000
- --------------------------------------------------------------------------------
CPI International,
Inc. 1 96,500 1,737,000
----------------
54,148,000
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--0.7%
ValueClick, Inc. 1 1,300,000 21,905,000
- --------------------------------------------------------------------------------
IT SERVICES--1.0%
BISYS Group, Inc.
(The) 1 2,000,000 31,880,000
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--1.1%
ATI Technologies,
Inc. 1 264,302 4,101,967
- --------------------------------------------------------------------------------
Standard Microsystems
Corp. 1 500,000 11,650,000
- --------------------------------------------------------------------------------
Varian Semiconductor
Equipment
Associates, Inc. 1 500,000 16,375,000
----------------
32,126,967
- --------------------------------------------------------------------------------
SOFTWARE--6.4%
Activision, Inc. 1 2,550,000 36,184,500
- --------------------------------------------------------------------------------
Amdocs Ltd. 1 400,000 14,880,000
- --------------------------------------------------------------------------------
Compuware Corp. 1 6,000,000 46,080,000
- --------------------------------------------------------------------------------
Novell, Inc. 1 3,850,000 31,647,000
- --------------------------------------------------------------------------------
Synopsys, Inc. 1 2,931,151 63,987,026
----------------
192,778,526
- --------------------------------------------------------------------------------
MATERIALS--6.4%
- --------------------------------------------------------------------------------
CHEMICALS--2.8%
Celanese Corp.,
Series A 1,100,000 24,145,000
- --------------------------------------------------------------------------------
Chemtura Corp. 3,200,000 39,040,000
- --------------------------------------------------------------------------------
Mosaic Co. (The) 1 1,400,000 21,000,000
----------------
84,185,000
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--0.9%
Texas Industries, Inc. 475,000 26,932,500
- --------------------------------------------------------------------------------
METALS & MINING--2.7%
Cleveland-Cliffs, Inc. 100,000 8,559,000
- --------------------------------------------------------------------------------
Phelps Dodge Corp. 400,000 34,476,000
- --------------------------------------------------------------------------------
Steel Dynamics, Inc. 175,000 10,927,000
17 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
METALS & MINING Continued
United States Steel
Corp. 400,000 $ 27,400,000
----------------
81,362,000
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--0.8%
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--0.8%
Crown Castle
International Corp. 1 700,000 23,555,000
- --------------------------------------------------------------------------------
UTILITIES--6.6%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--4.1%
AES Corp. (The) 1 2,800,000 47,516,000
- --------------------------------------------------------------------------------
CMS Energy Corp. 1 3,850,000 51,282,000
- --------------------------------------------------------------------------------
NRG Energy, Inc. 1 550,000 26,174,500
----------------
124,972,500
- --------------------------------------------------------------------------------
ENERGY TRADERS--1.5%
Mirant Corp. 1 1,850,000 45,436,000
- --------------------------------------------------------------------------------
GAS UTILITIES--1.0%
Southern Union Co. 1,150,000 29,808,000
----------------
Total Common Stocks
(Cost $2,497,923,208) 2,917,452,074
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--2.6%
- --------------------------------------------------------------------------------
Undivided interest of 8.57% in joint
repurchase agreement (Principal
Amount/Value $912,364,000, with a maturity
value of $912,721,343) with UBS Warburg
LLC, 4.70%, dated 4/28/06, to be
repurchased at $78,179,608 on 5/1/06,
collateralized by Federal National
Mortgage Assn., 5%, 3/1/34, with a value
of $933,734,744 (Cost $78,149,000) $ 78,149,000 $ 78,149,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS,
AT VALUE
(COST $2,576,072,208) 99.4% 2,995,601,074
- --------------------------------------------------------------------------------
OTHER ASSETS NET
OF LIABILITIES 0.6 17,359,747
-----------------------------------
NET ASSETS 100.0% $ 3,012,960,821
===================================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Represents ownership of at least 5% of the voting securities of the issuer,
and is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended April 30, 2006. Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
OCTOBER 31, 2005 ADDITIONS REDUCTIONS APRIL 30, 2006
- -----------------------------------------------------------------------------------------------------
Double Hull Tankers, Inc.* 2,000,000 -- 846,300 1,153,700
Horizon Lines, Inc., Cl. A* 2,500,000 -- 1,700,000 800,000
NorthStar Realty Finance Corp. 2,000,000 500,000 500,000 2,000,000
ValueVision Media, Inc., Cl. A 2,000,000 600,000 100,000 2,500,000
VALUE DIVIDEND REALIZED
SEE NOTE 1 INCOME GAIN (LOSS)
- -----------------------------------------------------------------------------------------------------
Double Hull Tankers, Inc.* $ --* $ -- $ 751,662
Horizon Lines, Inc., Cl. A* --* -- 3,724,880
NorthStar Realty Finance Corp. 22,420,000 1,275,000 577,977
ValueVision Media, Inc., Cl. A 31,250,000 -- (44,164)
-----------------------------------------------
$ 53,670,000 $ 1,275,000 $ 5,010,355
===============================================
*No longer an affiliate as of April 30, 2006.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES Unaudited
- --------------------------------------------------------------------------------
April 30, 2006
- -----------------------------------------------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $2,530,807,003) $ 2,941,931,074
Affiliated companies (cost $45,265,205) 53,670,000
----------------
2,995,601,074
- -----------------------------------------------------------------------------------------------------------------------
Cash 16,527,414
- -----------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 67,609,315
Shares of beneficial interest sold 25,826,455
Interest and dividends 1,095,870
Other 142,190
----------------
Total assets 3,106,802,318
- -----------------------------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 87,212,732
Shares of beneficial interest redeemed 5,010,302
Distribution and service plan fees 590,618
Transfer and shareholder servicing agent fees 533,026
Shareholder communications 229,763
Trustees' compensation 154,893
Other 110,163
----------------
Total liabilities 93,841,497
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 3,012,960,821
================
- -----------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 859,559
- -----------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 2,494,462,637
- -----------------------------------------------------------------------------------------------------------------------
Accumulated net investment loss (2,626,808)
- -----------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments 100,736,567
- -----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and liabilities
denominated in foreign currencies 419,528,866
----------------
NET ASSETS $ 3,012,960,821
================
19 | OPPENHEIMER SMALL- & MID- CAP VALUE 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
$2,031,792,194 and 56,374,702 shares of beneficial interest outstanding) $36.04
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $38.24
- -----------------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $329,870,196 and 10,091,464 shares
of beneficial interest outstanding) $32.69
- -----------------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $462,788,653 and 14,169,676 shares
of beneficial interest outstanding) $32.66
- -----------------------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $182,065,079 and 5,141,712 shares
of beneficial interest outstanding) $35.41
- -----------------------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $6,444,699 and 178,353 shares of beneficial interest outstanding) $36.13
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
STATEMENT OF OPERATIONS Unaudited
- --------------------------------------------------------------------------------
For the Six Months Ended April 30, 2006
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- -----------------------------------------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $29,609) $ 11,759,589
Affiliated companies 1,275,000
- -----------------------------------------------------------------------------------------------------------------------
Interest 1,574,986
----------------
Total investment income 14,609,575
- -----------------------------------------------------------------------------------------------------------------------
EXPENSES
- -----------------------------------------------------------------------------------------------------------------------
Management fees 8,056,636
- -----------------------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 2,034,631
Class B 1,490,365
Class C 1,852,831
Class N 357,077
- -----------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 1,630,539
Class B 409,766
Class C 427,595
Class N 225,160
Class Y 56
- -----------------------------------------------------------------------------------------------------------------------
Shareholder communications:
Class A 209,530
Class B 79,800
Class C 54,174
Class N 5,491
Class Y 1
- -----------------------------------------------------------------------------------------------------------------------
Trustees' compensation 86,797
- -----------------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 3,072
- -----------------------------------------------------------------------------------------------------------------------
Administration service fees 750
- -----------------------------------------------------------------------------------------------------------------------
Other 220,298
----------------
Total expenses 17,144,569
Less waivers and reimbursements of expenses (586)
----------------
Net expenses 17,143,983
- -----------------------------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (2,534,408)
- -----------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
- -----------------------------------------------------------------------------------------------------------------------
Net realized gain on:
Investments:
Unaffiliated companies 104,406,096
Affiliated companies 5,010,355
----------------
Net realized gain 109,416,451
- -----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 229,261,983
- -----------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 336,144,026
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 2006 OCTOBER 31,
(UNAUDITED) 2005
- -----------------------------------------------------------------------------------------------------------------------
OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------
Net investment loss $ (2,534,408) $ (5,529,882)
- -----------------------------------------------------------------------------------------------------------------------
Net realized gain 109,416,451 134,128,520
- -----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 229,261,983 86,417,734
------------------------------------
Net increase in net assets resulting from operations 336,144,026 215,016,372
- -----------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (77,805,352) (61,107,717)
Class B (16,849,244) (22,765,841)
Class C (19,268,298) (14,629,531)
Class N (6,894,529) (4,196,588)
Class Y (927,666) --
- -----------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest transactions:
Class A 585,410,289 681,217,184
Class B 33,399,709 54,529,663
Class C 139,840,777 156,100,810
Class N 66,572,829 60,721,673
Class Y 6,829,919 1,000
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
Total increase 1,046,452,460 1,064,887,025
- -----------------------------------------------------------------------------------------------------------------------
Beginning of period 1,966,508,361 901,621,336
------------------------------------
End of period (including accumulated net investment loss
of $2,626,808 and $92,400, respectively) $ 3,012,960,821 $ 1,966,508,361
====================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 2006 OCT. 31,
CLASS A (UNAUDITED) 2005 2004 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 33.08 $ 30.08 $ 26.11 $ 19.18 $ 19.53 $ 21.26
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .01 1 (.04) 1 (.17) 1 (.04) (.19) (.23)
Net realized and unrealized gain (loss) 4.82 6.22 5.42 6.97 (.09) (.47)
-------------------------------------------------------------------------------
Total from investment operations 4.83 6.18 5.25 6.93 (.28) (.70)
- ---------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Distributions from net realized gain (1.87) (3.18) (1.28) -- (.07) (1.03)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 36.04 $ 33.08 $ 30.08 $ 26.11 $ 19.18 $ 19.53
===============================================================================
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 15.13% 21.87% 20.90% 36.13% (1.45)% (3.02)%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 2,031,792 $ 1,298,204 $ 543,999 $ 330,215 $ 222,029 $ 172,395
- ---------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 1,669,078 $ 893,501 $ 436,617 $ 245,319 $ 231,657 $ 163,007
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss) 0.04% (0.11)% (0.61)% (0.12)% (0.69)% (1.06)%
Total expenses 1.14% 1.23% 1.35% 1.59% 1.68% 1.86%
Expenses after payments and waivers and
reduction to custodian expenses 1.14% 1.23% 1.35% 1.56% 1.66% 1.86%
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 70% 121% 163% 163% 151% 162%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 2006 OCT. 31,
CLASS B (UNAUDITED) 2005 2004 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 30.29 $ 28.01 $ 24.59 $ 18.20 $ 18.65 $ 20.47
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.13) 1 (.29) 1 (.37) 1 (.17) (.18) (.23)
Net realized and unrealized gain (loss) 4.40 5.75 5.07 6.56 (.20) (.56)
-------------------------------------------------------------------------------
Total from investment operations 4.27 5.46 4.70 6.39 (.38) (.79)
- ---------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Distributions from net realized gain (1.87) (3.18) (1.28) -- (.07) (1.03)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 32.69 $ 30.29 $ 28.01 $ 24.59 $ 18.20 $ 18.65
===============================================================================
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 14.66% 20.82% 19.91% 35.11% (2.06)% (3.60)%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 329,870 $ 272,643 $ 198,971 $ 171,896 $ 129,885 $ 95,418
- ---------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 301,189 $ 243,754 $ 190,251 $ 137,734 $ 134,304 $ 88,235
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment loss (0.81)% (0.98)% (1.43)% (0.85)% (1.34)% (1.65)%
Total expenses 2.00% 2.09% 2.18% 2.42% 2.34% 2.45%
Expenses after payments and waivers and
reduction to custodian expenses 2.00% 2.09% 2.18% 2.29% 2.32% 2.45%
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 70% 121% 163% 163% 151% 162%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 2006 OCT. 31,
CLASS C (UNAUDITED) 2005 2004 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 30.25 $ 27.97 $ 24.55 $ 18.17 $ 18.62 $ 20.44
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.12) 1 (.27) 1 (.37) 1 (.13) (.10) (.19)
Net realized and unrealized gain (loss) 4.40 5.73 5.07 6.51 (.28) (.60)
-------------------------------------------------------------------------------
Total from investment operations 4.28 5.46 4.70 6.38 (.38) (.79)
- ---------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Distributions from net realized gain (1.87) (3.18) (1.28) -- (.07) (1.03)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 32.66 $ 30.25 $ 27.97 $ 24.55 $ 18.17 $ 18.62
===============================================================================
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 14.71% 20.85% 19.95% 35.11% (2.06)% (3.61)%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 462,789 $ 292,689 $ 122,329 $ 71,779 $ 46,360 $ 26,604
- ---------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 374,911 $ 199,650 $ 96,555 $ 53,649 $ 45,455 $ 24,134
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment loss (0.75)% (0.91)% (1.42)% (0.85)% (1.33)% (1.64)%
Total expenses 1.93% 2.03% 2.16% 2.40% 2.33% 2.45%
Expenses after payments and waivers and
reduction to custodian expenses 1.93% 2.03% 2.16% 2.30% 2.31% 2.45%
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 70% 121% 163% 163% 151% 162%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 2006 OCT. 31,
CLASS N (UNAUDITED) 2005 2004 2003 2002 2001 1
- ---------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 32.58 $ 29.77 $ 25.98 $ 19.13 $ 19.51 $ 19.58
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.06) 2 (.14) 2 (.26) 2 (.11) (.27) (.04)
Net realized and unrealized gain (loss) 4.76 6.13 5.33 6.96 (.04) (.03)
-------------------------------------------------------------------------------
Total from investment operations 4.70 5.99 5.07 6.85 (.31) (.07)
- ---------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Distributions from net realized gain (1.87) (3.18) (1.28) -- (.07) --
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 35.41 $ 32.58 $ 29.77 $ 25.98 $ 19.13 $ 19.51
===============================================================================
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 14.96% 21.42% 20.29% 35.81% (1.61)% (0.36)%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 182,065 $ 102,971 $ 36,322 $ 11,216 $ 4,558 $ 409
- ---------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 144,513 $ 68,779 $ 21,951 $ 6,722 $ 2,882 $ 106
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment loss (0.33)% (0.44)% (0.93)% (0.36)% (0.78)% (1.14)%
Total expenses 1.50% 1.57% 1.70% 2.01% 1.82% 2.01%
Expenses after payments and waivers and
reduction to custodian expenses 1.50% 1.57% 1.66% 1.80% 1.80% 2.01%
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 70% 121% 163% 163% 151% 162%
1. For the period from March 1, 2001 (inception of offering) to October 31,
2001.
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 Fund distributions or the redemption of Fund shares.
4. Annualized for periods of less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
SIX MONTHS PERIOD
ENDED ENDED
APRIL 30, 2006 OCT. 31,
CLASS Y (UNAUDITED) 2005 1
- -------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 33.08 $ 33.38
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) 2 .06 -- 3
Net realized and unrealized gain (loss) 4.86 (.30)
--------------------------------------
Total from investment operations 4.92 (.30)
- -------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain (1.87) --
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 36.13 $ 33.08
======================================
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 4 15.42% (0.90)%
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 6,445 $ 1
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 5,133 $ 1
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 5
Net investment income (loss) 0.34% (0.32)%
Total expenses 0.68% 0.90% 6
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 70% 121%
1. For the period from October 24, 2005 (inception of offering) to October 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 Fund distributions or the redemption of Fund shares.
5. Annualized for periods of less than one full year.
6. Reduction to custodian expenses less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Small- & Mid- Cap Value Fund (the Fund), a series of Oppenheimer
Quest For Value Funds, is an open-end management investment company registered
under the Investment Company Act of 1940, as amended. The Fund's investment
objective is to seek capital appreciation. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B, Class C, Class N and Class Y shares.
Class A shares are sold at their offering price, which is normally net asset
value plus a front-end sales charge. Class B, Class C and Class N shares are
sold without a front-end sales charge but may be subject to a contingent
deferred sales charge (CDSC). Class N shares are sold only through retirement
plans. Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC, however, the institutional investor
may impose charges on those accounts. All classes of shares have identical
rights and voting privileges with respect to the Fund in general and exclusive
voting rights on matters that affect that class alone. Earnings, net assets and
net asset value per share may differ due to each class having its own expenses,
such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares six
years after the date of purchase. The Fund assesses a 2% fee on the proceeds of
fund shares that are redeemed (either by selling or exchanging to another
Oppenheimer fund) within 30 days of their purchase. The fee, which is retained
by the Fund, is accounted for as an addition to paid-in capital.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ are valued based on the closing
price provided by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the closing "bid" and "asked"
prices, and if not, at the closing bid price. Securities traded on foreign
exchanges are valued based on the last sale price on the principal exchange on
which the security is traded, as identified by the portfolio pricing service,
prior to the time when the Fund's assets are valued. In the absence of a sale,
the security is valued at the official closing price on the principal exchange.
Corporate, government and municipal debt instruments
28 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
having a remaining maturity in excess of sixty days and all mortgage-backed
securities will be valued at the mean between the "bid" and "asked" prices.
Futures contracts traded on a commodities or futures exchange will be valued at
the final settlement price or official closing price on the principal exchange
as reported by such principal exchange at its trading session ending at, or most
recently prior to, the time when the Fund's assets are valued. Securities
(including restricted securities) for which market quotations are not readily
available are valued at their fair value. Foreign and domestic securities whose
values have been materially affected by what the Manager identifies as a
significant event occurring before the Fund's assets are valued but after the
close of their respective exchanges will be fair valued. Fair value is
determined in good faith using consistently applied procedures under the
supervision of the Board of Trustees. Short-term "money market type" debt
securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of the New
York Stock Exchange (the "Exchange"), normally 4:00 P.M. Eastern time, on each
day the Exchange is open for business. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal. In the event of default by the other party to the agreement,
retention of the collateral may be subject to legal proceedings.
29 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund.
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for the
Fund's independent trustees. Benefits are based on years of service and fees
paid to each trustee during the years of service. During the six months ended
April 30, 2006, the Fund's projected benefit obligations were increased by
$80,681 and payments of $4,934 were made to retired trustees, resulting in an
accumulated liability of $161,757 as of April 30, 2006.
The Board of Trustees has adopted a deferred compensation plan for
independent trustees that enables trustees to elect to defer receipt of all or a
portion of the annual compensation they are entitled to receive from the Fund.
For purposes of determining the amount owed to the Trustee under the plan,
deferred amounts are treated as though equal dollar amounts had been invested in
shares of the Fund or in other Oppenheimer funds selected by the Trustee. The
Fund purchases shares of the funds selected for deferral by the Trustee in
amounts equal to his or her deemed investment, resulting in a Fund asset equal
to the deferred compensation liability. Such assets are included as a component
of "Other" within the asset section of the Statement of Assets and Liabilities.
Deferral of trustees' fees under the plan will not affect the net assets of the
Fund, and will not materially affect the Fund's assets, liabilities or net
investment income per share. Amounts will be deferred until distributed in
accordance to the Plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income and capital gain distributions, if
any, are declared and paid annually.
30 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. At April 30, 2006, the Fund had $6,882 of such earnings on
cash balances available to offset future custodian fees or interest expenses
incurred during the next fiscal year.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.01 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
SIX MONTHS ENDED APRIL 30, 2006 YEAR ENDED OCTOBER 31, 2005 1
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------
CLASS A
Sold 21,649,429 $ 744,229,908 26,126,619 $ 843,808,397
Dividends and/or
distributions reinvested 2,094,811 68,919,301 1,967,502 57,903,518
Redeemed (6,618,459) (227,738,920) 2 (6,928,846) (220,494,731) 3
--------------------------------------------------------------
Net increase 17,125,781 $ 585,410,289 21,165,275 $ 681,217,184
==============================================================
31 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST Continued
SIX MONTHS ENDED APRIL 30, 2006 YEAR ENDED OCTOBER 31, 2005 1
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------
CLASS B
Sold 1,955,377 $ 61,214,331 3,465,166 $ 102,291,118
Dividends and/or
distributions reinvested 505,805 15,143,815 780,877 21,200,799
Redeemed (1,371,703) (42,958,437) 2 (2,347,347) (68,962,254) 3
--------------------------------------------------------------
Net increase 1,089,479 $ 33,399,709 1,898,696 $ 54,529,663
==============================================================
- ----------------------------------------------------------------------------------------------------
CLASS C
Sold 5,035,562 $ 157,432,877 6,056,884 $ 179,229,772
Dividends and/or
distributions reinvested 473,830 14,172,250 473,750 12,843,349
Redeemed (1,014,438) (31,764,350) 2 (1,229,743) (35,972,311) 3
--------------------------------------------------------------
Net increase 4,494,954 $ 139,840,777 5,300,891 $ 156,100,810
==============================================================
- ----------------------------------------------------------------------------------------------------
CLASS N
Sold 2,567,512 $ 86,714,203 2,445,507 $ 77,193,747
Dividends and/or
distributions reinvested 184,925 5,986,033 130,920 3,807,139
Redeemed (771,128) (26,127,407) 2 (636,113) (20,279,213) 3
--------------------------------------------------------------
Net increase 1,981,309 $ 66,572,829 1,940,314 $ 60,721,673
==============================================================
- ----------------------------------------------------------------------------------------------------
CLASS Y
Sold 532,568 $ 18,602,122 29.958 $ 1,000
Dividends and/or
distributions reinvested 28,178 927,610 -- --
Redeemed (382,423) (12,699,813) 2 -- --
--------------------------------------------------------------
Net increase 178,323 $ 6,829,919 29.958 $ 1,000
==============================================================
1. For the year ended October 31, 2005, for Class A, Class B, Class C and Class
N shares and for the period from October 24, 2005 (inception of offering) to
October 31, 2005, for Class Y shares.
2. Net of redemption fees of $10,119, $1,826, $2,273, $876 and $31 for Class A,
Class B, Class C, Class N and Class Y, respectively.
3. Net of redemption fees of $36,403, $9,931, $8,134 and $2,802 for Class A,
Class B, Class C and Class N, respectively.
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the six months ended April 30, 2006, were as
follows:
PURCHASES SALES
------------------------------------------------------------
Investment securities $2,314,919,993 $1,692,518,479
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
average annual rate as shown in the following table:
32 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
FEE SCHEDULE NOV. 1, 2005 TO DEC. 31, 2006
-------------------------------------------
Up to $400 million of net assets 0.80%
Next $400 million of net assets 0.75
Over $800 million of net assets 0.60
FEE SCHEDULE EFFECTIVE JANUARY 1, 2006
-------------------------------------------
Up to $400 million of net assets 0.80%
Next $400 million of net assets 0.75
Next $1.2 billion of net assets 0.60
Over $2.0 billion of net assets 0.58
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the six months ended April 30, 2006, the Fund paid
$2,542,757 to OFS for services to the Fund.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a
Distribution and Service Plan for Class A shares. Under the Plan, the Fund pays
a service fee to the Distributor of 0.25% of the average annual net assets of
Class A shares. The Distributor currently uses all of those fees to pay dealers,
brokers, banks and other financial institutions periodically for providing
personal services and maintenance of accounts of their customers that hold Class
A shares. Under the plan, the Fund may also pay an asset-based sales charge to
the Distributor. Beginning January 1, 2003, the Board of Trustees set the annual
asset-based sales charge rate at zero. Fees incurred by the Fund under the plan
are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class N
shares to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% on Class B and
Class C shares and 0.25% on Class N shares. The Distributor also receives a
service fee of 0.25% per year under each plan. If either the Class B, Class C or
Class N plan is terminated by the Fund or by the shareholders of a class, the
Board of Trustees and its independent trustees must determine whether the
Distributor shall be entitled to payment from the Fund of all or a portion of
the service fee and/or asset-based sales charge in respect to shares sold prior
to the effective date of such termination. The Distributor's aggregate
uncompensated expenses under the plan at April 30, 2006 for Class B, Class C and
Class N shares were $2,983,262, $5,013,312 and $1,045,623, respectively. Fees
incurred by the Fund under the plans are detailed in the Statement of
Operations.
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption proceeds
prior to remittance, as
33 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
applicable. The sales charges retained by the Distributor from the sale of
shares and the CDSC retained by the Distributor on the redemption of shares is
shown in the following table for the period indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
SIX MONTHS RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- --------------------------------------------------------------------------------------------------------------
April 30, 2006 $924,360 $2,532 $204,315 $40,578 $49,755
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. During the six months ended April 30, 2006,
OFS waived $586 for Class N shares. This undertaking may be amended or withdrawn
at any time.
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts to settle specific purchases or sales of securities
denominated in a foreign currency and for protection from adverse exchange rate
fluctuation. Risks to the Fund include the potential inability of the
counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using prevailing foreign currency exchange rates.
Unrealized appreciation and depreciation on foreign currency contracts are
reported in the Statement of Assets and Liabilities as a receivable or payable
and in the Statement of Operations with the change in unrealized appreciation or
depreciation.
The Fund may realize a gain or loss upon the closing or settlement of the
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.
As of April 30, 2006, the Fund had no outstanding foreign currency
contracts.
- --------------------------------------------------------------------------------
6. LITIGATION
A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds, including the Fund) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
34 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that it is premature to render any opinion as to the
likelihood of an outcome unfavorable to it, the funds, the Directors/Trustees or
the Officers on the appeal of the decisions of the district court, and that no
estimate can yet be made with any degree of certainty as to the amount or range
of any potential loss. However, the Manager believes that the allegations
contained in the complaint are without merit and that there are substantial
grounds to sustain the district court's rulings.
35 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
36 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
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Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, 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 Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services by the Manager and its affiliates,
(v) the extent to which economies of scale are realized as the Fund grows and
whether fee levels reflect these economies of scale for Fund investors and (vi)
other benefits to the Manager from its relationship with the Fund. The Board was
aware that there are alternatives to retaining the Manager.
NATURE AND EXTENT OF SERVICES. The Board considered information on the
nature and extent of the services provided to the Fund and information regarding
the Manager's key personnel that provide such services. The Manager's duties
include providing the Fund with the services of the portfolio managers and the
Manager's investment team, who provide research, analysis and other advisory
services in regard to the Fund's investments; securities trading services;
oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing, and supervising
the activities of, all administrative and clerical personnel that are necessary
in order to provide effective corporate administration for the Fund; compiling
and maintaining records with respect to the Fund's operations; preparing and
filing reports required by the Securities and Exchange Commission; preparing
periodic reports regarding the operations of the Fund for its shareholders;
preparing proxy materials for shareholder meetings; and preparing the
registration statements required by Federal and state securities laws for the
sale of the Fund's shares. The Manager also provides the Fund with office space,
facilities and equipment.
QUALITY OF SERVICES. The Board also considered the quality of the services
provided and the quality of the Manager's resources that are available to the
Fund. The Board took account of the facts that the Manager has had over forty
years of experience as an
37 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
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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, and information the
Board has received regarding the experience and professional qualifications of
the Manager's personnel and the size and functions of its staff. In its
evaluation of the quality of the portfolio management services provided, the
Board considered the experience of Christopher Leavy and John Damian and the
Manager's value investment team and analysts. Messrs. Leavy and Damian have had
over 13 and 8 years, respectively, of experience managing equity investments.
The Board members also considered their experiences with the Manager and its
officers and other personnel through their service as directors or trustees of
the Fund and other funds advised by the Manager. The Board considered
information regarding the quality of services provided by affiliates of the
Manager, which it also reviews at other times during the year in connection with
the renewal of the Fund's service agreements. In light of the foregoing, the
Board concluded that the Fund benefits from the services provided under the
Agreement as a result of the Manager's experience, reputation, personnel,
operations, and resources.
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the investment performance of the Fund and the
Manager at each Board meeting, including comparative performance information.
The Board also reviewed information, prepared by the Manager and by the
independent consultant, comparing the Fund's historical performance to relevant
market indices and to the performance of other small cap value funds advised by
the Manager and by other investment advisers. The Board noted that the Fund's
one-year and three-year performance were better than its peer group average.
However its five-year and ten-year performance were slightly below its peer
group average.
MANAGEMENT FEES AND EXPENSES. The Board reviewed the fees paid to the
Manager and its affiliates and the other expenses borne by the Fund. The Board
also evaluated the comparability of the fees charged and the services provided
to the Fund to those of other clients or accounts advised by the Manager. The
independent consultant provided comparative data in regard to the fees and
expenses of the Fund, other small cap value funds and other funds with
comparable asset levels and distribution features. The Board noted that the
Fund's contractual and actual management fees and total expenses were all lower
than its peer group median and average.
ECONOMIES OF SCALE. The Board reviewed the extent to which the Manager may
realize economies of scale in managing and supporting the Fund, to what extent
those economies of scale benefit the Fund shareholders and the current level of
Fund assets in
38 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
relation to the Fund's breakpoint schedule for its management fees. The Board
noted that the Fund's breakpoints are intended to share economies of scale that
may exist as the Fund grows with its shareholders. Based on this evaluation, the
Board requested and the Manager agreed to a revised breakpoint schedule that
declines on additional assets as the Fund grows: 0.80% of the first $400 million
of average annual net assets of the Fund, 0.75% of the next $400 million, 0.60%
of the next $1.2 billion and 0.58% of average annual net assets in excess of $2
billion.
PROFITS AND OTHER BENEFITS TO THE MANAGER. The Board considered
information regarding the Manager's costs in serving as the Fund's investment
adviser, including the costs associated with the personnel and systems necessary
to manage the Fund, and information regarding the Manager's profitability from
its relationship with the Fund. 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 Fund and its shareholders. In addition to
considering the profits realized by the Manager, the Board considered
information regarding the direct and indirect benefits the Manager receives as a
result of its relationship with the Fund, including compensation paid to the
Manager's affiliates for services provided and research provided to the Manager
in connection with permissible brokerage arrangements (soft dollar
arrangements).
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and the independent Trustees. Fund counsel is independent of the
Manager within the meaning and intent of the Securities and Exchange Commission
Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
concluded that the nature, extent and quality of the services provided to the
Fund by the Manager are a benefit to the Fund and in the best interest of the
Fund's shareholders and that the amount and structure of the compensation
received by the Manager and its affiliates, and the revised fee structure
adopted by the Board and the Manager, are reasonable in relation to the services
provided. Accordingly, the Board elected to continue the Agreement for another
year. In arriving at this decision, the Board did not single out any factor or
factors as being more important than others, but considered all of the factors
together. The Board judged the terms and conditions of the Agreement, including
the management fee, in light of all of the surrounding circumstances.
39 | OPPENHEIMER SMALL- & MID- CAP VALUE 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.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
THE FUND'S AUDIT COMMITTEE PROVISIONS WITH RESPECT TO NOMINATIONS OF
DIRECTORS/TRUSTEES TO THE RESPECTIVE BOARDS
1. The Fund's 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 April 30, 2006, the registrant's principal executive officer
and principal financial officer found the registrant's disclosure controls and
procedures to provide reasonable assurances that information required to be
disclosed by the registrant in the reports that it files under the Securities
Exchange Act of 1934 (a) is accumulated and communicated to registrant's
management, including its principal executive officer and principal financial
officer, to allow timely decisions regarding required disclosure, and (b) is
recorded, processed, summarized and reported, within the time periods specified
in the rules and forms adopted by the U.S. Securities and Exchange Commission.
There have been no changes in the registrant's internal controls over financial
reporting that occurred during the registrant's second fiscal quarter of the
period covered by this report that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a) (1) Not applicable to semiannual reports.
(2) Exhibits attached hereto.
(3) Not applicable.
(b) Exhibit attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Oppenheimer Quest for Value Funds
By: /s/ JOHN V. MURPHY
------------------
John V. Murphy
Principal Executive Officer
Date: June 15, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ JOHN V. MURPHY
------------------
John V. Murphy
Principal Executive Officer
Date: June 15, 2006
By: /s/ BRIAN W. WIXTED
--------------------
Brian W. Wixted
Principal Financial Officer
Date: June 15, 2006