UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-21686
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OPPENHEIMER PORTFOLIO SERIES
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(Exact name of registrant as specified in charter)
6803 SOUTH TUCSON WAY, CENTENNIAL, COLORADO 80112-3924
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(Address of principal executive offices) (Zip code)
Robert G. Zack, Esq.
OppenheimerFunds, Inc.
TWO WORLD FINANCIAL CENTER, NEW YORK, NEW YORK 10281-1008
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(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 768-3200
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Date of fiscal year end: JANUARY 31
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Date of reporting period: JANUARY 31, 2007
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ITEM 1. REPORTS TO STOCKHOLDERS.
CONSERVATIVE INVESTOR FUND
TOP HOLDINGS AND ALLOCATIONS
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ASSET CLASS ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Alternative Investments 11.1%
Fixed Income 65.9
Global Equity 5.7
U.S. Equity 17.0
Money Market 0.3
Portfolio holdings and allocations are subject to change. Percentages are as of
January 31, 2007, and are based on the total market value of investments in
affiliated companies.
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9 | CONSERVATIVE INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
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HOW HAS THE PORTFOLIO PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS,
INC., OF THE PORTFOLIO'S PERFORMANCE DURING ITS FISCAL YEAR ENDED JANUARY 31,
2007, FOLLOWED BY A GRAPHICAL COMPARISON OF THE PORTFOLIO'S PERFORMANCE TO AN
APPROPRIATE BROAD-BASED MARKET INDEX.
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE. For the 12-month period ending
January 31, 2007, Conservative Investor Fund outperformed the Lehman Brothers
Aggregate Bond Index, but underperformed the S&P 500 Index. We attribute the
Portfolio's results to the outperformance of its allocation to alternative
investment funds, primarily its exposure to Oppenheimer Real Estate Fund's Class
Y shares. Portfolio performance was further strengthened by its allocation to
fixed-income funds, as most of these underlying funds posted strong returns and
outperformed their respective benchmarks. In contrast, the Portfolio's holdings
in Oppenheimer Commodity Strategy Total Return Fund's Class Y shares detracted
from results.
During the reporting period, the Portfolio received significant positive
contributions to performance from its allocation to alternative investments,
primarily from its holdings in Oppenheimer Real Estate's Class Y shares.
Oppenheimer Real Estate Fund's Class Y shares posted a return of 38.55% (without
sales charge) and strongly outperformed its own benchmark. This strong
outperformance can be attributed to the Fund's profitable investments in the
office, apartment and industrial sectors. The Portfolio's underlying
fixed-income funds, which included Oppenheimer Core Bond Fund, Oppenheimer
Limited-Term Government Fund, Oppenheimer Champion Income Fund and Oppenheimer
International Bond Fund, posted strong results and significantly added to the
Portfolio's total return. The Portfolio's single largest holding at the end of
the period, Oppenheimer Core Bond Fund, benefited from multiple factors. Perhaps
the most significant contributor was it's positioning within the corporate bond
sector, an area of the fixed income market that posted double-digit returns.
Additionally, Oppenheimer Core Bond Fund benefited from its interest rate
positioning and its mortgage strategy. Oppenheimer Limited-Term Government Fund
greatly benefited from active management of its interest-rate sensitivity and
mortgage portfolio.
The Portfolio's exposure to the high-yield bond market through its
allocation to Oppenheimer Champion Income Fund also contributed to performance.
Oppenheimer Champion Income, which produced competitive returns for the period,
received positive contributions to performance from a variety of higher-quality
issues across multiple market sectors. Lastly, the Portfolio's allocation to
Oppenheimer International Bond Fund added to returns. Over the period, this Fund
outperformed its Lipper peer group primarily due to its emphasis on bonds and
currencies from the emerging markets, which continued to gain value in a robust
global economy.
10 | CONSERVATIVE INVESTOR FUND
On the negative side of performance, the largest detractor was the
Portfolio's allocation to Oppenheimer Commodity Strategy Total Return Fund,
which declined as a result of its natural gas and petroleum holdings. Over the
period, the price of oil eroded due to multiple factors that included an easing
of geopolitical tensions, rise in inventories and slowing demand. Additionally,
the unseasonably warm winter contributed to the natural gas price decline.
The second area that disappointed was the Portfolio's allocation to equity
funds. Over the period, the investment climate proved quite volatile for equity
investors, especially for those that seek out high-quality companies with strong
long-term earnings growth prospects. Despite this difficult investing
environment, the Portfolio's underlying equity funds produced strong absolute
performance but most lagged their respective benchmarks.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each class of shares of the
Portfolio held until January 31, 2007. Performance is measured from the
inception of Classes A, B, C, N and Y on April 5, 2005. The Portfolio's
performance reflects the deduction of the maximum initial sales charge on Class
A shares, the applicable contingent deferred sales charge on Class B, Class C
and Class N shares, and reinvestments of all dividends and capital gains
distributions. Past performance cannot guarantee future results.
The Portfolio's performance is compared to the performance of the Lehman
Brothers Aggregate Bond Index and the S&P 500 Index. The Lehman Brothers
Aggregate Bond Index is an index of U.S. Government and corporate bonds that
includes reinvestment of interest. The index is unmanaged and cannot be
purchased directly by investors. Index performance is shown for illustrative
purposes only and does not predict or depict the performance of the Portfolio.
The S&P 500 Index is a broad-based measure of domestic stock performance that
includes the reinvestment of dividends. Index performance reflects the
reinvestment of income but does not consider the effect of transaction costs,
and none of the data in the graphs shows the effect of taxes. The Portfolio's
performance reflects the effects of the Portfolio's business and operating
expenses. While index comparisons may be useful to provide a benchmark for the
Portfolio's performance, it must be noted that the Portfolio's investments are
not limited to the investments in the index.
11 | CONSERVATIVE INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
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CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Conservative Investor Fund (Class A)
Lehman Brothers Aggregate Bond Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Conservative Investor Fund Lehman Brothers
(Class A) Aggregate Bond Index S&P 500 Index
04/05/2005 $ 9,425 $ 10,000 $ 10,000
04/30/2005 $ 9,406 $ 10,135 $ 9,810
07/31/2005 $ 9,745 $ 10,207 $ 10,514
10/31/2005 $ 9,708 $ 10,150 $ 10,327
01/31/2006 $ 10,099 $ 10,293 $ 11,005
04/30/2006 $ 10,195 $ 10,207 $ 11,322
07/31/2006 $ 10,185 $ 10,356 $ 11,079
10/31/2006 $ 10,530 $ 10,677 $ 12,013
01/31/2007 $ 10,817 $ 10,734 $ 12,603
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/07
1-Year 0.95% Since Inception (4/5/05) 4.40%
12 | CONSERVATIVE INVESTOR FUND
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Conservative Investor Fund (Class B)
Lehman Brothers Aggregate Bond Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Conservative Investor Fund Lehman Brothers
(Class B) Aggregate Bond Index S&P 500 Index
04/05/2005 $ 10,000 $ 10,000 $ 10,000
04/30/2005 $ 9,970 $ 10,135 $ 9,810
07/31/2005 $ 10,320 $ 10,207 $ 10,514
10/31/2005 $ 10,250 $ 10,150 $ 10,327
01/31/2006 $ 10,644 $ 10,293 $ 11,005
04/30/2006 $ 10,725 $ 10,207 $ 11,322
07/31/2006 $ 10,694 $ 10,356 $ 11,079
10/31/2006 $ 11,039 $ 10,677 $ 12,013
01/31/2007 $ 10,912 $ 10,734 $ 12,603
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/07
1-Year 1.28% Since Inception (4/5/05) 4.91%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 4% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 17 FOR FURTHER
INFORMATION.
13 | CONSERVATIVE INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
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CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Conservative Investor Fund (Class C)
Lehman Brothers Aggregate Bond Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Conservative Investor Fund Lehman Brothers
(Class C) Aggregate Bond Index S&P 500 Index
04/05/2005 $ 10,000 $ 10,000 $ 10,000
04/30/2005 $ 9,970 $ 10,135 $ 9,810
07/31/2005 $ 10,310 $ 10,207 $ 10,514
10/31/2005 $ 10,250 $ 10,150 $ 10,327
01/31/2006 $ 10,637 $ 10,293 $ 11,005
04/30/2006 $ 10,728 $ 10,207 $ 11,322
07/31/2006 $ 10,698 $ 10,356 $ 11,079
10/31/2006 $ 11,033 $ 10,677 $ 12,013
01/31/2007 $ 11,304 $ 10,734 $ 12,603
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/07
1-Year 5.28% Since Inception (4/5/05) 6.96%
14 | CONSERVATIVE INVESTOR FUND
CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Conservative Investor Fund (Class N)
Lehman Brothers Aggregate Bond Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Conservative Investor Fund Lehman Brothers
(Class N) Aggregate Bond Index S&P 500 Index
04/05/2005 $ 10,000 $ 10,000 $ 10,000
04/30/2005 $ 9,980 $ 10,135 $ 9,810
07/31/2005 $ 10,340 $ 10,207 $ 10,514
10/31/2005 $ 10,290 $ 10,150 $ 10,327
01/31/2006 $ 10,697 $ 10,293 $ 11,005
04/30/2006 $ 10,789 $ 10,207 $ 11,322
07/31/2006 $ 10,779 $ 10,356 $ 11,079
10/31/2006 $ 11,135 $ 10,677 $ 12,013
01/31/2007 $ 11,429 $ 10,734 $ 12,603
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/07
1-Year 5.84% Since Inception (4/5/05) 7.61%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 4% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 17 FOR FURTHER
INFORMATION.
15 | CONSERVATIVE INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
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CLASS Y SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Conservative Investor Fund (Class Y)
Lehman Brothers Aggregate Bond Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Conservative Investor Fund Lehman Brothers
(Class N) Aggregate Bond Index S&P 500 Index
04/05/2005 $ 10,000 $ 10,000 $ 10,000
04/30/2005 $ 9,980 $ 10,135 $ 9,810
07/31/2005 $ 10,350 $ 10,207 $ 10,514
10/31/2005 $ 10,320 $ 10,150 $ 10,327
01/31/2006 $ 10,734 $ 10,293 $ 11,005
04/30/2006 $ 10,846 $ 10,207 $ 11,322
07/31/2006 $ 10,846 $ 10,356 $ 11,079
10/31/2006 $ 11,223 $ 10,677 $ 12,013
01/31/2007 $ 11,539 $ 10,734 $ 12,603
AVERAGE ANNUAL TOTAL RETURNS OF CLASS Y SHARES OF THE PORTFOLIO AT 1/31/07
1-Year 7.50% Since Inception (4/5/05) 8.17%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 4% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 17 FOR FURTHER
INFORMATION.
16 | CONSERVATIVE INVESTOR FUND
NOTES
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Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. The Portfolio's total returns
shown do not reflect the deduction of income taxes on an individual's
investment. Taxes may reduce your actual investment returns on income or gains
paid by the Portfolio or any gains you may realize if you sell your shares.
INVESTORS SHOULD CONSIDER THE PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, AND
OTHER CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PORTFOLIO'S
PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT THE PORTFOLIO, AND MAY BE
OBTAINED BY ASKING YOUR FINANCIAL ADVISOR, CALLING US AT 1.800.525.7048 OR
VISITING OUR WEBSITE AT WWW.OPPENHEIMERFUNDS.COM. READ THE PROSPECTUS CAREFULLY
BEFORE INVESTING.
The Portfolio's investment strategy and focus can change over time. The mention
of specific fund holdings does not constitute a recommendation by
OppenheimerFunds, Inc.
CLASS A shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class A returns include the maximum initial sales charge of
5.75%.
CLASS B shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 4% (since inception). Class B shares are subject
to an annual 0.75% asset-based sales charge.
CLASS C shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
CLASS N shares of the Portfolio were first publicly offered on 4/5/05. Class N
shares are offered only through retirement plans. Unless otherwise noted, Class
N returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
17 | CONSERVATIVE INVESTOR FUND
NOTES
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CLASS Y shares of the Portfolio were first publicly offered on 4/5/05. Class Y
shares are offered only to certain institutional investors under special
agreements with the Distributor.
An explanation of the calculation of performance is in the Portfolio's Statement
of Additional Information.
18 | CONSERVATIVE INVESTOR FUND
PORTFOLIO EXPENSES
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PORTFOLIO EXPENSES. As a shareholder of the Portfolio, you incur two types of
costs: (1) transaction costs, which may include sales charges (loads) on
purchase payments, contingent deferred sales charges on redemptions; and
redemption fees, if any; and (2) ongoing costs, including management fees;
distribution and service fees; and other Portfolio expenses. These examples are
intended to help you understand your ongoing costs (in dollars) of investing in
the Portfolio and to compare these costs with the ongoing costs of investing in
other mutual funds.
The examples 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 January 31, 2007.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Portfolio's actual expense ratio for each class of shares,
and an assumed rate of return of 5% per year before expenses, which is not the
Portfolio's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Portfolio and other funds. To do so, compare this 5%
hypothetical example for the class of shares you hold with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
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
19 | CONSERVATIVE INVESTOR FUND
PORTFOLIO 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.
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BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(8/1/06) (1/31/07) JANUARY 31, 2007
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Class A Actual $1,000.00 $1,062.00 $1.98
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Class A Hypothetical 1,000.00 1,023.29 1.94
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Class B Actual 1,000.00 1,057.80 6.45
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Class B Hypothetical 1,000.00 1,018.95 6.33
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Class C Actual 1,000.00 1,056.70 6.19
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Class C Hypothetical 1,000.00 1,019.21 6.07
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Class N Actual 1,000.00 1,060.30 3.38
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Class N Hypothetical 1,000.00 1,021.93 3.32
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Class Y Actual 1,000.00 1,063.90 0.21
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Class Y Hypothetical 1,000.00 1,025.00 0.20
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Portfolio's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios,
excluding all underlying fund expenses, based on the 6-month period ended
January 31, 2007 are as follows:
CLASS EXPENSE RATIOS
- ----------------------------
Class A 0.38%
- ----------------------------
Class B 1.24
- ----------------------------
Class C 1.19
- ----------------------------
Class N 0.65
- ----------------------------
Class Y 0.04
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Portfolio's Manager that can be terminated at any time, without advance
notice. The "Financial Highlights" tables in the Portfolio's financial
statements, included in this report, also show the gross expense ratios, without
such waivers or reimbursements.
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20 | CONSERVATIVE INVESTOR FUND
STATEMENT OF INVESTMENTS January 31, 2007
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VALUE
SHARES SEE NOTE 1
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INVESTMENTS IN AFFILIATED COMPANIES--100.1% 1
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ALTERNATIVE INVESTMENTS--11.1%
Oppenheimer Commodity Strategy Total Return Fund, Cl. Y 1,441,991 $ 9,199,901
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Oppenheimer Real Estate Fund, Cl. Y 506,371 13,499,858
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22,699,759
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FIXED INCOME--66.0%
Oppenheimer Champion Income Fund, Cl. Y 2,477,295 23,732,492
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Oppenheimer Core Bond Fund, Cl. Y 6,523,270 66,406,884
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Oppenheimer International Bond Fund, Cl. Y 1,863,135 11,048,389
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Oppenheimer Limited-Term Government Fund, Cl. Y 3,414,211 33,834,824
---------------
135,022,589
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GLOBAL EQUITY--5.7%
Oppenheimer Global Fund, Cl. Y 155,463 11,599,074
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U.S. EQUITY--17.0%
Oppenheimer Capital Appreciation Fund, Cl. Y 2 231,332 11,256,625
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Oppenheimer Main Street Fund, Cl. Y 280,537 11,619,830
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Oppenheimer Value Fund, Cl. Y 439,532 11,946,477
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34,822,932
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MONEY MARKET--0.3%
Oppenheimer Institutional Money Market Fund, Cl. E,
5.35% 3 637,460 637,460
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TOTAL INVESTMENTS, AT VALUE (COST $199,187,678) 100.1% 204,781,814
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LIABILITIES IN EXCESS OF OTHER ASSETS (0.1) (125,261)
-----------------------------
NET ASSETS 100.0% $ 204,656,553
=============================
21 | CONSERVATIVE INVESTOR FUND
STATEMENT OF INVESTMENTS Continued
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FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended January 31, 2007 by virtue of the Portfolio owning at
least 5% of the voting securities of the issuer or as a result of the Portfolio
and the issuer having the same investment advisor. Transactions during the
period in which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
JANUARY 31, 2006 ADDITIONS REDUCTIONS JANUARY 31, 2007
- -------------------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation Fund, Cl. Y 99,978 143,194 11,840 231,332
Oppenheimer Champion Income Fund, Cl. Y - 2,511,921 a 34,626 2,477,295
Oppenheimer Commodity Strategy
Total Return Fund, Cl. Y 524,309 959,662 41,980 1,441,991
Oppenheimer Core Bond Fund, Cl. Y 2,533,270 4,171,755 181,755 6,523,270
Oppenheimer Global Fund, Cl. Y 66,908 99,627 11,072 155,463
Oppenheimer High Yield Fund, Cl. Y 978,485 1,158,273 2,136,758 -
Oppenheimer Institutional
Money Market Fund, Cl. E, 5.35% - 8,109,121 7,471,661 637,460
Oppenheimer International Bond Fund, Cl. Y 751,912 1,165,106 53,883 1,863,135
Oppenheimer Limited-Term
Government Fund, Cl. Y 1,326,111 2,183,797 95,697 3,414,211
Oppenheimer Main Street Fund, Cl. Y 117,728 177,051 14,242 280,537
Oppenheimer Real Estate Fund, Cl. Y 230,456 315,662 39,747 506,371
Oppenheimer Value Fund, Cl. Y 181,842 273,690 16,000 439,532
VALUE DIVIDEND REALIZED
SEE NOTE 1 INCOME GAIN (LOSS)
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Oppenheimer Capital Appreciation Fund, Cl. Y $ 11,256,625 $ - $ (2,201)
Oppenheimer Champion Income Fund, Cl. Y 23,732,492 723,488 b (1,851)
Oppenheimer Commodity Strategy Total Return Fund, Cl. Y 9,199,901 361,527 b (82,458)
Oppenheimer Core Bond Fund, Cl. Y 66,406,884 2,445,706 b (44,159)
Oppenheimer Global Fund, Cl. Y 11,599,074 153,044 b 3,159
Oppenheimer High Yield Fund, Cl. Y - 472,356 b (6,189)
Oppenheimer Institutional Money Market Fund, Cl. E, 5.35% 637,460 3,850 -
Oppenheimer International Bond Fund, Cl. Y 11,048,389 318,063 b (7,395)
Oppenheimer Limited-Term Government Fund, Cl. Y 33,834,824 1,215,188 b (13,487)
Oppenheimer Main Street Fund, Cl. Y 11,619,830 135,170 b (3,124)
Oppenheimer Real Estate Fund, Cl. Y 13,499,858 482,342 b 671
Oppenheimer Value Fund, Cl. Y 11,946,477 220,877 b (5,809)
-----------------------------------------------
$204,781,814 $ 6,531,611 $ (162,843)
===============================================
a Received 2,090,156 shares as the result of the acquisition of Oppenheimer High
Yield Fund.
b All or portion of the transactions were the result of a reinvestment of
dividends.
2. Non-income producing security.
3. Rate shown is the 7-day yield as of January 31, 2007.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 | CONSERVATIVE INVESTOR FUND
STATEMENT OF ASSETS AND LIABILITIES January 31, 2007
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments--
affiliated companies (cost $199,187,678) $ 204,781,814
- -------------------------------------------------------------------------------------------
Cash 5,099
- -------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 914,220
Interest and dividends 588,051
Investments sold 48,596
Other 4,946
-----------------
Total assets 206,342,726
- -------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 1,275,914
Shares of beneficial interest redeemed 293,819
Distribution and service plan fees 41,623
Shareholder communications 24,806
Legal, auditing and other professional fees 18,625
Transfer and shareholder servicing agent fees 15,429
Trustees' compensation 12,028
Other 3,929
-----------------
Total liabilities 1,686,173
- -------------------------------------------------------------------------------------------
NET ASSETS $ 204,656,553
=================
- -------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 18,774
- -------------------------------------------------------------------------------------------
Additional paid-in capital 197,500,739
- -------------------------------------------------------------------------------------------
Accumulated net investment income 536,524
- -------------------------------------------------------------------------------------------
Accumulated net realized gain on investments 1,006,380
- -------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 5,594,136
-----------------
NET ASSETS $ 204,656,553
=================
23 | CONSERVATIVE INVESTOR FUND
STATEMENT OF ASSETS AND LIABILITIES Continued
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- ------------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$110,377,482 and 10,097,912 shares of beneficial interest outstanding) $10.93
Maximum offering price per share (net asset value plus sales charge of
5.75% of offering price) $11.60
- ------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $21,990,968
and 2,023,368 shares of beneficial interest outstanding) $10.87
- ------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $50,876,128
and 4,687,414 shares of beneficial interest outstanding) $10.85
- ------------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $21,277,334
and 1,952,535 shares of beneficial interest outstanding) $10.90
- ------------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $134,641 and 12,282 shares of beneficial interest outstanding) $10.96
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | CONSERVATIVE INVESTOR FUND
STATEMENT OF OPERATIONS For the Year Ended January 31, 2007
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------------
Dividends from affiliated companies $ 6,531,611
- ------------------------------------------------------------------------------------------------------------
Interest 27,556
- ------------------------------------------------------------------------------------------------------------
Other income 359
--------------
Total investment income 6,559,526
- ------------------------------------------------------------------------------------------------------------
EXPENSES
- ------------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 188,370
Class B 158,470
Class C 351,781
Class N 68,193
- ------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 56,697
Class B 20,842
Class C 41,409
Class N 16,101
Class Y 22
- ------------------------------------------------------------------------------------------------------------
Shareholder communications:
Class A 24,184
Class B 11,803
Class C 16,633
Class N 1,999
Class Y 18
- ------------------------------------------------------------------------------------------------------------
Trustees' compensation 12,318
- ------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 546
- ------------------------------------------------------------------------------------------------------------
Other 28,075
--------------
Total expenses 997,461
Less waivers and reimbursements of expenses (81)
--------------
Net expenses 997,380
- ------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 5,562,146
- ------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments:
Affiliated companies (162,843)
Distributions received from affiliated companies 1,349,274
--------------
Net realized gain 1,186,431
- ------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 4,526,707
- ------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 11,275,284
==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | CONSERVATIVE INVESTOR FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED JANUARY 31, 2007 2006 1
- -------------------------------------------------------------------------------------------------------------
OPERATIONS
- -------------------------------------------------------------------------------------------------------------
Net investment income $ 5,562,146 $ 1,267,858
- -------------------------------------------------------------------------------------------------------------
Net realized gain 1,186,431 318,074
- -------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 4,526,707 1,067,429
-------------------------------
Net increase in net assets resulting from operations 11,275,284 2,653,361
- -------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (3,003,750) (681,145)
Class B (480,154) (105,273)
Class C (1,164,379) (216,389)
Class N (517,426) (125,016)
Class Y (3,818) (1,638)
-------------------------------
(5,169,527) (1,129,461)
- -------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (155,287) --
Class B (31,426) --
Class C (73,612) --
Class N (28,428) --
Class Y (185) --
-------------------------------
(288,938) --
- -------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest transactions:
Class A 60,904,680 45,236,761
Class B 12,171,265 9,001,293
Class C 30,347,750 18,835,139
Class N 13,094,093 7,498,474
Class Y 31,178 91,201
-------------------------------
116,548,966 80,662,868
- -------------------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------------------
Total increase 122,365,785 82,186,768
- -------------------------------------------------------------------------------------------------------------
Beginning of period 82,290,768 104,000 2
-------------------------------
End of period (including accumulated net investment income
of $536,524 and $143,905, respectively) $ 204,656,553 $ 82,290,768
===============================
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Reflects the value of the Manager's initial seed money investment on March
15, 2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | CONSERVATIVE INVESTOR FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED JANUARY 31, 2007 2006 1
- -------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.53 $ 10.00
- -------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .46 .38
Net realized and unrealized gain .29 .33
-------------------------------
Total from investment operations .75 .71
- -------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.33) (.18)
Distributions from net realized gain (.02) --
-------------------------------
Total dividends and/or distributions to shareholders (.35) (.18)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.93 $ 10.53
===============================
- -------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 7.11% 7.15%
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 110,378 $ 46,318
- -------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 76,542 $ 21,844
- -------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 4.24% 4.50%
Total expenses 5 0.38% 0.53%
Expenses after waivers and reimbursements
and reduction to custodian expenses 0.38% 0.51%
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 5% 11%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2007 0.98%
Period Ended January 31, 2006 1.19
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | CONSERVATIVE INVESTOR FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS B YEAR ENDED JANUARY 31, 2007 2006 1
- -------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.49 $ 10.00
- -------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .36 .32
Net realized and unrealized gain .30 .32
-------------------------------
Total from investment operations .66 .64
- -------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.26) (.15)
Distributions from net realized gain (.02) --
-------------------------------
Total dividends and/or distributions to shareholders (.28) (.15)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.87 $ 10.49
===============================
- -------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 6.28% 6.44%
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 21,991 $ 9,163
- -------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 15,882 $ 4,018
- -------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 3.36% 3.74%
Total expenses 5 1.23% 1.39%
Expenses after waivers and reimbursements
and reduction to custodian expenses 1.23% 1.34%
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 5% 11%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2007 1.83%
Period Ended January 31, 2006 2.05
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | CONSERVATIVE INVESTOR FUND
CLASS C YEAR ENDED JANUARY 31, 2007 2006 1
- -----------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------
Net asset value, beginning of period $ 10.48 $ 10.00
- -----------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .37 .32
Net realized and unrealized gain .29 .31
----------------------
Total from investment operations .66 .63
- -----------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.27) (.15)
Distributions from net realized gain (.02) --
----------------------
Total dividends and/or distributions to shareholders (.29) (.15)
- -----------------------------------------------------------------------------
Net asset value, end of period $ 10.85 $ 10.48
======================
- -----------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 6.28% 6.37%
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 50,876 $ 19,145
- -----------------------------------------------------------------------------
Average net assets (in thousands) $ 35,277 $ 7,647
- -----------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 3.46% 3.78%
Total expenses 5 1.19% 1.36%
Expenses after waivers and reimbursements
and reduction to custodian expenses 1.19% 1.33%
- -----------------------------------------------------------------------------
Portfolio turnover rate 5% 11%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2007 1.79%
Period Ended January 31, 2006 2.02
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | CONSERVATIVE INVESTOR FUND
FINANCIAL HIGHLIGHTS Continued
- -----------------------------------------------------------------------------
CLASS N YEAR ENDED JANUARY 31, 2007 2006 1
- -----------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------
Net asset value, beginning of period $ 10.51 $ 10.00
- -----------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .44 .41
Net realized and unrealized gain .28 .28
----------------------
Total from investment operations .72 .69
- -----------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.31) (.18)
Distributions from net realized gain (.02) --
----------------------
Total dividends and/or distributions to shareholders (.33) (.18)
- -----------------------------------------------------------------------------
Net asset value, end of period $ 10.90 $ 10.51
======================
- -----------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 6.84% 6.98%
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 21,277 $ 7,569
- -----------------------------------------------------------------------------
Average net assets (in thousands) $ 13,671 $ 2,231
- -----------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 4.08% 4.82%
Total expenses 5 0.66% 0.72%
Expenses after waivers and reimbursements
and reduction to custodian expenses 0.66% 0.71%
- -----------------------------------------------------------------------------
Portfolio turnover rate 5% 11%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2007 1.26%
Period Ended January 31, 2006 1.38
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30 | CONSERVATIVE INVESTOR FUND
CLASS Y YEAR ENDED JANUARY 31, 2007 2006 1
- -----------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------
Net asset value, beginning of period $ 10.54 $ 10.00
- -----------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .49 .38
Net realized and unrealized gain .30 .35
----------------------
Total from investment operations .79 .73
- -----------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.35) (.19)
Distributions from net realized gain (.02) --
----------------------
Total dividends and/or distributions to shareholders (.37) (.19)
- -----------------------------------------------------------------------------
Net asset value, end of period $ 10.96 $ 10.54
======================
- -----------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 7.50% 7.34%
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 135 $ 96
- -----------------------------------------------------------------------------
Average net assets (in thousands) $ 127 $ 71
- -----------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 4.57% 4.42%
Total expenses 5 0.06% 0.30%
Expenses after waivers and reimbursements
and reduction to custodian expenses 0.06% 0.25%
- -----------------------------------------------------------------------------
Portfolio turnover rate 5% 11%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2007 0.66%
Period Ended January 31, 2006 0.96
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31 | CONSERVATIVE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Portfolio Series (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
Conservative Investor Fund (the "Portfolio") is a series of the Fund whose
investment objective is to seek current income with a secondary objective of
long-term growth of capital. The Portfolio is a special type of mutual fund
known as a "fund of funds" because it invests in other mutual funds. The
Portfolio normally invests in a portfolio consisting of a target weighted
allocation in Class A or Class Y shares of other Oppenheimer funds. The Fund's
investment advisor is OppenheimerFunds, Inc. (the "Manager").
The Portfolio offers Class A, Class B, Class C, Class N and Class Y
shares. Class A shares are sold at their offering price, which is normally net
asset value plus a front-end sales charge. Class B, Class C and Class N shares
are sold without a front-end sales charge but may be subject to a contingent
deferred sales charge (CDSC). Class N shares are sold only through retirement
plans. Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC, however, the institutional investor
may impose charges on those accounts. All classes of shares have identical
rights and voting privileges with respect to the Portfolio in general and
exclusive voting rights on matters that affect that class alone. Earnings, net
assets and net asset value per share may differ due to each class having its own
expenses, such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares six
years after the date of purchase.
Under normal market conditions, the Manager will invest the Portfolio's
assets in shares of Oppenheimer Core Bond Fund, Oppenheimer Capital Appreciation
Fund, Oppenheimer Champion Income Fund, Oppenheimer Global Fund, Oppenheimer
International Bond Fund, Oppenheimer Limited-Term Government Fund, Oppenheimer
Main Street Fund(R), Oppenheimer Commodity Strategy Total Return Fund(R),
Oppenheimer Real Estate Fund, Oppenheimer Value Fund and Oppenheimer
Institutional Money Market Fund (individually, an "Underlying Fund" and
collectively, the "Underlying Funds").
The following is a summary of significant accounting policies consistently
followed by the Portfolio.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Portfolio calculates the net asset value of each class
of shares based upon the net asset value of the applicable Underlying Fund as of
the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for trading. For each Underlying
Fund, the net asset value per share for a class of shares on a "regular business
day" is determined by dividing the value of the Underlying Fund's net assets
attributable to that class by the number of shares of that class outstanding on
that day. To determine net asset values, the Underlying Fund assets
32 | CONSERVATIVE INVESTOR FUND
are valued primarily on the basis of current market quotations. If market
quotations are not readily available or do not accurately reflect fair value for
a security (in the Manager's judgment) or if a security's value has been
materially affected by events occurring after the close of the exchange or
market on which the security is principally traded, that security may be valued
by another method that the Underlying Fund's Board of Trustees/ Directors
believes accurately reflects the fair value. Because some foreign securities
trade in markets and on exchanges that operate on weekends and U.S. holidays,
the values of some of the Underlying Fund's foreign investments may change on
days when investors cannot buy or redeem Underlying Fund shares.
Short-term "money market type" debt securities with remaining maturities
of sixty days or less are valued at amortized cost (which approximates market
value).
- --------------------------------------------------------------------------------
RISKS OF INVESTING IN THE UNDERLYING FUNDS. Each of the Underlying Funds in
which the Portfolio invests has its own investment risks, and those risks can
affect the value of the Portfolio's investments and therefore the value of the
Portfolio's shares. To the extent that the Portfolio invests more of its assets
in one Underlying Fund than in another, the Portfolio will have greater exposure
to the risks of that Underlying Fund.
- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Portfolio is
permitted to invest daily available cash balances in an affiliated money market
fund. The Portfolio may invest the available cash in Class E shares of
Oppenheimer Institutional Money Market Fund ("IMMF") which seeks current income
and stability of principal. IMMF is a registered open-end management investment
company, regulated as a money market fund under the Investment Company Act of
1940, as amended. The Manager is also the investment advisor of IMMF. The
Portfolio's investment in IMMF is included in the Statement of Investments. As a
shareholder, the Portfolio is subject to its proportional share of IMMF's Class
E expenses, including its management fee. The Manager will waive fees and/or
reimburse Portfolio expenses in an amount equal to the indirect management fees
incurred through the Portfolio's investment in IMMF.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Portfolio intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
The tax components of capital shown in the table below represent
distribution requirements the Portfolio must satisfy under the income tax
regulations, losses the Portfolio may be able to offset against income and gains
realized in future years and
33 | CONSERVATIVE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
NET UNREALIZED
APPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2 TAX PURPOSES
----------------------------------------------------------------------
$548,267 $1,052,469 $-- $5,548,045
1. During the fiscal year ended January 31, 2007, the Portfolio did not utilize
any capital loss carryforward.
2. During the fiscal year ended January 31, 2006, the Portfolio did not utilize
any capital loss carryforward.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Portfolio.
Accordingly, the following amounts have been reclassified for January 31, 2007.
Net assets of the Portfolio were unaffected by the reclassifications.
REDUCTION TO
ACCUMULATED NET
INCREASE TO REALIZED GAIN
PAID-IN CAPITAL ON INVESTMENTS 3
--------------------------------------
$153,114 $153,114
3. $153,114, all of which was long-term capital gain, was distributed in
connection with Portfolio share redemptions.
The tax character of distributions paid during the years ended January 31, 2007
and January 31, 2006 was as follows:
YEAR ENDED PERIOD ENDED
JANUARY 31, 2007 JANUARY 31, 2006
--------------------------------------------------------------
Distributions paid from:
Ordinary income $ 5,169,527 $ 1,129,461
Long-term capital gain 288,938 --
-----------------------------------
Total $ 5,458,465 $ 1,129,461
===================================
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of January 31, 2007 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.
34 | CONSERVATIVE INVESTOR FUND
Federal tax cost of securities $ 199,233,769
==============
Gross unrealized appreciation $ 7,578,282
Gross unrealized depreciation (2,030,237)
--------------
Net unrealized appreciation $ 5,548,045
==============
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Portfolio has adopted an unfunded retirement plan
(the "Plan") for the Portfolio's independent trustees. Benefits are based on
years of service and fees paid to each trustee during their period of service.
The Plan was frozen with respect to adding new participants effective December
31, 2006 (the "Freeze Date") and existing Plan Participants as of the Freeze
Date will continue to receive accrued benefits under the Plan. Active
independent trustees as of the Freeze Date have each elected a distribution
method with respect to their benefits under the Plan. During the year ended
January 31, 2007, the Portfolio's projected benefit obligations were increased
by $9,986 and payments of $251 were made to retired trustees, resulting in an
accumulated liability of $9,735 as of January 31, 2007.
The Board of Trustees has adopted a compensation deferral 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
Portfolio. 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 Portfolio or in other Oppenheimer funds selected by
the Trustee. The Portfolio purchases shares of the funds selected for deferral
by the Trustee in amounts equal to his or her deemed investment, resulting in a
Portfolio 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 Portfolio, and will not materially affect the
Portfolio's assets, liabilities or net investment income per share. Amounts will
be deferred until distributed in accordance to the compensation deferral 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 Portfolio on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated share
35 | CONSERVATIVE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
holder redemption activity. The Portfolio pays interest to its custodian on such
cash overdrafts, to the extent they are not offset by positive cash balances
maintained by the Portfolio, at a rate equal to the Federal Funds Rate plus
0.50%. The "Reduction to custodian expenses" line item, if applicable,
represents earnings on cash balances maintained by the Portfolio during the
period. Such interest expense and other custodian fees may be paid with these
earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Portfolio'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 Portfolio. In
the normal course of business, the Portfolio may also enter into contracts that
provide general indemnifications. The Portfolio's maximum exposure under these
arrangements is unknown as this would be dependent on future claims that may be
made against the Portfolio. 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 Portfolio has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED JANUARY 31, 2007 PERIOD ENDED JANUARY 31, 2006 1,2
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------
CLASS A
Sold 6,963,555 $ 74,510,538 4,892,094 $ 50,465,464
Dividends and/or
distributions reinvested 273,173 2,955,734 58,785 607,250
Redeemed (1,539,439) (16,561,592) (560,256) (5,835,953)
-----------------------------------------------------------------
Net increase 5,697,289 $ 60,904,680 4,390,623 $ 45,236,761
=================================================================
- ---------------------------------------------------------------------------------------------
CLASS B
Sold 1,545,034 $ 16,399,320 949,406 $ 9,789,255
Dividends and/or
distributions reinvested 44,717 481,607 9,315 95,942
Redeemed (439,932) (4,709,662) (85,272) (883,904)
-----------------------------------------------------------------
Net increase 1,149,819 $ 12,171,265 873,449 $ 9,001,293
=================================================================
36 | CONSERVATIVE INVESTOR FUND
YEAR ENDED JANUARY 31, 2007 PERIOD ENDED JANUARY 31, 2006 1,2
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------
CLASS C
Sold 3,733,906 $ 39,648,370 1,904,973 $ 19,653,821
Dividends and/or
distributions reinvested 104,459 1,122,933 19,416 199,792
Redeemed (977,406) (10,423,553) (98,034) (1,018,474)
-----------------------------------------------------------------
Net increase 2,860,959 $ 30,347,750 1,826,355 $ 18,835,139
=================================================================
- ---------------------------------------------------------------------------------------------
CLASS N
Sold 1,890,946 $ 20,227,682 1,007,278 $ 10,503,896
Dividends and/or
distributions reinvested 43,968 474,413 11,897 122,654
Redeemed (702,789) (7,608,002) (298,865) (3,128,076)
-----------------------------------------------------------------
Net increase 1,232,125 $ 13,094,093 720,310 $ 7,498,474
=================================================================
- ---------------------------------------------------------------------------------------------
CLASS Y
Sold 11,192 $ 118,410 14,752 $ 151,331
Dividends and/or
distributions reinvested 366 3,967 157 1,619
Redeemed (8,365) (91,199) (5,920) (61,749)
-----------------------------------------------------------------
Net increase 3,193 $ 31,178 8,989 $ 91,201
=================================================================
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. The Portfolio sold 10,000 shares of Class A at a value of $100,000 and 100
shares of Class B, Class C, Class N and Class Y at a value of $1,000,
respectively, to the Manager upon seeding of the Portfolio on March 15, 2005.
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and money market funds, for the year ended January
31, 2007, were as follows:
PURCHASES SALES
- --------------------------------------------------------------------------------
Investment securities $126,236,503 $7,287,599
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the investment advisory agreement, the Manager does not
charge a management fee, but rather collects indirect management fees from
investments in the Underlying Funds. The weighted indirect management fees
collected from the Underlying Funds, as a percent of average daily net assets of
the Portfolio for the year ended January 31, 2007 was 0.54%.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS or the Transfer Agent), a
division of the Manager, acts as the transfer and shareholder servicing agent
for the Portfolio. The Portfolio pays OFS a per account fee. For the year ended
January 31, 2007, the Portfolio paid $123,858 to OFS for services to the
Portfolio.
37 | CONSERVATIVE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
Additionally, Class Y shares are subject to minimum fees of $10,000 per
annum for assets of $10 million or more. The Class Y shares are subject to the
minimum fees in the event that the per account fee does not equal or exceed the
applicable minimum fees. OFS may voluntarily waive the minimum fees.
- --------------------------------------------------------------------------------
OFFERING AND ORGANIZATIONAL COSTS. The Manager paid all offering and
organizational costs associated with the registration and seeding of the
Portfolio.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Portfolio, OppenheimerFunds Distributor, Inc. (the
Distributor) acts as the Portfolio's principal underwriter in the continuous
public offering of the Portfolio's classes of shares.
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Portfolio has adopted a Service Plan for
Class A shares. It reimburses the Distributor for a portion of its costs
incurred for services provided to accounts that hold Class A shares.
Reimbursement is made periodically at an annual rate of up to 0.25% of the
average annual net assets of Class A shares of the Portfolio. The Distributor
currently uses all of those fees to pay dealers, brokers, banks and other
financial institutions periodically for providing personal services and
maintenance of accounts of their customers that hold Class A shares. Any
unreimbursed expenses the Distributor incurs with respect to Class A shares in
any fiscal year cannot be recovered in subsequent periods. Fees incurred by the
Portfolio under the plan are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The
Portfolio has adopted Distribution and Service Plans for Class B, Class C and
Class N shares to compensate the Distributor for its services in connection with
the distribution of those shares and servicing accounts. Under the plans, the
Portfolio pays the Distributor an annual asset-based sales charge of 0.75% on
Class B and Class C shares and 0.25% on Class N shares. The Distributor also
receives a service fee of 0.25% per year under each plan. If either the Class B,
Class C or Class N plan is terminated by the Portfolio or by the shareholders of
a class, the Board of Trustees and its independent trustees must determine
whether the Distributor shall be entitled to payment from the Portfolio of all
or a portion of the service fee and/or asset-based sales charge in respect to
shares sold prior to the effective date of such termination. The Distributor
determines its uncompensated expenses under the plan at calendar quarter ends.
The Distributor's aggregate uncompensated expenses under the plan at December
31, 2006 for Class B, Class C and Class N shares were $339,811, $335,871 and
$216,428, respectively. Fees incurred by the Portfolio under the plans are
detailed in the Statement of Operations.
38 | CONSERVATIVE INVESTOR FUND
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Portfolio. They are deducted from the
proceeds of sales of Portfolio shares prior to investment or from redemption
proceeds prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the following table for the period
indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- ------------------------------------------------------------------------------------------------
January 31, 2007 $404,602 $923 $34,975 $14,310 $178
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. The Manager has voluntarily agreed to a
total expense limitation on the aggregate amount of combined direct
(fund-of-funds level) and indirect expense so that "Total expenses" as a
percentage of average daily net assets will not exceed the following annual
rates: 1.25%, 2.00%, 2.00%, 1.50% and 1.00%, for Class A, Class B, Class C,
Class N and Class Y, respectively. The Manager may modify or terminate this
undertaking at any time without notice to shareholders. These expense
limitations do not include Extraordinary Expenses and other expenses not
incurred in the ordinary course of the Portfolio's business. Notwithstanding the
foregoing limits, the Manager is not required to waive or reimburse Portfolio
expenses in excess of indirect management fees earned from investments in
Underlying Funds to assure that expenses do not exceed those limits.
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.
The Manager will waive fees and/or reimburse Portfolio expenses in an
amount equal to the indirect management fees incurred through the Portfolio's
investment in IMMF. During the year ended January 31, 2007, the Manager waived
$81 for IMMF management fees.
- --------------------------------------------------------------------------------
5. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Portfolio's tax returns to determine
whether it is "more-likely-than-not" that tax positions taken in the Portfolio's
tax return will be ultimately sustained. A tax liability and expense must be
recorded in
39 | CONSERVATIVE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. RECENT ACCOUNTING PRONOUNCEMENTS Continued
respect of any tax position that, in Management's judgment, will not be fully
realized. FIN 48 is effective for fiscal years beginning after December 15,
2006. As of January 31, 2007, the Manager has evaluated the implications of FIN
48 and does not currently anticipate a material impact to the Portfolio's
financial statements. The Manager will continue to monitor the Portfolio's tax
positions prospectively for potential future impacts.
In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 157, FAIR VALUE MEASUREMENTS. This standard establishes a
single authoritative definition of fair value, sets out a framework for
measuring fair value and expands disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. As of January 31, 2007, the Manager does not believe the
adoption of SFAS No. 157 will materially impact the financial statement amounts;
however, additional disclosures may be required about the inputs used to develop
the measurements and the effect of certain of the measurements on changes in net
assets for the period.
- --------------------------------------------------------------------------------
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 excluding the Portfolio) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.
40 | CONSERVATIVE INVESTOR FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
OPPENHEIMER PORTFOLIO SERIES:
We have audited the accompanying statement of assets and liabilities of
Conservative Investor Fund (one of the portfolios constituting the Oppenheimer
Portfolio Series), including the statement of investments, as of January 31,
2007, the related statement of operations for the year then ended, and the
statements of changes in net assets and the financial highlights for the year
then ended and for the period April 5, 2005 (commencement of operations) to
January 31, 2006. These financial statements and financial highlights are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of January 31, 2007, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Conservative Investor Fund as of January 31, 2007, the results of its operations
for the year then ended, and the changes in its net assets and the financial
highlights for the year then ended and for the period April 5, 2005
(commencement of operations) to January 31, 2006, in conformity with U.S.
generally accepted accounting principles.
KPMG LLP
Denver, Colorado
March 15, 2007
41 | CONSERVATIVE INVESTOR FUND
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2007, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Portfolio during
calendar year 2006. Regulations of the U.S. Treasury Department require the
Portfolio to report this information to the Internal Revenue Service.
Capital gain distributions of $0.017 per share were paid to Class A, Class
B, Class C, Class N and Class Y shareholders, respectively, on December 29,
2006. Whether received in stock or in cash, the capital gain distribution should
be treated by shareholders as a gain from the sale of the capital assets held
for more than one year (long-term capital gains).
Dividends, if any, paid by the Portfolio during the fiscal year ended
January 31, 2007 which are not designated as capital gain distributions should
be multiplied by 5.84% to arrive at the amount eligible for the corporate
dividend-received deduction.
A portion, if any, of the dividends paid by the Portfolio during the
fiscal year ended January 31, 2007 which are not designated as capital gain
distributions are eligible for lower individual income tax rates to the extent
that the Portfolio has received qualified dividend income as stipulated by
recent tax legislation. $486,335 of the Portfolio's fiscal year taxable income
may be eligible for the lower individual income tax rates. In early 2007,
shareholders of record received information regarding the percentage of
distributions that are eligible for lower individual income tax rates.
Recent tax legislation allows a regulated investment company to designate
distributions not designated as capital gain distributions, as either interest
related dividends or short-term capital gain dividends, both of which are exempt
from the U.S. withholding tax applicable to non U.S. taxpayers. For the fiscal
year ended January 31, 2007, $23,416 or 0.45% of the ordinary distributions paid
by the Portfolio qualifies as an interest related dividend.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Portfolio to the Internal Revenue Service.
Because of the complexity of the federal regulations which may affect your
individual tax return and the many variations in state and local tax
regulations, we recommend that you consult your tax advisor for specific
guidance.
42 | CONSERVATIVE INVESTOR FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in 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.
43 | CONSERVATIVE INVESTOR FUND
BOARD APPROVAL OF THE PORTFOLIO'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 about the
nature and extent of the services provided to the Fund and information regarding
the Manager's key personnel who 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
all administrative and clerical personnel who 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.
44 | CONSERVATIVE INVESTOR FUND
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 fact 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 Rudi
Schadt, Jerry Webman and Kurt Wolfgruber, the members of the Fund's Asset
Allocation Team. The Board members also considered their experiences with the
Manager and its officers and other personnel through their service on the boards
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 its members have become knowledgeable about 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 and from 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 all other retail front-end load and
no-load conservative mixed-asset target allocation funds advised by other
investment advisers. The Board noted that the Fund's one-year and since
inception performance were better than its peer group median.
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 mixed-asset target allocation
conservative funds of funds and other funds with comparable asset levels and
distribution features. The Board noted that the Manager has agreed to
voluntarily limit the aggregate amount of combined direct (fund-of-funds level)
and indirect expenses so that total annual portfolio and underlying fund
operating expenses as a percentage of average daily net assets will not exceed
the following annual rates:
45 | CONSERVATIVE INVESTOR FUND
BOARD APPROVAL OF THE PORTFOLIO'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
1.25% for Class A, 2.00% for Class B, 2.00% for Class C, 1.50% for Class N and
1.00% for Class Y. The Manager may modify or terminate that undertaking at any
time without notice to shareholders. The Board noted that the Fund does not pay
a management fee and that the Fund's total expenses are equal to its peer group
median.
ECONOMIES OF SCALE. The Board considered whether the Manager may realize
economies of scale in managing and supporting the Fund, the extent to which
those economies of scale would benefit the Fund's shareholders and the current
level of Fund assets.
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.
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.
46 | CONSERVATIVE INVESTOR FUND
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD;
FUND, LENGTH OF SERVICE, AGE NUMBER OF PORTFOLIOS IN THE FUND COMPLEX CURRENTLY OVERSEEN
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, COLORADO
TRUSTEES 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION,
RETIREMENT, DEATH OR REMOVAL.
BRIAN F. WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since September 1995); Director of
Chairman of the Board Special Value Opportunities Fund, LLC (registered investment company) (since September
of Trustees (since 2007) 2004); Investment Advisory Board Member of Zurich Financial Services (insurance) (since
and Trustee (since 2005) October 2004); Board of Governing Trustees of The Jackson Laboratory (non-profit) (since
Age: 63 August 1990); Trustee of the Institute for Advanced Study (non-profit educational institute)
(since May 1992); Special Limited Partner of Odyssey Investment Partners, LLC (private equity
investment) (January 1999-September 2004) and Managing Principal (1997-December 1998);
Trustee of Research Foundation of AIMR (2000-2002) (investment research, non-profit);
Governor, Jerome Levy Economics Institute of Bard College (August 1990-September 2001)
(economics research); Director of Ray & Berendtson, Inc. (May 2000-April 2002) (executive
search firm). Oversees 59 portfolios in the OppenheimerFunds complex.
MATTHEW P. FINK, Trustee of the Committee for Economic Development (policy research foundation) (since
Trustee (since 2005) 2005); Director of ICI Education Foundation (education foundation) (October 1991-August
Age: 66 2006); President of the Investment Company Institute (trade association) (October 1991-June
2004); Director of ICI Mutual Insurance Company (insurance company) (October 1991-June 2004).
Oversees 49 portfolios in the OppenheimerFunds complex.
ROBERT G. GALLI, A trustee or director of other Oppenheimer funds. Oversees 59 portfolios in the
Trustee (since 2005) OppenheimerFunds complex.
Age: 73
PHILLIP A. GRIFFITHS, Distinguished Presidential Fellow for International Affairs (since 2002) and Member (since
Trustee (since 2005) 1979) of the National Academy of Sciences; Council on Foreign Relations (since 2002);
Age: 68 Director of GSI Lumonics Inc. (precision medical equipment supplier) (since 2001); Senior
Advisor of The Andrew W. Mellon Foundation (since 2001); Chair of Science Initiative Group
(since 1999); Member of the American Philosophical Society (since 1996); Trustee of Woodward
Academy (since 1983); Foreign Associate of Third World Academy of Sciences; Director of the
Institute for Advanced Study (1991-2004); Director of Bankers Trust New York Corporation
(1994-1999); Provost at Duke University (1983-1991). Oversees 49 portfolios in the
OppenheimerFunds complex.
MARY F. MILLER, Trustee of the American Symphony Orchestra (not-for-profit) (since October 1998); and Senior
Trustee (since 2005) Vice President and General Auditor of American Express Company (financial services company)
Age: 64 (July 1998-February 2003). Oversees 49 portfolios in the OppenheimerFunds complex.
JOEL W. MOTLEY, Director of Columbia Equity Financial Corp. (privately-held financial adviser) (since 2002);
Trustee (since 2005) Managing Director of Carmona Motley, Inc. (privately-held financial adviser) (since January
Age: 54 2002); Managing Director of Carmona Motley Hoffman Inc. (privately-held financial adviser)
(January 1998-December 2001); Member of the Finance and Budget Committee of the Council on
Foreign Relations, the Investment Committee of the Episcopal Church of America, the
Investment Committee and Board of Human Rights Watch and the Investment Committee of Historic
Hudson Valley. Oversees 49 portfolios in the OppenheimerFunds complex.
47 | CONSERVATIVE INVESTOR FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
KENNETH A. RANDALL, Director of Dominion Resources, Inc. (electric utility holding company) (February
Trustee (since 2005) 1972-October 2005); Former Director of Prime Retail, Inc. (real estate investment trust),
Age: 79 Dominion Energy Inc. (electric power and oil & gas producer), Lumberman's Mutual Casualty
Company, American Motorists Insurance Company and American Manufacturers Mutual Insurance
Company; Former President and Chief Executive Officer of The Conference Board, Inc.
(international economic and business research). Oversees 49 portfolios in the
OppenheimerFunds complex.
RUSSELL S. REYNOLDS, JR., Chairman of The Directorship Search Group, Inc. (corporate governance consulting and
Trustee (since 2005) executive recruiting) (since 1993); Life Trustee of International House (non-profit
Age: 75 educational organization); Founder, Chairman and Chief Executive Officer of Russell Reynolds
Associates, Inc. (1969-1993); Banker at J.P. Morgan & Co. (1958-1966); 1st Lt. Strategic Air
Command, U.S. Air Force (1954-1958). Oversees 49 portfolios in the OppenheimerFunds complex.
JOSEPH M. WIKLER, Director of the following medical device companies: Medintec (since 1992) and Cathco (since
Trustee (since 2005) 1996); Director of Lakes Environmental Association (since 1996); Member of the Investment
Age: 65 Committee of the Associated Jewish Charities of Baltimore (since 1994); Director of
Fortis/Hartford mutual funds (1994-December 2001). Oversees 49 portfolios in the
OppenheimerFunds complex.
PETER I. WOLD, President of Wold Oil Properties, Inc. (oil and gas exploration and production company)
Trustee (since 2005) (since 1994); Vice President, Secretary and Treasurer of Wold Trona Company, Inc. (soda ash
Age: 59 processing and production) (since 1996); Vice President of Wold Talc Company, Inc. (talc
mining) (since 1999); Managing Member of Hole-in-the-Wall Ranch (cattle ranching) (since
1979); Director and Chairman of the Denver Branch of the Federal Reserve Bank of Kansas City
(1993-1999); and Director of PacifiCorp. (electric utility) (1995-1999). Oversees 49
portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW
AND OFFICER YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL
HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR
UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE
TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President (since
President and Principal September 2000) of the Manager; President and a director or trustee of other Oppenheimer
Executive Officer and Trustee funds; President and Director of Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent
(since 2005) holding company) and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of
Age: 57 the Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of
the Manager) (since November 2001); Chairman and Director of Shareholder Services, Inc. and
of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager) (since
July 2001); President and Director of OppenheimerFunds Legacy Program (charitable trust
program established by the Manager) (since July 2001); Director of the following investment
advisory subsidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial
Asset Management Corporation, Trinity Investment Management Corporation and Tremont Capital
Management, Inc. (since November 2001), HarbourView Asset Management Corporation and OFI
Private Investments, Inc. (since July 2001); President (since November 1, 2001) and Director
(since July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President of
Massachusetts Mutual Life Insurance Company (OAC's parent company) (since February 1997);
Director of DLB Acquisition Corporation (holding
48 | CONSERVATIVE INVESTOR FUND
JOHN V. MURPHY, company parent of Babson Capital Management LLC) (since June 1995); Member of the Investment
Continued Company Institute's Board of Governors (since October 3, 2003); Chief Operating Officer of
the Manager (September 2000-June 2001); President and Trustee of MML Series Investment Fund
and MassMutual Select Funds (open-end investment companies) (November 1999-November 2001);
Director of C.M. Life Insurance Company (September 1999-August 2000); President, Chief
Executive Officer and Director of MML Bay State Life Insurance Company (September 1999-
August 2000); Director of Emerald Isle Bancorp and Hibernia Savings Bank (wholly-owned
subsidiary of Emerald Isle Bancorp) (June 1989-June 1998). Oversees 96 portfolios in the
OppenheimerFunds complex.
- -------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. SCHADT, WEBMAN,
OF THE FUND WOLFGRUBER, ZACK, GILLESPIE AND MS. BLOOMBERG, TWO WORLD FINANCIAL CENTER, 225 LIBERTY
STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY, WIXTED, PETERSEN, SZILAGYI AND
MS. IVES, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN
INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
RUDI W. SCHADT, Vice President, Director of Research in Product Design and Risk Management of the Manager.
Vice President and Portfolio Prior to joining the Manager in February 2002 he was a Director and Senior Quantitative
Manager (since 2005) Analyst (2000-2001) at UBS Asset Management prior to which he was an Associate Director of
Age: 49 Research (since June 1999) and Senior Researcher and Portfolio Manager (from June 1997) at
State Street Global Advisors. An officer of 11 portfolios in the OppenheimerFunds complex.
DR. JERRY WEBMAN, Chief Economist of the Manager (since 2006); Senior Vice President (since February 1996) and
Vice President and Portfolio Senior Investment Officer and Director (since 1997) of the Manager's Fixed Income
Manager (since 2005) Investments; Senior Vice President (since May 1999) of HarbourView Asset Management
Age: 57 Corporation. An officer of 8 other portfolios in the OppenheimerFunds complex.
KURT WOLFGRUBER, Executive Vice President of the Manager (since March 2003) and Chief Investment Officer and
Vice President and Portfolio Director of the Manager (since July 2003) of the Manager. He has been Director of HarbourView
Manager (since 2005) Asset Management Corporation and of OFI Institutional Asset Management, Inc. (since June
Age: 57 2003) and of Tremont Capital Management, Inc. (since October 2001). He is also an officer of
8 other portfolios in the OppenheimerFunds complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Vice
Vice President and President of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and
Chief Compliance Officer Shareholder Services, Inc. (since June 1983). Former Vice President and Director of Internal
(since 2005) Audit of the Manager (1997-February 2004). An officer of 96 portfolios in the
Age: 56 OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the
Treasurer and Principal following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc.,
Financial & Accounting Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and Oppenheimer
Officer (since 2005) Partnership Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since March
Age: 47 2000), OppenheimerFunds International Ltd. (since May 2000), OppenheimerFunds plc (since May
2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds
Legacy Program (charitable trust program established by the Manager) (since June 2003);
Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the
Manager) (since May 2000); Assistant Treasurer of the following: OAC (since March
49 | CONSERVATIVE INVESTOR FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
BRIAN W. WIXTED, 1999), Centennial Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds
Continued Legacy Program (April 2000-June 2003); Principal and Chief Operating Officer of Bankers Trust
Company-Mutual Fund Services Division (March 1995-March 1999). An officer of 96 portfolios in
the OppenheimerFunds complex.
BRIAN S. PETERSEN, Vice President of the Manager (since February 2007); Assistant Vice President of the Manager
Assistant Treasurer (August 2002-February 2007); Manager/Financial Product Accounting of the Manager (November
(since 2004) 1998-July 2002). An officer of 96 portfolios in the OppenheimerFunds complex.
Age: 36
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Financial Reporting
Assistant Treasurer and Compliance of First Data Corporation (April 2003-July 2004); Manager of Compliance of
(since 2005) Berger Financial Group LLC (May 2001-March 2003); Director of Mutual Fund Operations at
Age: 36 American Data Services, Inc. (September 2000-May 2001). An officer of 96 portfolios in the
OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the
Secretary (since 2005) Manager; General Counsel and Director of the Distributor (since December 2001); General
Age: 58 Counsel of Centennial Asset Management Corporation (since December 2001); Senior Vice
President and General Counsel of HarbourView Asset Management Corporation (since December
2001); Secretary and General Counsel of OAC (since November 2001); Assistant Secretary (since
September 1997) and Director (since November 2001) of OppenheimerFunds International Ltd. and
OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc.
(since December 2002); Director of Oppenheimer Real Asset Management, Inc. (since November
2001); Senior Vice President, General Counsel and Director of Shareholder Financial Services,
Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice President, General
Counsel and Director of OFI Private Investments, Inc. and OFI Trust Company (since November
2001); Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior Vice
President and General Counsel of OFI Institutional Asset Management, Inc. (since November
2001); Director of OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice
President (May 1985-December 2003), Acting General Counsel (November 2001-February 2002) and
Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of the
following: Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial
Services, Inc. (November 1989-November 2001), and OppenheimerFunds International Ltd.
(September 1997-November 2001). An officer of 96 portfolios in the OppenheimerFunds complex.
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First Vice President
Assistant Secretary (April 2001-April 2004), Associate General Counsel (December 2000-April 2004), Corporate Vice
(since 2004) President (May 1999-April 2001) and Assistant General Counsel (May 1999-December 2000) of UBS
Age: 39 Financial Services Inc. (formerly, PaineWebber Incorporated). An officer of 96 portfolios in
the OppenheimerFunds complex.
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since October
Assistant Secretary 2003) of the Manager; Vice President (since 1999) and Assistant Secretary (since October
(since 2001) 2003) of the Distributor; Assistant Secretary of Centennial Asset Management Corporation
Age: 41 (since October 2003); Vice President and Assistant Secretary of Shareholder Services, Inc.
(since 1999); Assistant Secretary of OppenheimerFunds Legacy Program and Shareholder
Financial Services, Inc. (since December 2001); Assistant Counsel of the Manager (August
1994-October 2003). An officer of 96 portfolios in the OppenheimerFunds complex.
50 | CONSERVATIVE INVESTOR FUND
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since September 2004);
Assistant Secretary First Vice President (2001-September 2004); Director (2000-September 2004) and Vice
(since 2004) President (1998-2000) of Merrill Lynch Investment Management. An officer of 96 portfolios in
Age: 43 the OppenheimerFunds complex.
THE PORTFOLIO'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL
INFORMATION ABOUT THE PORTFOLIO'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT
CHARGE UPON REQUEST, BY CALLING 1.800.525.7048.
51 | CONSERVATIVE INVESTOR FUND
MODERATE INVESTOR FUND
TOP HOLDINGS AND ALLOCATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSET CLASS ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Alternative Investments 10.0%
Fixed Income 43.9
Global Equity 10.2
U.S. Equity 35.6
Money Market 0.3
Portfolio holdings and allocations are subject to change. Percentages are as of
January 31, 2007, and are based on the total market value of investments.
- --------------------------------------------------------------------------------
9 | MODERATE INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
HOW HAS THE PORTFOLIO PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS,
INC., OF THE PORTFOLIO'S PERFORMANCE DURING ITS FISCAL YEAR ENDED JANUARY 31,
2007, FOLLOWED BY A GRAPHICAL COMPARISON OF THE PORTFOLIO'S PERFORMANCE TO AN
APPROPRIATE BROAD-BASED MARKET INDEX.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. For the 12-month period ending
January 31, 2007, Moderate Investor Fund significantly outperformed its
fixed-income benchmark, the Lehman Brothers Aggregate Bond Index, but
underperformed its equity benchmark, the S&P 500 Index. We attribute the
Portfolio's positive results to the outperformance of its alternative investment
funds, primarily its exposure to Oppenheimer Real Estate Fund's Class Y shares.
Portfolio performance was further strengthened by its allocation to fixed-income
funds, as most of these underlying funds posted strong returns and outperformed
their respective benchmarks.
In contrast, the Portfolio's exposure to commodities through its
allocation to the Oppenheimer Commodity Strategy Total Return Fund was the
greatest detractor from results. Additionally, although the Portfolio's
underlying equity funds produced strong absolute returns, which boosted
Portfolio performance, a majority of them lagged in terms of relative
performance to their respective benchmarks
On the alternative investments side, the Portfolio's position in
Oppenheimer Real Estate Fund's Class Y shares at period end, which posted
impressive returns and strongly outperformed its own benchmark, was a boon to
the Portfolio's performance. Oppenheimer Real Estate Fund's success can be
attributed, in part, to the Fund's profitable investments in the office,
apartment and industrial sectors.
The Portfolio also benefited from its allocation to fixed-income funds, as
the majority of these funds produced both strong absolute and relative returns.
The Portfolio's single largest holding at period end, Oppenheimer Core Bond
Fund, outperformed due to multiple factors. Perhaps the most significant
contributor was its positioning within the corporate bond sector, an area of the
fixed-income market that posted double-digit returns. Oppenheimer Limited-Term
Government Fund added to the Portfolio's returns as it benefited from active
management of its interest-rate sensitivity and mortgage portfolio. The
Portfolio's exposure to the high yield bond market, through its allocation to
Oppenheimer Champion Income Fund also contributed to performance. The Portfolio
also benefited from its allocation to Oppenheimer International Bond Fund's
Class Y shares, as this Fund outperformed its Lipper peer group primarily due to
its emphasis on bonds and currencies from the emerging markets.
On the equity side, the strong absolute gains generated by the Portfolio's
underlying funds were not enough to overcome the negative affects of many of
these funds weak relative gains, a situation that ultimately hampered the
Portfolio's total returns. For example,
10 | MODERATE INVESTOR FUND
the Portfolio gained from its holdings in Oppenheimer Global Fund and
Oppenheimer Main Street Fund, but both funds lagged behind their respective
benchmarks. An exception was Oppenheimer Value Fund's Class Y shares (also the
Fund's second largest holding at period end), which posted a strong total return
and outpaced its benchmark, the S&P 500 Index. The underperformance of several
of the Portfolio's equity funds can be attributed to a variety of factors, which
included the continued underperformance of growth stocks versus value stocks and
disappointing stock selection. Additionally, over the last 12-months the market
tended to not appropriately reward companies that consistently grew their
earnings. This situation ended up hurting some of the Portfolio's underlying
equity funds, as their investment philosophies tend to emphasize strong earnings
growth.
Lastly, the Portfolio's exposure to commodities through its allocation to
the Oppenheimer Commodity Strategy Total Return Fund was the largest detractor
from results. Over the period, oil prices were quite volatile, ranging from $65
to a mid-summer high of close to $80 per barrel then dropping precipitously to
around $55 by period end. This volatility and ultimate price erosion is a result
of multiple factors that included an easing of geopolitical tensions, a rise in
inventories and a slowing demand. Additionally, an unseasonably warm winter
contributed to the natural gas price decline.
COMPARING THE PORTFOLIO'S PERFORMANCE TO THE MARKET. The graphs that follow show
the performance of a hypothetical $10,000 investment in each class of shares of
the Portfolio held until January 31, 2007. Performance is measured from the
inception of Classes A, B, C, N and Y on April 5, 2005. The Portfolio's
performance reflects the deduction of the maximum initial sales charge on Class
A shares, the applicable contingent deferred sales charge on Class B, Class C
and Class N shares, and reinvestments of all dividends and capital gains
distributions. Past performance cannot guarantee future results.
The Portfolio's performance is compared to the performance of the S&P 500
Index and the Lehman Brothers Aggregate Bond Index. The S&P 500 Index is a
broad-based measure of domestic stock performance that includes the reinvestment
of dividends. The Lehman Brothers Aggregate Bond Index is an index of U.S.
Government and corporate bonds that includes reinvestment of dividends. Index
performance reflects the reinvestment of income but does not consider the effect
of transaction costs, and none of the data in the graphs shows the effect of
taxes. The Portfolio's performance reflects the effects of the Portfolio's
business and operating expenses. While index comparisons may be useful to
provide a benchmark for the Portfolio's performance, it must be noted that the
Portfolio's investments are not limited to the investments in the index.
11 | MODERATE INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Moderate Investor Fund (Class A)
Lehman Brothers Aggregate Bond Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Moderate Investor Fund Lehman Brothers
(Class A) Aggregate Bond Index S&P 500 Index
04/05/2005 $ 9,425 $ 10,000 $ 10,000
04/30/2005 $ 9,331 $ 10,135 $ 9,810
07/31/2005 $ 9,821 $ 10,207 $ 10,514
10/31/2005 $ 9,774 $ 10,150 $ 10,327
01/31/2006 $ 10,328 $ 10,293 $ 11,005
04/30/2006 $ 10,491 $ 10,207 $ 11,322
07/31/2006 $ 10,357 $ 10,356 $ 11,079
10/31/2006 $ 10,836 $ 10,677 $ 12,013
01/31/2007 $ 11,230 $ 10,734 $ 12,603
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/07
1-Year 2.48% Since Inception (4/5/05) 6.57%
12 | MODERATE INVESTOR FUND
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Moderate Investor Fund (Class B)
Lehman Brothers Aggregate Bond Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Moderate Investor Fund Lehman Brothers
(Class B) Aggregate Bond Index S&P 500 Index
04/05/2005 $ 10,000 $ 10,000 $ 10,000
04/30/2005 $ 9,900 $ 10,135 $ 9,810
07/31/2005 $ 10,390 $ 10,207 $ 10,514
10/31/2005 $ 10,330 $ 10,150 $ 10,327
01/31/2006 $ 10,890 $ 10,293 $ 11,005
04/30/2006 $ 11,042 $ 10,207 $ 11,322
07/31/2006 $ 10,869 $ 10,356 $ 11,079
10/31/2006 $ 11,346 $ 10,677 $ 12,013
01/31/2007 $ 11,338 $ 10,734 $ 12,603
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/07
1-Year 2.80% Since Inception (4/5/05) 7.14%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 4% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 17 FOR FURTHER
INFORMATION.
13 | MODERATE INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Moderate Investor Fund (Class C)
Lehman Brothers Aggregate Bond Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Moderate Investor Fund Lehman Brothers
(Class C) Aggregate Bond Index S&P 500 Index
04/05/2005 $ 10,000 $ 10,000 $ 10,000
04/30/2005 $ 9,890 $ 10,135 $ 9,810
07/31/2005 $ 10,380 $ 10,207 $ 10,514
10/31/2005 $ 10,320 $ 10,150 $ 10,327
01/31/2006 $ 10,882 $ 10,293 $ 11,005
04/30/2006 $ 11,035 $ 10,207 $ 11,322
07/31/2006 $ 10,872 $ 10,356 $ 11,079
10/31/2006 $ 11,349 $ 10,677 $ 12,013
01/31/2007 $ 11,736 $ 10,734 $ 12,603
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/07
1-Year 6.85% Since Inception (4/5/05) 9.18%
14 | MODERATE INVESTOR FUND
CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Moderate Investor Fund (Class N)
Lehman Brothers Aggregate Bond Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Moderate Investor Fund Lehman Brothers
(Class N) Aggregate Bond Index S&P 500 Index
04/05/2005 $ 10,000 $ 10,000 $ 10,000
04/30/2005 $ 9,900 $ 10,135 $ 9,810
07/31/2005 $ 10,410 $ 10,207 $ 10,514
10/31/2005 $ 10,360 $ 10,150 $ 10,327
01/31/2006 $ 10,935 $ 10,293 $ 11,005
04/30/2006 $ 11,108 $ 10,207 $ 11,322
07/31/2006 $ 10,955 $ 10,356 $ 11,079
10/31/2006 $ 11,443 $ 10,677 $ 12,013
01/31/2007 $ 11,862 $ 10,734 $ 12,603
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/07
1-Year 7.47% Since Inception (4/5/05) 9.82%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 4% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 17 FOR FURTHER
INFORMATION.
15 | MODERATE INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS Y SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Moderate Investor Fund (Class Y)
Lehman Brothers Aggregate Bond Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Moderate Investor Fund Lehman Brothers
(Class Y) Aggregate Bond Index S&P 500 Index
04/05/2005 $ 10,000 $ 10,000 $ 10,000
04/30/2005 $ 9,900 $ 10,135 $ 9,810
07/31/2005 $ 10,420 $ 10,207 $ 10,514
10/31/2005 $ 10,390 $ 10,150 $ 10,327
01/31/2006 $ 10,979 $ 10,293 $ 11,005
04/30/2006 $ 11,173 $ 10,207 $ 11,322
07/31/2006 $ 11,030 $ 10,356 $ 11,079
10/31/2006 $ 11,559 $ 10,677 $ 12,013
01/31/2007 $ 11,987 $ 10,734 $ 12,603
AVERAGE ANNUAL TOTAL RETURNS OF CLASS Y SHARES OF THE PORTFOLIO AT 1/31/07
1-Year 9.18% Since Inception (4/5/05) 10.46%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 4% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 17 FOR FURTHER
INFORMATION.
16 | MODERATE INVESTOR FUND
NOTES
- --------------------------------------------------------------------------------
Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. The Portfolio's total returns
shown do not reflect the deduction of income taxes on an individual's
investment. Taxes may reduce your actual investment returns on income or gains
paid by the Portfolio or any gains you may realize if you sell your shares.
INVESTORS SHOULD CONSIDER THE PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, AND
OTHER CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PORTFOLIO'S
PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT THE PORTFOLIO, AND MAY BE
OBTAINED BY ASKING YOUR FINANCIAL ADVISOR, CALLING US AT 1.800.525.7048 OR
VISITING OUR WEBSITE AT WWW.OPPENHEIMERFUNDS.COM. READ THE PROSPECTUS CAREFULLY
BEFORE INVESTING.
The Portfolio's investment strategy and focus can change over time. The mention
of specific fund holdings does not constitute a recommendation by
OppenheimerFunds, Inc.
CLASS A shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class A returns include the maximum initial sales charge of
5.75%.
CLASS B shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 4% (since inception). Class B shares are subject
to an annual 0.75% asset-based sales charge.
CLASS C shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
CLASS N shares of the Portfolio were first publicly offered on 4/5/05. Class N
shares are offered only through retirement plans. Unless otherwise noted, Class
N returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
CLASS Y shares of the Portfolio were first publicly offered on 4/5/05. Class Y
shares are offered only to certain institutional investors under special
agreements with the Distributor.
An explanation of the calculation of performance is in the Portfolio's Statement
of Additional Information.
17 | MODERATE INVESTOR FUND
PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
PORTFOLIO EXPENSES. As a shareholder of the Portfolio, you incur two types of
costs: (1) transaction costs, which may include sales charges (loads) on
purchase payments, contingent deferred sales charges on redemptions; and
redemption fees, if any; and (2) ongoing costs, including management fees;
distribution and service fees; and other Portfolio expenses. These examples are
intended to help you understand your ongoing costs (in dollars) of investing in
the Portfolio and to compare these costs with the ongoing costs of investing in
other mutual funds.
The examples 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 January 31, 2007.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Portfolio's actual expense ratio for each class of shares,
and an assumed rate of return of 5% per year before expenses, which is not the
Portfolio's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Portfolio and other funds. To do so, compare this 5%
hypothetical example for the class of shares you hold with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
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
18 | MODERATE INVESTOR FUND
the Statement of Additional Information). Therefore, the "hypothetical" lines of
the table are useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(8/1/06) 1/31/07 JANUARY 31, 2007
- --------------------------------------------------------------------------------
Class A Actual $ 1,000.00 $ 1,084.30 $ 2.16
- --------------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,023.14 2.09
- --------------------------------------------------------------------------------
Class B Actual 1,000.00 1,080.00 6.42
- --------------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,019.06 6.23
- --------------------------------------------------------------------------------
Class C Actual 1,000.00 1,079.50 6.20
- --------------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,019.26 6.02
- --------------------------------------------------------------------------------
Class N Actual 1,000.00 1,082.70 3.47
- --------------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,021.88 3.37
- --------------------------------------------------------------------------------
Class Y Actual 1,000.00 1,086.80 0.00
- --------------------------------------------------------------------------------
Class Y Hypothetical 1,000.00 1,025.21 0.00
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Portfolio's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios,
excluding all underlying fund expenses, based on the 6-month period ended
January 31, 2007 are as follows
CLASS EXPENSE RATIOS
- ------------------------
Class A 0.41%
- ------------------------
Class B 1.22
- ------------------------
Class C 1.18
- ------------------------
Class N 0.66
- ------------------------
Class Y 0.00
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Portfolio's Manager that can be terminated at any time, without advance
notice. The "Financial Highlights" tables in the Portfolio's financial
statements, included in this report, also show the gross expense ratios, without
such waivers or reimbursements.
- --------------------------------------------------------------------------------
19 | MODERATE INVESTOR FUND
STATEMENT OF INVESTMENTS January 31, 2007
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- ---------------------------------------------------------------------------------------------
INVESTMENTS IN AFFILIATED COMPANIES--99.8% 1
- ---------------------------------------------------------------------------------------------
ALTERNATIVE INVESTMENTS--9.9%
Oppenheimer Commodity Strategy Total Return Fund, Cl. Y 3,864,044 $ 24,652,598
- ---------------------------------------------------------------------------------------------
Oppenheimer Real Estate Fund, Cl. Y 1,351,142 36,021,440
--------------
60,674,038
- ---------------------------------------------------------------------------------------------
FIXED INCOME--43.8%
Oppenheimer Champion Income Fund, Cl. Y 6,341,189 60,748,588
- ---------------------------------------------------------------------------------------------
Oppenheimer Core Bond Fund, Cl. Y 11,639,178 118,486,838
- ---------------------------------------------------------------------------------------------
Oppenheimer International Bond Fund, Cl. Y 4,986,529 29,570,116
- ---------------------------------------------------------------------------------------------
Oppenheimer Limited-Term Government Fund, Cl. Y 5,914,588 58,613,569
--------------
267,419,111
- ---------------------------------------------------------------------------------------------
GLOBAL EQUITY--10.2%
Oppenheimer Global Fund, Cl. Y 831,381 62,029,320
- ---------------------------------------------------------------------------------------------
U.S. EQUITY--35.6%
Oppenheimer Capital Appreciation Fund, Cl. Y 2 1,239,117 60,295,453
- ---------------------------------------------------------------------------------------------
Oppenheimer Main Street Fund, Cl. Y 1,499,294 62,100,737
- ---------------------------------------------------------------------------------------------
Oppenheimer Main Street Opportunity Fund, Cl. Y 2,033,988 30,936,958
- ---------------------------------------------------------------------------------------------
Oppenheimer Value Fund, Cl. Y 2,348,542 63,833,361
--------------
217,166,509
- ---------------------------------------------------------------------------------------------
MONEY MARKET--0.3%
Oppenheimer Institutional Money Market Fund, Cl. E, 5.35% 3 1,897,564 1,897,564
- ---------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $584,165,120) 99.8% 609,186,542
- ---------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.2 1,196,303
----------------------------
NET ASSETS 100.0% $ 610,382,845
============================
20 | MODERATE INVESTOR FUND
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended January 31, 2007 by virtue of the Portfolio owning at
least 5% of the voting securities of the issuer or as a result of the Portfolio
and the issuer having the same investment advisor. Transactions during the
period in which the issuer was an affiliate are as follows:
SHARES SHARES
JANUARY 31, GROSS GROSS JANUARY 31,
2006 ADDITIONS REDUCTIONS 2007
- -----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation Fund, Cl. Y 452,591 820,723 34,197 1,239,117
Oppenheimer Champion Income Fund, Cl. Y -- 6,393,241 a 52,052 6,341,189
Oppenheimer Commodity Strategy Total Return
Fund, Cl. Y 1,239,352 2,701,647 76,955 3,864,044
Oppenheimer Core Bond Fund, Cl. Y 3,823,987 8,038,131 222,940 11,639,178
Oppenheimer Global Fund, Cl. Y 307,304 566,577 42,500 831,381
Oppenheimer High Yield Fund, Cl. Y 2,132,328 3,051,493 5,183,821 --
Oppenheimer Institutional Money Market Fund,
Cl. E, 5.35% -- 28,804,117 26,906,553 1,897,564
Oppenheimer International Bond Fund, Cl. Y 1,704,413 3,377,939 95,823 4,986,529
Oppenheimer Limited-Term Government Fund, Cl. Y 1,959,654 4,068,792 113,858 5,914,588
Oppenheimer Main Street Fund, Cl. Y 533,482 1,009,269 43,457 1,499,294
Oppenheimer Main Street Opportunity Fund, Cl. Y 729,566 1,370,938 66,516 2,033,988
Oppenheimer Real Estate Fund, Cl. Y 527,524 898,794 75,176 1,351,142
Oppenheimer Value Fund, Cl. Y 829,078 1,563,344 43,880 2,348,542
VALUE DIVIDEND REALIZED
SEE NOTE 1 INCOME LOSS
- -----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation Fund, Cl. Y $ 60,295,453 $ -- $ 38,812
Oppenheimer Champion Income Fund, Cl. Y 60,748,588 1,199,700 b 2,599
Oppenheimer Commodity Strategy Total Return Fund, Cl. Y 24,652,598 960,594 b 169,353
Oppenheimer Core Bond Fund, Cl. Y 118,486,838 4,199,544 b 69,237
Oppenheimer Global Fund, Cl. Y 62,029,320 815,840 b 28,536
Oppenheimer High Yield Fund, Cl. Y -- 1,737,465 b 15,099
Oppenheimer Institutional Money Market Fund, Cl. E, 5.35% 1,897,564 18,255 --
Oppenheimer International Bond Fund, Cl. Y 29,570,116 817,417 b 13,532
Oppenheimer Limited-Term Government Fund, Cl. Y 58,613,569 2,033,230 b 17,783
Oppenheimer Main Street Fund, Cl. Y 62,100,737 717,241 b 27,770
Oppenheimer Main Street Opportunity Fund, Cl. Y 30,936,958 843,357 b 15,430
Oppenheimer Real Estate Fund, Cl. Y 36,021,440 1,299,152 b 27,261
Oppenheimer Value Fund, Cl. Y 63,833,361 1,174,091 b 22,467
------------------------------------------------
$ 609,186,542 $ 15,815,886 $ 447,879
================================================
a Received 5,084,247 shares as the result of the acquisition of Oppenheimer High
Yield Fund.
b All or portion of the transactions were the result of non-cash dividends.
2. Non-income producing security.
3. Rate shown is the 7-day yield as of January 31, 2007.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21 | MODERATE INVESTOR FUND
STATEMENT OF ASSETS AND LIABILITIES January 31, 2007
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments--
affiliated companies (cost $584,165,120) $ 609,186,542
- -------------------------------------------------------------------------------------
Cash 7,116
- -------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 3,850,796
Interest and dividends 1,199,053
Investments sold 150,185
Other 9,386
---------------
Total assets 614,403,078
- -------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 3,247,894
Shares of beneficial interest redeemed 490,753
Distribution and service plan fees 123,145
Transfer and shareholder servicing agent fees 55,974
Shareholder communications 40,612
Trustees' compensation 32,591
Other 29,264
---------------
Total liabilities 4,020,233
- -------------------------------------------------------------------------------------
NET ASSETS $ 610,382,845
===============
- -------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 53,628
- -------------------------------------------------------------------------------------
Additional paid-in capital 578,274,656
- -------------------------------------------------------------------------------------
Accumulated net investment income 999,526
- -------------------------------------------------------------------------------------
Accumulated net realized gain on investments 6,033,613
- -------------------------------------------------------------------------------------
Net unrealized appreciation on investments 25,021,422
---------------
NET ASSETS $ 610,382,845
===============
22 | MODERATE INVESTOR FUND
- -------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- -------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$313,310,580 and 27,438,947 shares of beneficial interest outstanding) $ 11.42
Maximum offering price per share (net asset value plus sales charge of
5.75% of offering price) $ 12.12
- -------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $101,928,629
and 8,987,009 shares of beneficial interest outstanding) $ 11.34
- -------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $142,351,224
and 12,562,015 shares of beneficial interest outstanding) $ 11.33
- -------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $51,619,937
and 4,537,174 shares of beneficial interest outstanding) $ 11.38
- -------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $1,172,475 and 102,372 shares of beneficial interest outstanding) $ 11.45
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23 | MODERATE INVESTOR FUND
STATEMENT OF OPERATIONS For the Year Ended January 31, 2007
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ---------------------------------------------------------------------------------------------------------------
Dividends from affiliated companies $ 15,815,886
- ---------------------------------------------------------------------------------------------------------------
Interest 67,307
- ---------------------------------------------------------------------------------------------------------------
Other income 1,324
----------------
Total investment income 15,884,517
- ---------------------------------------------------------------------------------------------------------------
EXPENSES
- ---------------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 511,859
Class B 698,861
Class C 954,943
Class N 135,077
- ---------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 217,997
Class B 105,245
Class C 115,898
Class N 34,269
Class Y 3
- ---------------------------------------------------------------------------------------------------------------
Shareholder communications:
Class A 53,284
Class B 29,093
Class C 25,278
Class N 2,898
- ---------------------------------------------------------------------------------------------------------------
Trustees' compensation 33,399
- ---------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 1,489
- ---------------------------------------------------------------------------------------------------------------
Other 37,849
----------------
Total expenses 2,957,442
Less reduction to custodian expenses (11)
Less waivers and reimbursements of expenses (346)
----------------
Net expenses 2,957,085
- ---------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 12,927,432
- ---------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ---------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments:
Affiliated companies (447,879)
Distributions received from affiliated companies 7,169,211
----------------
Net realized gain 6,721,332
- ---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 20,367,168
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 40,015,932
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | MODERATE INVESTOR FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED JANUARY 31, 2007 2006 1
- -----------------------------------------------------------------------------------------------------------------
OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
Net investment income $ 12,927,432 $ 2,808,609
- -----------------------------------------------------------------------------------------------------------------
Net realized gain 6,721,332 1,518,222
- -----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 20,367,168 4,654,254
------------------------------------
Net increase in net assets resulting from operations 40,015,932 8,981,085
- -----------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (6,838,205) (1,457,787)
Class B (1,753,095) (428,124)
Class C (2,462,961) (555,237)
Class N (1,056,853) (164,658)
Class Y (23,344) (5,308)
------------------------------------
(12,134,458) (2,611,114)
- -----------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (694,225) --
Class B (231,731) --
Class C (318,700) --
Class N (111,013) --
Class Y (2,136) --
------------------------------------
(1,357,805) --
- -----------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest transactions:
Class A 191,855,068 104,188,008
Class B 60,241,093 35,779,888
Class C 88,079,456 46,402,364
Class N 37,858,714 11,835,440
Class Y 845,510 299,664
------------------------------------
378,879,841 198,505,364
- -----------------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
Total increase 405,403,510 204,875,335
- -----------------------------------------------------------------------------------------------------------------
Beginning of period 204,979,335 104,000 2
------------------------------------
End of period (including accumulated net investment
income of $999,526 and $206,552, respectively) $ 610,382,845 $ 204,979,335
====================================
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Reflects the value of the Manager's initial seed money investment on March
15, 2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | MODERATE INVESTOR FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED JANUARY 31, 2007 2006 1
- -----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.78 $ 10.00
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .39 .38
Net realized and unrealized gain .55 .57
------------------------------------
Total from investment operations .94 .95
- -----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.27) (.17)
Distributions from net realized gain (.03) --
------------------------------------
Total dividends and/or distributions to shareholders (.30) (.17)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.42 $ 10.78
====================================
- -----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 8.73% 9.58%
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 313,311 $ 107,686
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 206,672 $ 43,984
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 3.57% 4.39%
Total expenses 5 0.40% 0.47%
Expenses after waivers and reimbursements and reduction to custodian
expenses 0.40% 0.46%
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 4% 0%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2007 1.01%
Period Ended January 31, 2006 1.15
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | MODERATE INVESTOR FUND
CLASS B YEAR ENDED JANUARY 31, 2007 2006 1
- -----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.74 $ 10.00
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .30 .31
Net realized and unrealized gain .54 .58
------------------------------------
Total from investment operations .84 .89
- -----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.21) (.15)
Distributions from net realized gain (.03) --
------------------------------------
Total dividends and/or distributions to shareholders (.24) (.15)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.34 $ 10.74
====================================
- -----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 7.80% 8.90%
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 101,929 $ 36,956
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 70,066 $ 15,521
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.73% 3.56%
Total expenses 5 1.21% 1.31%
Expenses after waivers and reimbursements
and reduction to custodian expenses 1.21% 1.29%
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 4% 0%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2007 1.82%
Period Ended January 31, 2006 1.99
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | MODERATE INVESTOR FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS C YEAR ENDED JANUARY 31, 2007 2006 1
- -----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.73 $ 10.00
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .30 .31
Net realized and unrealized gain .54 .57
------------------------------------
Total from investment operations .84 .88
- -----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.21) (.15)
Distributions from net realized gain (.03) --
------------------------------------
Total dividends and/or distributions to shareholders (.24) (.15)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.33 $ 10.73
====================================
- -----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 7.85% 8.82%
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 142,351 $ 47,904
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 95,773 $ 19,527
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.78% 3.64%
Total expenses 5 1.16% 1.23%
Expenses after waivers and reimbursements
and reduction to custodian expenses 1.16% 1.22%
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 4% 0%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2007 1.77%
Period Ended January 31, 2006 1.91
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | MODERATE INVESTOR FUND
CLASS N YEAR ENDED JANUARY 31, 2007 2006 1
- -----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.76 $ 10.00
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .40 .40
Net realized and unrealized gain .51 .53
------------------------------------
Total from investment operations .91 .93
- -----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.26) (.17)
Distributions from net realized gain (.03) --
------------------------------------
Total dividends and/or distributions to shareholders (.29) (.17)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.38 $ 10.76
====================================
- -----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 8.47% 9.35%
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 51,620 $ 12,117
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 27,110 $ 4,158
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 3.58% 4.56%
Total expenses 5 0.65% 0.68%
Expenses after waivers and reimbursements
and reduction to custodian expenses 0.65% 0.67%
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 4% 0%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2007 1.26%
Period Ended January 31, 2006 1.36
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | MODERATE INVESTOR FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS Y YEAR ENDED JANUARY 31, 2007 2006 1
- -----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.79 $ 10.00
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .56 .36
Net realized and unrealized gain .43 .61
------------------------------------
Total from investment operations .99 .97
- -----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.30) (.18)
Distributions from net realized gain (.03) --
------------------------------------
Total dividends and/or distributions to shareholders (.33) (.18)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.45 $ 10.79
====================================
- -----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 9.18% 9.79%
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 1,172 $ 316
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 335 $ 216
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 5.06% 4.20%
Total expenses 5 0.00% 0.28%
Expenses after waivers and reimbursements
and reduction to custodian expenses 0.00% 0.12%
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 4% 0%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2007 0.61%
Period Ended January 31, 2006 0.96
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30 | MODERATE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Portfolio Series (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
Moderate Investor Fund (the "Portfolio") is a series of the Fund whose
investment objective is to seek long term growth of capital and current income.
The Portfolio is a special type of mutual fund known as a "fund of funds"
because it invests in other mutual funds. The Portfolio normally invests in a
portfolio consisting of a target-weighted allocation in Class A or Class Y
shares of other Oppenheimer funds. The Fund's investment advisor is
OppenheimerFunds, Inc. (the "Manager").
The Portfolio offers Class A, Class B, Class C, Class N and Class Y
shares. Class A shares are sold at their offering price, which is normally net
asset value plus a front-end sales charge. Class B, Class C and Class N shares
are sold without a front-end sales charge but may be subject to a contingent
deferred sales charge (CDSC). Class N shares are sold only through retirement
plans. Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC, however, the institutional investor
may impose charges on those accounts. All classes of shares have identical
rights and voting privileges with respect to the Portfolio in general and
exclusive voting rights on matters that affect that class alone. Earnings, net
assets and net asset value per share may differ due to each class having its own
expenses, such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares six
years after the date of purchase.
Under normal market conditions, the Manager will invest the Portfolio's
assets in shares of Oppenheimer Core Bond Fund, Oppenheimer Capital Appreciation
Fund, Oppenheimer Champion Income Fund, Oppenheimer Global Fund, Oppenheimer
International Bond Fund, Oppenheimer Limited-Term Government Fund, Oppenheimer
Main Street Fund(R), Oppenheimer Main Street Opportunity Fund(R), Oppenheimer
Commodity Strategy Total Return Fund(R), Oppenheimer Real Estate Fund,
Oppenheimer Value Fund and Oppenheimer Institutional Money Market Fund
(individually, an "Underlying Fund" and collectively, the "Underlying Funds").
The following is a summary of significant accounting policies consistently
followed by the Portfolio.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Portfolio calculates the net asset value of each class
of shares based upon the net asset value of the applicable Underlying Fund as of
the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for trading. For each Underlying
Fund, the net asset value per share for a class of shares on a "regular business
day" is determined by dividing the value of the Underlying Fund's net assets
attributable to that class by the number of shares of that
31 | MODERATE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
class outstanding on that day. To determine net asset values, the Underlying
Fund assets are valued primarily on the basis of current market quotations. If
market quotations are not readily available or do not accurately reflect fair
value for a security (in the Manager's judgment) or if a security's value has
been materially affected by events occurring after the close of the exchange or
market on which the security is principally traded, that security may be valued
by another method that the Underlying Fund's Board of Trustees/Directors
believes accurately reflects the fair value. Because some foreign securities
trade in markets and on exchanges that operate on weekends and U.S. holidays,
the values of some of the Underlying Fund's foreign investments may change on
days when investors cannot buy or redeem Underlying Fund shares.
Short-term "money market type" debt securities with remaining maturities
of sixty days or less are valued at amortized cost (which approximates market
value).
- --------------------------------------------------------------------------------
RISKS OF INVESTING IN THE UNDERLYING FUNDS. Each of the Underlying Funds in
which the Portfolio invests has its own investment risks, and those risks can
affect the value of the Portfolio's investments and therefore the value of the
Portfolio's shares. To the extent that the Portfolio invests more of its assets
in one Underlying Fund than in another, the Portfolio will have greater exposure
to the risks of that Underlying Fund.
- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Portfolio is
permitted to invest daily available cash balances in an affiliated money market
fund. The Portfolio may invest the available cash in Class E shares of
Oppenheimer Institutional Money Market Fund ("IMMF") which seeks current income
and stability of principal. IMMF is a registered open-end management investment
company, regulated as a money market fund under the Investment Company Act of
1940, as amended. The Manager is also the investment advisor of IMMF. The
Portfolio's investment in IMMF is included in the Statement of Investments. As a
shareholder, the Portfolio is subject to its proportional share of IMMF's Class
E expenses, including its management fee. The Manager will waive fees and/or
reimburse Portfolio expenses in an amount equal to the indirect management fees
incurred through the Portfolio's investment in IMMF.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Portfolio intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
32 | MODERATE INVESTOR FUND
The tax components of capital shown in the table below represent distribution
requirements the Portfolio must satisfy under the income tax regulations, losses
the Portfolio may be able to offset against income and gains realized in future
years and unrealized appreciation or depreciation of securities and other
investments for federal income tax purposes.
NET UNREALIZED
APPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2 TAX PURPOSES
----------------------------------------------------------------------
$ 1,031,319 $ 6,161,658 $ -- $ 24,893,377
1. During the fiscal year ended January 31, 2007, the Portfolio did not utilize
any capital loss carryforward.
2. During the fiscal year ended January 31, 2006, the Portfolio did not utilize
any capital loss carryforward.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Portfolio.
Accordingly, the following amounts have been reclassified for January 31, 2007.
Net assets of the Portfolio were unaffected by the reclassifications.
REDUCTION TO ACCUMULATED
INCREASE TO PAID-IN CAPITAL NET REALIZED GAIN ON INVESTMENTS 3
--------------------------------------------------------------------
$ 680,350 $ 680,350
3. $680,350, all of which was long-term capital gain, was distributed in
connection with Portfolio share redemptions.
The tax character of distributions paid during the years ended January 31, 2007
and January 31, 2006 was as follows:
YEAR ENDED PERIOD ENDED
JANUARY 31, 2007 JANUARY 31, 2006
----------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 12,134,458 $ 2,611,114
Long-term capital gain 1,357,805 --
-----------------------------------
Total $ 13,492,263 $ 2,611,114
===================================
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of January 31, 2007 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is
33 | MODERATE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
attributable to the tax deferral of losses or tax realization of financial
statement unrealized gain or loss.
Federal tax cost of securities $ 584,293,165
==============
Gross unrealized appreciation $ 30,268,682
Gross unrealized depreciation (5,375,305)
--------------
Net unrealized appreciation $ 24,893,377
==============
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Portfolio has adopted an unfunded retirement plan
(the "Plan") for the Portfolio's independent trustees. Benefits are based on
years of service and fees paid to each trustee during their period of service.
The Plan was frozen with respect to adding new participants effective December
31, 2006 (the "Freeze Date") and existing Plan Participants as of the Freeze
Date will continue to receive accrued benefits under the Plan. Active
independent trustees as of the Freeze Date have each elected a distribution
method with respect to their benefits under the Plan. During the year ended
January 31, 2007, the Portfolio's projected benefit obligations were increased
by $27,088 and payments of $689 were made to retired trustees, resulting in an
accumulated liability of $26,399 as of January 31, 2007.
The Board of Trustees has adopted a compensation deferral 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
Portfolio. 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 Portfolio or in other Oppenheimer funds selected by
the Trustee. The Portfolio purchases shares of the funds selected for deferral
by the Trustee in amounts equal to his or her deemed investment, resulting in a
Portfolio 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 Portfolio, and will not materially affect the
Portfolio's assets, liabilities or net investment income per share. Amounts will
be deferred until distributed in accordance to the compensation deferral 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.
34 | MODERATE INVESTOR FUND
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Portfolio on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Portfolio pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Portfolio, at a rate equal to
the Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line
item, if applicable, represents earnings on cash balances maintained by the
Portfolio during the period. Such interest expense and other custodian fees may
be paid with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Portfolio'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 Portfolio. In
the normal course of business, the Portfolio may also enter into contracts that
provide general indemnifications. The Portfolio's maximum exposure under these
arrangements is unknown as this would be dependent on future claims that may be
made against the Portfolio. 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 Portfolio has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED JANUARY 31, 2007 PERIOD ENDED JANUARY 31, 2006 1,2
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------
CLASS A
Sold 20,288,978 $ 223,056,909 10,348,982 $ 108,067,839
Dividends and/or
distributions reinvested 639,909 7,205,339 131,505 1,380,804
Redeemed (3,480,234) (38,407,180) (500,193) (5,260,635)
------------------------------------------------------------------
Net increase 17,448,653 $ 191,855,068 9,980,294 $ 104,188,008
==================================================================
- ---------------------------------------------------------------------------------------------
CLASS B
Sold 6,606,757 $ 71,847,371 3,602,759 $ 37,460,502
Dividends and/or
distributions reinvested 169,423 1,897,534 38,687 404,664
Redeemed (1,231,276) (13,503,812) (199,441) (2,085,278)
------------------------------------------------------------------
Net increase 5,544,904 $ 60,241,093 3,442,005 $ 35,779,888
==================================================================
35 | MODERATE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST Continued
YEAR ENDED JANUARY 31, 2007 PERIOD ENDED JANUARY 31, 2006 1,2
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------
CLASS C
Sold 9,578,836 $ 104,254,518 4,610,775 $ 47,936,138
Dividends and/or
distributions reinvested 232,677 2,603,646 48,772 509,662
Redeemed (1,715,538) (18,778,708) (193,607) (2,043,436)
------------------------------------------------------------------
Net increase 8,095,975 $ 88,079,456 4,465,940 $ 46,402,364
==================================================================
- ---------------------------------------------------------------------------------------------
CLASS N
Sold 4,596,537 $ 50,879,391 1,274,902 $ 13,414,589
Dividends and/or
distributions reinvested 94,107 1,056,826 14,511 152,071
Redeemed (1,279,558) (14,077,503) (163,425) (1,731,220)
------------------------------------------------------------------
Net increase 3,411,086 $ 37,858,714 1,125,988 $ 11,835,440
==================================================================
- ---------------------------------------------------------------------------------------------
CLASS Y
Sold 102,771 $ 1,171,814 35,197 $ 362,730
Dividends and/or
distributions reinvested 2,252 25,447 503 5,289
Redeemed (31,969) (351,751) (6,482) (68,355)
------------------------------------------------------------------
Net increase 73,054 $ 845,510 29,218 $ 299,664
==================================================================
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. The Portfolio sold 10,000 shares of Class A at a value of $100,000 and 100
shares of Class B, Class C, Class N and Class Y at a value of $1,000,
respectively, to the Manager upon seeding of the Portfolio on March 15, 2005.
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and money market funds, for the year ended January
31, 2007, were as follows:
PURCHASES SALES
- --------------------------------------------------------------------------------
Investment securities $ 398,091,239 $ 15,833,706
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the investment advisory agreement, the Manager does not
charge a management fee, but rather collects indirect management fees from
investments in the Underlying Funds. The weighted indirect management fees
collected from the Underlying Funds, as a percent of average daily net assets of
the Portfolio for the year ended January 31, 2007 was 0.56%.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS or the Transfer Agent), a
division of the Manager, acts as the transfer and shareholder servicing agent
for the Portfolio. The Portfolio pays OFS a per account fee. For the year ended
January 31, 2007, the Portfolio paid $433,544 to OFS for services to the
Portfolio.
36 | MODERATE INVESTOR FUND
Additionally, Class Y shares are subject to minimum fees of $10,000 per
annum for assets of $10 million or more. The Class Y shares are subject to the
minimum fees in the event that the per account fee does not equal or exceed the
applicable minimum fees. OFS may voluntarily waive the minimum fees.
- --------------------------------------------------------------------------------
OFFERING AND ORGANIZATIONAL COSTS. The Manager paid all offering and
organizational costs associated with the registration and seeding of the
Portfolio.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Portfolio, OppenheimerFunds Distributor, Inc. (the
Distributor) acts as the Portfolio's principal underwriter in the continuous
public offering of the Portfolio's classes of shares.
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Portfolio has adopted a Service Plan for
Class A shares. It reimburses the Distributor for a portion of its costs
incurred for services provided to accounts that hold Class A shares.
Reimbursement is made periodically at an annual rate of up to 0.25% of the
average annual net assets of Class A shares of the Portfolio. The Distributor
currently uses all of those fees to pay dealers, brokers, banks and other
financial institutions periodically for providing personal services and
maintenance of accounts of their customers that hold Class A shares. Any
unreimbursed expenses the Distributor incurs with respect to Class A shares in
any fiscal year cannot be recovered in subsequent periods. Fees incurred by the
Portfolio under the plan are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The
Portfolio has adopted Distribution and Service Plans for Class B, Class C and
Class N shares to compensate the Distributor for its services in connection with
the distribution of those shares and servicing accounts. Under the plans, the
Portfolio pays the Distributor an annual asset-based sales charge of 0.75% on
Class B and Class C shares and 0.25% on Class N shares. The Distributor also
receives a service fee of 0.25% per year under each plan. If either the Class B,
Class C or Class N plan is terminated by the Portfolio or by the shareholders of
a class, the Board of Trustees and its independent trustees must determine
whether the Distributor shall be entitled to payment from the Portfolio of all
or a portion of the service fee and/or asset-based sales charge in respect to
shares sold prior to the effective date of such termination. The Distributor
determines its uncompensated expenses under the plan at calendar quarter ends.
The Distributor's aggregate uncompensated expenses under the plan at December
31, 2006 for Class B, Class C and Class N shares were $1,467,225, $952,601 and
$434,332, respectively. Fees incurred by the Portfolio under the plans are
detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Portfolio. They are deducted from the
proceeds of sales of Portfolio shares prior to investment or from redemption
proceeds prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the
37 | MODERATE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
CDSC retained by the Distributor on the redemption of shares is shown in the
following table for the period indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- ---------------------------------------------------------------------------------------------------
January 31, 2007 $ 1,329,676 $ 6,009 $ 141,693 $ 29,564 $ 7,827
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. The Manager has voluntarily agreed to a
total expense limitation on the aggregate amount of combined direct
(fund-of-funds level) and indirect expense so that "Total expenses" as a
percentage of average daily net assets will not exceed the following annual
rates: 1.30%, 2.05%, 2.05%, 1.55% and 1.05%, for Class A, Class B, Class C,
Class N and Class Y, respectively. The Manager may modify or terminate this
undertaking at any time without notice to shareholders. These expense
limitations do not include Extraordinary Expenses and other expenses not
incurred in the ordinary course of the Portfolio's business. Notwithstanding the
foregoing limits, the Manager is not required to waive or reimburse Portfolio
expenses in excess of indirect management fees earned from investments in
Underlying Funds to assure that expenses do not exceed those limits.
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.
The Manager will waive fees and/or reimburse Portfolio expenses in an
amount equal to the indirect management fees incurred through the Portfolio's
investment in IMMF. During the year ended January 31, 2007, the Manager waived
$346 for IMMF management fees.
- --------------------------------------------------------------------------------
5. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Portfolio's tax returns to determine
whether it is "more-likely-than-not" that tax positions taken in the Portfolio's
tax return will be ultimately sustained. A tax liability and expense must be
recorded in respect of any tax position that, in Management's judgment, will not
be fully realized. FIN 48 is effective for fiscal years beginning after December
15, 2006. As of January 31, 2007, the Manager has evaluated the implications of
FIN 48 and does not currently anticipate a material impact to the Portfolio's
financial statements. The Manager will continue to monitor the Portfolio's tax
positions prospectively for potential future impacts.
38 | MODERATE INVESTOR FUND
In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 157, FAIR VALUE MEASUREMENTS. This standard establishes a
single authoritative definition of fair value, sets out a framework for
measuring fair value and expands disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. As of January 31, 2007, the Manager does not believe the
adoption of SFAS No. 157 will materially impact the financial statement amounts;
however, additional disclosures may be required about the inputs used to develop
the measurements and the effect of certain of the measurements on changes in net
assets for the period.
- --------------------------------------------------------------------------------
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 excluding the Portfolio) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.
39 | MODERATE INVESTOR FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER PORTFOLIO SERIES:
We have audited the accompanying statement of assets and liabilities of Moderate
Investor Fund (one of the portfolios constituting the Oppenheimer Portfolio
Series), including the statement of investments, as of January 31, 2007, the
related statement of operations for the year then ended, and the statements of
changes in net assets and the financial highlights for the year then ended and
for the period April 5, 2005 (commencement of operations) to January 31, 2006.
These financial statements and financial highlights are the responsibility of
the Portfolio's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of January 31, 2007, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Moderate Investor Fund as of January 31, 2007, the results of its operations for
the year then ended, and the changes in its net assets and the financial
highlights for the year then ended and for the period April 5, 2005
(commencement of operations) to January 31, 2006, in conformity with U.S.
generally accepted accounting principles.
KPMG LLP
Denver, Colorado
March 15, 2007
40 | MODERATE INVESTOR FUND
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2007, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Portfolio during
calendar year 2006. Regulations of the U.S. Treasury Department require the
Portfolio to report this information to the Internal Revenue Service.
Capital gain distributions of $0.0274 per share were paid to Class A,
Class B, Class C, Class N and Class Y shareholders, respectively, on December
29, 2006. Whether received in stock or in cash, the capital gain distribution
should be treated by shareholders as a gain from the sale of the capital assets
held for more than one year (long-term capital gains).
Dividends, if any, paid by the Portfolio during the fiscal year ended
January 31, 2007 which are not designated as capital gain distributions should
be multiplied by 15.57% to arrive at the amount eligible for the corporate
dividend-received deduction.
A portion, if any, of the dividends paid by the Portfolio during the
fiscal year ended January 31, 2007 which are not designated as capital gain
distributions are eligible for lower individual income tax rates to the extent
that the Portfolio has received qualified dividend income as stipulated by
recent tax legislation. $2,886,157 of the Portfolio's fiscal year taxable income
may be eligible for the lower individual income tax rates. In early 2007,
shareholders of record received information regarding the percentage of
distributions that are eligible for lower individual income tax rates.
Recent tax legislation allows a regulated investment company to designate
distributions not designated as capital gain distributions, as either interest
related dividends or short-term capital gain dividends, both of which are exempt
from the U.S. withholding tax applicable to non U.S. taxpayers. For the fiscal
year ended January 31, 2007, $54,916 or 0.45% of the ordinary distributions paid
by the Portfolio qualifies as an interest related dividend.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Portfolio to the Internal Revenue Service.
Because of the complexity of the federal regulations which may affect your
individual tax return and the many variations in state and local tax
regulations, we recommend that you consult your tax advisor for specific
guidance.
41 | MODERATE INVESTOR FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's web-site 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.
42 | MODERATE INVESTOR FUND
BOARD APPROVAL OF THE PORTFOLIO'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 about the
nature and extent of the services provided to the Fund and information regarding
the Manager's key personnel who 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
all administrative and clerical personnel who 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.
43 | MODERATE INVESTOR FUND
BOARD APPROVAL OF THE PORTFOLIO'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
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 fact 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 Rudi
Schadt, Jerry Webman and Kurt Wolfgruber, the members of the Fund's Asset
Allocation Team. The Board members also considered their experiences with the
Manager and its officers and other personnel through their service on the boards
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 its members have become knowledgeable about 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 and from 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 all other retail front-end load and
no-load mixed-asset target allocation moderate funds advised by other investment
advisers. The Board noted that the Fund's one-year and since inception
performance were better than its peer group median.
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 moderate mixed-asset target allocation
funds of funds and other funds with comparable asset levels and distribution
features. The Board noted that the Manager has agreed to voluntarily limit the
aggregate amount of combined direct (fund-of-funds level) and indirect expenses
so that total annual portfolio and underlying fund operating expenses as a
percentage of average daily net assets will not exceed the following annual
rates: 1.30% for Class A, 2.05% for Class B and Class C, 1.55% for Class N and
1.05% for Class Y. The
44 | MODERATE INVESTOR FUND
Manager may modify or terminate that undertaking at any time without notice to
shareholders. The Board noted that the Fund does not pay a management fee and
that the Fund's total expenses are lower than its peer group median.
ECONOMIES OF SCALE. The Board considered whether the Manager may realize
economies of scale in managing and supporting the Fund, the extent to which
those economies of scale would benefit the Fund's shareholders and the current
level of Fund assets.
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.
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.
45 | MODERATE INVESTOR FUND
TRUSTEES AND OFFICERS Unaudited
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NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS
FUND, LENGTH OF SERVICE, AGE HELD; NUMBER OF PORTFOLIOS IN THE FUND COMPLEX CURRENTLY OVERSEEN
INDEPENDENT TRUSTEES THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL,
COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
BRIAN F. WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since September 1995);
Chairman of the Board of Director of Special Value Opportunities Fund, LLC (registered investment company)
Trustees (since 2007) and (since September 2004); Investment Advisory Board Member of Zurich
Trustee (since 2005) Financial Services (insurance) (since October 2004); Board of Governing Trustees of
Age: 63 The Jackson Laboratory (non-profit) (since August 1990); Trustee of the Institute
for Advanced Study (non-profit educational institute) (since May 1992); Special
Limited Partner of Odyssey Investment Partners, LLC (private equity investment)
(January 1999-September 2004) and Managing Principal (1997-December 1998); Trustee
of Research Foundation of AIMR (2000-2002) (investment research, non-profit);
Governor, Jerome Levy Economics Institute of Bard College (August 1990-September
2001) (economics research); Director of Ray & Berendtson, Inc. (May 2000-April 2002)
(executive search firm). Oversees 59 portfolios in the OppenheimerFunds complex.
MATTHEW P. FINK, Trustee of the Committee for Economic Development (policy research foundation)
Trustee (since 2005) (since 2005); Director of ICI Education Foundation (education foundation) (October
Age: 66 1991-August 2006); President of the Investment Company Institute (trade association)
(October 1991-June 2004); Director of ICI Mutual Insurance Company (insurance
company) (October 1991-June 2004). Oversees 49 portfolios in the OppenheimerFunds
complex.
ROBERT G. GALLI, A trustee or director of other Oppenheimer funds. Oversees 59 portfolios in the
Trustee (since 2005) OppenheimerFunds complex.
Age: 73
PHILLIP A. GRIFFITHS, Distinguished Presidential Fellow for International Affairs (since 2002) and Member
Trustee (since 2005) (since 1979) of the National Academy of Sciences; Council on Foreign Relations
Age: 68 (since 2002); Director of GSI Lumonics Inc. (precision medical equipment supplier)
(since 2001); Senior Advisor of The Andrew W. Mellon Foundation (since 2001); Chair
of Science Initiative Group (since 1999); Member of the American Philosophical
Society (since 1996); Trustee of Woodward Academy (since 1983); Foreign Associate of
Third World Academy of Sciences; Director of the Institute for Advanced Study
(1991-2004); Director of Bankers Trust New York Corporation (1994-1999); Provost at
Duke University (1983-1991). Oversees 49 portfolios in the OppenheimerFunds complex.
MARY F. MILLER, Trustee of the American Symphony Orchestra (not-for-profit) (since October 1998);
Trustee (since 2005) and Senior Vice President and General Auditor of American Express Company (financial
Age: 64 services company) (July 1998-February 2003). Oversees 49 portfolios in the
OppenheimerFunds complex.
JOEL W. MOTLEY, Director of Columbia Equity Financial Corp. (privately-held financial adviser)
Trustee (since 2005) (since 2002); Managing Director of Carmona Motley, Inc. (privately-held financial
Age: 54 adviser) (since January 2002); Managing Director of Carmona Motley Hoffman Inc.
(privately-held financial adviser) (January 1998-December 2001); Member of the
Finance and Budget Committee of the Council on Foreign Relations, the Investment
Committee of the Episcopal Church of America, the Investment Committee and Board of
Human Rights Watch and the Investment Committee of Historic Hudson Valley. Oversees
49 portfolios in the OppenheimerFunds complex.
46 | MODERATE INVESTOR FUND
KENNETH A. RANDALL, Director of Dominion Resources, Inc. (electric utility holding company) (February
Trustee (since 2005) 1972-October 2005); Former Director of Prime Retail, Inc. (real estate investment
Age: 79 trust), Dominion Energy Inc. (electric power and oil & gas producer), Lumberman's
Mutual Casualty Company, American Motorists Insurance Company and American
Manufacturers Mutual Insurance Company; Former President and Chief Executive Officer
of The Conference Board, Inc. (international economic and business research).
Oversees 49 portfolios in the OppenheimerFunds complex.
RUSSELL S. REYNOLDS, JR., Chairman of The Directorship Search Group, Inc. (corporate governance consulting
Trustee (since 2005) and executive recruiting) (since 1993); Life Trustee of International House
Age: 75 (non-profit educational organization); Founder, Chairman and Chief Executive Officer
of Russell Reynolds Associates, Inc. (1969-1993); Banker at J.P. Morgan & Co.
(1958-1966); 1st Lt. Strategic Air Command, U.S. Air Force (1954-1958). Oversees 49
portfolios in the OppenheimerFunds complex.
JOSEPH M. WIKLER, Director of the following medical device companies: Medintec (since 1992) and Cathco
Trustee (since 2005) (since 1996); Director of Lakes Environmental Association (since 1996); Member of
Age: 65 the Investment Committee of the Associated Jewish Charities of Baltimore (since
1994); Director of Fortis/Hartford mutual funds (1994-December 2001). Oversees 49
portfolios in the OppenheimerFunds complex.
PETER I. WOLD, President of Wold Oil Properties, Inc. (oil and gas exploration and production
Trustee (since 2005) company) (since 1994); Vice President, Secretary and Treasurer of Wold Trona
Age: 59 Company, Inc. (soda ash processing and production) (since 1996); Vice President of
Wold Talc Company, Inc. (talc mining) (since 1999); Managing Member of
Hole-in-the-Wall Ranch (cattle ranching) (since 1979); Director and Chairman of the
Denver Branch of the Federal Reserve Bank of Kansas City (1993-1999); and Director
of PacifiCorp. (electric utility) (1995-1999). Oversees 49 portfolios in the
OppenheimerFunds complex.
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INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH
AND OFFICER FLOOR, NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN
INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN
OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR
REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH
OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President
President and Principal (since September 2000) of the Manager; President and a director or trustee of other
Executive Officer and Trustee Oppenheimer funds; President and Director of Oppenheimer Acquisition Corp. ("OAC")
(since 2005) (the Manager's parent holding company) and of Oppenheimer Partnership Holdings, Inc.
Age: 57 (holding company subsidiary of the Manager) (since July 2001); Director of
OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since November
2001); Chairman and Director of Shareholder Services, Inc. and of Shareholder
Financial Services, Inc. (transfer agent subsidiaries of the Manager) (since July
2001); President and Director of OppenheimerFunds Legacy Program (charitable trust
program established by the Manager) (since July 2001); Director of the following
investment advisory subsidiaries of the Manager: OFI Institutional Asset Management,
Inc., Centennial Asset Management Corporation, Trinity Investment Management
Corporation and Tremont Capital Management, Inc. (since November 2001), HarbourView
Asset Management Corporation and OFI Private Investments, Inc. (since July 2001);
President (since November 1, 2001) and Director (since July 2001) of Oppenheimer
Real Asset Management, Inc.; Executive Vice President of
47 | MODERATE INVESTOR FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
JOHN V. MURPHY, Massachusetts Mutual Life Insurance Company (OAC's parent company) (since February
Continued 1997); Director of DLB Acquisition Corporation (holding company parent of Babson
Capital Management LLC) (since June 1995); Member of the Investment Company
Institute's Board of Governors (since October 3, 2003); Chief Operating Officer of
the Manager (September 2000-June 2001); President and Trustee of MML Series
Investment Fund and MassMutual Select Funds (open-end investment companies)
(November 1999-November 2001); Director of C.M. Life Insurance Company (September
1999-August 2000); President, Chief Executive Officer and Director of MML Bay State
Life Insurance Company (September 1999-August 2000); Director of Emerald Isle
Bancorp and Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp)
(June 1989-June 1998). Oversees 96 portfolios in the OppenheimerFunds complex.
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OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. SCHADT,
THE FUND WEBMAN, WOLFGRUBER, ZACK, GILLESPIE AND MS. BLOOMBERG, TWO WORLD FINANCIAL CENTER,
225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY, WIXTED,
PETERSEN, SZILAGYI AND MS. IVES, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO
80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
RUDI W. SCHADT, Vice President, Director of Research in Product Design and Risk Management of the
Vice President and Portfolio Manager. Prior to joining the Manager in February 2002 he was a Director and Senior
Manager (since 2005) Quantitative Analyst (2000-2001) at UBS Asset Management prior to which he was an
Age: 49 Associate Director of Research (since June 1999) and Senior Researcher and Portfolio
Manager (from June 1997) at State Street Global Advisors. An officer of 11
portfolios in the OppenheimerFunds complex.
DR. JERRY WEBMAN, Chief Economist of the Manager (since 2006); Senior Vice President (since February
Vice President and Portfolio 1996) and Senior Investment Officer and Director (since 1997) of the Manager's Fixed
Manager (since 2005) Income Investments; Senior Vice President (since May 1999) of HarbourView Asset
Age: 57 Management Corporation. An officer of 8 other portfolios in the OppenheimerFunds
complex.
KURT WOLFGRUBER, Executive Vice President of the Manager (since March 2003) and Chief Investment
Vice President and Portfolio Officer and Director of the Manager (since July 2003) of the Manager. He has been
Manager (since 2005) Director of HarbourView Asset Management Corporation and of OFI Institutional Asset
Age: 57 Management, Inc. (since June 2003) and of Tremont Capital Management, Inc. (since
October 2001). He is also an officer of 8 other portfolios in the OppenheimerFunds
complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March
Vice President and Chief 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset
Compliance Officer Management Corporation and Shareholder Services, Inc. (since June 1983). Former Vice
(since 2005) President and Director of Internal Audit of the Manager (1997-February 2004). An
Age: 56 officer of 96 portfolios in the OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of
Treasurer and Principal the following: HarbourView Asset Management Corporation, Shareholder Financial
Financial & Accounting Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management
Officer (since 2005) Corporation, and Oppenheimer Partnership Holdings, Inc. (since March 1999), OFI
Age: 47 Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd.
(since May 2000), OppenheimerFunds plc (since May 2000), OFI Institutional Asset
Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program
(charitable trust program established
48 | MODERATE INVESTOR FUND
BRIAN W. WIXTED, by the Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI
Continued Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant
Treasurer of the following: OAC (since March 1999), Centennial Asset Management
Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April
2000-June 2003); Principal and Chief Operating Officer of Bankers Trust
Company-Mutual Fund Services Division (March 1995-March 1999). An officer of 96
portfolios in the OppenheimerFunds complex.
BRIAN S. PETERSEN, Vice President of the Manager (since February 2007); Manager/Financial Product
Assistant Treasurer Accounting of the Manager (November 1998-July 2002). An officer of 96 portfolios in
(since 2004) the OppenheimerFunds complex.
Age: 36
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Financial
Assistant Treasurer Reporting and Compliance of First Data Corporation (April 2003-July 2004); Manager
(since 2005) of Compliance of Berger Financial Group LLC (May 2001-March 2003); Director of
Age: 36 Mutual Fund Operations at American Data Services, Inc. (September 2000-May 2001). An
officer of 96 portfolios in the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002)
Secretary (since 2005) of the Manager; General Counsel and Director of the Distributor (since December
Age: 58 2001); General Counsel of Centennial Asset Management Corporation (since December
2001); Senior Vice President and General Counsel of HarbourView Asset Management
Corporation (since December 2001); Secretary and General Counsel of OAC (since
November 2001); Assistant Secretary (since September 1997) and Director (since
November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice
President and Director of Oppenheimer Partnership Holdings, Inc. (since December
2002); Director of Oppenheimer Real Asset Management, Inc. (since November 2001);
Senior Vice President, General Counsel and Director of Shareholder Financial
Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice
President, General Counsel and Director of OFI Private Investments, Inc. and OFI
Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy
Program (since June 2003); Senior Vice President and General Counsel of OFI
Institutional Asset Management, Inc. (since November 2001); Director of
OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President (May
1985-December 2003), Acting General Counsel (November 2001-February 2002) and
Associate General Counsel (May 1981-October 2001) of the Manager; Assistant
Secretary of the following: Shareholder Services, Inc. (May 1985-November 2001),
Shareholder Financial Services, Inc. (November 1989-November 2001), and
OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of 96
portfolios in the OppenheimerFunds complex.
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First Vice
Assistant Secretary President (April 2001-April 2004), Associate General Counsel (December 2000-April
(since 2004) 2004), Corporate Vice President (May 1999-April 2001) and Assistant General Counsel
Age: 39 (May 1999-December 2000) of UBS Financial Services Inc. (formerly, PaineWebber
Incorporated). An officer of 96 portfolios in the OppenheimerFunds complex.
49 | MODERATE INVESTOR FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since
Assistant Secretary October 2003) of the Manager; Vice President (since 1999) and Assistant Secretary
(since 2001) (since October 2003) of the Distributor; Assistant Secretary of Centennial Asset
Age: 41 Management Corporation (since October 2003); Vice President and Assistant Secretary
of Shareholder Services, Inc. (since 1999); Assistant Secretary of OppenheimerFunds
Legacy Program and Shareholder Financial Services, Inc. (since December 2001);
Assistant Counsel of the Manager (August 1994-October 2003). An officer of 96
portfolios in the OppenheimerFunds complex.
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since September
Assistant Secretary 2004); First Vice President (2001-September 2004); Director (2000-September 2004)
(since 2004) and Vice President (1998-2000) of Merrill Lynch Investment Management. An officer of
Age: 43 96 portfolios in the OppenheimerFunds complex.
THE PORTFOLIO'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL
INFORMATION ABOUT THE PORTFOLIO'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT
CHARGE UPON REQUEST, BY CALLING 1.800.525.7048.
50 | MODERATE INVESTOR FUND
EQUITY INVESTOR FUND
TOP HOLDINGS AND ALLOCATIONS
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ASSET CLASS ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Global Equity 29.8%
U.S. Equity 70.0
Money Market 0.2
Portfolio holdings and allocations are subject to change. Percentages are as of
January 31, 2007, and are based on the total market value of investments in
affiliated companies.
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8 | EQUITY INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
HOW HAS THE PORTFOLIO PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS,
INC., OF THE PORTFOLIO'S PERFORMANCE DURING ITS FISCAL YEAR ENDED JANUARY 31,
2007, FOLLOWED BY A GRAPHICAL COMPARISON OF THE PORTFOLIO'S PERFORMANCE TO AN
APPROPRIATE BROAD-BASED MARKET INDEX.
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE. For its fiscal year ending
January 31, 2007, Equity Investor Fund's Class A shares, without sales charge,
returned 10.85% and under-performed its benchmark, the S&P 500 Index, which
returned 14.53%. We attribute this relative underperformance to the cumulative
underperformance of the Portfolio's underlying funds relative to their
respective benchmarks. In terms of individual detractors on a fund level, such
factors included volatile global equity markets and disappointing stock
selection within the Portfolio's underlying funds. Additionally, over the last
12-months, the global market tended to not appropriately reward high-quality
companies that consistently grew their earnings. This situation ended up hurting
many of the Portfolio's underlying funds, as their investment philosophies tend
to emphasize strong earnings growth.
Despite the Portfolio's relative underperformance, its absolute
performance was favorable. Strong contributions made by three out of the
Portfolio's top five allocations helped Portfolio performance. Oppenheimer
Global Fund (the Portfolio's largest holding), Oppenheimer Value Fund and
Oppenheimer Main Street Fund all boosted Portfolio returns. The strong
performance of those Funds can be attributed to successful security selection.
An additional positive contributor was the Oppenheimer Developing Markets Fund.
Among the top performance detractors to the Portfolio were the Oppenheimer
Capital Appreciation Fund (the Portfolio's second largest holding) and the
Oppenheimer Global Opportunities Fund. While the Oppenheimer Capital
Appreciation Fund was partially hurt by its exposure to the underperforming US
growth stock sector, the Oppenheimer Global Opportunities Fund experienced
disappointing returns due to both asset allocation and stock selection issues.
COMPARING THE PORTFOLIO'S PERFORMANCE TO THE MARKET. The graphs that follow show
the performance of a hypothetical $10,000 investment in each class of shares of
the Portfolio held until January 31, 2007. Performance is measured from the
inception of Classes A, B, C, N and Y on April 5, 2005. The Portfolio's
performance reflects the deduction of the maximum initial sales charge on Class
A shares, the applicable contingent deferred sales charge on Class B, Class C
and Class N shares, and reinvestments of all dividends and capital gains
distributions. Past performance cannot guarantee future results.
The Portfolio's performance is compared to the performance of the S&P 500
Index. The S&P 500 Index is an unmanaged index of equity securities. Index
performance reflects the reinvestment of income but does not consider the effect
of transaction costs, and
9 | EQUITY INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
none of the data in the graphs shows the effect of taxes. The Portfolio s
performance reflects the effects of the Portfolio's business and operating
expenses. While index comparisons may be useful to provide a benchmark for the
Portfolio's performance, it must be noted that the Portfolio's investments are
not limited to the investments in the index.
10 | EQUITY INVESTOR FUND
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Equity Investor Fund (Class A)
S&P 500 Index
MSCI World Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Equity Investor Fund
(Class A) S&P 500 Index MSCI World Index
04/05/2005 $ 9,425 $ 10,000 $ 10,000
04/30/2005 $ 9,199 $ 9,810 $ 9,788
07/31/2005 $ 9,991 $ 10,514 $ 10,414
10/31/2005 $ 9,972 $ 10,327 $ 10,514
01/31/2006 $ 11,071 $ 11,005 $ 11,612
04/30/2006 $ 11,433 $ 11,322 $ 12,226
07/31/2006 $ 10,746 $ 11,079 $ 11,897
10/31/2006 $ 11,624 $ 12,013 $ 12,817
01/31/2007 $ 12,272 $ 12,603 $ 13,570
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/07
1-Year 4.48% Since Inception (4/5/05) 11.89%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 4% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 16 FOR FURTHER
INFORMATION.
11 | EQUITY INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Equity Investor Fund (Class B)
S&P 500 Index
MSCI World Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Equity Investor Fund
(Class B) S&P 500 Index MSCI World Index
04/05/2005 $ 10,000 $ 10,000 $ 10,000
04/30/2005 $ 9,750 $ 9,810 $ 9,788
07/31/2005 $ 10,580 $ 10,514 $ 10,414
10/31/2005 $ 10,540 $ 10,327 $ 10,514
01/31/2006 $ 11,670 $ 11,005 $ 11,612
04/30/2006 $ 12,023 $ 11,322 $ 12,226
07/31/2006 $ 11,276 $ 11,079 $ 11,897
10/31/2006 $ 12,185 $ 12,013 $ 12,817
01/31/2007 $ 12,433 $ 12,603 $ 13,570
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/07
1-Year 4.97% Since Inception (4/5/05) 12.69%
12 | EQUITY INVESTOR FUND
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Equity Investor Fund (Class C)
S&P 500 Index
MSCI World Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Equity Investor Fund
(Class C) S&P 500 Index MSCI World Index
04/05/2005 $ 10,000 $ 10,000 $ 10,000
04/30/2005 $ 9,750 $ 9,810 $ 9,788
07/31/2005 $ 10,570 $ 10,514 $ 10,414
10/31/2005 $ 10,530 $ 10,327 $ 10,514
01/31/2006 $ 11,664 $ 11,005 $ 11,612
04/30/2006 $ 12,028 $ 11,322 $ 12,226
07/31/2006 $ 11,280 $ 11,079 $ 11,897
10/31/2006 $ 12,180 $ 12,013 $ 12,817
01/31/2007 $ 12,831 $ 12,603 $ 13,570
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/07
1-Year 9.00% Since Inception (4/5/05) 14.66%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 4% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 16 FOR FURTHER
INFORMATION.
13 | EQUITY INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Equity Investor Fund (Class N)
S&P 500 Index
MSCI World Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Equity Investor Fund
(Class N) S&P 500 Index MSCI World Index
04/05/2005 $ 10,000 $ 10,000 $ 10,000
04/30/2005 $ 9,750 $ 9,810 $ 9,788
07/31/2005 $ 10,600 $ 10,514 $ 10,414
10/31/2005 $ 10,580 $ 10,327 $ 10,514
01/31/2006 $ 11,734 $ 11,005 $ 11,612
04/30/2006 $ 12,109 $ 11,322 $ 12,226
07/31/2006 $ 11,380 $ 11,079 $ 11,897
10/31/2006 $ 12,301 $ 12,013 $ 12,817
01/31/2007 $ 12,986 $ 12,603 $ 13,570
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/07
1-Year 9.67% Since Inception (4/5/05) 15.42%
14 | EQUITY INVESTOR FUND
CLASS Y SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Equity Investor Fund (Class Y)
S&P 500 Index
MSCI World Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Equity Investor Fund
(Class Y) S&P 500 Index MSCI World Index
04/05/2005 $ 10,000 $ 10,000 $ 10,000
04/30/2005 $ 9,760 $ 9,810 $ 9,788
07/31/2005 $ 10,600 $ 10,514 $ 10,414
10/31/2005 $ 10,600 $ 10,327 $ 10,514
01/31/2006 $ 11,769 $ 11,005 $ 11,612
04/30/2006 $ 12,164 $ 11,322 $ 12,226
07/31/2006 $ 11,444 $ 11,079 $ 11,897
10/31/2006 $ 12,407 $ 12,013 $ 12,817
01/31/2007 $ 13,113 $ 12,603 $ 13,570
AVERAGE ANNUAL TOTAL RETURNS OF CLASS Y SHARES OF THE PORTFOLIO AT 1/31/07
1-Year 11.42% Since Inception (4/5/05) 16.04%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 4% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 16 FOR FURTHER
INFORMATION.
15 | EQUITY INVESTOR FUND
NOTES
- --------------------------------------------------------------------------------
Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. The Portfolio's total returns
shown do not reflect the deduction of income taxes on an individual's
investment. Taxes may reduce your actual investment returns on income or gains
paid by the Portfolio or any gains you may realize if you sell your shares.
INVESTORS SHOULD CONSIDER THE PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, AND
OTHER CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PORTFOLIO'S
PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT THE PORTFOLIO, AND MAY BE
OBTAINED BY ASKING YOUR FINANCIAL ADVISOR, CALLING US AT 1.800.525.7048 OR
VISITING OUR WEBSITE AT WWW.OPPENHEIMERFUNDS.COM. READ THE PROSPECTUS CAREFULLY
BEFORE INVESTING.
The Portfolio's investment strategy and focus can change over time. The mention
of specific fund holdings does not constitute a recommendation by
OppenheimerFunds, Inc.
CLASS A shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class A returns include the maximum initial sales charge of
5.75%.
CLASS B shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 4% (since inception). Class B shares are subject
to an annual 0.75% asset-based sales charge.
CLASS C shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
CLASS N shares of the Portfolio were first publicly offered on 4/5/05. Class N
shares are offered only through retirement plans. Unless otherwise noted, Class
N returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
CLASS Y shares of the Portfolio were first publicly offered on 4/5/05. Class Y
shares are offered only to certain institutional investors under special
agreements with the Distributor.
An explanation of the calculation of performance is in the Portfolio's Statement
of Additional Information.
16 | EQUITY INVESTOR FUND
PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
PORTFOLIO EXPENSES. As a shareholder of the Portfolio, you incur two types of
costs: (1) transaction costs, which may include sales charges (loads) on
purchase payments, contingent deferred sales charges on redemptions; and
redemption fees, if any; and (2) ongoing costs, including management fees;
distribution and service fees; and other Portfolio expenses. These examples are
intended to help you understand your ongoing costs (in dollars) of investing in
the Portfolio and to compare these costs with the ongoing costs of investing in
other mutual funds.
The examples 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 January 31, 2007.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Portfolio's actual expense ratio for each class of shares,
and an assumed rate of return of 5% per year before expenses, which is not the
Portfolio's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Portfolio and other funds. To do so, compare this 5%
hypothetical example for the class of shares you hold with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front-end
or contingent deferred sales charges (loads), or a $12.00 fee imposed annually
on accounts valued at less than $500.00 (subject to exceptions described in
17 | EQUITY INVESTOR FUND
PORTFOLIO 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
(8/1/06) (1/31/07) JANUARY 31, 2007
- ----------------------------------------------------------------------
Class A Actual $ 1,000.00 $ 1,142.00 $ 2.70
- ----------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,022.68 2.55
- ----------------------------------------------------------------------
Class B Actual 1,000.00 1,138.10 7.03
- ----------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,018.65 6.64
- ----------------------------------------------------------------------
Class C Actual 1,000.00 1,137.50 6.92
- ----------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,018.75 6.53
- ----------------------------------------------------------------------
Class N Actual 1,000.00 1,141.10 3.62
- ----------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,021.83 3.42
- ----------------------------------------------------------------------
Class Y Actual 1,000.00 1,145.80 0.11
- ----------------------------------------------------------------------
Class Y Hypothetical 1,000.00 1,025.10 0.10
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Portfolio's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios,
excluding all underlying fund expenses, based on the 6-month period ended
January 31, 2007 are as follows:
CLASS EXPENSE RATIOS
- ------------------------
Class A 0.50%
- ------------------------
Class B 1.30
- ------------------------
Class C 1.28
- ------------------------
Class N 0.67
- ------------------------
Class Y 0.02
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Portfolio's Manager that can be terminated at any time, without advance
notice. The "Financial Highlights" tables in the Portfolio's financial
statements, included in this report, also show the gross expense ratios, without
such waivers or reimbursements.
- --------------------------------------------------------------------------------
18 | EQUITY INVESTOR FUND
STATEMENT OF INVESTMENTS January 31, 2007
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- ---------------------------------------------------------------------------------------------
INVESTMENTS IN AFFILIATED COMPANIES--99.8% 1
- ---------------------------------------------------------------------------------------------
GLOBAL EQUITY--29.7%
Oppenheimer Developing Markets Fund, Cl. Y 425,351 $ 17,371,323
- ---------------------------------------------------------------------------------------------
Oppenheimer Global Fund, Cl. Y 915,262 68,287,717
- ---------------------------------------------------------------------------------------------
Oppenheimer Global Opportunities Fund, Cl. Y 430,055 15,761,516
--------------
101,420,556
- ---------------------------------------------------------------------------------------------
U.S. EQUITY--69.8%
Oppenheimer Capital Appreciation Fund, Cl. Y 2 1,364,861 66,414,138
- ---------------------------------------------------------------------------------------------
Oppenheimer Main Street Fund, Cl. Y 1,239,380 51,335,107
- ---------------------------------------------------------------------------------------------
Oppenheimer Main Street Opportunity Fund, Cl. Y 2,241,434 34,092,207
- ---------------------------------------------------------------------------------------------
Oppenheimer Main Street Small Cap Fund, Cl. Y 1,423,589 33,710,600
- ---------------------------------------------------------------------------------------------
Oppenheimer Value Fund, Cl. Y 1,940,570 52,744,684
--------------
238,296,736
- ---------------------------------------------------------------------------------------------
MONEY MARKET--0.3%
Oppenheimer Institutional Money Market Fund, Cl. E, 5.35% 3 812,798 812,798
- ---------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $320,374,505) 99.8% 340,530,090
- ---------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.2 779,347
--------------------------
NET ASSETS 100.0% $ 341,309,437
==========================
19 | EQUITY INVESTOR FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended January 31, 2007 by virtue of the Portfolio owning at
least 5% of the voting securities of the issuer or as a result of the Portfolio
and the issuer having the same investment advisor. Transactions during the
period in which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
JAN. 31, 2006 ADDITIONS REDUCTIONS JAN. 31, 2007
- ------------------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation Fund, Cl. Y 393,164 983,560 11,863 1,364,861
Oppenheimer Developing Markets Fund, Cl. Y 131,194 314,497 20,340 425,351
Oppenheimer Global Fund, Cl. Y 265,671 662,425 12,834 915,262
Oppenheimer Global Opportunities Fund, Cl. Y 124,676 323,417 18,038 430,055
Oppenheimer Institutional Money Market
Fund, Cl. E, 5.35% -- 18,991,348 18,178,550 812,798
Oppenheimer Main Street Fund, Cl. Y 347,889 901,686 10,195 1,239,380
Oppenheimer Main Street Opportunity Fund, Cl. Y 633,885 1,625,988 18,439 2,241,434
Oppenheimer Main Street Small Cap Fund, Cl. Y 409,733 1,025,265 11,409 1,423,589
Oppenheimer Value Fund, Cl. Y 541,824 1,414,683 15,937 1,940,570
VALUE DIVIDEND REALIZED
SEE NOTE 1 INCOME GAIN (LOSS)
- ------------------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation Fund, Cl. Y $ 66,414,138 $ -- $ (12,619)
Oppenheimer Developing Markets Fund, Cl. Y 17,371,323 526,250 a 6,359
Oppenheimer Global Fund, Cl. Y 68,287,717 877,397 a (15,027)
Oppenheimer Global Opportunities Fund, Cl. Y 15,761,516 1,056,485 a (933)
Oppenheimer Institutional Money Market Fund, Cl. E, 5.35% 812,798 11,695 --
Oppenheimer Main Street Fund, Cl. Y 51,335,107 579,774 a (5,715)
Oppenheimer Main Street Opportunity Fund, Cl. Y 34,092,207 911,538 a (4,346)
Oppenheimer Main Street Small Cap Fund, Cl. Y 33,710,600 595,977 a (12,265)
Oppenheimer Value Fund, Cl. Y 52,744,684 948,586 a (4,716)
--------------------------------------------
$ 340,530,090 $ 5,507,702 $ (49,262)
============================================
a All or portion of the transactions were the results of a reinvestment of
dividends.
2. Non-income producing security.
3. Rate shown is the 7-day yield as of January 31, 2007.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20 | EQUITY INVESTOR FUND
STATEMENT OF ASSETS AND LIABILITIES January 31, 2007
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments--
affiliated companies (cost $320,374,505) $ 340,530,090
- -------------------------------------------------------------------------------------------------------------
Cash 5,923
- -------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 2,010,024
Investments sold 82,990
Interest and dividends 4,474
Other 5,647
--------------
Total assets 342,639,148
- -------------------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 903,935
Shares of beneficial interest redeemed 234,836
Distribution and service plan fees 68,119
Transfer and shareholder servicing agent fees 51,098
Shareholder communications 32,192
Trustees' compensation 16,564
Other 22,967
--------------
Total liabilities 1,329,711
- -------------------------------------------------------------------------------------------------------------
NET ASSETS $ 341,309,437
==============
- -------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 27,107
- -------------------------------------------------------------------------------------------------------------
Additional paid-in capital 313,032,247
- -------------------------------------------------------------------------------------------------------------
Accumulated net investment loss (16,141)
- -------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments 8,110,639
- -------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 20,155,585
--------------
NET ASSETS $ 341,309,437
==============
21 | EQUITY INVESTOR FUND
STATEMENT OF ASSETS AND LIABILITIES Continued
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- -------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of $173,539,184
and 13,740,671 shares of beneficial interest outstanding) $ 12.63
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $ 13.40
- -------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $59,405,873 and 4,736,815 shares of
beneficial interest outstanding) $ 12.54
- -------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $70,691,519 and 5,639,824 shares of
beneficial interest outstanding) $ 12.53
- -------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $35,651,911 and 2,829,694 shares of
beneficial interest outstanding) $ 12.60
- -------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net assets of
$2,020,950 and 159,542 shares of beneficial interest outstanding) $ 12.67
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 | EQUITY INVESTOR FUND
STATEMENT OF OPERATIONS For the Year Ended January 31, 2007
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ---------------------------------------------------------------------------------------------------------------
Dividends from affiliated companies $ 5,507,702
- ---------------------------------------------------------------------------------------------------------------
Interest 33,983
- ---------------------------------------------------------------------------------------------------------------
Other income 861
----------------
Total investment income 5,542,546
- ---------------------------------------------------------------------------------------------------------------
EXPENSES
- ---------------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 268,972
Class B 384,556
Class C 451,719
Class N 93,970
- ---------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 209,311
Class B 88,498
Class C 100,720
Class N 29,532
Class Y 142
- ---------------------------------------------------------------------------------------------------------------
Shareholder communications:
Class A 49,029
Class B 24,131
Class C 20,603
Class N 2,473
Class Y 4
- ---------------------------------------------------------------------------------------------------------------
Trustees' compensation 17,007
- ---------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 1,138
- ---------------------------------------------------------------------------------------------------------------
Other 27,749
----------------
Total expenses 1,769,554
Less reduction to custodian expenses (76)
Less waivers and reimbursements of expenses (221)
----------------
Net expenses 1,769,257
- ---------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 3,773,289
- ---------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ---------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments:
Affiliated companies (49,262)
Distributions received from affiliated companies 9,162,902
----------------
Net realized gain 9,113,640
- ---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 14,991,693
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 27,878,622
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23 | EQUITY INVESTOR FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED JANUARY 31, 2007 2006 1
- -------------------------------------------------------------------------------------------------------------
OPERATIONS
- -------------------------------------------------------------------------------------------------------------
Net investment income $ 3,773,289 $ 591,687
- -------------------------------------------------------------------------------------------------------------
Net realized gain 9,113,640 1,283,674
- -------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 14,991,693 5,163,892
-------------------------------
Net increase in net assets resulting from operations 27,878,622 7,039,253
- -------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (2,293,120) (380,503)
Class B (510,255) (127,617)
Class C (615,967) (120,802)
Class N (486,103) (41,332)
Class Y (30,630) (6,678)
-------------------------------
(3,936,075) (676,932)
- -------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (522,857) (67,178)
Class B (182,273) (28,621)
Class C (214,177) (25,903)
Class N (112,075) (7,402)
Class Y (5,808) (1,071)
-------------------------------
(1,037,190) (130,175)
- -------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest transactions:
Class A 113,644,714 44,717,597
Class B 36,285,425 17,711,412
Class C 45,942,782 18,857,875
Class N 27,802,175 5,289,149
Class Y 1,165,948 650,857
-------------------------------
224,841,044 87,226,890
- -------------------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------------------
Total increase 247,746,401 93,459,036
- -------------------------------------------------------------------------------------------------------------
Beginning of period 93,563,036 104,000 2
-------------------------------
End of period (including accumulated net investment loss of
$16,141 and $41, respectively) $ 341,309,437 $ 93,563,036
===============================
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Reflects the value of the Manager's initial seed money investment on March
15, 2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | EQUITY INVESTOR FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED JANUARY 31, 2007 2006 1
- -------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.60 $ 10.00
- -------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .25 .22
Net realized and unrealized gain 1.00 1.52
-------------------------------
Total from investment operations 1.25 1.74
- -------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.18) (.12)
Distributions from net realized gain (.04) (.02)
-------------------------------
Total dividends and distributions to shareholders (.22) (.14)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.63 $ 11.60
===============================
- -------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 10.85% 17.46%
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 173,539 $ 48,132
- -------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 109,318 $ 17,321
- -------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.07% 2.47%
Total expenses 5 0.50% 0.70%
Expenses after waivers and reimbursements
and reduction to custodian expenses 0.50% 0.68%
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 2% 7%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2007 1.15%
Period Ended January 31, 2006 1.39
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | EQUITY INVESTOR FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS B YEAR ENDED JANUARY 31, 2007 2006 1
- -------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.55 $ 10.00
- -------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .14 .16
Net realized and unrealized gain 1.01 1.50
-------------------------------
Total from investment operations 1.15 1.66
- -------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.12) (.09)
Distributions from net realized gain (.04) (.02)
-------------------------------
Total dividends and distributions to shareholders (.16) (.11)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.54 $ 11.55
===============================
- -------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 9.97% 16.70%
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 59,406 $ 19,078
- -------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 38,569 $ 7,050
- -------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 1.19% 1.83%
Total expenses 5 1.31% 1.53%
Expenses after waivers and reimbursements
and reduction to custodian expenses 1.31% 1.50%
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 2% 7%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2007 1.96%
Period Ended January 31, 2006 2.22
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | EQUITY INVESTOR FUND
CLASS C YEAR ENDED JANUARY 31, 2007 2006 1
- --------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.54 $ 10.00
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .14 .15
Net realized and unrealized gain 1.01 1.51
---------------------
Total from investment operations 1.15 1.66
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.12) (.10)
Distributions from net realized gain (.04) (.02)
---------------------
Total dividends and distributions to shareholders (.16) (.12)
- --------------------------------------------------------------------------------
Net asset value, end of period $ 12.53 $ 11.54
=====================
- --------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 10.00% 16.64%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 70,691 $ 20,034
- --------------------------------------------------------------------------------
Average net assets (in thousands) $ 45,312 $ 6,131
- --------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 1.23% 1.71%
Total expenses 5 1.29% 1.48%
Expenses after waivers and reimbursements
and reduction to custodian expenses 1.29% 1.45%
- --------------------------------------------------------------------------------
Portfolio turnover rate 2% 7%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2007 1.94%
Period Ended January 31, 2006 2.17
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | EQUITY INVESTOR FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS N YEAR ENDED JANUARY 31, 2007 2006 1
- --------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.59 $ 10.00
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .29 .24
Net realized and unrealized gain .94 1.49
---------------------
Total from investment operations 1.23 1.73
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.18) (.12)
Distributions from net realized gain (.04) (.02)
---------------------
Total dividends and distributions to shareholders (.22) (.14)
- --------------------------------------------------------------------------------
Net asset value, end of period $ 12.60 $ 11.59
=====================
- --------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 10.67% 17.34%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 35,652 $ 5,608
- --------------------------------------------------------------------------------
Average net assets (in thousands) $ 18,874 $ 1,717
- --------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.47% 2.62%
Total expenses 5 0.69% 0.79%
Expenses after waivers and reimbursements and
reduction to custodian expenses 0.69% 0.78%
- --------------------------------------------------------------------------------
Portfolio turnover rate 2% 7%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2007 1.34%
Period Ended January 31, 2006 1.48
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | EQUITY INVESTOR FUND
CLASS Y YEAR ENDED JANUARY 31, 2007 2006 1
- --------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.61 $ 10.00
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .29 .24
Net realized and unrealized gain 1.03 1.52
---------------------
Total from investment operations 1.32 1.76
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.22) (.13)
Distributions from net realized gain (.04) (.02)
---------------------
Total dividends and distributions to shareholders (.26) (.15)
- --------------------------------------------------------------------------------
Net asset value, end of period $ 12.67 $ 11.61
=====================
- --------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 11.42% 17.69%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 2,021 $ 711
- --------------------------------------------------------------------------------
Average net assets (in thousands) $ 1,267 $ 331
- --------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.46% 2.67%
Total expenses 5 0.03% 0.30%
Expenses after waivers and reimbursements and
reduction to custodian expenses 0.03% 0.27%
- --------------------------------------------------------------------------------
Portfolio turnover rate 2% 7%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2007 0.68%
Period Ended January 31, 2006 0.99
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | EQUITY INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Portfolio Series (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
Equity Investor Fund formerly known as Aggressive Investor Fund (the
"Portfolio") is a series of the Fund whose investment objective is to seek long
term growth of capital. The Portfolio is a special type of mutual fund known as
a "fund of funds" because it invests in other mutual funds. The Portfolio
normally invests in a portfolio consisting of a target-weighted allocation in
Class A or Class Y shares of other Oppenheimer funds. The Fund's investment
advisor is OppenheimerFunds, Inc. (the "Manager").
The Portfolio offers Class A, Class B, Class C, Class N and Class Y
shares. Class A shares are sold at their offering price, which is normally net
asset value plus a front-end sales charge. Class B, Class C and Class N shares
are sold without a front-end sales charge but may be subject to a contingent
deferred sales charge (CDSC). Class N shares are sold only through retirement
plans. Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC, however, the institutional investor
may impose charges on those accounts. All classes of shares have identical
rights and voting privileges with respect to the Portfolio in general and
exclusive voting rights on matters that affect that class alone. Earnings, net
assets and net asset value per share may differ due to each class having its own
expenses, such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares six
years after the date of purchase.
Under normal market conditions, the Manager will invest the Portfolio's
assets in shares of Oppenheimer Capital Appreciation Fund, Oppenheimer
Developing Markets Fund, Oppenheimer Global Fund, Oppenheimer Global
Opportunities Fund, Oppenheimer Main Street Fund(R), Oppenheimer Main Street
Opportunity Fund(R), Oppenheimer Main Street Small Cap Fund(R), Oppenheimer
Value Fund and Oppenheimer Institutional Money Market Fund (individually, an
"Underlying Fund" and collectively, the "Underlying Funds").
The following is a summary of significant accounting policies consistently
followed by the Portfolio.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Portfolio calculates the net asset value of each class
of shares based upon the net asset value of the applicable Underlying Fund as of
the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for trading. For each Underlying
Fund, the net asset value per share for a class of shares on a "regular business
day" is determined by dividing the value of the Underlying Fund's net assets
attributable to that class by the number of shares of that class outstanding on
that day. To determine net asset values, the Underlying Fund assets
30 | EQUITY INVESTOR FUND
are valued primarily on the basis of current market quotations. If market
quotations are not readily available or do not accurately reflect fair value for
a security (in the Manager's judgment) or if a security's value has been
materially affected by events occurring after the close of the exchange or
market on which the security is principally traded, that security may be valued
by another method that the Underlying Fund's Board of Trustees/Directors
believes accurately reflects the fair value. Because some foreign securities
trade in markets and on exchanges that operate on weekends and U.S. holidays,
the values of some of the Underlying Fund's foreign investments may change on
days when investors cannot buy or redeem Underlying Fund shares.
Short-term "money market type" debt securities with remaining maturities
of sixty days or less are valued at amortized cost (which approximates market
value).
- --------------------------------------------------------------------------------
RISKS OF INVESTING IN THE UNDERLYING FUNDS. Each of the Underlying Funds
in which the Portfolio invests has its own investment risks, and those risks can
affect the value of the Portfolio's investments and therefore the value of the
Portfolio's shares. To the extent that the Portfolio invests more of its assets
in one Underlying Fund than in another, the Portfolio will have greater exposure
to the risks of that Underlying Fund.
- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Portfolio is
permitted to invest daily available cash balances in an affiliated money market
fund. The Portfolio may invest the available cash in Class E shares of
Oppenheimer Institutional Money Market Fund ("IMMF") which seeks current income
and stability of principal. IMMF is a registered open-end management investment
company, regulated as a money market fund under the Investment Company Act of
1940, as amended. The Manager is also the investment advisor of IMMF. The
Portfolio's investment in IMMF is included in the Statement of Investments. As a
shareholder, the Portfolio is subject to its proportional share of IMMF's Class
E expenses, including its management fee. The Manager will waive fees and/or
reimburse Portfolio expenses in an amount equal to the indirect management fees
incurred through the Portfolio's investment in IMMF.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Portfolio intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
31 | EQUITY INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
The tax components of capital shown in the table below represent distribution
requirements the Portfolio must satisfy under the income tax regulations, losses
the Portfolio may be able to offset against income and gains realized in future
years and unrealized appreciation or depreciation of securities and other
investments for federal income tax purposes.
NET UNREALIZED
APPRECIATION
BASED ON COST OF
SECURITIES AND OTHER
UNDISTRIBUTED NET UNDISTRIBUTED ACCUMULATED LOSS INVESTMENTS FOR FEDERAL
INVESTMENT INCOME LONG-TERM GAIN CARRYFORWARD 1,2 INCOME TAX PURPOSES
- --------------------------------------------------------------------------------
$ -- $ 8,112,082 $ -- $ 20,154,142
1. During the fiscal year ended January 31, 2007, the Portfolio did not utilize
any capital loss carryforward.
2. During the fiscal year ended January 31, 2006, the Portfolio did not utilize
any capital loss carryforward.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Portfolio.
Accordingly, the following amounts have been reclassified for January 31, 2007.
Net assets of the Portfolio were unaffected by the reclassifications.
REDUCTION TO
REDUCTION TO ACCUMULATED
ACCUMULATED NET REALIZED
INCREASE TO NET INVESTMENT GAIN ON
PAID-IN CAPITAL LOSS INVESTMENTS 3
--------------------------------------------------------------
$ 795,429 $ 146,686 $ 942,115
3. $795,429, all of which was long-term capital gain, was distributed in
connection with Portfolio share redemptions.
The tax character of distributions paid during the years ended January 31, 2007
and January 31, 2006 was as follows:
YEAR ENDED PERIOD ENDED
JANUARY 31, 2007 JANUARY 31, 2006
--------------------------------------------------------------
Distributions paid from:
Ordinary income $ 3,936,056 $ 807,107
Long-term capital gain 1,037,209 --
-----------------------------------
Total $ 4,973,265 $ 807,107
===================================
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of January 31, 2007 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is
32 | EQUITY INVESTOR FUND
attributable to the tax deferral of losses or tax realization of financial
statement unrealized gain or loss.
Federal tax cost of securities $ 320,375,948
================
Gross unrealized appreciation $ 20,793,751
Gross unrealized depreciation (639,609)
----------------
Net unrealized appreciation $ 20,154,142
================
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Portfolio has adopted an unfunded retirement plan
(the "Plan") for the Portfolio's independent trustees. Benefits are based on
years of service and fees paid to each trustee during their period of service.
The Plan was frozen with respect to adding new participants effective December
31, 2006 (the "Freeze Date") and existing Plan Participants as of the Freeze
Date will continue to receive accrued benefits under the Plan. Active
independent trustees as of the Freeze Date have each elected a distribution
method with respect to their benefits under the Plan. During the year ended
January 31, 2007, the Portfolio's projected benefit obligations were increased
by $13,776 and payments of $355 were made to retired trustees, resulting in an
accumulated liability of $13,421 as of January 31, 2007.
The Board of Trustees has adopted a compensation deferral 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
Portfolio. 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 Portfolio or in other Oppenheimer funds selected by
the Trustee. The Portfolio purchases shares of the funds selected for deferral
by the Trustee in amounts equal to his or her deemed investment, resulting in a
Portfolio 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 Portfolio, and will not materially affect the
Portfolio's assets, liabilities or net investment income per share. Amounts will
be deferred until distributed in accordance to the compensation deferral 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.
33 | EQUITY INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Portfolio on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Portfolio pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Portfolio, at a rate equal to
the Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line
item, if applicable, represents earnings on cash balances maintained by the
Portfolio during the period. Such interest expense and other custodian fees may
be paid with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Portfolio'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 Portfolio. In
the normal course of business, the Portfolio may also enter into contracts that
provide general indemnifications. The Portfolio's maximum exposure under these
arrangements is unknown as this would be dependent on future claims that may be
made against the Portfolio. 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 Portfolio has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED JANUARY 31, 2007 PERIOD ENDED JANUARY 31, 2006 1,2
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------
CLASS A
Sold 10,788,987 $ 127,694,890 4,307,796 $ 46,498,407
Dividends and/or
distributions reinvested 217,939 2,704,630 38,611 427,037
Redeemed (1,417,148) (16,754,806) (205,514) (2,207,847)
----------------------------------------------------------------
Net increase 9,589,778 $ 113,644,714 4,140,893 $ 44,717,597
================================================================
34 | EQUITY INVESTOR FUND
YEAR ENDED JANUARY 31, 2007 PERIOD ENDED JANUARY 31, 2006 1,2
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------
CLASS B
Sold 3,586,753 $ 42,131,412 1,712,718 $ 18,374,371
Dividends and/or
distributions reinvested 54,487 671,822 13,238 145,879
Redeemed (556,353) (6,517,809) (74,128) (808,838)
----------------------------------------------------------------
Net increase 3,084,887 $ 36,285,425 1,651,828 $ 17,711,412
================================================================
- -------------------------------------------------------------------------------------------
CLASS C
Sold 4,655,073 $ 54,733,344 1,784,313 $ 19,370,332
Dividends and/or
distributions reinvested 65,253 803,921 12,844 141,411
Redeemed (816,245) (9,594,483) (61,514) (653,868)
----------------------------------------------------------------
Net increase 3,904,081 $ 45,942,782 1,735,643 $ 18,857,875
================================================================
- -------------------------------------------------------------------------------------------
CLASS N
Sold 2,837,844 $ 33,657,788 536,355 $ 5,884,519
Dividends and/or
distributions reinvested 41,434 512,955 3,629 40,096
Redeemed (533,502) (6,368,568) (56,166) (635,466)
----------------------------------------------------------------
Net increase 2,345,776 $ 27,802,175 483,818 $ 5,289,149
================================================================
- -------------------------------------------------------------------------------------------
CLASS Y
Sold 121,765 $ 1,440,825 69,936 $ 744,994
Dividends and/or
distributions reinvested 2,927 36,412 699 7,734
Redeemed (26,372) (311,289) (9,513) (101,871)
----------------------------------------------------------------
Net increase 98,320 $ 1,165,948 61,122 $ 650,857
================================================================
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. The Portfolio sold 10,000 shares of Class A at a value of $100,000 and 100
shares of Class B, Class C, Class N and Class Y at a value of $1,000,
respectively, to the Manager upon seeding of the Portfolio on March 15, 2005.
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and money market funds, for the year ended January
31, 2007, were as follows:
PURCHASES SALES
--------------------------------------------------------------
Investment securities $ 237,016,650 $ 4,467,498
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the investment advisory agreement, the Manager does not
charge a management fee, but rather collects indirect management fees from
investments in the Underlying Funds. The weighted indirect management fees
collected from the Underlying Funds, as a percent of average daily net assets of
the Portfolio for the year ended January 31, 2007 was 0.58%.
35 | EQUITY INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS or the Transfer Agent), a
division of the Manager, acts as the transfer and shareholder servicing agent
for the Portfolio. The Portfolio pays OFS a per account fee. For the year ended
January 31, 2007, the Portfolio paid $388,730 to OFS for services to the
Portfolio.
Additionally, Class Y shares are subject to minimum fees of $10,000 per
annum for assets of $10 million or more. The Class Y shares are subject to the
minimum fees in the event that the per account fee does not equal or exceed the
applicable minimum fees. OFS may voluntarily waive the minimum fees.
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DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Portfolio, OppenheimerFunds Distributor, Inc. (the
Distributor) acts as the Portfolio's principal underwriter in the continuous
public offering of the Portfolio's classes of shares.
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SERVICE PLAN FOR CLASS A SHARES. The Portfolio has adopted a Service Plan for
Class A shares. It reimburses the Distributor for a portion of its costs
incurred for services provided to accounts that hold Class A shares.
Reimbursement is made periodically at an annual rate of up to 0.25% of the
average annual net assets of Class A shares of the Portfolio. The Distributor
currently uses all of those fees to pay dealers, brokers, banks and other
financial institutions periodically for providing personal services and
maintenance of accounts of their customers that hold Class A shares. Any
unreimbursed expenses the Distributor incurs with respect to Class A shares in
any fiscal year cannot be recovered in subsequent periods. Fees incurred by the
Portfolio under the plan are detailed in the Statement of Operations.
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DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The
Portfolio has adopted Distribution and Service Plans for Class B, Class C and
Class N shares to compensate the Distributor for its services in connection with
the distribution of those shares and servicing accounts. Under the plans, the
Portfolio pays the Distributor an annual asset-based sales charge of 0.75% on
Class B and Class C shares and 0.25% on Class N shares. The Distributor also
receives a service fee of 0.25% per year under each plan. If either the Class B,
Class C or Class N plan is terminated by the Portfolio or by the shareholders of
a class, the Board of Trustees and its independent trustees must determine
whether the Distributor shall be entitled to payment from the Portfolio of all
or a portion of the service fee and/or asset-based sales charge in respect to
shares sold prior to the effective date of such termination. The Distributor
determines its uncompensated expenses under the plan at calendar quarter ends.
The Distributor's aggregate uncompensated expenses under the plan at December
31, 2006 for Class B, Class C and Class N shares were $978,843, $487,187 and
$248,623, respectively. Fees incurred by the Portfolio under the plans are
detailed in the Statement of Operations.
36 | EQUITY INVESTOR FUND
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SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Portfolio. They are deducted from the
proceeds of sales of Portfolio shares prior to investment or from redemption
proceeds prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the following table for the period
indicated.
CLASS A CLASS B CLASS C CLASS N
CONTINGENT CONTINGENT CONTINGENT CONTINGENT
CLASS A DEFERRED SALES DEFERRED SALES DEFERRED SALES DEFERRED SALES
FRONT-END SALES CHARGES CHARGES CHARGES CHARGES
CHARGES RETAINED RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED BY DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- -------------------------------------------------------------------------------------------------------
January 31, 2007 $ 798,660 $ 48 $ 67,253 $ 13,101 $ 1,835
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. The Manager has voluntarily agreed to a
total expense limitation on the aggregate amount of combined direct
(fund-of-funds level) and indirect expense so that "Total expenses" as a
percentage of average daily net assets will not exceed the following annual
rates: 1.45%, 2.20%, 2.20%, 1.70% and 1.20%, for Class A, Class B, Class C,
Class N and Class Y, respectively. The Manager may modify or terminate this
undertaking at any time without notice to shareholders. These expense
limitations do not include Extraordinary Expenses and other expenses not
incurred in the ordinary course of the Portfolio's business. Notwithstanding the
foregoing limits, the Manager is not required to waive or reimburse Portfolio
expenses in excess of indirect management fees earned from investments in
Underlying Funds to assure that expenses do not exceed those limits.
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.
The Manager will waive fees and/or reimburse Portfolio expenses in an
amount equal to the indirect management fees incurred through the Portfolio's
investment in IMMF. During the year ended January 31, 2007, the Manager waived
$221 for IMMF management fees.
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5. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Portfolio's tax returns to determine
whether it is "more-likely-than-not" that tax positions taken in the Portfolio's
tax return will be ultimately sustained. A tax liability and expense must be
recorded in respect of any tax position that, in Management's judgment, will
37 | EQUITY INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Continued
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5. RECENT ACCOUNTING PRONOUNCEMENTS Continued
not be fully realized. FIN 48 is effective for fiscal years beginning after
December 15, 2006. As of January 31, 2007, the Manager has evaluated the
implications of FIN 48 and does not currently anticipate a material impact to
the Portfolio's financial statements. The Manager will continue to monitor the
Portfolio's tax positions prospectively for potential future impacts.
In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 157, FAIR VALUE MEASUREMENTS. This standard establishes a
single authoritative definition of fair value, sets out a framework for
measuring fair value and expands disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. As of January 31, 2007, the Manager does not believe the
adoption of SFAS No. 157 will materially impact the financial statement amounts;
however, additional disclosures may be required about the inputs used to develop
the measurements and the effect of certain of the measurements on changes in net
assets for the period.
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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 excluding the Portfolio) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.
38 | EQUITY INVESTOR FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER PORTFOLIO SERIES:
We have audited the accompanying statement of assets and liabilities of Equity
Investor Fund, formerly Aggressive Investor Fund (one of the portfolios
constituting the Oppenheimer Portfolio Series), including the statement of
investments, as of January 31, 2007, the related statement of operations for the
year then ended, and the statements of changes in net assets and the financial
highlights for the year then ended and for the period April 5, 2005
(commencement of operations) to January 31, 2006. These financial statements and
financial highlights are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of January 31, 2007, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Equity Investor Fund as of January 31, 2007, the results of its operations for
the year then ended, and the changes in its net assets and the financial
highlights for the year then ended and for the period April 5, 2005
(commencement of operations) to January 31, 2006, in conformity with U.S.
generally accepted accounting principles.
KPMG LLP
Denver, Colorado
March 15, 2007
39 | EQUITY INVESTOR FUND
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2007, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Portfolio during
calendar year 2006. Regulations of the U.S. Treasury Department require the
Portfolio to report this information to the Internal Revenue Service.
Capital gain distributions of $0.0417 per share were paid to Class A,
Class B, Class C, Class N and Class Y shareholders, respectively, on December
29, 2006. Whether received in stock or in cash, the capital gain distribution
should be treated by shareholders as a gain from the sale of the capital assets
held for more than one year (long-term capital gains).
Dividends, if any, paid by the Portfolio during the fiscal year ended
January 31, 2007 which are not designated as capital gain distributions should
be multiplied by 49.79% to arrive at the amount eligible for the corporate
dividend-received deduction.
A portion, if any, of the dividends paid by the Portfolio during the
fiscal year ended January 31, 2007 which are not designated as capital gain
distributions are eligible for lower individual income tax rates to the extent
that the Portfolio has received qualified dividend income as stipulated by
recent tax legislation. $3,146,085 of the Portfolio's fiscal year taxable income
may be eligible for the lower individual income tax rates. In early 2007,
shareholders of record received information regarding the percentage of
distributions that are eligible for lower individual income tax rates.
Recent tax legislation allows a regulated investment company to designate
distributions not designated as capital gain distributions, as either interest
related dividends or short-term capital gain dividends, both of which are exempt
from the U.S. withholding tax applicable to non U.S. taxpayers. For the fiscal
year ended January 31, 2007, $23,237 or 0.59% of the ordinary distributions paid
by the Portfolio qualifies as an interest related dividend.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Portfolio to the Internal Revenue Service.
Because of the complexity of the federal regulations which may affect your
individual tax return and the many variations in state and local tax
regulations, we recommend that you consult your tax advisor for specific
guidance.
40 | EQUITY INVESTOR FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in 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.
41 | EQUITY INVESTOR FUND
BOARD APPROVAL OF THE PORTFOLIO'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 about the
nature and extent of the services provided to the Fund and information regarding
the Manager's key personnel who 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
all administrative and clerical personnel who 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.
42 | EQUITY INVESTOR FUND
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 fact 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 Rudi
Schadt, Jerry Webman and Kurt Wolfgruber, the members of the Fund's Asset
Allocation Team. The Board members also considered their experiences with the
Manager and its officers and other personnel through their service on the boards
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 its members have become knowledgeable about 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 and from 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 all other retail front-end load and
no-load global multi-cap core funds advised by other investment advisers. The
Board noted that the Fund's one-year and since inception performance were below
its peer group median.
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 multi-cap core funds of funds, one
other international multi-cap core fund of funds and other funds with comparable
asset levels and distribution features. The Board noted that the Manager has
agreed to voluntarily limit the aggregate amount of combined direct
(fund-of-funds level) and indirect expenses so that total annual portfolio and
underlying fund operating expenses as a percentage of average daily net assets
will not exceed the
43 | EQUITY INVESTOR FUND
BOARD APPROVAL OF THE PORTFOLIO'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
following annual rates: 1.45% for Class A, 2.20% for Class B, 2.20% for Class C,
1.70% for Class N and 1.20% for Class Y. The Manager may modify or terminate
that undertaking at any time without notice to shareholders. The Board noted
that the Fund does not pay a management fee and that the Fund's total expenses
are lower than its peer group median.
ECONOMIES OF SCALE. The Board considered whether the Manager may realize
economies of scale in managing and supporting the Fund, the extent to which
those economies of scale would benefit the Fund's shareholders and the current
level of Fund assets.
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.
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.
44 | EQUITY INVESTOR FUND
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS
FUND, LENGTH OF SERVICE, AGE HELD; NUMBER OF PORTFOLIOS IN THE FUND COMPLEX CURRENTLY OVERSEEN
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL,
TRUSTEES COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR
HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
BRIAN F. WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since September 1995);
Chairman of the Board of Director of Special Value Opportunities Fund, LLC (registered investment company)
Trustees (since 2007) and (since September 2004); Investment Advisory Board Member of Zurich Financial
Trustee (since 2005) Services (insurance) (since October 2004); Board of Governing Trustees of The
Age: 63 Jackson Laboratory (non-profit) (since August 1990); Trustee of the Institute for
Advanced Study (non-profit educational institute) (since May 1992); Special
Limited Partner of Odyssey Investment Partners, LLC (private equity investment)
(January 1999-September 2004) and Managing Principal (1997-December 1998);
Trustee of Research Foundation of AIMR (2000-2002) (investment research,
non-profit); Governor, Jerome Levy Economics Institute of Bard College (August
1990-September 2001) (economics research); Director of Ray & Berendtson, Inc.
(May 2000-April 2002) (executive search firm). Oversees 59 portfolios in the
OppenheimerFunds complex.
MATTHEW P. FINK, Trustee of the Committee for Economic Development (policy research foundation)
Trustee (since 2005) (since 2005); Director of ICI Education Foundation (education foundation)
Age: 66 (October 1991-August 2006); President of the Investment Company Institute (trade
association) (October 1991-June 2004); Director of ICI Mutual Insurance Company
(insurance company) (October 1991-June 2004). Oversees 49 portfolios in the
OppenheimerFunds complex.
ROBERT G. GALLI, A trustee or director of other Oppenheimer funds. Oversees 59 portfolios in the
Trustee (since 2005) OppenheimerFunds complex.
Age: 73
PHILLIP A. GRIFFITHS, Distinguished Presidential Fellow for International Affairs (since 2002) and
Trustee (since 2005) Member (since 1979) of the National Academy of Sciences; Council on Foreign
Age: 68 Relations (since 2002); Director of GSI Lumonics Inc. (precision medical
equipment supplier) (since 2001); Senior Advisor of The Andrew W. Mellon
Foundation (since 2001); Chair of Science Initiative Group (since 1999); Member
of the American Philosophical Society (since 1996); Trustee of Woodward Academy
(since 1983); Foreign Associate of Third World Academy of Sciences; Director of
the Institute for Advanced Study (1991-2004); Director of Bankers Trust New York
Corporation (1994-1999); Provost at Duke University (1983-1991). Oversees 49
portfolios in the OppenheimerFunds complex.
MARY F. MILLER, Trustee of the American Symphony Orchestra (not-for-profit) (since October 1998);
Trustee (since 2005) and Senior Vice President and General Auditor of American Express Company
Age: 64 (financial services company) (July 1998-February 2003). Oversees 49 portfolios in
the OppenheimerFunds complex.
JOEL W. MOTLEY, Director of Columbia Equity Financial Corp. (privately-held financial adviser)
Trustee (since 2005) (since 2002); Managing Director of Carmona Motley, Inc. (privately-held financial
Age: 54 adviser) (since January 2002); Managing Director of Carmona Motley Hoffman Inc.
(privately-held financial adviser) (January 1998-December 2001); Member of the
Finance and Budget Committee of the Council on Foreign Relations, the Investment
Committee of the Episcopal Church of America, the Investment Committee and Board
of Human Rights Watch and the Investment Committee of Historic Hudson Valley.
Oversees 49 portfolios in the OppenheimerFunds complex.
45 | EQUITY INVESTOR FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
KENNETH A. RANDALL, Director of Dominion Resources, Inc. (electric utility holding company) (February
Trustee (since 2005) 1972-October 2005); Former Director of Prime Retail, Inc. (real estate investment
Age: 79 trust), Dominion Energy Inc. (electric power and oil & gas producer), Lumberman's
Mutual Casualty Company, American Motorists Insurance Company and American
Manufacturers Mutual Insurance Company; Former President and Chief Executive
Officer of The Conference Board, Inc. (international economic and business
research). Oversees 49 portfolios in the OppenheimerFunds complex.
RUSSELL S. REYNOLDS, JR., Chairman of The Directorship Search Group, Inc. (corporate governance consulting
Trustee (since 2005) and executive recruiting) (since 1993); Life Trustee of International House
Age: 75 (non-profit educational organization); Founder, Chairman and Chief Executive
Officer of Russell Reynolds Associates, Inc. (1969-1993); Banker at J.P. Morgan &
Co. (1958-1966); 1st Lt. Strategic Air Command, U.S. Air Force (1954-1958).
Oversees 49 portfolios in the OppenheimerFunds complex.
JOSEPH M. WIKLER, Director of the following medical device companies: Medintec (since 1992) and
Trustee (since 2005) Cathco (since 1996); Director of Lakes Environmental Association (since 1996);
Age: 65 Member of the Investment Committee of the Associated Jewish Charities of
Baltimore (since 1994); Director of Fortis/Hartford mutual funds (1994-December
2001). Oversees 49 portfolios in the OppenheimerFunds complex.
PETER I. WOLD, President of Wold Oil Properties, Inc. (oil and gas exploration and production
Trustee (since 2005) company) (since 1994); Vice President, Secretary and Treasurer of Wold Trona
Age: 59 Company, Inc. (soda ash processing and production) (since 1996); Vice President
of Wold Talc Company, Inc. (talc mining) (since 1999); Managing Member of
Hole-in-the-Wall Ranch (cattle ranching) (since 1979); Director and Chairman of
the Denver Branch of the Federal Reserve Bank of Kansas City (1993-1999); and
Director of PacifiCorp. (electric utility) (1995-1999). Oversees 49 portfolios in
the OppenheimerFunds complex.
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INTERESTED TRUSTEE AND THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH
OFFICER FLOOR, NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN
INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN
OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR
REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH
OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President
President and Principal (since September 2000) of the Manager; President and a director or trustee of
Executive Officer and other Oppenheimer funds; President and Director of Oppenheimer Acquisition Corp.
Trustee (since 2005) ("OAC") (the Manager's parent holding company) and of Oppenheimer Partnership
Age: 57 Holdings, Inc. (holding company subsidiary of the Manager) (since July 2001);
Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since
November 2001); Chairman and Director of Shareholder Services, Inc. and of
Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager)
(since July 2001); President and Director of OppenheimerFunds Legacy Program
(charitable trust program established by the Manager) (since July 2001); Director
of the following investment advisory subsidiaries of the Manager: OFI
Institutional Asset Management, Inc., Centennial Asset Management Corporation,
Trinity Investment Management Corporation and Tremont Capital Management, Inc.
(since November 2001), HarbourView Asset Management Corporation and OFI Private
Investments, Inc. (since July 2001); President (since November 1, 2001) and
Director (since July 2001) of Oppenheimer Real Asset Management, Inc.; Executive
Vice President of
46 | EQUITY INVESTOR FUND
JOHN V. MURPHY, Massachusetts Mutual Life Insurance Company (OAC's parent company) (since
Continued February 1997); Director of DLB Acquisition Corporation (holding company parent
of Babson Capital Management LLC) (since June 1995); Member of the Investment
Company Institute's Board of Governors (since October 3, 2003); Chief Operating
Officer of the Manager (September 2000-June 2001); President and Trustee of MML
Series Investment Fund and MassMutual Select Funds (open-end investment
companies) (November 1999-November 2001); Director of C.M. Life Insurance Company
(September 1999-August 2000); President, Chief Executive Officer and Director of
MML Bay State Life Insurance Company (September 1999-August 2000); Director of
Emerald Isle Bancorp and Hibernia Savings Bank (wholly-owned subsidiary of
Emerald Isle Bancorp) (June 1989-June 1998). Oversees 96 portfolios in the
OppenheimerFunds complex.
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OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS.
THE FUND SCHADT, WEBMAN, WOLFGRUBER, ZACK, GILLESPIE AND MS. BLOOMBERG, TWO WORLD
FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS.
VANDEHEY, WIXTED, PETERSEN, SZILAGYI AND MS. IVES, 6803 S. TUCSON WAY,
CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR
UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
RUDI W. SCHADT, Vice President, Director of Research in Product Design and Risk Management of the
Vice President and Portfolio Manager. Prior to joining the Manager in February 2002 he was a Director and
Manager (since 2005) Senior Quantitative Analyst (2000-2001) at UBS Asset Management prior to which he
Age: 49 was an Associate Director of Research (since June 1999) and Senior Researcher and
Portfolio Manager (from June 1997) at State Street Global Advisors. An officer of
11 portfolios in the OppenheimerFunds complex.
DR. JERRY WEBMAN, Chief Economist of the Manager (since 2006); Senior Vice President (since
Vice President and Portfolio February 1996) and Senior Investment Officer and Director (since 1997) of the
Manager (since 2005) Manager's Fixed Income Investments; Senior Vice President (since May 1999) of
Age: 57 HarbourView Asset Management Corporation. An officer of 8 other portfolios in the
OppenheimerFunds complex.
KURT WOLFGRUBER, Executive Vice President of the Manager (since March 2003) and Chief Investment
Vice President and Portfolio Officer and Director of the Manager (since July 2003) of the Manager. He has been
Manager (since 2005) Director of HarbourView Asset Management Corporation and of OFI Institutional
Age: 57 Asset Management, Inc. (since June 2003) and of Tremont Capital Management, Inc.
(since October 2001). He is also an officer of 8 other portfolios in the
OppenheimerFunds complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March
Vice President and Chief 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset
Compliance Officer Management Corporation and Shareholder Services, Inc. (since June 1983). Former
(since 2005) Vice President and Director of Internal Audit of the Manager (1997-February
Age: 56 2004). An officer of 96 portfolios in the OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer
Treasurer and Principal of the following: HarbourView Asset Management Corporation, Shareholder Financial
Financial & Accounting Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management
Officer (since 2005) Corporation, and Oppenheimer Partnership Holdings, Inc. (since March 1999), OFI
Age: 47 Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd.
(since May 2000), OppenheimerFunds plc (since May 2000), OFI Institutional Asset
Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program
(charitable trust program established by the Manager) (since June 2003);
Treasurer and Chief Financial Officer of
47 | EQUITY INVESTOR FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
BRIAN W. WIXTED, OFI Trust Company (trust company subsidiary of the Manager) (since May 2000);
Continued Assistant Treasurer of the following: OAC (since March 1999), Centennial Asset
Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy
Program (April 2000-June 2003); Principal and Chief Operating Officer of Bankers
Trust Company-Mutual Fund Services Division (March 1995-March 1999). An officer
of 96 portfolios in the OppenheimerFunds complex.
BRIAN S. PETERSEN, Vice President of the Manager (since February 2007); Assistant Vice President of
Assistant Treasurer the Manager (August 2002-February 2007); Manager/Financial Product Accounting of
(since 2004) the Manager (November 1998-July 2002). An officer of 96 portfolios in the
Age: 36 OppenheimerFunds complex.
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Financial
Assistant Treasurer Reporting and Compliance of First Data Corporation (April 2003-July 2004);
(since 2005) Manager of Compliance of Berger Financial Group LLC (May 2001-March 2003);
Age: 36 Director of Mutual Fund Operations at American Data Services, Inc. (September
2000-May 2001). An officer of 96 portfolios in the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March
Secretary (since 2005) 2002) of the Manager; General Counsel and Director of the Distributor (since
Age: 58 December 2001); General Counsel of Centennial Asset Management Corporation (since
December 2001); Senior Vice President and General Counsel of HarbourView Asset
Management Corporation (since December 2001); Secretary and General Counsel of
OAC (since November 2001); Assistant Secretary (since September 1997) and
Director (since November 2001) of OppenheimerFunds International Ltd. and
OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership
Holdings, Inc. (since December 2002); Director of Oppenheimer Real Asset
Management, Inc. (since November 2001); Senior Vice President, General Counsel
and Director of Shareholder Financial Services, Inc. and Shareholder Services,
Inc. (since December 2001); Senior Vice President, General Counsel and Director
of OFI Private Investments, Inc. and OFI Trust Company (since November 2001);
Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior Vice
President and General Counsel of OFI Institutional Asset Management, Inc. (since
November 2001); Director of OppenheimerFunds (Asia) Limited (since December
2003); Senior Vice President (May 1985-December 2003), Acting General Counsel
(November 2001-February 2002) and Associate General Counsel (May 1981-October
2001) of the Manager; Assistant Secretary of the following: Shareholder Services,
Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November
1989-November 2001), and OppenheimerFunds International Ltd. (September
1997-November 2001). An officer of 96 portfolios in the OppenheimerFunds complex.
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First Vice
Assistant Secretary President (April 2001-April 2004), Associate General Counsel (December 2000-April
(since 2004) 2004), Corporate Vice President (May 1999-April 2001) and Assistant General
Age: 39 Counsel (May 1999-December 2000) of UBS Financial Services Inc. (formerly,
PaineWebber Incorporated). An officer of 96 portfolios in the OppenheimerFunds
complex.
48 | EQUITY INVESTOR FUND
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary
Assistant Secretary (since October 2003) of the Manager; Vice President (since 1999) and Assistant
(since 2001) Secretary (since October 2003) of the Distributor; Assistant Secretary of
Age: 41 Centennial Asset Management Corporation (since October 2003); Vice President and
Assistant Secretary of Shareholder Services, Inc. (since 1999); Assistant
Secretary of OppenheimerFunds Legacy Program and Shareholder Financial Services,
Inc. (since December 2001); Assistant Counsel of the Manager (August 1994-October
2003). An officer of 96 portfolios in the OppenheimerFunds complex.
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since September
Assistant Secretary 2004); First Vice President (2001-September 2004); Director (2000- September
(since 2004) 2004) and Vice President (1998-2000) of Merrill Lynch Investment Management. An
Age: 43 officer of 96 portfolios in the OppenheimerFunds complex.
THE PORTFOLIO'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL
INFORMATION ABOUT THE PORTFOLIO'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT
CHARGE, UPON REQUEST, BY CALLING 1.800.525.7048.
49 | EQUITY INVESTOR FUND
ACTIVE ALLOCATION FUND
TOP HOLDINGS AND ALLOCATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSET CLASS ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Alternative Investments 6.2%
Fixed Income 23.5
Global Equity 20.2
U.S. Equity 49.8
Money Market 0.3
Portfolio holdings and allocations are subject to change. Percentages are as of
January 31, 2007, and are based on the total market value of investments in
affiliated companies.
- --------------------------------------------------------------------------------
9 | ACTIVE ALLOCATION FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
HOW HAS THE PORTFOLIO PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS,
INC., OF THE PORTFOLIO'S PERFORMANCE DURING ITS FISCAL YEAR ENDED JANUARY 31,
2007, FOLLOWED BY A GRAPHICAL COMPARISON OF THE PORTFOLIO'S PERFORMANCE TO AN
APPROPRIATE BROAD-BASED MARKET INDEX.
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE. For its fiscal year ending
January 31, 2007, the Portfolio underperformed its benchmark, the S&P 500 Index.
We attribute the Portfolio's underperformance to its allocation to fixed-income
funds, which as an asset class underperformed equities over the period.
In contrast, contributors to the Portfolio's competitive performance
included the strong returns generated by the Portfolio's approximately 20%
tactical (active) allocation component, which benefited from significant
allocations to international funds and sector focused fixed income funds.
Additionally, the Portfolio's static allocation to alternative investments,
specifically its holdings in Oppenheimer Real Estate Fund's Class Y shares,
greatly added to overall results.
During the period, the Portfolio in general benefited from its large
equity exposure. Equities proved to be volatile over the period hitting lows in
mid-summer and then rapidly advancing through period end. For example, the S&P
500 Index rose 14.53% over the 12-month reporting period, despite returning only
0.67% for the first six months. In addition, the Portfolio's exposure to foreign
markets added to returns. In addition to performance gained through its
allocations to international equities, the Portfolio's tactical component
benefited from its exposure to Oppenheimer Champion Income Fund Class Y Shares
and Oppenheimer International Bond Fund Class Y Shares. We also introduced a
derivative overlay strategy during the period. The purpose of this new strategy
is to help maximize performance results by enabling our portfolio management
team to effectively respond to changing market conditions by implementing
sizable positions quickly and efficiently. Although this new strategy had a
neutral affect on performance over the period, we believe going forward it will
add to results.
Within the strategic component, the Portfolio's allocation to alternative
investments, primarily its position in Oppenheimer Real Estate Fund Class Y
Shares, contributed to performance. The success of Oppenheimer Real Estate Fund
can be attributed, in part, to its profitable investments in the office,
apartment and industrial sectors.
Lastly, although fixed income as an asset class underperformed equities
over the period, the underlying bond funds held within the strategic component
added to the Portfolio's returns. Contributors to performance included the
Portfolio's allocations to Oppenheimer Core Bond Fund Class Y Shares and
Oppenheimer Strategic Income Fund Class Y Shares.
10 | ACTIVE ALLOCATION FUND
COMPARING THE PORTFOLIO'S PERFORMANCE TO THE MARKET. The graphs that follow show
the performance of a hypothetical $10,000 investment in each class of shares of
the Portfolio held until January 31, 2007. Performance is measured from the
inception of Classes A, B, C, N and Y on April 5, 2005. The Portfolio's
performance reflects the deduction of the maximum initial sales charge on Class
A shares, the applicable contingent deferred sales charge on Class B, Class C
and Class N shares, and reinvestments of all dividends and capital gains
distributions. Past performance cannot guarantee future results.
The Portfolio's performance is compared to the performance of the S&P 500
Index. The S&P 500 Index is an unmanaged index of equity securities. Index
performance reflects the reinvestment of income but does not consider the effect
of transaction costs, and none of the data in the graphs shows the effect of
taxes. The Portfolio's performance reflects the effects of the Portfolio's
business and operating expenses. While index comparisons may be useful to
provide a benchmark for the Portfolio's performance, it must be noted that the
Portfolio's investments are not limited to the investments in the index.
11 | ACTIVE ALLOCATION FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Active Allocation Fund (Class A)
S&P 500 Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Active Allocation Fund Lehman Brothers
(Class A) S&P 500 Index Aggregate Bond Index
04/05/2005 $ 9,425 $ 10,000 $ 10,000
04/30/2005 $ 9,227 $ 9,810 $ 10,135
07/31/2005 $ 9,868 $ 10,514 $ 10,207
10/31/2005 $ 9,830 $ 10,327 $ 10,150
01/31/2006 $ 10,679 $ 11,005 $ 10,293
04/30/2006 $ 10,948 $ 11,322 $ 10,207
07/31/2006 $ 10,573 $ 11,079 $ 10,356
10/31/2006 $ 11,314 $ 12,013 $ 10,677
01/31/2007 $ 11,869 $ 12,603 $ 10,734
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/07
1-Year 4.75% Since Inception (4/5/05) 9.86%
12 | ACTIVE ALLOCATION FUND
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Active Allocation Fund (Class B)
S&P 500 Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Active Allocation Fund Lehman Brothers
(Class B) S&P 500 Index Aggregate Bond Index
04/05/2005 $ 10,000 $ 10,000 $ 10,000
04/30/2005 $ 9,790 $ 9,810 $ 10,135
07/31/2005 $ 10,450 $ 10,514 $ 10,207
10/31/2005 $ 10,390 $ 10,327 $ 10,150
01/31/2006 $ 11,272 $ 11,005 $ 10,293
04/30/2006 $ 11,527 $ 11,322 $ 10,207
07/31/2006 $ 11,109 $ 11,079 $ 10,356
10/31/2006 $ 11,863 $ 12,013 $ 10,677
01/31/2007 $ 12,016 $ 12,603 $ 10,734
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/07
1-Year 5.15% Since Inception (4/5/05) 10.60%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 4% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 17 FOR FURTHER
INFORMATION.
13 | ACTIVE ALLOCATION FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Active Allocation Fund (Class C)
S&P 500 Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Active Allocation Fund Lehman Brothers
(Class C) S&P 500 Index Aggregate Bond Index
04/05/2005 $ 10,000 $ 10,000 $ 10,000
04/30/2005 $ 9,780 $ 9,810 $ 10,135
07/31/2005 $ 10,440 $ 10,514 $ 10,207
10/31/2005 $ 10,380 $ 10,327 $ 10,150
01/31/2006 $ 11,266 $ 11,005 $ 10,293
04/30/2006 $ 11,520 $ 11,322 $ 10,207
07/31/2006 $ 11,103 $ 11,079 $ 10,356
10/31/2006 $ 11,856 $ 12,013 $ 10,677
01/31/2007 $ 12,416 $ 12,603 $ 10,734
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/07
1-Year 9.21% Since Inception (4/5/05) 12.61%
14 | ACTIVE ALLOCATION FUND
CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Active Allocation Fund (Class N)
S&P 500 Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Active Allocation Fund Lehman Brothers
(Class N) S&P 500 Index Aggregate Bond Index
04/05/2005 $ 10,000 $ 10,000 $ 10,000
04/30/2005 $ 9,790 $ 9,810 $ 10,135
07/31/2005 $ 10,460 $ 10,514 $ 10,207
10/31/2005 $ 10,410 $ 10,327 $ 10,150
01/31/2006 $ 11,318 $ 11,005 $ 10,293
04/30/2006 $ 11,593 $ 11,322 $ 10,207
07/31/2006 $ 11,185 $ 11,079 $ 10,356
10/31/2006 $ 11,961 $ 12,013 $ 10,677
01/31/2007 $ 12,549 $ 12,603 $ 10,734
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/07
1-Year 9.88% Since Inception (4/5/05) 13.27%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 4% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 17 FOR FURTHER
INFORMATION.
15 | ACTIVE ALLOCATION FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS Y SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Active Allocation Fund (Class Y)
S&P 500 Index
Lehman Brothers Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Active Allocation Fund Lehman Brothers
(Class Y) S&P 500 Index Aggregate Bond Index
04/05/2005 $ 10,000 $ 10,000 $ 10,000
04/30/2005 $ 9,790 $ 9,810 $ 10,135
07/31/2005 $ 10,490 $ 10,514 $ 10,207
10/31/2005 $ 10,450 $ 10,327 $ 10,150
01/31/2006 $ 11,372 $ 11,005 $ 10,293
04/30/2006 $ 11,668 $ 11,322 $ 10,207
07/31/2006 $ 11,280 $ 11,079 $ 10,356
10/31/2006 $ 12,077 $ 12,013 $ 10,677
01/31/2007 $ 12,687 $ 12,603 $ 10,734
AVERAGE ANNUAL TOTAL RETURNS OF CLASS Y SHARES OF THE PORTFOLIO AT 1/31/07
1-Year 11.56% Since Inception (4/5/05) 13.95%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 4% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 17 FOR FURTHER
INFORMATION.
16 | ACTIVE ALLOCATION FUND
NOTES
- --------------------------------------------------------------------------------
Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. The Portfolio's total returns
shown do not reflect the deduction of income taxes on an individual's
investment. Taxes may reduce your actual investment returns on income or gains
paid by the Portfolio or any gains you may realize if you sell your shares.
INVESTORS SHOULD CONSIDER THE PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, AND
OTHER CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PORTFOLIO'S
PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT THE PORTFOLIO, AND MAY BE
OBTAINED BY ASKING YOUR FINANCIAL ADVISOR, CALLING US AT 1.800.525.7048 OR
VISITING OUR WEBSITE AT WWW.OPPENHEIMERFUNDS.COM. READ THE PROSPECTUS CAREFULLY
BEFORE INVESTING.
The Portfolio's investment strategy and focus can change over time. The mention
of specific fund holdings does not constitute a recommendation by
OppenheimerFunds, Inc.
CLASS A shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class A returns include the maximum initial sales charge of
5.75%.
CLASS B shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 4% (since inception). Class B shares are subject
to an annual 0.75% asset-based sales charge.
CLASS C shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
CLASS N shares of the Portfolio were first publicly offered on 4/5/05. Class N
shares are offered only through retirement plans. Unless otherwise noted, Class
N returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
CLASS Y shares of the Portfolio were first publicly offered on 4/5/05. Class Y
shares are offered only to certain institutional investors under special
agreements with the Distributor.
An explanation of the calculation of performance is in the Portfolio's Statement
of Additional Information.
17 | ACTIVE ALLOCATION FUND
PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
PORTFOLIO EXPENSES. As a shareholder of the Portfolio, you incur two types of
costs: (1) transaction costs, which may include sales charges (loads) on
purchase payments, contingent deferred sales charges on redemptions; and
redemption fees, if any; and (2) ongoing costs, including management fees;
distribution and service fees; and other Portfolio expenses. These examples are
intended to help you understand your ongoing costs (in dollars) of investing in
the Portfolio and to compare these costs with the ongoing costs of investing in
other mutual funds.
The examples 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 January 31, 2007.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Portfolio's actual expense ratio for each class of shares,
and an assumed rate of return of 5% per year before expenses, which is not the
Portfolio's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Portfolio and other funds. To do so, compare this 5%
hypothetical example for the class of shares you hold with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
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
18 | ACTIVE ALLOCATION FUND
the Statement of Additional Information). Therefore, the "hypothetical" lines of
the table are useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(8/1/06) (1/31/07) JANUARY 31, 2007
- --------------------------------------------------------------------------------
Class A Actual $ 1,000.00 $ 1,122.50 $ 2.73
- --------------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,022.63 2.60
- --------------------------------------------------------------------------------
Class B Actual 1,000.00 1,117.60 6.91
- --------------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,018.70 6.58
- --------------------------------------------------------------------------------
Class C Actual 1,000.00 1,118.30 6.80
- --------------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,018.80 6.48
- --------------------------------------------------------------------------------
Class N Actual 1,000.00 1,122.00 3.75
- --------------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,021.68 3.57
- --------------------------------------------------------------------------------
Class Y Actual 1,000.00 1,124.70 0.59
- --------------------------------------------------------------------------------
Class Y Hypothetical 1,000.00 1,024.65 0.56
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Portfolio's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios,
excluding all underlying fund expenses, based on the 6-month period ended
January 31, 2007 are as follows:
CLASS EXPENSE RATIOS
- ------------------------------------
Class A 0.51%
- ------------------------------------
Class B 1.29
- ------------------------------------
Class C 1.27
- ------------------------------------
Class N 0.70
- ------------------------------------
Class Y 0.11
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Portfolio's Manager that can be terminated at any time, without advance
notice. The "Financial Highlights" tables in the Portfolio's financial
statements, included in this report, also show the gross expense ratios, without
such waivers or reimbursements.
- --------------------------------------------------------------------------------
19 | ACTIVE ALLOCATION FUND
STATEMENT OF INVESTMENTS January 31, 2007
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------------------------
INVESTMENTS IN AFFILIATED COMPANIES--99.5% 1
- -------------------------------------------------------------------------------------------
ALTERNATIVE INVESTMENT--6.2%
Oppenheimer Real Estate Fund, Cl. Y 4,290,964 $ 114,397,122
- -------------------------------------------------------------------------------------------
FIXED INCOME--23.4%
Oppenheimer Champion Income Fund, Cl. Y 3,973,401 38,065,182
- -------------------------------------------------------------------------------------------
Oppenheimer Core Bond Fund, Cl. Y 17,144,429 174,530,294
- -------------------------------------------------------------------------------------------
Oppenheimer International Bond Fund, Cl. Y 2,779,230 16,480,832
- -------------------------------------------------------------------------------------------
Oppenheimer Strategic Income Fund, Cl. Y 41,051,737 174,880,398
- -------------------------------------------------------------------------------------------
Oppenheimer U.S. Government Trust, Cl. Y 3,000,034 28,260,323
----------------
432,217,029
- -------------------------------------------------------------------------------------------
GLOBAL EQUITY--20.1%
Oppenheimer Developing Markets Fund, Cl. Y 366,377 14,962,836
- -------------------------------------------------------------------------------------------
Oppenheimer Global Fund, Cl. Y 2,405,097 179,444,278
- -------------------------------------------------------------------------------------------
Oppenheimer Global Opportunities Fund, Cl. Y 2,450,325 89,804,395
- -------------------------------------------------------------------------------------------
Oppenheimer International Growth Fund, Cl. Y 1,566,542 44,364,461
- -------------------------------------------------------------------------------------------
Oppenheimer International Small Company Fund, Cl. Y 558,527 15,069,057
- -------------------------------------------------------------------------------------------
Oppenheimer Quest International Value Fund, Inc., Cl. A 1,270,789 28,224,216
----------------
371,869,243
- -------------------------------------------------------------------------------------------
U.S. EQUITY--49.5%
Oppenheimer Capital Appreciation Fund, Cl. Y 2 5,035,770 245,040,531
- -------------------------------------------------------------------------------------------
Oppenheimer Main Street Fund, Cl. Y 4,361,432 180,650,507
- -------------------------------------------------------------------------------------------
Oppenheimer Main Street Opportunity Fund, Cl. Y 6,480,652 98,570,721
- -------------------------------------------------------------------------------------------
Oppenheimer Main Street Small Cap Fund, Cl. Y 4,007,613 94,900,278
- -------------------------------------------------------------------------------------------
Oppenheimer Small- & Mid- Cap Value Fund, Cl. Y 762,924 29,235,233
- -------------------------------------------------------------------------------------------
Oppenheimer Value Fund, Cl. Y 9,865,588 268,146,693
----------------
916,543,963
- -------------------------------------------------------------------------------------------
MONEY MARKET FUND--0.3%
Oppenheimer Institutional Money Market Fund, Cl. E, 5.35% 3 6,349,533 6,349,533
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $1,725,106,789) 99.5% 1,841,376,890
- -------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.5 9,308,861
-----------------------------
NET ASSETS 100.0% $ 1,850,685,751
=============================
20 | ACTIVE ALLOCATION FUND
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended January 31, 2007 by virtue of the Portfolio owning at
least 5% of the voting securities of the issuer or as a result of the Portfolio
and the issuer having the same investment advisor. Transactions during the
period in which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
JAN. 31, 2006 ADDITIONS REDUCTIONS JAN. 31, 2007
- ------------------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation Fund, Cl. Y 1,206,388 3,940,179 110,797 5,035,770
Oppenheimer Champion Income Fund, CI. Y -- 4,016,113 a 42,712 3,973,401
Oppenheimer Core Bond Fund, Cl. Y 5,106,446 14,435,409 2,397,426 17,144,429
Oppenheimer Commodity Strategy Total Return Fund, Cl.Y 3,273,185 1,528,500 4,801,685 --
Oppenheimer Developing Markets Fund, Cl. Y 735,369 627,112 996,104 366,377
Oppenheimer Global Fund, Cl. Y 817,108 1,711,507 123,518 2,405,097
Oppenheimer Global Opportunities Fund, Cl. Y 771,757 1,700,456 21,888 2,450,325
Oppenheimer High Yield Fund, Cl. Y -- 3,212,815 3,212,815 --
Oppenheimer Institutional Money Market Fund, Cl. E, 5.35% -- 55,347,770 48,998,237 6,349,533
Oppenheimer International Bond Fund, Cl. Y -- 2,826,079 46,849 2,779,230
Oppenheimer International Growth Fund, Cl. Y -- 5,307,789 3,741,247 1,566,542
Oppenheimer International Small Company Fund, Cl. Y 1,296,021 1,395,685 2,133,179 558,527
Oppenheimer Main Street Fund, Cl. Y 1,422,021 3,054,812 115,401 4,361,432
Oppenheimer Main Street Opportunity Fund, Cl. Y 1,943,920 4,584,594 47,862 6,480,652
Oppenheimer Main Street Small Cap Fund, Cl. Y 1,258,510 2,798,723 49,620 4,007,613
Oppenheimer Quest International Value Fund, Inc., Cl. A -- 4,142,780 2,871,991 1,270,789
Oppenheimer Real Estate Fund, Cl. Y 1,403,079 2,919,127 31,242 4,290,964
Oppenheimer Small- & Mid- Cap Value Fund, Cl. Y -- 774,860 11,936 762,924
Oppenheimer Strategic Income Fund, Cl. Y 12,557,766 28,830,059 336,088 41,051,737
Oppenheimer U.S. Government Trust, Cl. Y 2,764,889 5,067,407 4,832,262 3,000,034
Oppenheimer Value Fund, Cl. Y 2,210,413 11,655,581 4,000,406 9,865,588
VALUE DIVIDEND REALIZED
SEE NOTE 1 INCOME GAIN (LOSS)
- ------------------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation Fund, Cl. Y $ 245,040,531 $ -- $ (22,587)
Oppenheimer Champion Income Fund, CI. Y 38,065,182 745,915 b (16)
Oppenheimer Core Bond Fund, Cl. Y 174,530,294 6,357,289 b (807,105)
Oppenheimer Commodity Strategy Total Return Fund, Cl. Y -- 194,036 b (795,037)
Oppenheimer Developing Markets Fund, Cl. Y 14,962,836 459,594 b 3,506,348
Oppenheimer Global Fund, Cl. Y 179,444,278 2,313,737 b 61,146
Oppenheimer Global Opportunities Fund, Cl. Y 89,804,395 6,104,016 b (53,943)
Oppenheimer High Yield Fund, Cl. Y -- 625,415 b (2,637)
Oppenheimer Institutional Money Market Fund, Cl. E, 5.35% 6,349,533 65,979 --
Oppenheimer International Bond Fund, Cl. Y 16,480,832 287,999 b (2,638)
Oppenheimer International Growth Fund, Cl. Y 44,364,461 466,953 b (2,775,829)
Oppenheimer International Small Company Fund, Cl. Y 15,069,057 273,764 b 727,823
Oppenheimer Main Street Fund, Cl. Y 180,650,507 2,049,777 b (9,636)
Oppenheimer Main Street Opportunity Fund, Cl. Y 98,570,721 2,665,228 b (12,064)
Oppenheimer Main Street Small Cap Fund, Cl. Y 94,900,278 1,692,596 b (31,539)
Oppenheimer Quest International Value Fund, Inc., Cl. A 28,224,216 944,545 b 2,210,540
Oppenheimer Real Estate Fund, Cl. Y 114,397,122 4,107,218 b (23,640)
Oppenheimer Small- & Mid- Cap Value Fund, Cl. Y 29,235,233 736,822 b (13,088)
Oppenheimer Strategic Income Fund, Cl. Y 174,880,398 6,146,225 b (43,749)
Oppenheimer U.S. Government Trust, Cl. Y 28,260,323 850,588 b (524,723)
Oppenheimer Value Fund, Cl. Y 268,146,693 4,853,831 b (209,697)
---------------------------------------------
$1,841,376,890 $41,941,527 $ 1,177,929
=============================================
a Received 3,160,989 shares as the result of the acquisition of Oppenheimer High
Yield Fund.
b All or portion of the transactions were the result of a reinvestment of
dividends.
2. Non-income producing security.
3. Rate shown is the 7-day yield as of January 31, 2007.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21 | ACTIVE ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES January 31, 2007
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investments, at value--see accompanying statement of
investment--Affiliated companies (cost $1,725,106,789) $ 1,841,376,890
- --------------------------------------------------------------------------------
Cash 82,074
- --------------------------------------------------------------------------------
Cash used for collateral on futures 1,455,226
- --------------------------------------------------------------------------------
Unrealized appreciation on swap contracts 71,607
- --------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 14,355,365
Interest and dividends 1,309,510
Investments sold 637,430
Futures margins 68,680
Other 22,510
----------------
Total assets 1,859,379,292
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Unrealized depreciation on swap contracts 152,060
- --------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 6,471,197
Shares of beneficial interest redeemed 1,295,097
Distribution and service plan fees 368,252
Transfer and shareholder servicing agent fees 175,135
Trustees' compensation 93,187
Shareholder communications 86,043
Other 52,570
----------------
Total liabilities 8,693,541
- --------------------------------------------------------------------------------
NET ASSETS $ 1,850,685,751
================
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- --------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 154,079
- --------------------------------------------------------------------------------
Additional paid-in capital 1,707,967,526
- --------------------------------------------------------------------------------
Accumulated net investment income 2,861,582
- --------------------------------------------------------------------------------
Accumulated net realized gain on investments 22,413,507
- --------------------------------------------------------------------------------
Net unrealized appreciation on investments 117,289,057
----------------
NET ASSETS $ 1,850,685,751
================
22 | ACTIVE ALLOCATION FUND
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- --------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $956,519,613 and 79,393,209 shares of beneficial interest
outstanding) $ 12.05
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $ 12.79
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $349,024,430 and 29,151,150 shares of beneficial interest
outstanding) $ 11.97
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $433,213,171 and 36,221,676 shares of beneficial interest
outstanding) $ 11.96
- --------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $109,145,668 and 9,083,217 shares of beneficial interest
outstanding) $ 12.02
- --------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based
on net assets of $2,782,869 and 230,075 shares of beneficial interest
outstanding) $ 12.10
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23 | ACTIVE ALLOCATION FUND
STATEMENT OF OPERATIONS For the Year Ended January 31, 2007
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends from affiliated companies $ 41,941,527
- --------------------------------------------------------------------------------
Interest 198,791
- --------------------------------------------------------------------------------
Other income 3,353
--------------
Total investment income 42,143,671
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 1,502,817
Class B 2,287,115
Class C 2,711,958
Class N 313,696
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 739,555
Class B 349,911
Class C 365,147
Class N 50,929
Class Y 73
- --------------------------------------------------------------------------------
Shareholder communications:
Class A 130,291
Class B 70,468
Class C 59,199
Class N 4,609
- --------------------------------------------------------------------------------
Asset allocation fees 1,167,638
- --------------------------------------------------------------------------------
Trustees' compensation 95,556
- --------------------------------------------------------------------------------
Custodian fees and expenses 5,092
- --------------------------------------------------------------------------------
Other 60,136
--------------
Total expenses 9,914,190
Less reduction to custodian expenses (270)
Less waivers and reimbursements of expenses (40,776)
--------------
Net expenses 9,873,144
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 32,270,527
24 | ACTIVE ALLOCATION FUND
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
Net realized gain (loss) on investments:
Affiliated companies $ 1,177,929
Distributions received from affiliated companies 31,989,767
Closing and expiration of futures contracts (7,123,542)
Swap contracts 658,034
--------------
Net realized gain 26,702,188
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments 93,167,482
Futures contracts 1,099,409
Swap contracts (80,453)
--------------
Net change in unrealized appreciation 94,186,438
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 153,159,153
==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | ACTIVE ALLOCATION FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED JANUARY 31, 2007 2006 1
- -------------------------------------------------------------------------------------------------------------
OPERATIONS
- --------------------------------------------------------------------------------------------------------------
Net investment income $ 32,270,527 $ 8,127,024
- --------------------------------------------------------------------------------------------------------------
Net realized gain 26,702,188 5,393,678
- --------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 94,186,438 23,102,619
--------------------------------
Net increase in net assets resulting from operations 153,159,153 36,623,321
- --------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (17,134,058) (4,500,051)
Class B (4,713,190) (1,549,890)
Class C (5,972,851) (1,619,117)
Class N (1,888,584) (414,437)
Class Y (50,117) (6,386)
--------------------------------
(29,758,800) (8,089,881)
- --------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (3,316,909) (376,546)
Class B (1,236,698) (149,661)
Class C (1,515,292) (153,460)
Class N (381,215) (35,176)
Class Y (8,618) (507)
--------------------------------
(6,458,732) (715,350)
- --------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- --------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest transactions:
Class A 602,241,849 278,869,967
Class B 210,888,833 109,728,240
Class C 280,476,657 119,590,827
Class N 74,350,364 27,088,823
Class Y 2,130,523 455,957
--------------------------------
1,170,088,226 535,733,814
- --------------------------------------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------------------------------------
Total increase 1,287,029,847 563,551,904
- --------------------------------------------------------------------------------------------------------------
Beginning of period 563,655,904 104,000 2
--------------------------------
End of period (including accumulated net investment income of $2,861,582
and $53,764, respectively) $1,850,685,751 $ 563,655,904
================================
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Reflects the value of the Manager's initial seed money investment on March
15, 2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | ACTIVE ALLOCATION FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED JANUARY 31, 2007 2006 1
- ----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.10 $ 10.00
- ----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .35 .43
Net realized and unrealized gain .89 .89
-----------------------------------
Total from investment operations 1.24 1.32
- ----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.24) (.20)
Distributions from net realized gain (.05) (.02)
-----------------------------------
Total dividends and/or distributions to shareholders (.29) (.22)
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.05 $ 11.10
===================================
- ----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 11.14% 13.31%
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 956,520 $ 293,578
- ----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 605,517 $ 112,224
- ----------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 3.10% 4.94%
Total expenses 5 0.51% 0.56%
Expenses after waivers and reimbursements
and reduction to custodian expenses 0.50% 0.55%
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 40% 90%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2007 1.16%
Period Ended January 31, 2006 1.28
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | ACTIVE ALLOCATION FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS B YEAR ENDED JANUARY 31, 2007 2006 1
- ----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.07 $ 10.00
- ----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .26 .36
Net realized and unrealized gain .86 .91
-----------------------------------
Total from investment operations 1.12 1.27
- ----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.17) (.18)
Distributions from net realized gain (.05) (.02)
-----------------------------------
Total dividends and/or distributions to shareholders (.22) (.20)
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.97 $ 11.07
===================================
- ----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 10.15% 12.72%
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 349,024 $ 115,629
- ----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 229,365 $ 46,284
- ----------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.26% 4.06%
Total expenses 5 1.29% 1.37%
Expenses after waivers and reimbursements
and reduction to custodian expenses 1.29% 1.34%
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 40% 90%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2007 1.94%
Period Ended January 31, 2006 2.09
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | ACTIVE ALLOCATION FUND
CLASS C YEAR ENDED JANUARY 31, 2007 2006 1
- ----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.06 $ 10.00
- ----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .27 .37
Net realized and unrealized gain .86 .89
-----------------------------------
Total from investment operations 1.13 1.26
- ----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.18) (.18)
Distributions from net realized gain (.05) (.02)
-----------------------------------
Total dividends and/or distributions to shareholders (.23) (.20)
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.96 $ 11.06
===================================
- ----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 10.21% 12.66%
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 433,213 $ 125,622
- ----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 272,038 $ 45,647
- ----------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.34% 4.18%
Total expenses 5 1.27% 1.33%
Expenses after waivers and reimbursements
and reduction to custodian expenses 1.26% 1.31%
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 40% 90%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2007 1.92%
Period Ended January 31, 2006 2.05
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | ACTIVE ALLOCATION FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS N YEAR ENDED JANUARY 31, 2007 2006 1
- ----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.09 $ 10.00
- ----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .35 .46
Net realized and unrealized gain .86 .85
-----------------------------------
Total from investment operations 1.21 1.31
- ----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.23) (.20)
Distributions from net realized gain (.05) (.02)
-----------------------------------
Total dividends and/or distributions to shareholders (.28) (.22)
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.02 $ 11.09
===================================
- ----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 10.88% 13.18%
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 109,146 $ 28,345
- ----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 62,929 $ 9,156
- ----------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 3.07% 5.28%
Total expenses 5 0.70% 0.73%
Expenses after waivers and reimbursements
and reduction to custodian expenses 0.70% 0.72%
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 40% 90%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2007 1.35%
Period Ended January 31, 2006 1.45
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30 | ACTIVE ALLOCATION FUND
CLASS Y YEAR ENDED JANUARY 31, 2007 2006 1
- ----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.13 $ 10.00
- ----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .44 .39
Net realized and unrealized gain .85 .97
-----------------------------------
Total from investment operations 1.29 1.36
- ----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.27) (.21)
Distributions from net realized gain (.05) (.02)
-----------------------------------
Total dividends and/or distributions to shareholders (.32) (.23)
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.10 $ 11.13
===================================
- ----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 11.56% 13.72%
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 2,783 $ 482
- ----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 1,317 $ 196
- ----------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 3.79% 4.44%
Total expenses 5 0.11% 0.33%
Expenses after waivers and reimbursements
and reduction to custodian expenses 0.11% 0.21%
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 40% 90%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods of less than one full year.
5. Expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2007 0.76%
Period Ended January 31, 2006 1.05
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31 | ACTIVE ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Portfolio Series (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
Active Allocation Fund (the "Portfolio") is a series of the Fund whose
investment objective is to seek long term growth of capital with a secondary
objective of current income. The Portfolio is a special type of mutual fund
known as a "fund of funds" because it invests in other mutual funds. The
Portfolio normally invests in a portfolio consisting of a target weighted
allocation in Class A or Class Y shares of other Oppenheimer funds. The Fund's
investment advisor is OppenheimerFunds, Inc. (the "Manager").
The Portfolio offers Class A, Class B, Class C, Class N and Class Y
shares. Class A shares are sold at their offering price, which is normally net
asset value plus a front-end sales charge. Class B, Class C and Class N shares
are sold without a front-end sales charge but may be subject to a contingent
deferred sales charge (CDSC). Class N shares are sold only through retirement
plans. Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC, however, the institutional investor
may impose charges on those accounts. All classes of shares have identical
rights and voting privileges with respect to the Portfolio in general and
exclusive voting rights on matters that affect that class alone. Earnings, net
assets and net asset value per share may differ due to each class having its own
expenses, such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares six
years after the date of purchase.
Under normal market conditions, the Manager will invest the Portfolio's
assets in shares of Oppenheimer Core Bond Fund, Oppenheimer Capital Appreciation
Fund, Oppenheimer Global Fund, Oppenheimer Global Opportunities Fund,
Oppenheimer Main Street Fund(R), Oppenheimer Main Street Opportunity Fund(R),
Oppenheimer Main Street Small Cap Fund(R), Oppenheimer Real Estate Fund,
Oppenheimer Strategic Income Fund, Oppenheimer Value Fund and Oppenheimer
Institutional Money Market Fund (individually, an "Underlying Fund" and
collectively, the "Underlying Funds").
In addition, up to 20% of the Portfolio's net assets may be invested
according to a tactical allocation among up to four Oppenheimer funds, which are
also considered Underlying Funds, or money market securities based on
recommendations made by the Manager.
Oppenheimer Funds:
Oppenheimer Capital Appreciation Fund
Oppenheimer Core Bond Fund
Oppenheimer Champion Income Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
32 | ACTIVE ALLOCATION FUND
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer MidCap Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Quest International Value Fund, Inc.
Oppenheimer Commodity Strategy Total Return Fund(R)
Oppenheimer Small- & Mid- Cap Value Fund
Oppenheimer U.S. Government Trust
Oppenheimer Value Fund
The following is a summary of significant accounting policies consistently
followed by the Portfolio.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Portfolio calculates the net asset value of each class
of shares based upon the net asset value of the applicable Underlying Fund as of
the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for trading. For each Underlying
Fund, the net asset value per share for a class of shares on a "regular business
day" is determined by dividing the value of the Underlying Fund's net assets
attributable to that class by the number of shares of that class outstanding on
that day. To determine net asset values, the Underlying Fund assets are valued
primarily on the basis of current market quotations. If market quotations are
not readily available or do not accurately reflect fair value for a security (in
the Manager's judgment) or if a security's value has been materially affected by
events occurring after the close of the exchange or market on which the security
is principally traded, that security may be valued by another method that the
Underlying Fund's Board of Trustees/Directors believes accurately reflects the
fair value. Because some foreign securities trade in markets and on exchanges
that operate on weekends and U.S. holidays, the values of some of the Underlying
Fund's foreign investments may change on days when investors cannot buy or
redeem Underlying Fund shares.
Short-term "money market type" debt securities with remaining maturities
of sixty days or less are valued at amortized cost (which approximates market
value).
- --------------------------------------------------------------------------------
RISKS OF INVESTING IN THE UNDERLYING FUNDS. Each of the Underlying Funds in
which the Portfolio invests has its own investment risks, and those risks can
affect the value of the Portfolio's investments and therefore the value of the
Portfolio's shares. To the extent that the Portfolio invests more of its assets
in one Underlying Fund than in another, the Portfolio will have greater exposure
to the risks of that Underlying Fund.
- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Portfolio is
permitted to invest daily available cash balances in an affiliated money market
fund. The Portfolio may invest the available cash in Class E shares of
Oppenheimer Institutional Money Market Fund ("IMMF") which seeks current income
and stability of principal. IMMF is a registered open-end management investment
company, regulated as a
33 | ACTIVE ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
money market fund under the Investment Company Act of 1940, as amended. The
Manager is also the investment advisor of IMMF. The Portfolio's investment in
IMMF is included in the Statement of Investments. As a shareholder, the
Portfolio is subject to its proportional share of IMMF's Class E expenses,
including its management fee. The Manager will waive fees and/or reimburse
Portfolio expenses in an amount equal to the indirect management fees incurred
through the Portfolio's investment in IMMF.
- --------------------------------------------------------------------------------
INVESTMENTS WITH OFF BALANCE SHEET RISK. The Portfolio enters into financial
instrument transactions (such as swaps, futures, options and other derivatives)
that may have off-balance sheet market risk. Off-balance sheet market risk
exists when the maximum potential loss on a particular financial instrument is
greater than the value of such financial instrument, as reflected in the
Portfolio's Statement of Assets and Liabilities.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Portfolio intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
The tax components of capital shown in the table below represent distribution
requirements the Portfolio must satisfy under the income tax regulations, losses
the Portfolio may be able to offset against income and gains realized in future
years and unrealized appreciation or depreciation of securities and other
investments for federal income tax purposes.
NET UNREALIZED
APPRECIATION
BASED ON COST OF
SECURITIES AND OTHER
UNDISTRIBUTED NET UNDISTRIBUTED ACCUMULATED LOSS INVESTMENTS FOR FEDERAL
INVESTMENT INCOME LONG-TERM GAIN CARRYFORWARD 1,2 INCOME TAX PURPOSES
- -------------------------------------------------------------------------------
$2,923,904 $25,441,757 $-- $114,289,345
1. During the fiscal year ended January 31, 2007, the Portfolio did not utilize
any capital loss carryforward.
2. During the fiscal year ended January 31, 2006, the Portfolio did not utilize
any capital loss carryforward.
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
34 | ACTIVE ALLOCATION FUND
distributions, the fiscal year in which amounts are distributed may differ from
the fiscal year in which the income or net realized gain was recorded by the
Portfolio. Accordingly, the following amounts have been reclassified for January
31, 2007. Net assets of the Portfolio were unaffected by the reclassifications.
REDUCTION TO
ACCUMULATED
INCREASE TO NET REALIZED
INCREASE TO ACCUMULATED NET GAIN ON
PAID-IN CAPITAL INVESTMENT INCOME INVESTMENTS 3
----------------------------------------------------------------
$1,706,263 $296,091 $2,002,354
3. $1,706,263, including $1,698,839 of long-term capital gain, was distributed
in connection with Portfolio share redemptions.
The tax character of distributions paid during the years ended January 31, 2007
and January 31, 2006 was as follows:
YEAR ENDED PERIOD ENDED
JANUARY 31, 2007 JANUARY 31, 2006
----------------------------------------------------------------
Distributions paid from:
Ordinary income $ 30,212,092 $ 8,805,231
Long-term capital gain 6,005,440 --
-------------------------------
Total $ 36,217,532 $ 8,805,231
===============================
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of January 31, 2007 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.
Federal tax cost of securities $ 1,727,146,806
Federal tax cost of other investments (38,581,222)
----------------
Total federal tax cost $ 1,688,565,584
================
Gross unrealized appreciation $ 117,372,702
Gross unrealized depreciation (3,083,357)
----------------
Net unrealized appreciation $ 114,289,345
================
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Portfolio has adopted an unfunded retirement plan
(the "Plan") for the Portfolio's independent trustees. Benefits are based on
years of service and fees paid to each trustee during their period of service.
The Plan was frozen with respect to adding new participants effective December
31, 2006 (the "Freeze Date") and existing Plan Participants as of the Freeze
Date will continue to receive accrued benefits under the Plan. Active
independent trustees as of the Freeze Date have each elected a distribution
method with respect to their benefits under the Plan. During the year ended
January 31, 2007, the Portfolio's projected benefit obligations were increased
by $77,487 and payments
35 | ACTIVE ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
of $1,985 were made to retired trustees, resulting in an accumulated liability
of $75,502 as of January 31, 2007.
The Board of Trustees has adopted a compensation deferral 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
Portfolio. 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 Portfolio or in other Oppenheimer funds selected by
the Trustee. The Portfolio purchases shares of the funds selected for deferral
by the Trustee in amounts equal to his or her deemed investment, resulting in a
Portfolio 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 Portfolio, and will not materially affect the
Portfolio's assets, liabilities or net investment income per share. Amounts will
be deferred until distributed in accordance to the compensation deferral 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 Portfolio on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Portfolio pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Portfolio, at a rate equal to
the Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line
item, if applicable, represents earnings on cash balances maintained by the
Portfolio during the period. Such interest expense and other custodian fees may
be paid with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
36 | ACTIVE ALLOCATION FUND
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Portfolio'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 Portfolio. In
the normal course of business, the Portfolio may also enter into contracts that
provide general indemnifications. The Portfolio's maximum exposure under these
arrangements is unknown as this would be dependent on future claims that may be
made against the Portfolio. 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 Portfolio has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED JANUARY 31, 2007 PERIOD ENDED JANUARY 31, 2006 1,2
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------
CLASS A
Sold 57,596,220 $ 654,562,965 27,068,123 $ 285,660,045
Dividends and/or
distributions reinvested 1,662,202 19,663,799 438,928 4,665,805
Redeemed (6,303,806) (71,984,915) (1,078,458) (11,455,883)
-----------------------------------------------------------------
Net increase 52,954,616 $ 602,241,849 26,428,593 $ 278,869,967
=================================================================
- -----------------------------------------------------------------------------------------------
CLASS B
Sold 21,225,979 $ 239,218,008 10,764,936 $ 113,091,487
Dividends and/or
distributions reinvested 490,803 5,771,900 154,655 1,639,339
Redeemed (3,014,115) (34,101,075) (471,208) (5,002,586)
-----------------------------------------------------------------
Net increase 18,702,667 $ 210,888,833 10,448,383 $ 109,728,240
=================================================================
- -----------------------------------------------------------------------------------------------
CLASS C
Sold 27,543,050 $ 310,509,299 11,696,791 $ 123,196,995
Dividends and/or
distributions reinvested 600,867 7,060,230 155,748 1,649,374
Redeemed (3,282,836) (37,092,872) (492,044) (5,255,542)
-----------------------------------------------------------------
Net increase 24,861,081 $ 280,476,657 11,360,495 $ 119,590,827
=================================================================
- -----------------------------------------------------------------------------------------------
CLASS N
Sold 7,119,593 $ 81,030,208 2,664,849 $ 28,261,231
Dividends and/or
distributions reinvested 176,954 2,088,058 42,051 446,165
Redeemed (769,703) (8,767,902) (150,627) (1,618,573)
-----------------------------------------------------------------
Net increase 6,526,844 $ 74,350,364 2,556,273 $ 27,088,823
=================================================================
37 | ACTIVE ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST Continued
YEAR ENDED JANUARY 31, 2007 PERIOD ENDED JANUARY 31, 2006 1,2
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------
CLASS Y
Sold 197,518 $ 2,248,494 54,640 $ 577,537
Dividends and/or
distributions reinvested 4,945 58,703 645 6,870
Redeemed (15,653) (176,674) (12,120) (128,450)
---------------------------------------------------------------
Net increase 186,810 $ 2,130,523 43,165 $ 455,957
===============================================================
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. The Portfolio sold 10,000 shares of Class A at a value of $100,000 and 100
shares of Class B, Class C, Class N and Class Y at a value of $1,000,
respectively, to the Manager upon seeding of the Portfolio on March 15, 2005.
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and money market funds, for the year ended January
31, 2007, were as follows:
PURCHASES SALES
- -------------------------------------------------------------------------------
Investment securities $1,647,337,564 $464,132,371
- -------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the investment advisory agreement, the Manager does not
charge a management fee, but rather collects indirect management fees from
investments in the Underlying Funds. The weighted indirect management fees
collected from the Underlying Funds, as a percent of average daily net assets of
the Portfolio for the year ended January 31, 2007 was 0.58%.
The Portfolio pays the Manager an asset allocation fee equal to an annual
rate of 0.10% of the average daily net assets of the Portfolio.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS or the Transfer Agent), a
division of the Manager, acts as the transfer and shareholder servicing agent
for the Portfolio. The Portfolio pays OFS a per account fee. For the year ended
January 31, 2007, the Portfolio paid $1,380,526 to OFS for services to the
Portfolio.
Additionally, Class Y shares are subject to minimum fees of $10,000 per
annum for assets of $10 million or more. The Class Y shares are subject to the
minimum fees in the event that the per account fee does not equal or exceed the
applicable minimum fees. OFS may voluntarily waive the minimum fees.
- --------------------------------------------------------------------------------
OFFERING AND ORGANIZATIONAL COSTS. The Manager paid all offering and
organizational costs associated with the registration and seeding of the
Portfolio.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Portfolio, OppenheimerFunds Distributor, Inc. (the
Distributor) acts as the
38 | ACTIVE ALLOCATION FUND
Portfolio's principal underwriter in the continuous public offering of the
Portfolio's classes of shares.
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Portfolio has adopted a Service Plan for
Class A shares. It reimburses the Distributor for a portion of its costs
incurred for services provided to accounts that hold Class A shares.
Reimbursement is made periodically at an annual rate of up to 0.25% of the
average annual net assets of Class A shares of the Portfolio. The Distributor
currently uses all of those fees to pay dealers, brokers, banks and other
financial institutions periodically for providing personal services and
maintenance of accounts of their customers that hold Class A shares. Any
unreimbursed expenses the Distributor incurs with respect to Class A shares in
any fiscal year cannot be recovered in subsequent periods. Fees incurred by the
Portfolio under the plan are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The
Portfolio has adopted Distribution and Service Plans for Class B, Class C and
Class N shares to compensate the Distributor for its services in connection with
the distribution of those shares and servicing accounts. Under the plans, the
Portfolio pays the Distributor an annual asset-based sales charge of 0.75% on
Class B and Class C shares and 0.25% on Class N shares. The Distributor also
receives a service fee of 0.25% per year under each plan. If either the Class B,
Class C or Class N plan is terminated by the Portfolio or by the shareholders of
a class, the Board of Trustees and its independent trustees must determine
whether the Distributor shall be entitled to payment from the Portfolio of all
or a portion of the service fee and/or asset-based sales charge in respect to
shares sold prior to the effective date of such termination. The Distributor
determines its uncompensated expenses under the plan at calendar quarter ends.
The Distributor's aggregate uncompensated expenses under the plan at December
31, 2006 for Class B, Class C and Class N shares were $5,145,968, $2,910,863 and
$897,937, respectively. Fees incurred by the Portfolio under the plans are
detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Portfolio. They are deducted from the
proceeds of sales of Portfolio shares prior to investment or from redemption
proceeds prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the following table for the period
indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- -----------------------------------------------------------------------------------------------------
January 31, 2007 $ 3,640,370 $ 7,591 $ 350,030 $ 70,255 $ 7,339
- -----------------------------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. The Manager has voluntarily agreed to a
total expense limitation on the aggregate amount of combined direct
(fund-of-funds
39 | ACTIVE ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
level) and indirect expense so that "Total expenses" as a percentage of average
daily net assets will not exceed the following annual rates: 1.45%, 2.20%,
2.20%, 1.70% and 1.20%, for Class A, Class B, Class C, Class N and Class Y,
respectively. During the year ended January 31, 2007, the Manager reimbursed the
Portfolio $20,446, $7,730, $9,156, $2,146 and $44, for the Class A, Class B,
Class C, Class N and Class Y shares, respectively. The Manager may modify or
terminate this undertaking at any time without notice to shareholders. These
expense limitations do not include Extraordinary Expenses and other expenses not
incurred in the ordinary course of the Portfolio's business. Notwithstanding the
foregoing limits, the Manager is not required to waive or reimburse Portfolio
expenses in excess of indirect management fees earned from investments in
Underlying Funds to assure that expenses do not exceed those limits.
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.
The Manager will waive fees and/or reimburse Portfolio expenses in an
amount equal to the indirect management fees incurred through the Portfolio's
investment in IMMF. During the year ended January 31, 2007, the Manager waived
$1,254 for IMMF management fees.
- --------------------------------------------------------------------------------
5. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a negotiated price on a stipulated future
date. Futures contracts are traded on a commodity exchange. The Portfolio may
buy and sell futures contracts that relate to broadly based securities indices
(financial futures) or debt securities (interest rate futures) in order to gain
exposure to or protection from changes in market value of stocks and bonds or
interest rates. The Portfolio may also buy or write put or call options on these
futures contracts.
The Portfolio generally sells futures contracts as a hedge against
increases in interest rates and decreases in market value of portfolio
securities. The Portfolio may also purchase futures contracts to gain exposure
to market changes as it may be more efficient or cost effective than actually
buying securities.
Upon entering into a futures contract, the Portfolio is required to
deposit either cash or securities (initial margin) in an amount equal to a
certain percentage of the contract value. Subsequent payments (variation margin)
are made or received by the Portfolio each day. The variation margin payments
are equal to the daily changes in the contract value and are recorded as
unrealized gains and losses. The Portfolio recognizes a realized gain or loss
when the contract is closed or has expired.
Cash held by the broker to cover initial margin requirements on open
futures contracts is noted in the Statement of Assets and Liabilities.
Securities held in collateralized accounts to cover initial margin requirements
on open futures contracts are noted in the
40 | ACTIVE ALLOCATION FUND
Statement of Investments. The Statement of Assets and Liabilities reflects a
receivable and/or payable for the daily mark to market for variation margin.
Realized gains and losses are reported in the Statement of Operations at the
closing and expiration of futures contracts. The net change in unrealized
appreciation and depreciation is reported in the Statement of Operations.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
As of January 31, 2007, the Portfolio had outstanding futures contracts as
follows:
EXPIRATION NUMBER OF VALUATION AS OF UNREALIZED
CONTRACT DESCRIPTION DATES CONTRACTS JANUARY 31, 2007 APPRECIATION
- ------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
Standard & Poor's 500 E-Mini 3/16/07 501 $ 36,147,150 $ 316,136
------------
CONTRACTS TO SELL
Russell 2000 (The) 3/16/07 226 18,179,440 6,497
U.S. Treasury Nts., 2 yr. 3/30/07 26 5,293,438 17,020
U.S. Treasury Nts., 5 yr. 3/30/07 489 51,115,781 759,756
------------
783,273
------------
$ 1,099,409
============
- --------------------------------------------------------------------------------
6. TOTAL RETURN SWAP CONTRACTS
A total return swap is an agreement under which a set of future cash flows is
exchanged between two counterparties. One cash flow stream will typically be
based on a reference interest rate or index and the other on the total return of
a reference asset such as a security, a basket of securities, or an index. The
total return includes appreciation or depreciation on the reference asset, plus
any interest or dividend payments. Payments under the swap are based on an
agreed upon principal amount but since this principal amount is not exchanged,
it represents neither an asset nor a liability to either counter-party, and is
referred to as notional. Total return swaps are marked to market daily using
different sources, including quotations from counterparties, pricing services,
brokers or market makers. The unrealized appreciation (depreciation) related to
the change in the valuation of the notional amount of the swap is combined with
the amount due to (owed by) the Portfolio at termination or settlement and
disclosed separately on the Statement of Assets and Liabilities. The net change
in this amount is included on the Statement of Operations. The Portfolio also
records any periodic payments received from (paid to) the counterparty,
including at termination, under such contracts as realized gain (loss) on the
Statement of Operations. The primary risks associated with total return swaps
are credit risks (if the counterparty fails to meet its obligations) and market
risk (if there is no liquid market for the agreement or unfavorable changes
occur in the reference asset).
41 | ACTIVE ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. TOTAL RETURN SWAP CONTRACTS Continued
As of January 31, 2007, the Portfolio had entered into the following total
return swap agreements:
UNREALIZED
SWAP NOTIONAL PAID BY RECEIVED BY TERMINATION APPRECIATION
COUNTERPARTY AMOUNT/UNITS THE PORTFOLIO THE PORTFOLIO DATES (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------
Goldman Sachs
International: One-Month
BBA LIBOR
USD and if
negative the
absolute value
of the Total If positive the
Return of the Total Return of
MSCI Daily the MSCI Daily
Total Return Net Total Return Net
Emerging Market Emerging Market
3,130 USD Index. USD Index. 12/10/07 $ 3,842
One-Month
BBA LIBOR
USD and if
negative the
absolute value
of the Total If positive, the
Return of the Total Return of
MSCI Daily the MSCI Daily
Total Return Net Total Return Net
Emerging Market Emerging Market
55,206 USD Index. USD Index. 12/10/07 67,765
One-Month
BBA LIBOR
USD minus spread,
plus if negative,
the absolute If positive, the
value of Lehman Lehman MBS
MBS Fixed Fixed Rate Index
UBS AG London 18,000,000 Rate Index. Total Return. 7/1/07 (152,060)
--------------
$ (80,453)
==============
Abbreviations are as follows:
BBA LIBOR USD British Bankers' Association London-Interbank Offered Rate for
United States Dollar
MBS Mortgage-Backed Security
MSCI Morgan Stanley Capital International
- --------------------------------------------------------------------------------
7. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the
42 | ACTIVE ALLOCATION FUND
evaluation of tax positions taken in the course of preparing the Portfolio's tax
returns to determine whether it is "more-likely-than-not" that tax positions
taken in the Portfolio's tax return will be ultimately sustained. A tax
liability and expense must be recorded in respect of any tax position that, in
Management's judgment, will not be fully realized. FIN 48 is effective for
fiscal years beginning after December 15, 2006. As of January 31, 2007, the
Manager has evaluated the implications of FIN 48 and does not currently
anticipate a material impact to the Portfolio's financial statements. The
Manager will continue to monitor the Portfolio's tax positions prospectively for
potential future impacts.
In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 157, FAIR VALUE MEASUREMENTS. This standard establishes a
single authoritative definition of fair value, sets out a framework for
measuring fair value and expands disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. As of January 31, 2007, the Manager does not believe the
adoption of SFAS No. 157 will materially impact the financial statement amounts;
however, additional disclosures may be required about the inputs used to develop
the measurements and the effect of certain of the measurements on changes in net
assets for the period.
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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 excluding the Portfolio) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.
43 | ACTIVE ALLOCATION FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER PORTFOLIO SERIES:
We have audited the accompanying statement of assets and liabilities of Active
Allocation Fund (one of the portfolios constituting the Oppenheimer Portfolio
Series), including the statement of investments, as of January 31, 2007, the
related statement of operations for the year then ended, and the statements of
changes in net assets and the financial highlights for the year then ended and
for the period April 5, 2005 (commencement of operations) to January 31, 2006.
These financial statements and financial highlights are the responsibility of
the Portfolio's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of January 31, 2007, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Active Allocation Fund as of January 31, 2007, the results of its operations for
the year then ended, and the changes in its net assets and the financial
highlights for the year then ended and for the period April 5, 2005
(commencement of operations) to January 31, 2006, in conformity with U.S.
generally accepted accounting principles.
KPMG LLP
Denver, Colorado
March 15, 2007
44 | ACTIVE ALLOCATION FUND
FEDERAL INCOME TAX INFORMATION Unaudited
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In early 2007, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Portfolio during
calendar year 2006. Regulations of the U.S. Treasury Department require the
Portfolio to report this information to the Internal Revenue Service.
Capital gain distributions of $0.0424 per share were paid to Class A,
Class B, Class C, Class N and Class Y shareholders, respectively, on December
29, 2006. Whether received in stock or in cash, the capital gain distribution
should be treated by shareholders as a gain from the sale of the capital assets
held for more than one year (long-term capital gains).
Dividends, if any, paid by the Portfolio during the fiscal year ended
January 31, 2007 which are not designated as capital gain distributions should
be multiplied by 22.38% to arrive at the amount eligible for the corporate
dividend-received deduction.
A portion, if any, of the dividends paid by the Portfolio during the
fiscal year ended January 31, 2007 which are not designated as capital gain
distributions are eligible for lower individual income tax rates to the extent
that the Portfolio has received qualified dividend income as stipulated by
recent tax legislation. $12,114,010 of the Portfolio's fiscal year taxable
income may be eligible for the lower individual income tax rates. In early 2007,
shareholders of record received information regarding the percentage of
distributions that are eligible for lower individual income tax rates.
Recent tax legislation allows a regulated investment company to designate
distributions not designated as capital gain distributions, as either interest
related dividends or short-term capital gain dividends, both of which are exempt
from the U.S. withholding tax applicable to non U.S. taxpayers. For the fiscal
year ended January 31, 2007, $152,830 or 0.51% of the ordinary distributions
paid by the Portfolio qualifies as an interest related dividend and $571,891 or
100% of the short-term capital gain distribution paid by the Portfolio qualifies
as a short-term capital gain dividend.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Portfolio to the Internal Revenue Service.
Because of the complexity of the federal regulations which may affect your
individual tax return and the many variations in state and local tax
regulations, we recommend that you consult your tax advisor for specific
guidance.
45 | ACTIVE ALLOCATION FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
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The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file 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.
46 | ACTIVE ALLOCATION FUND
BOARD APPROVAL OF THE PORTFOLIO'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 about the
nature and extent of the services provided to the Fund and information regarding
the Manager's key personnel who 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
all administrative and clerical personnel who 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.
47 | ACTIVE ALLOCATION FUND
BOARD APPROVAL OF THE PORTFOLIO'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
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 fact 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 Rudi
Schadt, Jerry Webman, Kurt Wolfgruber and Caleb Wong, the members of the Fund's
Asset Allocation Team. The Board members also considered their experiences with
the Manager and its officers and other personnel through their service on the
boards 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 its members have become knowledgeable about 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 and from 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 all other retail front-end load and
no-load moderate mixed-asset target allocation funds advised by other investment
advisers. The Board noted that the Fund's one-year and since inception
performance were better than its peer group median.
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, one other mixed-asset target allocation
moderate fund of funds, other flexible portfolio funds of funds and other funds
with comparable asset levels and distribution features. The Board noted that the
Manager has agreed to voluntarily limit the aggregate amount of combined direct
(fund-of-funds level) and indirect expenses so that total annual portfolio and
underlying fund operating expenses as a percentage of average daily net assets
will
48 | ACTIVE ALLOCATION FUND
not exceed the following annual rates: 1.45% for Class A, 2.20% for Class B,
2.20% for Class C, 1.70% for Class N and 1.20% for Class Y. The Manager may
modify or terminate that undertaking at any time without notice to shareholders.
The Board noted that the Fund's contractual and actual management fees and total
expenses are lower than its peer group median.
ECONOMIES OF SCALE. The Board considered whether the Manager may realize
economies of scale in managing and supporting the Fund, the extent to which
those economies of scale would benefit the Fund's shareholders and the current
level of Fund assets.
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.
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.
49 | ACTIVE ALLOCATION FUND
TRUSTEES AND OFFICERS Unaudited
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NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS
FUND, LENGTH OF SERVICE, AGE HELD; NUMBER OF PORTFOLIOS IN THE FUND COMPLEX CURRENTLY OVERSEEN
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL,
TRUSTEES COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR
HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
BRIAN F. WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since September 1995);
Chairman of the Board of Director of Special Value Opportunities Fund, LLC (registered investment company)
Trustees (since 2007) and (since September 2004); Investment Advisory Board Member of Zurich Financial
Trustee (since 2005) Services (insurance) (since October 2004); Board of Governing Trustees of The
Age: 63 Jackson Laboratory (non-profit) (since August 1990); Trustee of the Institute for
Advanced Study (non-profit educational institute) (since May 1992); Special Limited
Partner of Odyssey Investment Partners, LLC (private equity investment) (January
1999-September 2004) and Managing Principal (1997- December 1998); Trustee of
Research Foundation of AIMR (2000-2002) (investment research, non-profit);
Governor, Jerome Levy Economics Institute of Bard College (August 1990-September
2001) (economics research); Director of Ray & Berendtson, Inc. (May 2000-April
2002) (executive search firm). Oversees 59 portfolios in the OppenheimerFunds
complex.
MATTHEW P. FINK, Trustee of the Committee for Economic Development (policy research foundation)
Trustee (since 2005) (since 2005); Director of ICI Education Foundation (education foundation) (October
Age: 66 1991-August 2006); President of the Investment Company Institute (trade
association) (October 1991-June 2004); Director of ICI Mutual Insurance Company
(insurance company) (October 1991-June 2004). Oversees 49 portfolios in the
OppenheimerFunds complex.
ROBERT G. GALLI, A trustee or director of other Oppenheimer funds. Oversees 59 portfolios in the
Trustee (since 2005) OppenheimerFunds complex.
Age: 73
PHILLIP A. GRIFFITHS, Distinguished Presidential Fellow for International Affairs (since 2002) and Member
Trustee (since 2005) (since 1979) of the National Academy of Sciences; Council on Foreign Relations
Age: 68 (since 2002); Director of GSI Lumonics Inc. (precision medical equipment supplier)
(since 2001); Senior Advisor of The Andrew W. Mellon Foundation (since 2001); Chair
of Science Initiative Group (since 1999); Member of the American Philosophical
Society (since 1996); Trustee of Woodward Academy (since 1983); Foreign Associate
of Third World Academy of Sciences; Director of the Institute for Advanced Study
(1991-2004); Director of Bankers Trust New York Corporation (1994-1999); Provost at
Duke University (1983-1991). Oversees 49 portfolios in the OppenheimerFunds
complex.
MARY F. MILLER, Trustee of the American Symphony Orchestra (not-for-profit) (since October 1998);
Trustee (since 2005) and Senior Vice President and General Auditor of American Express Company
Age: 64 (financial services company) (July 1998-February 2003). Oversees 49 portfolios in
the OppenheimerFunds complex.
JOEL W. MOTLEY, Director of Columbia Equity Financial Corp. (privately-held financial adviser)
Trustee (since 2005) (since 2002); Managing Director of Carmona Motley, Inc. (privately-held financial
Age: 54 adviser) (since January 2002); Managing Director of Carmona Motley Hoffman Inc.
(privately-held financial adviser) (January 1998-December 2001); Member of the
Finance and Budget Committee of the Council on Foreign Relations, the Investment
Committee of the Episcopal Church of America, the Investment Committee and Board of
Human Rights Watch and the Investment Committee of Historic Hudson Valley. Oversees
49 portfolios in the OppenheimerFunds complex.
50 | ACTIVE ALLOCATION FUND
KENNETH A. RANDALL, Director of Dominion Resources, Inc. (electric utility holding company) (February
Trustee (since 2005) 1972-October 2005); Former Director of Prime Retail, Inc. (real estate investment
Age: 79 trust), Dominion Energy Inc. (electric power and oil & gas producer), Lumberman's
Mutual Casualty Company, American Motorists Insurance Company and American
Manufacturers Mutual Insurance Company; Former President and Chief Executive
Officer of The Conference Board, Inc. (international economic and business
research). Oversees 49 portfolios in the OppenheimerFunds complex.
RUSSELL S. REYNOLDS, JR., Chairman of The Directorship Search Group, Inc. (corporate governance consulting
Trustee (since 2005) and executive recruiting) (since 1993); Life Trustee of International House
Age: 75 (non-profit educational organization); Founder, Chairman and Chief Executive
Officer of Russell Reynolds Associates, Inc. (1969-1993); Banker at J.P. Morgan &
Co. (1958-1966); 1st Lt. Strategic Air Command, U.S. Air Force (1954-1958).
Oversees 49 portfolios in the OppenheimerFunds complex.
JOSEPH M. WIKLER, Director of the following medical device companies: Medintec (since 1992) and
Trustee (since 2005) Cathco (since 1996); Director of Lakes Environmental Association (since 1996);
Age: 65 Member of the Investment Committee of the Associated Jewish Charities of Baltimore
(since 1994); Director of Fortis/Hartford mutual funds (1994-December 2001).
Oversees 49 portfolios in the OppenheimerFunds complex.
PETER I. WOLD, President of Wold Oil Properties, Inc. (oil and gas exploration and production
Trustee (since 2005) company) (since 1994); Vice President, Secretary and Treasurer of Wold Trona
Age: 59 Company, Inc. (soda ash processing and production) (since 1996); Vice President of
Wold Talc Company, Inc. (talc mining) (since 1999); Managing Member of
Hole-in-the-Wall Ranch (cattle ranching) (since 1979); Director and Chairman of the
Denver Branch of the Federal Reserve Bank of Kansas City (1993-1999); and Director
of PacifiCorp. (electric utility) (1995-1999). Oversees 49 portfolios in the
OppenheimerFunds complex.
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INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH
AND OFFICER FLOOR, NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN
INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN
OFFICER FOR AN/INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR
REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH
OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President
President and Principal (since September 2000) of the Manager; President and a director or trustee of other
Executive Officer and Trustee Oppenheimer funds; President and Director of Oppenheimer Acquisition Corp. ("OAC")
(since 2005) (the Manager's parent holding company) and of Oppenheimer Partnership Holdings,
Age: 57 Inc. (holding company subsidiary of the Manager) (since July 2001); Director of
OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since November
2001); Chairman and Director of Shareholder Services, Inc. and of Shareholder
Financial Services, Inc. (transfer agent sub-sidiaries of the Manager) (since July
2001); President and Director of OppenheimerFunds Legacy Program (charitable trust
program established by the Manager) (since July 2001); Director of the following
investment advisory subsidiaries of the Manager: OFI Institutional Asset
Management, Inc., Centennial Asset Management Corporation, Trinity Investment
Management Corporation and Tremont Capital Management, Inc. (since November 2001),
HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since
July 2001); President (since November 1, 2001) and Director (since July 2001) of
Oppenheimer Real Asset Management, Inc.; Executive Vice President of
51 | ACTIVE ALLOCATION FUND
TRUSTEES AND OFFICERS Unaudited / Continued
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JOHN V. MURPHY, Massachusetts Mutual Life Insurance Company (OAC's parent company) (since February
Continued 1997); Director of DLB Acquisition Corporation (holding company parent of Babson
Capital Management LLC) (since June 1995); Member of the Investment Company
Institute's Board of Governors (since October 3, 2003); Chief Operating Officer of
the Manager (September 2000-June 2001); President and Trustee of MML Series
Investment Fund and MassMutual Select Funds (open-end investment companies)
(November 1999-November 2001); Director of C.M. Life Insurance Company (September
1999-August 2000); President, Chief Executive Officer and Director of MML Bay State
Life Insurance Company (September 1999-August 2000); Director of Emerald Isle
Bancorp and Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp)
(June 1989-June 1998). Oversees 96 portfolios in the OppenheimerFunds complex.
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OTHER OFFICERS THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS.
OF THE PORTFOLIO SCHADT, WEBMAN, WOLFGRUBER, WONG, ZACK, GILLESPIE AND MS. BLOOMBERG, TWO WORLD
FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS.
VANDEHEY, WIXTED, PETERSEN, SZILAGYI AND MS. IVES, 6803 S. TUCSON WAY, CENTENNIAL,
COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
RUDI W. SCHADT, Vice President, Director of Research in Product Design and Risk Management of the
Vice President and Portfolio Manager. Prior to joining the Manager in February 2002 he was a Director and Senior
Manager (since 2005) Quantitative Analyst (2000-2001) at UBS Asset Management prior to which he was an
Age: 49 Associate Director of Research (since June 1999) and Senior Researcher and
Portfolio Manager (from June 1997) at State Street Global Advisors. An officer of
11 portfolios in the OppenheimerFunds complex.
DR. JERRY WEBMAN, Chief Economist of the Manager (since 2006); Senior Vice President (since February
Vice President and Portfolio 1996) and Senior Investment Officer and Director (since 1997) of the Manager's
Manager (since 2005) Fixed Income Investments; Senior Vice President (since May 1999) of HarbourView
Age: 57 Asset Management Corporation. An officer of 8 other portfolios in the
OppenheimerFunds complex.
KURT WOLFGRUBER, Executive Vice President of the Manager (since March 2003) and Chief Investment
Vice President and Portfolio Officer and Director of the Manager (since July 2003) of the Manager. He has been
Manager (since 2005) Director of HarbourView Asset Management Corporation and of OFI Institutional Asset
Age: 57 Management, Inc. (since June 2003) and of Tremont Capital Management, Inc. (since
October 2001). He is also an officer of 8 other portfolios in the OppenheimerFunds
complex.
CALEB WONG, Vice President of the Manager (since June 1999); worked in fixed-income quantitative
Vice President and Portfolio research and risk management for the Manager (since July 1996); an officer
Manager (since 2005) of 3 portfolios in the OppenheimerFunds complex. Formerly Assistant Vice President
Age: 41 of the Manager (January 1997-June 1999); before joining the Manager in July 1996
Mr. Wong was enrolled in the Ph.D. program for Economics at the University of
Chicago.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March
Vice President and 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset
Chief Compliance Officer Management Corporation and Shareholder Services, Inc. (since June 1983). Former
(since 2005) Vice President and Director of Internal Audit of the Manager (1997-February 2004).
Age: 56 An officer of 96 portfolios in the OppenheimerFunds complex.
52 | ACTIVE ALLOCATION FUND
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of
Treasurer and Principal the following: HarbourView Asset Management Corporation, Shareholder Financial
Financial & Accounting Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management
Officer (since 2005) Corporation, and Oppenheimer Partnership Holdings, Inc. (since March 1999), OFI
Age: 47 Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd.
(since May 2000), OppenheimerFunds plc (since May 2000), OFI Institutional Asset
Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program
(charitable trust program established by the Manager) (since June 2003); Treasurer
and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the
Manager) (since May 2000); Assistant Treasurer of the following: OAC (since March
1999), Centennial Asset Management Corporation (March 1999-October 2003) and
OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief
Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March
1995-March 1999). An officer of 96 portfolios in the OppenheimerFunds complex.
BRIAN S. PETERSEN, Vice President of the Manager (since February 2007); Assistant Vice President of
Assistant Treasurer the Manager (August 2002-February 2007); Manager/Financial Product Accounting of
(since 2004) the Manager (November 1998-July 2002). An officer of 96 portfolios in the
Age: 36 OppenheimerFunds complex.
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Financial
Assistant Treasurer Reporting and Compliance of First Data Corporation (April 2003-July 2004); Manager
(since 2005) of Compliance of Berger Financial Group LLC (May 2001-March 2003); Director of
Age: 36 Mutual Fund Operations at American Data Services, Inc. (September 2000-May 2001).
An officer of 96 portfolios in the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March
Secretary (since 2005) 2002) of the Manager; General Counsel and Director of the Distributor (since
Age: 58 December 2001); General Counsel of Centennial Asset Management Corporation (since
December 2001); Senior Vice President and General Counsel of HarbourView Asset
Management Corporation (since December 2001); Secretary and General Counsel of OAC
(since November 2001); Assistant Secretary (since September 1997) and Director
(since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds
plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since
December 2002); Director of Oppenheimer Real Asset Management, Inc. (since November
2001); Senior Vice President, General Counsel and Director of Shareholder Financial
Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice
President, General Counsel and Director of OFI Private Investments, Inc. and OFI
Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy
Program (since June 2003); Senior Vice President and General Counsel of OFI
Institutional Asset Management, Inc. (since November 2001); Director of
OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President (May
1985-December 2003), Acting General Counsel (November 2001-February 2002) and
Associate General Counsel (May 1981-October 2001) of the Manager; Assistant
Secretary of the following: Shareholder Services, Inc. (May 1985-November 2001),
Shareholder Financial Services, Inc. (November 1989-November 2001), and
OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of
96 portfolios in the OppenheimerFunds complex.
53 | ACTIVE ALLOCATION FUND
TRUSTEES AND OFFICERS Unaudited / Continued
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LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First Vice
Assistant Secretary President (April 2001-April 2004), Associate General Counsel (December 2000-April
(since 2004) 2004), Corporate Vice President (May 1999-April 2001) and Assistant General Counsel
Age: 39 (May 1999-December 2000) of UBS Financial Services Inc. (formerly, PaineWebber
Incorporated). An officer of 96 portfolios in the OppenheimerFunds complex.
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since
Assistant Secretary October 2003) of the Manager; Vice President (since 1999) and Assistant Secretary
(since 2001) (since October 2003) of the Distributor; Assistant Secretary of Centennial Asset
Age: 41 Management Corporation (since October 2003); Vice President and Assistant Secretary
of Shareholder Services, Inc. (since 1999); Assistant Secretary of OppenheimerFunds
Legacy Program and Shareholder Financial Services, Inc. (since December 2001);
Assistant Counsel of the Manager (August 1994-October 2003). An officer of 96
portfolios in the OppenheimerFunds complex.
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since September
Assistant Secretary 2004); First Vice President (2001-September 2004); Director (2000-September 2004)
(since 2004) and Vice President (1998-2000) of Merrill Lynch Investment Management. An officer
Age: 43 of 96 portfolios in the OppenheimerFunds complex.
THE PORTFOLIO'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL
INFORMATION ABOUT THE PORTFOLIO'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT
CHARGE UPON REQUEST, BY CALLING 1.800.525.7048.
54 | ACTIVE ALLOCATION FUND
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees of the registrant has determined that the registrant does
not have an audit committee financial expert serving on its Audit Committee. In
this regard, no member of the Audit Committee was identified as having all of
the technical attributes identified in Instruction 2(b) to Item 3 of Form N-CSR
to qualify as an "audit committee financial expert," whether
through the type of specialized education or experience described in that
Instruction. The Board has concluded that while the members of the Audit
Committee collectively have the necessary attributes and experience required to
serve effectively as an Audit Committee, no single member possesses all of the
required technical attributes through the particular methods of education or
experience set forth in the Instructions to be designated as an audit committee
financial expert.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The principal accountant for the audit of the registrant's annual financial
statements billed $68,500 in fiscal 2007 and $60,000 in fiscal 2006.
(b) Audit-Related Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees during the last two fiscal years.
The principal accountant for the audit of the registrant's annual financial
statements billed $225,954 in fiscal 2007 and $156,805 in fiscal 2006 to the
registrant's investment adviser or any entity controlling, controlled by, or
under common control with the adviser that provides ongoing services to the
registrant.
Such services include: internal control reviews and professional services
relating to FAS 123R.
(c) Tax Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees to the registrant during the last two fiscal
years.
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees in fiscal 2007 and $6,536 in fiscal 2006 to the
registrant's investment adviser or any entity controlling, controlled by, or
under common control with the adviser that provides ongoing services to the
registrant.
Such services include: Preparation of form 5500.
(d) All Other Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees during the last two fiscal years
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees during the last two fiscal years to the
registrant's investment adviser or any entity
controlling, controlled by, or under common control with the adviser that
provides ongoing services to the registrant.
(e) (1) During its regularly scheduled periodic meetings, the registrant's
audit committee will pre-approve all audit, audit-related, tax and
other services to be provided by the principal accountants of the
registrant.
The audit committee has delegated pre-approval authority to its
Chairman for any subsequent new engagements that arise between
regularly scheduled meeting dates provided that any fees such
pre-approved are presented to the audit committee at its next regularly
scheduled meeting.
Under applicable laws, pre-approval of non-audit services maybe waived
provided that: 1) the aggregate amount of all such services provided
constitutes no more than five percent of the total amount of fees paid
by the registrant to it principal accountant during the fiscal year in
which services are provided 2) such services were not recognized by the
registrant at the time of engagement as non-audit services and 3) such
services are promptly brought to the attention of the audit committee
of the registrant and approved prior to the completion of the audit.
(2) 100%
(f) Not applicable as less than 50%.
(g) The principal accountant for the audit of the registrant's annual
financial statements billed $225,954 in fiscal 2007 and $163,341in
fiscal 2006 to the registrant and the registrant's investment adviser
or any entity controlling, controlled by, or under common control with
the adviser that provides ongoing services to the registrant related to
non-audit fees. Those billings did not include any prohibited non-audit
services as defined by the Securities Exchange Act of 1934.
(h)
No such services were rendered.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
THE FUND'S GOVERNANCE COMMITTEE PROVISIONS WITH RESPECT TO NOMINATIONS OF
DIRECTORS/TRUSTEES TO THE RESPECTIVE BOARDS
1. The Fund's Governance Committee (the "Committee") will evaluate potential
Board candidates to assess their qualifications. The Committee shall have
the authority, upon approval of the Board, to retain an executive search
firm to assist in this effort. The Committee may consider recommendations
by business and personal contacts of current Board members and by executive
search firms which the Committee may engage from time to time and may also
consider shareholder recommendations. The Committee may consider the advice
and recommendation of the Funds' investment manager and its affiliates in
making the selection.
2. The Committee shall screen candidates for Board membership. The Committee
has not established specific qualifications that it believes must be met by
a trustee nominee. In evaluating trustee nominees, the Committee considers,
among other things, an individual's background, skills, and experience;
whether the individual is an "interested person" as defined in the
Investment Company Act of 1940; and whether the individual would be deemed
an "audit committee financial expert" within the meaning of applicable SEC
rules. The Committee also considers whether the individual's background,
skills, and experience will complement the background, skills, and
experience of other nominees and will contribute to the Board. There are no
differences in the manner in which the Committee evaluates nominees for
trustees based on whether the nominee is recommended by a shareholder.
3. The Committee may consider nominations from shareholders for the Board at
such times as the Committee meets to consider new nominees for the Board.
The Committee shall have the
sole discretion to determine the candidates to present to the Board and, in
such cases where required, to shareholders. Recommendations for trustee
nominees should, at a minimum, be accompanied by the following:
o the name, address, and business, educational, and/or other pertinent
background of the person being recommended;
o a statement concerning whether the person is an "interested person" as
defined in the Investment Company Act of 1940;
o any other information that the Funds would be required to include in a
proxy statement concerning the person if he or she was nominated; and
o the name and address of the person submitting the recommendation and,
if that person is a shareholder, the period for which that person held
Fund shares.
The recommendation also can include any additional information which the
person submitting it believes would assist the Committee in evaluating the
recommendation.
4. Shareholders should note that a person who owns securities issued by
Massachusetts Mutual Life Insurance Company (the parent company of the
Funds' investment adviser) would be deemed an "interested person" under the
Investment Company Act of 1940. In addition, certain other relationships
with Massachusetts Mutual Life Insurance Company or its subsidiaries, with
registered broker-dealers, or with the Funds' outside legal counsel may
cause a person to be deemed an "interested person."
5. Before the Committee decides to nominate an individual as a trustee,
Committee members and other directors customarily interview the individual
in person. In addition, the individual customarily is asked to complete a
detailed questionnaire which is designed to elicit information which must
be disclosed under SEC and stock exchange rules and to determine whether
the individual is subject to any statutory disqualification from serving as
a trustee of a registered investment company.
ITEM 11. CONTROLS AND PROCEDURES.
Based on their evaluation of the registrant's disclosure controls and procedures
(as defined in rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR
270.30a-3(c)) as of January 31, 2007, the registrant's principal executive
officer and principal financial officer found the registrant's disclosure
controls and procedures to provide reasonable assurances that information
required to be disclosed by the registrant in the reports that it files under
the Securities Exchange Act of 1934 (a) is accumulated and communicated to
registrant's management, including its principal executive officer and principal
financial officer, to allow timely decisions regarding required disclosure, and
(b) is recorded, processed, summarized and reported, within the time periods
specified in the rules and forms adopted by the U.S. Securities and Exchange
Commission.
There have been no changes in the registrant's internal controls over financial
reporting that occurred during the registrant's second fiscal quarter of the
period covered by this report that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a) (1) Exhibit attached hereto.
(2) Exhibits attached hereto.
(3) Not applicable.
(b) Exhibit attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Oppenheimer Portfolio Series
By: /s/ John V. Murphy
---------------------------
John V. Murphy
Principal Executive Officer
Date: March 13, 2007
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: March 13, 2007
By: /s/ Brian W. Wixted
---------------------------
Brian W. Wixted
Principal Financial Officer
Date: March 13, 2007