UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-5225
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Oppenheimer Quest for Value Funds
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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: October 31
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Date of reporting period: 10/31/2007
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ITEM 1. REPORTS TO STOCKHOLDERS.
OPPENHEIMER QUEST BALANCED FUND
TOP HOLDINGS AND ALLOCATIONS
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TOP TEN COMMON STOCK INDUSTRIES
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Oil, Gas & Consumable Fuels 8.4%
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Capital Markets 6.1
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Biotechnology 5.3
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Aerospace & Defense 4.8
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Semiconductors & Semiconductor Equipment 4.7
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Diversified Financial Services 4.2
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Food & Staples Retailing 4.0
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Health Care Providers & Services 3.5
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Hotels, Restaurants & Leisure 3.5
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Household Durables 3.4
Portfolio holdings and allocations are subject to change. Percentages are as of
October 31, 2007, and are based on net assets.
TOP TEN COMMON STOCK HOLDINGS
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ConocoPhillips 7.6%
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Boeing Co. 4.8
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Biogen Idec, Inc. 3.5
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WellPoint, Inc. 3.5
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Yum! Brands, Inc. 3.5
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Bank of New York Mellon Corp. 3.2
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Roche Holding Ltd., Sponsored ADR 3.0
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Lehman Brothers Holdings, Inc. 3.0
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Countrywide Financial Corp. 2.4
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Wal-Mart Stores, Inc. 2.4
Portfolio holdings and allocations are subject to change. Percentages are as of
October 31, 2007, and are based on net assets. For up-to-date Top 10 Fund
Holdings, please visit www.oppenheimerfunds.com.
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7 | OPPENHEIMER QUEST BALANCED FUND
TOP HOLDINGS AND ALLOCATIONS
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PORTFOLIO ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Stocks 59.3%
Bonds and Notes 25.8
Cash Equivalents 14.9
Portfolio holdings and allocations are subject to change. Percentages are as of
October 31, 2007, and are based on the total market value of investments.
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8 | OPPENHEIMER QUEST BALANCED FUND
FUND PERFORMANCE DISCUSSION
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HOW HAS THE FUND PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS, INC., OF
THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR ENDED OCTOBER 31, 2007, FOLLOWED
BY A GRAPHICAL COMPARISON OF THE FUND'S PERFORMANCE TO AN APPROPRIATE
BROAD-BASED MARKET INDEX.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. Oppenheimer Quest Balanced Fund's
Class A shares (without sales charge), which invests in both stocks and bonds,
underper-formed the Standard & Poor's 500 Index while outpacing the Lehman
Brothers Aggregate Bond Index. The Fund's performance received a boost from an
overweighting in equities, which outperformed bonds, and from well-timed moves
in the bond portfolio. These contributions partly offset weakness in stocks with
direct exposure to the troubled housing and mortgage industries. On the other
hand, performance was held back by weaker stock selection in other areas,
notably finance and consumer discretionary.
Our strategy is to position the Fund's equity portfolio in undervalued
stocks that, in our view, stand to appreciate once investors take into account a
changing environment or the company's underappreciated strengths. For example,
the Fund's largest position and largest contributor was ConocoPhillips. The
share price for this integrated oil company surged as energy prices rose at
various points during the year. Despite the gains, we believe the stock is still
undervalued. A large percentage of ConocoPhillips' business is tied to the North
American refinery and natural gas industries, areas of the energy sector that we
believe will be more profitable in the future.
Other strong contributors included technology companies EMC Corp. and
Apple, Inc. We added Apple to the portfolio in mid-2006, in the belief that its
share price did not adequately reflect the company's potential to capture market
share in the personal-computer business. The success of its iPods had created a
"halo effect" that was boosting sales of its laptops and personal computers,
the company's largest business segment. The stock price subsequently doubled and
we opted to exit the position as it appreciated.
We also sold our investment in EMC, a provider of software for protecting
and maximizing information technology systems, after it appreciated strongly.
The gains at EMC were driven by the successful spinoff of its virtualization
software division, VMware.
In contrast, we maintained or added to our investments in the housing and
mortgage industries, even though two stocks in these industries (i.e.,
homebuilder Centex Corp.--which we sold and replaced with other housing
stocks--and mortgage lender Countrywide Financial Corp.) were the largest
detractors from results. While it seems very likely that the worst is not yet
over for these industries, we believe the long-term dynamics are favorable and
current stock prices are attractive. Maintaining the Fund's investment in these
areas makes it possible for the Fund to recoup the year's losses once these
industries recover.
9 | OPPENHEIMER QUEST BALANCED FUND
FUND PERFORMANCE DISCUSSION
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The Fund's bond portfolio benefited from a well-timed repositioning in the
summer. We initially invested defensively, maintaining a below-index duration
(i.e., a relatively low sensitivity to interest-rate movements). We emphasized
short-term, high-quality corporate bonds, which provided higher yields than
comparable-maturity Treasuries for little incremental risk. Anticipating that
the mortgage crisis would spill over to the rest of the bond market during the
summer, we lengthened the duration beginning in July and shifted approximately
40% of the fixed-income assets from corporate bonds to the government sector
(i.e., Treasury and agency securities). Both moves were additive. Longer-term
securities appreciated most after the Fed cut interest rates in the last three
months of the period, and Treasury prices rose sharply after July as wary
investors sought the relative safety of government-backed bonds.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each class of shares of the
Fund held until October 31, 2007. In the case of Class A, Class B and Class C
shares, performance is measured over a ten-fiscal-year period. In the case of
Class N shares, performance is measured from inception of the Class on March 1,
2001. In the case of Class Y shares, performance is measured from the inception
of the Class on May 1, 2000. The Fund's performance reflects the deduction of
the maximum initial sales charge on Class A shares, the applicable contingent
deferred sales charge on Class B, Class C and Class N shares, and reinvestments
of all dividends and capital gains distributions. Past performance cannot
guarantee future results.
The Fund's performance is compared to the performance of the S&P 500
Index, a broad-based index of equity securities widely regarded as a general
measure of the performance of the U.S. equity securities market. Index
performance reflects the reinvestment of income but does not consider the effect
of transaction costs, and none of the data in the graphs shows the effect of
taxes. The Fund's performance reflects the effects of the Fund's business and
operating expenses. While index comparisons may be useful to provide a benchmark
for the Fund's performance, it must be noted that the Fund's investments are not
limited to the investments in the index.
10 | OPPENHEIMER QUEST BALANCED FUND
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Quest Balanced Fund, Inc.(SM) (Class A)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Value of Investment S&P 500 Index
Date In Fund Reinvested Monthly
10/31/1997 9,425 10,000
01/31/1998 10,221 10,760
04/30/1998 11,393 12,250
07/31/1998 11,065 12,396
10/31/1998 12,055 12,201
01/31/1999 13,797 14,258
04/30/1999 14,489 14,924
07/31/1999 14,537 14,900
10/31/1999 14,645 15,332
01/31/2000 14,338 15,732
04/30/2000 14,526 16,434
07/31/2000 14,154 16,236
10/31/2000 15,491 16,264
01/31/2001 16,549 15,590
04/30/2001 16,900 14,303
07/31/2001 16,791 13,910
10/31/2001 15,746 12,216
01/31/2002 15,833 13,075
04/30/2002 15,010 12,499
07/31/2002 12,455 10,625
10/31/2002 12,301 10,372
01/31/2003 12,969 10,067
04/30/2003 13,951 10,836
07/31/2003 15,119 11,756
10/31/2003 16,221 12,528
01/31/2004 17,557 13,545
04/30/2004 17,142 13,314
07/31/2004 17,384 13,303
10/31/2004 17,809 13,707
01/31/2005 18,223 14,387
04/30/2005 17,746 14,157
07/31/2005 19,187 15,171
10/31/2005 18,430 14,902
01/31/2006 19,291 15,880
04/30/2006 19,890 16,337
07/31/2006 19,108 15,987
10/31/2006 20,415 17,335
01/31/2007 21,578 18,182
04/30/2007 22,248 18,825
07/31/2007 22,089 18,565
10/31/2007 21,838 19,857
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE FUND AT
10/31/07
1-Year 0.82% 5-Year 10.84% 10-Year 8.12%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. BECAUSE CLASS B SHARES CONVERT TO
CLASS A SHARES 72 MONTHS AFTER PURCHASE, THE 10-YEAR RETURN FOR CLASS B USES
CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 16 FOR FURTHER
INFORMATION.
11 | OPPENHEIMER QUEST BALANCED FUND
FUND PERFORMANCE DISCUSSION
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CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Quest Balanced Fund(SM) (Class B)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Value of Investment S&P 500 Index
Date In Fund Reinvested Monthly
10/31/1997 10,000 10,000
01/31/1998 10,830 10,760
04/30/1998 12,047 12,250
07/31/1998 11,682 12,396
10/31/1998 12,708 12,201
01/31/1999 14,526 14,258
04/30/1999 15,235 14,924
07/31/1999 15,261 14,900
10/31/1999 15,356 15,332
01/31/2000 15,007 15,732
04/30/2000 15,188 16,434
07/31/2000 14,766 16,236
10/31/2000 16,140 16,264
01/31/2001 17,218 15,590
04/30/2001 17,562 14,303
07/31/2001 17,415 13,910
10/31/2001 16,305 12,216
01/31/2002 16,380 13,075
04/30/2002 15,509 12,499
07/31/2002 12,850 10,625
10/31/2002 12,656 10,372
01/31/2003 13,314 10,067
04/30/2003 14,305 10,836
07/31/2003 15,473 11,756
10/31/2003 16,585 12,528
01/31/2004 17,951 13,545
04/30/2004 17,528 13,314
07/31/2004 17,774 13,303
10/31/2004 18,209 13,707
01/31/2005 18,632 14,387
04/30/2005 18,145 14,157
07/31/2005 19,617 15,171
10/31/2005 18,844 14,902
01/31/2006 19,724 15,880
04/30/2006 20,337 16,337
07/31/2006 19,537 15,987
10/31/2006 20,874 17,335
01/31/2007 22,063 18,182
04/30/2007 22,748 18,825
07/31/2007 22,586 18,565
10/31/2007 22,328 19,857
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE FUND AT
10/31/07
1-Year 1.17% 5-Year 11.04% 10-Year 8.36%
12 | OPPENHEIMER QUEST BALANCED FUND
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Quest Balanced Fund(SM) (Class C)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Value of Investment S&P 500 Index
Date In Fund Reinvested Monthly
10/31/1997 10,000 10,000
01/31/1998 10,832 10,760
04/30/1998 12,049 12,250
07/31/1998 11,685 12,396
10/31/1998 12,712 12,201
01/31/1999 14,524 14,258
04/30/1999 15,235 14,924
07/31/1999 15,270 14,900
10/31/1999 15,356 15,332
01/31/2000 15,006 15,732
04/30/2000 15,188 16,434
07/31/2000 14,774 16,236
10/31/2000 16,139 16,264
01/31/2001 17,221 15,590
04/30/2001 17,565 14,303
07/31/2001 17,420 13,910
10/31/2001 16,309 12,216
01/31/2002 16,383 13,075
04/30/2002 15,512 12,499
07/31/2002 12,851 10,625
10/31/2002 12,657 10,372
01/31/2003 13,331 10,067
04/30/2003 14,326 10,836
07/31/2003 15,484 11,756
10/31/2003 16,579 12,528
01/31/2004 17,918 13,545
04/30/2004 17,461 13,314
07/31/2004 17,684 13,303
10/31/2004 18,088 13,707
01/31/2005 18,460 14,387
04/30/2005 17,961 14,157
07/31/2005 19,374 15,171
10/31/2005 18,577 14,902
01/31/2006 19,405 15,880
04/30/2006 19,968 16,337
07/31/2006 19,154 15,987
10/31/2006 20,429 17,335
01/31/2007 21,554 18,182
04/30/2007 22,182 18,825
07/31/2007 21,981 18,565
10/31/2007 21,683 19,857
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE FUND AT
10/31/07
1-Year 5.15% 5-Year 11.37% 10-Year 8.05%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. BECAUSE CLASS B SHARES CONVERT TO
CLASS A SHARES 72 MONTHS AFTER PURCHASE, THE 10-YEAR RETURN FOR CLASS B USES
CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 16 FOR FURTHER
INFORMATION.
13 | OPPENHEIMER QUEST BALANCED FUND
FUND PERFORMANCE DISCUSSION
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CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Quest Balanced Fund(SM) (Class N)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Value of Investment S&P 500 Index
Date In Fund Reinvested Monthly
03/01/2001 10,000 10,000
04/30/2001 10,345 10,094
07/31/2001 10,271 9,817
10/31/2001 9,630 8,621
01/31/2002 9,690 9,227
04/30/2002 9,183 8,821
07/31/2002 7,616 7,499
10/31/2002 7,512 7,320
01/31/2003 7,920 7,104
04/30/2003 8,514 7,647
07/31/2003 9,219 8,296
10/31/2003 9,879 8,841
01/31/2004 10,686 9,559
04/30/2004 10,420 9,396
07/31/2004 10,567 9,388
10/31/2004 10,814 9,674
01/31/2005 11,055 10,154
04/30/2005 10,763 9,991
07/31/2005 11,620 10,707
10/31/2005 11,150 10,517
01/31/2006 11,667 11,207
04/30/2006 12,020 11,530
07/31/2006 11,539 11,282
10/31/2006 12,316 12,234
01/31/2007 13,007 12,832
04/30/2007 13,401 13,285
07/31/2007 13,299 13,102
10/31/2007 13,136 14,014
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE FUND AT
10/31/07
1-Year 5.66% 5-Year 11.83% Since Inception (3/1/01) 4.18%
14 | OPPENHEIMER QUEST BALANCED FUND
CLASS Y SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Quest Balanced Fund(SM) (Class Y)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Value of Investment S&P 500 Index
Date In Fund Reinvested Monthly
05/01/2000 10,000 10,000
07/31/2000 9,795 9,879
10/31/2000 10,732 9,897
01/31/2001 11,482 9,487
04/30/2001 11,740 8,703
07/31/2001 11,677 8,464
10/31/2001 10,962 7,434
01/31/2002 11,046 7,956
04/30/2002 10,484 7,605
07/31/2002 8,712 6,466
10/31/2002 8,607 6,311
01/31/2003 9,089 6,126
04/30/2003 9,787 6,594
07/31/2003 10,611 7,153
10/31/2003 11,396 7,623
01/31/2004 12,344 8,242
04/30/2004 12,058 8,101
07/31/2004 12,247 8,095
10/31/2004 12,555 8,341
01/31/2005 12,848 8,755
04/30/2005 12,533 8,614
07/31/2005 13,551 9,232
10/31/2005 13,031 9,068
01/31/2006 13,646 9,663
04/30/2006 14,085 9,941
07/31/2006 13,541 9,728
10/31/2006 14,480 10,548
01/31/2007 15,319 11,064
04/30/2007 15,804 11,455
07/31/2007 15,703 11,297
10/31/2007 15,535 12,083
AVERAGE ANNUAL TOTAL RETURNS OF CLASS Y SHARES OF THE FUND AT 10/31/07
1-Year 7.29% 5-Year 12.54% Since Inception (5/1/00) 6.05%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. BECAUSE CLASS B SHARES CONVERT TO
CLASS A SHARES 72 MONTHS AFTER PURCHASE, THE 10-YEAR RETURN FOR CLASS B USES
CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 16 FOR FURTHER
INFORMATION.
15 | OPPENHEIMER QUEST BALANCED FUND
NOTES
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Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. The Fund's total returns shown do
not reflect the deduction of income taxes on an individual's investment. Taxes
may reduce your actual investment returns on income or gains paid by the Fund or
any gains you may realize if you sell your shares.
INVESTORS SHOULD CONSIDER THE FUND'S INVESTMENT OBJECTIVES, RISKS, AND OTHER
CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE FUND'S PROSPECTUS CONTAINS
THIS AND OTHER INFORMATION ABOUT THE FUND, AND MAY BE OBTAINED BY ASKING YOUR
FINANCIAL ADVISOR, CALLING US AT 1.800.525.7048 OR VISITING OUR WEBSITE AT
WWW.OPPENHEIMERFUNDS.COM. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
The Fund's investment strategy and focus can change over time. The mention of
specific fund holdings does not constitute a recommendation by OppenheimerFunds,
Inc.
CLASS A shares of the Fund were first publicly offered on 11/1/91. Unless
otherwise noted, Class A returns include the current maximum initial sales
charge of 5.75%. There is a voluntary waiver of a portion of the Class A
asset-based sales charge as described in the Prospectus.
CLASS B shares of the Fund were first publicly offered on 9/1/93. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charges of 5% (1-year) and 2% (5-year). Because Class B shares convert to
Class A shares 72 months after purchase, the 10-year return for Class B does not
include any contingent deferred sales charge on redemptions and uses Class A
performance for the period after conversion. Class B shares are subject to an
annual 0.75% asset-based sales charge.
CLASS C shares of the Fund were first publicly offered on 9/1/93. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
16 | OPPENHEIMER QUEST BALANCED FUND
CLASS N shares of the Fund were first publicly offered on 3/1/01. Class N shares
are offered only through retirement plans. Unless otherwise noted, Class N
returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
CLASS Y shares of the Fund were first publicly offered on 5/1/00. Class Y shares
are offered only to certain institutional investors under special agreement with
the Distributor.
An explanation of the calculation of performance is in the Fund's Statement of
Additional Information.
17 | OPPENHEIMER QUEST BALANCED FUND
FUND EXPENSES
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FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include sales charges (loads) on purchase payments,
contingent deferred sales charges on redemptions; and redemption fees, if any;
and (2) ongoing costs, including management fees; distribution and service fees;
and other Fund expenses. These examples are intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended October 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 Fund's actual expense ratio for each class of shares, and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front-end
or contingent deferred sales charges (loads), or a $12.00 fee imposed annually
on accounts valued at less than $500.00 (subject to exceptions described in the
Statement of Additional Information). Therefore, the "hypothetical" lines of
18 | OPPENHEIMER QUEST BALANCED FUND
the table are useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
5/1/07 10/31/07 OCTOBER 31, 2007
- ------------------------------------------------------------------------------
Class A Actual $1,000.00 $ 981.60 $5.71
- ------------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,019.46 5.82
- ------------------------------------------------------------------------------
Class B Actual 1,000.00 978.00 9.62
- ------------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,015.53 9.80
- ------------------------------------------------------------------------------
Class C Actual 1,000.00 977.50 9.37
- ------------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,015.78 9.55
- ------------------------------------------------------------------------------
Class N Actual 1,000.00 980.20 7.11
- ------------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,018.05 7.25
- ------------------------------------------------------------------------------
Class Y Actual 1,000.00 982.90 4.26
- ------------------------------------------------------------------------------
Class Y Hypothetical 1,000.00 1,020.92 4.34
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended October 31, 2007 are as follows:
CLASS EXPENSE RATIOS
- ------------------------------
Class A 1.14%
- ------------------------------
Class B 1.92
- ------------------------------
Class C 1.87
- ------------------------------
Class N 1.42
- ------------------------------
Class Y 0.85
The expense ratios reflect reduction to custodian expenses and voluntary waivers
or reimbursements by the Fund's Manager that can be terminated at any time,
without advance notice. The "Financial Highlights" tables in the Fund's
financial statements, included in this report, also show the gross expense
ratios, without such waivers or reimbursements and reduction to custodian
expenses, if applicable.
- --------------------------------------------------------------------------------
19 | OPPENHEIMER QUEST BALANCED FUND
STATEMENT OF INVESTMENTS October 31, 2007
- --------------------------------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--69.0%
- -------------------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--9.9%
- -------------------------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--3.5%
Yum! Brands, Inc. 4,800,000 $ 193,296,000
- -------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES--3.4%
Lennar Corp., Cl. A 1 4,200,000 95,970,000
- -------------------------------------------------------------------------------------------------------------------------------
Pulte Homes, Inc. 6,400,000 94,976,000
----------------
190,946,000
- -------------------------------------------------------------------------------------------------------------------------------
MULTILINE RETAIL--1.4%
Family Dollar Stores, Inc. 3,000,000 76,050,000
- -------------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL--1.6%
PetSmart, Inc. 3,000,000 89,850,000
- -------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--4.0%
- -------------------------------------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--4.0%
Sysco Corp. 2,500,000 85,725,000
- -------------------------------------------------------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 3,000,000 135,630,000
----------------
221,355,000
- -------------------------------------------------------------------------------------------------------------------------------
ENERGY--8.4%
- -------------------------------------------------------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS--8.4%
Chevron Corp. 500,000 45,755,000
- -------------------------------------------------------------------------------------------------------------------------------
ConocoPhillips 5,000,000 424,800,000
----------------
470,555,000
- -------------------------------------------------------------------------------------------------------------------------------
FINANCIALS--15.8%
- -------------------------------------------------------------------------------------------------------------------------------
CAPITAL MARKETS--6.1%
Bank of New York Mellon Corp. 3,600,000 175,860,000
- -------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc. 1 2,600,000 164,684,000
----------------
340,544,000
- -------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--4.2%
CIT Group, Inc. 3,200,000 112,768,000
- -------------------------------------------------------------------------------------------------------------------------------
Moody's Corp. 1 2,700,000 118,044,000
----------------
230,812,000
- -------------------------------------------------------------------------------------------------------------------------------
INSURANCE--1.6%
Ambac Financial Group, Inc. 1 2,406,100 88,616,663
- -------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS--1.2%
Annaly Mortgage Management, Inc. 4,027,126 68,823,583
20 | OPPENHEIMER QUEST BALANCED FUND
SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--2.7%
Countrywide Financial Corp. 1 8,752,591 $ 135,840,212
- -------------------------------------------------------------------------------------------------------------------------------
PMI Group, Inc. (The) 1,000,000 16,030,000
----------------
151,870,212
- -------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE--12.1%
- -------------------------------------------------------------------------------------------------------------------------------
BIOTECHNOLOGY--5.3%
Biogen Idec, Inc. 2 2,650,000 197,266,000
- -------------------------------------------------------------------------------------------------------------------------------
ImClone Systems, Inc. 2 400,000 17,260,000
- -------------------------------------------------------------------------------------------------------------------------------
Regeneron Pharmaceuticals, Inc. 2 1,700,000 37,400,000
- -------------------------------------------------------------------------------------------------------------------------------
Theravance, Inc. 1,2 1,700,000 42,534,000
----------------
294,460,000
- -------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--3.5%
WellPoint, Inc. 2 2,482,900 196,720,167
- -------------------------------------------------------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES--0.3%
Nektar Therapeutics 2 2,500,000 14,950,000
- -------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS--3.0%
Roche Holding Ltd., Sponsored ADR 1,980,000 168,993,000
- -------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS--6.4%
- -------------------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--4.8%
Boeing Co. 2,700,000 266,193,000
- -------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--1.6%
ChoicePoint, Inc. 2 2,252,034 88,549,977
- -------------------------------------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--12.4%
- -------------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--2.3%
Cisco Systems, Inc. 2 3,900,000 128,934,000
- -------------------------------------------------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--2.4%
Google, Inc., Cl. A 2 190,000 134,330,000
- -------------------------------------------------------------------------------------------------------------------------------
IT SERVICES--1.0%
Infosys Technologies Ltd., Sponsored ADR 1 1,141,045 58,124,832
- -------------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--4.7%
ASML Holding NV 2 3,499,911 122,216,892
- -------------------------------------------------------------------------------------------------------------------------------
KLA-Tencor Corp. 558,304 29,394,706
- -------------------------------------------------------------------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co. Ltd., ADR 10,049,992 107,032,415
----------------
258,644,013
- -------------------------------------------------------------------------------------------------------------------------------
SOFTWARE--2.0%
Microsoft Corp. 3,000,000 110,430,000
----------------
Total Common Stocks (Cost $3,728,580,628) 3,843,047,447
21 | OPPENHEIMER QUEST BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--11.5%
- -------------------------------------------------------------------------------------------------------------------------------
Fannie Mae Nts., 4.75%, 3/12/10 1 $ 28,010,000 $ 28,267,720
- -------------------------------------------------------------------------------------------------------------------------------
Federal Farm Credit Bank Nts.:
4.75%, 5/7/10 19,660,000 19,842,622
4.80%, 4/25/11 49,010,000 49,599,100
- -------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Unsec. Nts., 5%, 10/15/11 1 29,465,000 29,976,365
- -------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
5%, 5/15/37 1 125,000,000 130,478,625
STRIPS, 4.87%, 2/15/37 1,3 65,000,000 16,588,780
STRIPS, 4.972%, 2/15/15 1,3 198,362,000 144,417,652
STRIPS, 5.152%, 8/15/15 1,3 92,509,000 65,413,021
STRIPS, 5.164%, 11/15/15 1,3 49,181,000 34,331,977
STRIPS, 5.186%, 8/15/27 1,3 259,952,000 100,364,348
- -------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts., 4.50%, 5/15/17 1 19,672,000 19,751,927
----------------
Total U.S. Government Obligations (Cost $615,980,290) 639,032,137
- -------------------------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--18.6%
- -------------------------------------------------------------------------------------------------------------------------------
American Express Credit Corp.:
3% Nts., 5/16/08 19,460,000 19,290,951
5% Nts., Series B, 12/2/10 1 34,230,000 34,387,698
- -------------------------------------------------------------------------------------------------------------------------------
Ameriprise Financial, Inc., 5.35% Sr. Unsec. Nts., 11/15/10 39,120,000 39,458,662
- -------------------------------------------------------------------------------------------------------------------------------
Bank of America Corp., 4.375% Sr. Unsec. Nts., 12/1/10 53,980,000 53,263,416
- -------------------------------------------------------------------------------------------------------------------------------
Berkshire Hathaway Finance Corp., 3.375% Nts., 10/15/08 43,940,000 43,363,683
- -------------------------------------------------------------------------------------------------------------------------------
Boeing Capital Corp., 6.50% Nts., 2/15/12 42,325,000 44,779,723
- -------------------------------------------------------------------------------------------------------------------------------
Cisco Systems, Inc., 5.25% Nts., 2/22/11 42,690,000 43,181,831
- -------------------------------------------------------------------------------------------------------------------------------
CIT Group, Inc., 4.75% Sr. Nts., 12/15/10 24,575,000 23,728,563
- -------------------------------------------------------------------------------------------------------------------------------
Citigroup, Inc.:
4.625% Nts., 8/3/10 1 19,640,000 19,535,672
6% Nts., 2/21/12 1 15,000,000 15,436,395
- -------------------------------------------------------------------------------------------------------------------------------
Duke Capital Corp., 7.50% Bonds, 10/1/09 30,455,000 31,761,245
- -------------------------------------------------------------------------------------------------------------------------------
E.I. du Pont de Nemours & Co., 4.125% Nts., 4/30/10 48,875,000 48,228,042
- -------------------------------------------------------------------------------------------------------------------------------
General Dynamics Corp., 4.50% Sr. Unsec. Nts., 8/15/10 1 47,240,000 46,981,172
- -------------------------------------------------------------------------------------------------------------------------------
General Electric Capital Corp.:
4.875% Nts., Series A, 10/21/10 1 24,450,000 24,486,406
6% Nts., 6/15/12 1 19,700,000 20,456,125
- -------------------------------------------------------------------------------------------------------------------------------
General Mills, Inc., 6% Unsec. Nts., 2/15/12 1 44,190,000 45,296,518
- -------------------------------------------------------------------------------------------------------------------------------
GMAC LLC, 6.125% Nts., 1/22/08 1 25,435,000 25,367,419
- -------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The), 5.70% Sr. Unsec. Nts., 9/1/12 1 33,880,000 34,441,934
- -------------------------------------------------------------------------------------------------------------------------------
Household Finance Corp.:
4.125% Unsec. Nts., 11/16/09 19,640,000 19,291,036
7% Sr. Unsec. Unsub. Nts., 5/15/12 20,000,000 21,193,440
22 | OPPENHEIMER QUEST BALANCED FUND
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- -------------------------------------------------------------------------------------------------------------------------------
John Deere Capital Corp., 7% Sr. Nts., 3/15/12 1 $ 24,550,000 $ 26,314,310
- -------------------------------------------------------------------------------------------------------------------------------
Kellogg Co., 2.875% Nts., 6/1/08 43,500,000 42,944,592
- -------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 3.70% Nts., Series B, 4/21/08 17,990,000 17,839,352
- -------------------------------------------------------------------------------------------------------------------------------
News America Holdings, Inc., 9.25% Sr. Debs., 2/1/13 1 10,465,000 12,099,968
- -------------------------------------------------------------------------------------------------------------------------------
Procter & Gamble Co. (The):
3.50% Nts., 12/15/08 43,230,000 42,592,012
6.875% Unsec. Unsub. Nts., 9/15/09 1 9,820,000 10,205,396
- -------------------------------------------------------------------------------------------------------------------------------
SLM Corp., 4.50% Nts., Series A, 7/26/10 39,250,000 36,772,305
- -------------------------------------------------------------------------------------------------------------------------------
Time Warner Entertainment Co. LP, 7.25% Sr. Unsec. Debs., 9/1/08 19,640,000 19,909,814
- -------------------------------------------------------------------------------------------------------------------------------
U.S. Bancorp:
4.50% Sr. Nts., Series P, 7/29/10 15,610,000 15,502,307
5.30% Nts., 4/28/09 1 14,800,000 14,888,608
- -------------------------------------------------------------------------------------------------------------------------------
Verizon Global Funding Corp.:
7.25% Sr. Unsec. Unsub. Nts., 12/1/10 24,450,000 26,102,160
7.375% Sr. Nts., 9/1/12 15,000,000 16,433,731
- -------------------------------------------------------------------------------------------------------------------------------
Wachovia Corp., 4.375% Nts., 6/1/10 1 39,280,000 38,703,762
- -------------------------------------------------------------------------------------------------------------------------------
Walt Disney Co. (The), 5.70% Nts., 7/15/11 48,645,000 49,904,224
- -------------------------------------------------------------------------------------------------------------------------------
Waste Management, Inc., 6.50% Sr. Unsub. Nts., 11/15/08 8,740,000 8,852,991
----------------
Total Non-Convertible Corporate Bonds and Notes (Cost $1,026,702,445) 1,032,995,463
- -------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM NOTES--0.1%
- -------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank 4.40%, 11/1/07 (Cost $6,310,000) 6,310,000 6,310,000
- -------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (excluding Investments Purchased with
Cash Collateral from Securities Loaned) (Cost $5,377,573,363) 5,521,385,047
- -------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED--17.2% 4,5
- -------------------------------------------------------------------------------------------------------------------------------
Undivided interest of 47.78% in joint repurchase agreement (Principal Amount/
Value $2,000,000,000, with a maturity value of $2,000,273,889) with Bank of
America NA, 4.93%, dated 10/31/07, to be repurchased at $955,668,270
on 11/1/07, collateralized by U.S. Agency Mortgages, 5%-6%,
5/1/33-6/1/37, with a value of $2,040,000,000
(Cost $955,537,414) 955,537,414 955,537,414
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $6,333,110,777) 116.4% 6,476,922,461
- -------------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (16.4) (911,200,642)
--------------------------------
NET ASSETS 100.0% $ 5,565,721,819
================================
23 | OPPENHEIMER QUEST BALANCED FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Partial or fully-loaned security. See Note 5 of accompanying Notes.
2. Non-income producing security.
3. Zero coupon bond reflects effective yield on the date of purchase.
4. The security/securities have been segregated to satisfy the forward
commitment to return the cash collateral received in securities lending
transactions upon the borrower's return of the securities loaned. See Note 5 of
accompanying Notes.
5. The Fund may have elements of risk due to concentrated investments. Such
concentrations may subject the Fund to additional risks.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | OPPENHEIMER QUEST BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES October 31, 2007
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------------
Investments, at value (including cost and market value of $955,537,414 in repurchase
agreements) (cost $6,333,110,777)--see accompanying statement of investments $ 6,476,922,461
- -------------------------------------------------------------------------------------------------------------
Cash 2,382,585
- -------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 66,361,487
Interest and dividends 21,947,528
Shares of beneficial interest sold 330,670
Other 229,644
----------------
Total assets 6,568,174,375
- -------------------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 955,537,414
- -------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 27,097,497
Shares of beneficial interest redeemed 16,389,597
Distribution and service plan fees 1,069,868
Transfer and shareholder servicing agent fees 965,972
Trustees' compensation 936,243
Shareholder communications 368,412
Other 87,553
----------------
Total liabilities 1,002,452,556
- -------------------------------------------------------------------------------------------------------------
NET ASSETS $ 5,565,721,819
================
- -------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 2,925,671
- -------------------------------------------------------------------------------------------------------------
Additional paid-in capital 4,790,827,083
- -------------------------------------------------------------------------------------------------------------
Accumulated net investment income 9,975,683
- -------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments 618,181,698
- -------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 143,811,684
----------------
NET ASSETS $ 5,565,721,819
================
25 | OPPENHEIMER QUEST BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES Continued
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- -----------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $2,988,970,879 and 155,862,772 shares of beneficial interest outstanding) $ 19.18
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $ 20.35
- -----------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $1,294,217,567 and 68,822,450 shares of beneficial interest outstanding) $ 18.81
- -----------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $883,838,953 and 46,977,574 shares of beneficial interest outstanding) $ 18.81
- -----------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $171,674,598 and 9,065,028 shares of beneficial interest outstanding) $ 18.94
- -----------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $227,019,822 and 11,839,323 shares of
beneficial interest outstanding) $ 19.18
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | OPPENHEIMER QUEST BALANCED FUND
STATEMENT OF OPERATIONS For the Year Ended October 31, 2007
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- -------------------------------------------------------------------------------------------------------------
Interest $ 82,862,095
- -------------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $1,578,509) 64,504,404
- -------------------------------------------------------------------------------------------------------------
Portfolio lending fees 674,943
- -------------------------------------------------------------------------------------------------------------
Other income 106,388
----------------
Total investment income 148,147,830
- -------------------------------------------------------------------------------------------------------------
EXPENSES
- -------------------------------------------------------------------------------------------------------------
Management fees 43,893,917
- -------------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 7,498,135
Class B 16,488,489
Class C 9,787,652
Class N 962,551
- -------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 5,728,960
Class B 3,358,055
Class C 1,583,929
Class N 462,089
Class Y 426,320
- -------------------------------------------------------------------------------------------------------------
Shareholder communications:
Class A 399,818
Class B 330,640
Class C 126,930
Class N 13,834
Class Y 259
- -------------------------------------------------------------------------------------------------------------
Trustees' compensation 224,992
- -------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 69,799
- -------------------------------------------------------------------------------------------------------------
Administration service fees 1,500
- -------------------------------------------------------------------------------------------------------------
Other 316,978
----------------
Total expenses 91,674,847
Less reduction to custodian expenses (31,867)
Less waivers and reimbursements of expenses (1,569,123)
----------------
Net expenses 90,073,857
- -------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 58,073,973
- -------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- -------------------------------------------------------------------------------------------------------------
Net realized gain on investments 723,071,694
- -------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments (355,283,690)
- -------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 425,861,977
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | OPPENHEIMER QUEST BALANCED FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 2007 2006
- ------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------------------------------
Net investment income $ 58,073,973 $ 53,923,761
- ------------------------------------------------------------------------------------------------------------------
Net realized gain 723,071,694 251,310,872
- ------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (355,283,690) 371,082,120
-------------------------------
Net increase in net assets resulting from operations 425,861,977 676,316,753
- ------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (38,823,680) (40,353,835)
Class B (7,986,941) (9,442,976)
Class C (5,482,242) (6,062,238)
Class N (1,869,026) (2,103,130)
Class Y (4,597,368) (4,313,806)
-------------------------------
(58,759,257) (62,275,985)
- ------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (108,511,577) (112,335,599)
Class B (66,078,509) (74,130,785)
Class C (36,754,728) (40,907,900)
Class N (7,512,570) (7,470,626)
Class Y (9,946,135) (9,186,316)
-------------------------------
(228,803,519) (244,031,226)
- ------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from beneficial interest transactions:
Class A (128,740,215) (393,883,632)
Class B (596,771,964) (467,003,506)
Class C (160,197,800) (227,815,940)
Class N (39,783,676) (21,452,884)
Class Y (59,198,820) (9,256,183)
-------------------------------
(984,692,475) (1,119,412,145)
- ------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
Total decrease (846,393,274) (749,402,603)
- ------------------------------------------------------------------------------------------------------------------
Beginning of period 6,412,115,093 7,161,517,696
-------------------------------
End of period (including accumulated net investment income of
$9,975,683 and $10,660,967, respectively) $5,565,721,819 $6,412,115,093
===============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | OPPENHEIMER QUEST BALANCED FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED OCTOBER 31, 2007 2006 2005 2004 2003
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 18.82 $ 17.79 $ 17.19 $ 15.69 $ 12.02
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .24 1 .21 1 .11 1 .07 .16
Net realized and unrealized gain 1.05 1.66 .49 1.46 3.64
---------------------------------------------------------------------
Total from investment operations 1.29 1.87 .60 1.53 3.80
- -----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.25) (.23) -- (.03) (.13)
Distributions from net realized gain (.68) (.61) -- -- --
---------------------------------------------------------------------
Total dividends and/or
distributions to shareholders (.93) (.84) -- (.03) (.13)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 19.18 $ 18.82 $ 17.79 $ 17.19 $ 15.69
=====================================================================
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 6.97% 10.77% 3.49% 9.79% 31.87%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $2,988,971 $3,058,131 $3,277,261 $3,054,761 $2,287,707
- -----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $3,068,226 $3,215,973 $3,285,181 $2,759,594 $1,902,499
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.26% 1.13% 0.61% 0.38% 1.60%
Total expenses 1.16% 1.17% 1.17% 1.21% 1.38%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 1.14% 1.17% 1.17% 1.21% 1.38%
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 112% 63% 89% 106% 92%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
3. Annualized for periods less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | OPPENHEIMER QUEST BALANCED FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS B YEAR ENDED OCTOBER 31, 2007 2006 2005 2004 2003
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 18.46 $ 17.46 $ 17.01 $ 15.61 $ 11.98
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .09 1 .06 1 (.03) 1 (.07) .06
Net realized and unrealized gain 1.03 1.63 .48 1.47 3.63
---------------------------------------------------------------------
Total from investment operations 1.12 1.69 .45 1.40 3.69
- -----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.09) (.08) -- -- (.06)
Distributions from net realized gain (.68) (.61) -- -- --
---------------------------------------------------------------------
Total dividends and/or
distributions to shareholders (.77) (.69) -- -- (.06)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 18.81 $ 18.46 $ 17.46 $ 17.01 $ 15.61
=====================================================================
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 6.17% 9.90% 2.65% 8.97% 30.89%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $1,294,217 $1,847,651 $2,205,679 $2,549,069 $2,306,366
- -----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $1,649,062 $2,014,712 $2,470,464 $2,495,872 $1,985,215
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss) 0.48% 0.35% (0.17)% (0.40)% 0.84%
Total expenses 1.94% 1.95% 1.96% 2.00% 2.15%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 1.92% 1.95% 1.96% 2.00% 2.15%
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 112% 63% 89% 106% 92%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
3. Annualized for periods less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30 | OPPENHEIMER QUEST BALANCED FUND
CLASS C YEAR ENDED OCTOBER 31, 2007 2006 2005 2004 2003
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 18.48 $ 17.48 $ 17.02 $ 15.60 $ 11.97
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .10 1 .07 1 (.02) 1 (.06) .07
Net realized and unrealized gain 1.02 1.64 .48 1.48 3.62
---------------------------------------------------------------------
Total from investment operations 1.12 1.71 .46 1.42 3.69
- -----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.11) (.10) -- -- (.06)
Distributions from net realized gain (.68) (.61) -- -- --
---------------------------------------------------------------------
Total dividends and/or
distributions to shareholders (.79) (.71) -- -- (.06)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 18.81 $ 18.48 $ 17.48 $ 17.02 $ 15.60
=====================================================================
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 6.15% 9.97% 2.70% 9.10% 30.99%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 883,839 $1,022,881 $1,191,400 $1,207,729 $ 982,288
- -----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 979,278 $1,122,088 $1,248,447 $1,129,522 $ 835,198
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss) 0.53% 0.41% (0.11)% (0.34)% 0.92%
Total expenses 1.89% 1.89% 1.89% 1.94% 2.08%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 1.87% 1.89% 1.89% 1.94% 2.08%
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 112% 63% 89% 106% 92%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
3. Annualized for periods less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31 | OPPENHEIMER QUEST BALANCED FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS N YEAR ENDED OCTOBER 31, 2007 2006 2005 2004 2003
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 18.59 $ 17.58 $ 17.05 $ 15.58 $ 11.94
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .18 1 .15 1 .05 1 .03 .11
Net realized and unrealized gain 1.03 1.64 .48 1.45 3.63
---------------------------------------------------------------------
Total from investment operations 1.21 1.79 .53 1.48 3.74
- -----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.18) (.17) -- (.01) (.10)
Distributions from net realized gain (.68) (.61) -- -- --
---------------------------------------------------------------------
Total dividends and/or
distributions to shareholders (.86) (.78) -- (.01) (.10)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 18.94 $ 18.59 $ 17.58 $ 17.05 $ 15.58
=====================================================================
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 6.66% 10.45% 3.11% 9.47% 31.50%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 171,675 $ 207,130 $ 216,843 $ 207,450 $ 142,866
- -----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 193,216 $ 215,652 $ 219,040 $ 180,201 $ 112,416
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 0.95% 0.83% 0.30% 0.04% 1.23%
Total expenses 1.46% 1.48% 1.49% 1.55% 1.74%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 1.44% 1.48% 1.49% 1.55% 1.70%
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 112% 63% 89% 106% 92%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
3. Annualized for periods less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32 | OPPENHEIMER QUEST BALANCED FUND
CLASS Y YEAR ENDED OCTOBER 31, 2007 2006 2005 2004 2003
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 18.82 $ 17.79 $ 17.14 $ 15.62 $ 11.96
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .30 1 .26 1 .17 1 .12 .20
Net realized and unrealized gain 1.04 1.66 .48 1.46 3.64
---------------------------------------------------------------------
Total from investment operations 1.34 1.92 .65 1.58 3.84
- -----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.30) (.28) -- (.06) (.18)
Distributions from net realized gain (.68) (.61) -- -- --
---------------------------------------------------------------------
Total dividends and/or
distributions to shareholders (.98) (.89) -- (.06) (.18)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 19.18 $ 18.82 $ 17.79 $ 17.14 $ 15.62
=====================================================================
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 7.29% 11.11% 3.79% 10.17% 32.40%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 227,020 $ 276,322 $ 270,335 $ 238,775 $ 182,409
- -----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 294,643 $ 276,812 $ 253,220 $ 216,973 $ 145,793
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.56% 1.43% 0.93% 0.70% 1.89%
Total expenses 0.86% 0.87% 0.85% 0.90% 1.05%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 0.84% 0.87% 0.85% 0.90% 1.05%
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 112% 63% 89% 106% 92%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
3. Annualized for periods less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33 | OPPENHEIMER QUEST BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Quest Balanced Fund (the Fund), a series of Oppenheimer Quest For
Value Funds, is an open-end management investment company registered under the
Investment Company Act of 1940, as amended. The Fund's investment objective is
to seek a combination of growth of capital and investment income. The Fund's
primary objective is growth of capital. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager). The Manager has entered into a subadvisory
agreement with Oppenheimer Capital LLC.
The Fund offers Class A, Class B, Class C, Class N and Class Y shares.
Class A shares are sold at their offering price, which is normally net asset
value plus a front-end sales charge. Class B, Class C and Class N shares are
sold without a front-end sales charge but may be subject to a contingent
deferred sales charge (CDSC). Class N shares are sold only through retirement
plans. Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC, however, the institutional investor
may impose charges on those accounts. All classes of shares have identical
rights and voting privileges with respect to the Fund in general and exclusive
voting rights on matters that affect that class alone. Earnings, net assets and
net asset value per share may differ due to each class having its own expenses,
such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares six
years after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ(R) are valued based on the
closing price provided by NASDAQ prior to the time when the Fund's assets are
valued. In the absence of a sale, the security is valued at the last sale price
on the prior trading day, if it is within the spread of the closing "bid" and
"asked" prices, and if not, at the closing bid price. Securities traded on
foreign exchanges are valued based on the last sale price on the principal
exchange on which the security is traded, as identified by the portfolio pricing
service, prior to the time when the Fund's assets are valued. In the absence of
a sale, the security is valued at the official closing price on the principal
exchange. Corporate, government and municipal debt instruments having a
remaining maturity in excess of sixty days and all mortgage-backed securities
will be valued at the mean between the "bid" and "asked" prices. Futures
contracts traded on a commodities or futures exchange will be valued at the
final settlement price or official closing price on the principal exchange as
reported by such principal exchange at its
34 | OPPENHEIMER QUEST BALANCED FUND
trading session ending at, or most recently prior to, the time when the Fund's
assets are valued. Options are valued daily based upon the last sale price on
the principal exchange on which the option is traded. Securities (including
restricted securities) for which market quotations are not readily available are
valued at their fair value. Foreign and domestic securities whose values have
been materially affected by what the Manager identifies as a significant event
occurring before the Fund's assets are valued but after the close of their
respective exchanges will be fair valued. Fair value is determined in good faith
using consistently applied procedures under the supervision of the Board of
Trustees. Investments in open-end registered investment companies (including
affiliated funds) are valued at that fund's net asset value. Short-term "money
market type" debt securities with remaining maturities of sixty days or less are
valued at amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of the New
York Stock Exchange (the "Exchange"), normally 4:00 P.M. Eastern time, on each
day the Exchange is open for business. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal. In the event of default by the other party to the agreement,
retention of the collateral may be subject to legal proceedings.
35 | OPPENHEIMER QUEST BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
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
----------------------------------------------------------------------
$477,473,659 $151,655,769 $-- $143,811,684
1. During the fiscal year ended October 31, 2007, the Fund did not utilize any
capital loss carryforward.
2. During the fiscal year ended October 31, 2006, the Fund 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 Fund. Accordingly, the
following amounts have been reclassified for October 31, 2007. Net assets of the
Fund were unaffected by the reclassifications.
REDUCTION TO
ACCUMULATED NET
INCREASE TO REALIZED GAIN
PAID-IN CAPITAL ON INVESTMENTS 3
-----------------------------------------
$82,268,149 $82,268,149
3. $82,268,149, including $30,377,835 of long-term capital gain, was distributed
in connection with Fund share redemptions.
36 | OPPENHEIMER QUEST BALANCED FUND
The tax character of distributions paid during the years ended October 31, 2007
and October 31, 2006 was as follows:
YEAR ENDED YEAR ENDED
OCTOBER 31, 2007 OCTOBER 31, 2006
----------------------------------------------------------------
Distributions paid from:
Ordinary income $ 58,759,257 $ 62,275,985
Long-term capital gain 228,803,519 244,031,226
-------------------------------
Total $287,562,776 $306,307,211
===============================
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of October 31, 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 $6,333,110,776
==============
Gross unrealized appreciation $ 442,656,612
Gross unrealized depreciation (298,844,928)
--------------
Net unrealized appreciation $ 143,811,684
==============
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for the
Fund's independent trustees. Benefits are based on years of service and fees
paid to each trustee during the years of service. During the year ended October
31, 2007, the Fund's projected benefit obligations were increased by $60,635 and
payments of $32,752 were made to retired trustees, resulting in an accumulated
liability of $897,725 as of October 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 Fund.
For purposes of determining the amount owed to the Trustee under the plan,
deferred amounts are treated as though equal dollar amounts had been invested in
shares of the Fund or in other Oppenheimer funds selected by the Trustee. The
Fund purchases shares of the funds selected for deferral by the Trustee in
amounts equal to his or her deemed investment, resulting in a Fund asset equal
to the deferred compensation liability. Such assets are included as a component
of "Other" within the asset section of the Statement of Assets and Liabilities.
Deferral of trustees' fees under the plan will not affect the net assets of the
Fund, and will not materially affect the Fund's assets, liabilities or net
investment income per share. Amounts will be deferred until distributed in
accordance to the 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 distributions, if any, are declared
and paid quarterly. Capital gain distributions, if any, are declared and paid
annually.
37 | OPPENHEIMER QUEST BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.01 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED OCTOBER 31, 2007 YEAR ENDED OCTOBER 31, 2006
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------
CLASS A
Sold 35,489,027 $ 687,676,079 31,500,972 $ 570,267,687
Dividends and/or distributions
reinvested 7,123,507 133,921,031 7,682,670 137,709,558
Redeemed (49,248,174) (950,337,325) (60,923,880) (1,101,860,877)
-------------------------------------------------------------
Net decrease (6,635,640) $(128,740,215) (21,740,238) $ (393,883,632)
=============================================================
38 | OPPENHEIMER QUEST BALANCED FUND
YEAR ENDED OCTOBER 31, 2007 YEAR ENDED OCTOBER 31, 2006
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------
CLASS B
Sold 5,750,763 $ 108,295,990 8,581,552 $ 152,390,833
Dividends and/or distributions
reinvested 3,323,312 61,171,684 3,911,374 68,946,474
Redeemed (40,324,642) (766,239,638) (38,752,535) (688,340,813)
-------------------------------------------------------------
Net decrease (31,250,567) $(596,771,964) (26,259,609) $ (467,003,506)
=============================================================
- -----------------------------------------------------------------------------------------------
CLASS C
Sold 4,047,727 $ 76,381,348 6,246,846 $ 111,066,770
Dividends and/or distributions
reinvested 1,895,049 34,917,394 2,171,851 38,302,739
Redeemed (14,322,061) (271,496,542) (21,234,631) (377,185,449)
-------------------------------------------------------------
Net decrease (8,379,285) $(160,197,800) (12,815,934) $ (227,815,940)
=============================================================
- -----------------------------------------------------------------------------------------------
CLASS N
Sold 2,122,976 $ 40,397,741 3,181,896 $ 56,868,554
Dividends and/or distributions
reinvested 479,235 8,888,151 516,842 9,162,505
Redeemed (4,677,872) (89,069,568) (4,889,445) (87,483,943)
-------------------------------------------------------------
Net decrease (2,075,661) $ (39,783,676) (1,190,707) $ (21,452,884)
=============================================================
- -----------------------------------------------------------------------------------------------
CLASS Y
Sold 5,595,917 $ 106,380,498 3,658,168 $ 66,104,385
Dividends and/or distributions
reinvested 619,383 11,649,549 628,190 11,251,180
Redeemed (9,060,364) (177,228,867) (4,798,899) (86,611,748)
-------------------------------------------------------------
Net decrease (2,845,064) $ (59,198,820) (512,541) $ (9,256,183)
=============================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and investments in IMMF, for the year ended October
31, 2007, were as follows:
PURCHASES SALES
- ------------------------------------------------------------------
Investment securities $5,999,115,124 $7,772,682,606
U.S. government and
government agency obligations 757,820,487 148,067,093
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of average net assets as shown in the following table:
39 | OPPENHEIMER QUEST BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
FEE SCHEDULE
-------------------------------------
Up to $1.0 billion 0.80%
Next $2.0 billion 0.76
Next $1.0 billion 0.71
Next $1.0 billion 0.66
Next $1.0 billion 0.60
Next $1.0 billion 0.55
Next $2.0 billion 0.50
Over $9.0 billion 0.48
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
SUB-ADVISOR FEES. The Manager retains Oppenheimer Capital LLC (the
"Sub-Advisor") to provide the day-to-day portfolio management of the Fund. Under
the Sub-Advisory Agreement, the Manager, not the Fund, pays the Sub-Advisor an
annual fee in monthly installments, based on the average daily net assets of the
Fund. The fee is calculated as a percentage of the fee the Fund pays the
Manager. The rate is 40% of the advisory fee collected by the Manager based on
the net assets of the Fund as of November 22, 1995, and 30% of the fee collected
by the Manager on assets in excess of that amount. For the year ended October
31, 2007, the Manager paid $12,697,554 to the Sub-Advisor for its services to
the Fund.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended October 31, 2007, the Fund paid
$11,774,629 to OFS for services to the Fund.
Additionally, Class Y shares are subject to minimum fees of $10,000 per
annum for assets of $10 million or more. The Class Y shares are subject to the
minimum fees in the event that the per account fee does not equal or exceed the
applicable minimum fees. OFS may voluntarily waive the minimum fees.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a
Distribution and Service Plan for Class A shares. Under the plan, the Fund pays
a service fee to the Distributor of up to 0.25% of the average annual net assets
of Class A shares. The Distributor currently uses all of those fees to pay
dealers, brokers, banks and other financial institutions periodically for
providing personal services and maintenance of accounts of their customers that
hold Class A shares. Under the plan, the Fund may also pay an asset-based sales
charge to the Distributor at an annual rate of up to 0.15% of average net
assets. Beginning January 1, 2003, the Board of Trustees set the annual
asset-based sales charge rate at zero. Fees incurred by the Fund under the plan
are detailed in the Statement of Operations.
40 | OPPENHEIMER QUEST BALANCED FUND
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class N
shares to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% on Class B and
Class C shares and 0.25% on Class N shares. The Distributor also receives a
service fee of 0.25% per year under each plan. If either the Class B, Class C or
Class N plan is terminated by the Fund or by the shareholders of a class, the
Board of Trustees and its independent trustees must determine whether the
Distributor shall be entitled to payment from the Fund of all or a portion of
the service fee and/or asset-based sales charge in respect to shares sold prior
to the effective date of such termination. The Distributor determines its
uncompensated expenses under the plan at calendar quarter ends. The
Distributor's aggregate uncompensated expenses under the plan at September 30,
2007 for Class B, Class C and Class N shares were $33,694,765, $27,089,018 and
$5,344,935, respectively. Fees incurred by the Fund under the plans are detailed
in the Statement of Operations.
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption proceeds
prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the following table for the period
indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- -------------------------------------------------------------------------------------------------
October 31, 2007 $ 966,185 $ 33,092 $ 2,432,358 $ 37,822 $ 4,380
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. Effective January 1, 2007, the Manager
has voluntarily agreed to reduce its advisory fee rate for any quarter during
the calendar year ending December 31, 2007, by 0.10% of the Fund's average daily
net assets if the Funds trailing one-year total return performance, measured at
the end of the prior calendar quarter, is in the fifth quintile of the Fund's
Lipper peer group. If the Fund's total return performance at the end of a
subsequent calendar quarter improves to the fourth quintile of the Fund's Lipper
peer group, the advisory fee reduction will be 0.05% if the Fund's average daily
net assets for the remainder of the calendar year. If the Fund's total return
performance in a subsequent calendar quarter improves to the third higher
quintile of the Fund's Lipper peer group, the advisory fee reduction will be
terminated for the remainder of the calendar year. The Fund was in the second
quintile at the end of the second quarter. Effective July 1, 2007, the voluntary
undertaking was terminated by the Manager. During the year ended October 31,
2007, OFS waived $761,641, $429,759, $247,983, $48,915 and $80,825 for Class A,
Class B, Class C, Class N and Class Y shares, respectively.
41 | OPPENHEIMER QUEST BALANCED FUND
NOTES TO FINANCIAL STATEMENTS Continued
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- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
OFS has voluntarily agreed to limit transfer and shareholder servicing
agent fees for all classes to 0.35% of average annual net assets per class. This
undertaking may be amended or withdrawn at any time.
- --------------------------------------------------------------------------------
5. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of
securities, letters of credit or cash, against the loaned securities and
maintains collateral in an amount not less than 100% of the market value of the
loaned securities during the period of the loan. The market value of the loaned
securities is determined at the close of business each day. If the Fund is
undercollateralized at the close of business due to an increase in market value
of securities on loan, additional collateral is requested from the borrowing
counterparty and is delivered to the Fund on the next business day. Cash
collateral may be invested in approved investments and the Fund bears the risk
of any loss in value of these investments. The Fund retains a portion of the
interest earned from the collateral. If the borrower defaults on its obligation
to return the securities loaned because of insolvency or other reasons, the Fund
could experience delays and cost in recovering the securities loaned or in
gaining access to the collateral. The Fund continues to receive the economic
benefit of interest or dividends paid on the securities loaned in the form of a
substitute payment received from the borrower. As of October 31, 2007, the Fund
had on loan securities valued at $967,426,730, which are included in the
Statement of Assets and Liabilities as "Investments, at value" and, when
applicable, as "Receivable for Investments sold." Collateral of $1,005,319,079
was received for the loans, $955,537,414 of which was received in cash and
subsequently invested in approved investments. In addition, collateral of
$49,781,665 was also received in the form of securities.
- --------------------------------------------------------------------------------
6. RECENT ACCOUNTING PRONOUNCEMENT
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 Fund's tax returns to determine whether it
is "more-likely-than-not" that tax positions taken in the Fund'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
October 31, 2007, the Manager has evaluated the implications of FIN 48 and does
not currently anticipate a material impact to the Fund's financial statements.
The Manager will continue to monitor the Fund's tax positions prospectively for
potential future impacts.
42 | OPPENHEIMER QUEST BALANCED FUND
In September 2006, ("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 October 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.
- --------------------------------------------------------------------------------
8. SUBSEQUENT EVENT
On November 19, 2007, the Fund's Board of Trustees voted to freeze participation
in the retirement plan for the Board's independent trustees by not adding new
participants to the plan after December 31, 2007. Active independent trustees
who have accrued benefits under the plan prior to the freeze date will elect a
distribution method with respect to their benefits. Benefits already accrued
under the plan for Trustees who were participants prior to that freeze date are
not affected.
43 | OPPENHEIMER QUEST BALANCED FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER QUEST FOR VALUE FUNDS:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Quest Balanced Fund, (one of the portfolios constituting the
Oppenheimer Quest For Value Funds), including the statement of investments, as
of October 31, 2007, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the five-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of October 31, 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
Oppenheimer Quest Balanced Fund as of October 31, 2007, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with U.S.
generally accepted accounting principles.
KPMG LLP
Denver, Colorado
December 13, 2007
44 | OPPENHEIMER QUEST BALANCED FUND
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2008, if applicable, shareholders of record will receive information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2007. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Capital gain distributions of $0.6799 per share were paid to Class A,
Class B, Class C, Class N and Class Y shareholders, respectively, on December
11, 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 Fund during the fiscal year ended October
31, 2007 which are not designated as capital gain distributions should be
multiplied by 8.90% to arrive at the amount eligible for the corporate
dividend-received deduction.
A portion, if any, of the dividends paid by the Fund during the fiscal
year ended October 31, 2007 which are not designated as capital gain
distributions are eligible for lower individual income tax rates to the extent
that the Fund has received qualified dividend income as stipulated by recent tax
legislation. $63,046,883 of the Fund's fiscal year taxable income may be
eligible for the lower individual income tax rates. In early 2008, shareholders
of record will receive 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 October 31, 2007, $33,445,743 or 56.92% of the ordinary distributions
paid by the Fund qualifies as an interest related dividend.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
45 | OPPENHEIMER QUEST BALANCED FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
46 | OPPENHEIMER QUEST BALANCED FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AND SUB-ADVISORY AGREEMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory and sub-advisory agreements (the "Agreements"). The
Investment Company Act of 1940, as amended, requires that the Board request and
evaluate, and that the Manager and Oppenheimer Capital LLC (the "Sub-Adviser")
provide, such information as may be reasonably necessary to evaluate the terms
of the Agreements. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's and Sub-Adviser's services, (ii) the investment performance of the
Fund and the Sub-Adviser, (iii) the fees and expenses of the Fund, including
comparative expense information, (iv) the profitability of the Manager and
Sub-Adviser 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 and
Sub-Adviser from its relationship with the Fund. The Board was aware that there
are alternatives to retaining the Manager and the Sub-Adviser.
NATURE AND EXTENT OF SERVICES. The Board considered information about the
nature and extent of the services provided to the Fund by the Manager, the
Sub-Advisor and their affiliates and information regarding the Manager's and
Sub-Adviser's key personnel who provide such services. The Manager's and
Sub-Adviser's duties include providing the Fund with the services of the
portfolio managers and investment team, who provide research, analysis and other
advisory services in regard to the Fund's investments; securities trading
services; monitoring compliance with applicable Fund policies and procedures and
adherence to the Fund's investment restrictions. The Manager and Sub-Adviser are
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 and
Sub-Adviser also provide the Fund with office space, facilities and equipment.
47 | OPPENHEIMER QUEST BALANCED FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AND SUB-ADVISORY AGREEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
QUALITY OF SERVICES. The Board also considered the quality of the services
provided and the quality of the Manager's and Sub-Adviser's resources that are
available to the Fund. The Board took account of the fact that the Manager has
had over forty years of 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 and Sub-Adviser's administrative,
accounting, legal and compliance services, and information the Board has
received regarding the experience and professional qualifications of the
Manager's and Sub-Adviser's personnel and the size and functions of their
staffs. In its evaluation of the quality of the portfolio management services
provided by the Sub-Adviser, the Board considered the experience of Colin
Glinsman and Mathew Greenwald, the portfolio managers for the Fund, and the
Sub-Adviser's large-cap investment team and analysts. 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 Agreements and from the Manager's
and Sub-Adviser's experience, reputation, personnel, operations, and resources.
INVESTMENT PERFORMANCE OF THE FUND. During the year, the Manager provided
information on the investment performance of the Fund and the Manager and
Sub-Adviser at each Board meeting, including comparative performance
information. The Board also reviewed information, prepared by the Manager, the
Sub-Adviser and the independent consultant, comparing the Fund's historical
performance to relevant market indices and to the performance of other retail
front-end load and no-load mixed asset target allocation growth funds advised by
the Manager, the Sub-Adviser and by other investment advisers. The Board noted
that the Fund's ten-year performance was better than its peer group median.
However its one-year, three-year, and five-year 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 considered 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 growth
funds and other funds with comparable asset levels
48 | OPPENHEIMER QUEST BALANCED FUND
and distribution features. The Board noted that the Fund's contractual and
actual management fees and total expenses are higher than its peer group median.
The Board also noted that, for each quarter during the renewal period ending
August 31, 2008, the Manager has voluntarily agreed to reduce its advisory fee
rate for any quarter during the calendar year ending December 31, 2007, by 0.10%
of the Fund's average daily net assets if the Fund's trailing one-year total
return performance, measured at the end of the prior calendar quarter, is in the
fifth quintile of the Fund's Lipper peer group. If the Fund's total return
performance at the end of a subsequent calendar quarter improves to the fourth
quintile of the Fund's Lipper peer group, the advisory fee reduction will be
0.05% of the Fund's average daily net assets for the remainder of the calendar
year. If the Fund's total return performance in a subsequent calendar quarter
improves to the third higher quintile of the Fund's Lipper peer group, the
advisory fee reduction will be terminated for the remainder of the calendar
year. The Board noted that the Manager, not the Fund, pays the Sub-Adviser's fee
under the sub-advisory agreement.
ECONOMIES OF SCALE. The Board reviewed the extent to which the Manager and
the Sub-Adviser may realize economies of scale in managing and supporting the
Fund, the extent to which those economies of scale benefit the Fund's
shareholders and the current level of Fund assets in relation to the Fund's
breakpoint schedule for its management fees. The Board also noted the Fund's
breakpoints, which are intended to share economies of scale that may exist as
the Fund grows with its shareholders.
BENEFITS TO THE MANAGER AND SUB-ADVISER. The Board considered information
regarding the Manager's costs in serving as the Fund's investment adviser,
including the fee paid to the Sub-Adviser, the costs associated with the
personnel and systems necessary to manage the Fund, and information regarding
the Manager's profitability from its relationship with the Fund. The Board
considered that the Manager and the Sub-Adviser must be able to pay and retain
experienced professional personnel at competitive rates to provide services to
the Fund and that maintaining the financial viability of the Manager and
Sub-Adviser are important in order for them to continue to provide significant
services to the Fund and its shareholders. In addition to considering the
profits realized by the Manager and the Sub-Adviser, the Board considered
information regarding the direct and indirect benefits that each of the Manager
and Sub-Adviser receives as a result of its relationship with the Fund,
including compensation paid to the Manager's affiliates for services provided
and research provided to the Manager and Sub-Adviser in connection with
permissible brokerage arrangements (soft dollar arrangements).
49 | OPPENHEIMER QUEST BALANCED FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AND SUB-ADVISORY AGREEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and the independent Trustees. Fund counsel is independent of the
Manager and Sub-Adviser within the meaning and intent of the Securities and
Exchange Commission Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
concluded that the nature, extent and quality of the services provided to the
Fund by the Manager and the Sub-Adviser are a benefit to the Fund and in the
best interest of the Fund's shareholders and that the amount and structure of
the compensation received by the Manager and Sub-Adviser and its affiliates, are
reasonable in relation to the services provided. Accordingly, the Board elected
to continue the Agreements for another year. In arriving at this decision, the
Board did not single out any factor or factors as being more important than
others, but considered all of the factors together. The Board judged the terms
and conditions of the Agreements, including the management fee, in light of all
of the surrounding circumstances.
50 | OPPENHEIMER QUEST BALANCED 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, COLORADO
TRUSTEES 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION,
RETIREMENT, DEATH OR REMOVAL.
THOMAS W. COURTNEY, Principal of Courtney Associates, Inc. (venture capital firm) (since 1982); General Partner of
Chairman of the Board of Trivest Venture Fund (private venture capital fund); President of Investment Counseling
Trustees (since 2001), Federated Investors, Inc. (1973-1982); Trustee of the following open-end investment companies:
Trustee (since 1987) Cash Assets Trust (1984), Premier VIT (formerly PIMCO Advisors VIT), Tax Free Trust of Arizona
Age: 74 (since 1984) and four funds for the Hawaiian Tax Free Trust. Oversees 11 portfolios in the
OppenheimerFunds complex.
DAVID K. DOWNES, President, Chief Executive Officer and Board Member of CRAFund Advisors, Inc. (investment
Trustee (since 2005) management company) (since January 2004); President of The Community Reinvestment Act Qualified
Age: 67 Investment Fund (investment management company) (since January 2004); Independent Chairman of
the Board of Trustees of Quaker Investment Trust (registered investment company) (since January
2004); Director of Internet Capital Group (information technology company) (since October 2003);
Chief Operating Officer and Chief Financial Officer of Lincoln National Investment Companies,
Inc. (subsidiary of Lincoln National Corporation, a publicly traded company) and Delaware
Investments U.S., Inc. (investment management subsidiary of Lincoln National Corporation)
(1993-2003); President, Chief Executive Officer and Trustee of Delaware Investment Family of
Funds (1993-2003); President and Board Member of Lincoln National Convertible Securities Funds,
Inc. and the Lincoln National Income Funds, TDC (1993-2003); Chairman and Chief Executive
Officer of Retirement Financial Services, Inc. (registered transfer agent and investment adviser
and subsidiary of Delaware Investments U.S., Inc.) (1993-2003); President and Chief Executive
Officer of Delaware Service Company, Inc. (1995-2003); Chief Administrative Officer, Chief
Financial Officer, Vice Chairman and Director of Equitable Capital Management Corporation
(investment subsidiary of Equitable Life Assurance Society) (1985-1992); Corporate Controller of
Merrill Lynch & Company (financial services holding company) (1977-1985); held the following
positions at the Colonial Penn Group, Inc. (insurance company): Corporate Budget Director
(1974-1977), Assistant Treasurer (1972-1974) and Director of Corporate Taxes (1969-1972); held
the following positions at Price Waterhouse & Company (financial services firm): Tax Manager
(1967-1969), Tax Senior (1965-1967) and Staff Accountant (1963-1965); United States Marine Corps
(1957-1959). Oversees 63 portfolios in the OppenheimerFunds complex.
ROBERT G. GALLI, A director or trustee of other Oppenheimer funds. Oversees 63 portfolios in the OppenheimerFunds
Trustee (since 1998) complex.
Age: 74
LACY B. HERRMANN, Founder and Chairman Emeritus of Aquila Group of Funds (open-end investment company) (since
Trustee (since 1987) December 2004); Chairman of Aquila Management Corporation and Aquila Investment Management LLC
Age: 78 (since August 1984); Chief Executive Officer and President of Aquila Management Corporation
(August 1984-December 1994); Vice President, Director and Secretary of Aquila Distributors, Inc.
(distributor of Aquila Management Corporation); Treasurer of Aquila Distributors, Inc.;
President and Chairman of the Board of Trustees of Capital Cash Management Trust ("CCMT");
President and Director of STCM Management Company, Inc. (sponsor and adviser to CCMT); Chairman,
President and Director of InCap Management Corporation; Sub-Advisor and Administrator of Prime
Cash Fund & Short Term Asset Reserves;
51 | OPPENHEIMER QUEST BALANCED FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
LACY B. HERRMANN, Director of OCC Cash Reserves, Inc. (open-end investment company) (June 2003-December 2004);
Continued Trustee of Premier VIT (formerly PIMCO Advisors VIT) (investment company) (since 1994); Trustee
of OCC Accumulation Trust (open-end investment company) (until December 2004); Trustee Emeritus
of Brown University (since June 1983). Oversees 11 portfolios in the OppenheimerFunds complex.
BRIAN F. WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since September 1995); Director of
Trustee (since 2001) Special Value Opportunities Fund, LLC (registered investment company) (since September 2004);
Age: 64 Member of Zurich Financial Services Investment Advisory Board (insurance) (since October 2004);
Chairman (since August 2007) and Trustee (since August 1991) of the Board of Governing Trustees
of The Jackson Laboratory (non-profit); 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); 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 63 portfolios in the
OppenheimerFunds complex.
- ----------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE MR. MURPHY IS AN "INTERESTED TRUSTEE" BECAUSE HE IS AFFILIATED WITH THE MANAGER BY VIRTUE OF HIS
AND OFFICER POSITIONS AS AN OFFICER AND DIRECTOR OF THE MANAGER, AND AS A SHAREHOLDER OF ITS PARENT
COMPANY. THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH
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.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director of the Manager (since June 2001); President of
Trustee (since 2005) and the Manager (September 2000-March 2007); President and director or trustee of other Oppenheimer
President and Principal funds; President and Director of Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent
Executive Officer (since 2001) holding company) and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of
Age: 58 the Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of
the Manager) (November 2001-December 2006); 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 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 company parent of Babson Capital Management LLC) (since June
1995); Chairman (since October 2007) and Member of the Investment Company Institute's Board of
Governors (since October 2003). Oversees 102 portfolios in the OppenheimerFunds complex.
52 | OPPENHEIMER QUEST BALANCED FUND
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OTHER OFFICERS THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. ZACK, GILLESPIE AND
OF THE FUND 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.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief
Vice President and Chief Compliance Officer of the Manager, OppenheimerFunds Distributor, Inc., Centennial Asset
Compliance Officer Management and Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds
(since 2004) Distributor, Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since
Age: 57 June 1983). Former Vice President and Director of Internal Audit of the Manager (1997-February
2004). An officer of 102 portfolios in the 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, Inc. and Oppenheimer Partnership
Officer (since 1999) Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since March 2000),
Age: 48 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). An officer of 102 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 102 portfolios in the OppenheimerFunds complex.
Age: 37
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Financial Reporting and
Assistant Treasurer Compliance of First Data Corporation (April 2003-July 2004); Manager of Compliance of Berger
(since 2005) Financial Group LLC (May 2001-March 2003). An officer of 102 portfolios in the OppenheimerFunds
Age: 37 complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the
Secretary (since 2001) Manager; General Counsel and Director of the Distributor (since December 2001); General Counsel
Age: 59 of Centennial Asset Management Corporation (since December 2001); Senior Vice President and
General Counsel of Harbour-View 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
International Distributor Limited (since December 2003); Senior Vice President (May 1985-
December 2003). An officer of 102 portfolios in the OppenheimerFunds complex.
53 | OPPENHEIMER QUEST BALANCED FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
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). An officer of
(since 2004) 102 portfolios in the OppenheimerFunds complex.
Age: 39
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since September 2004); First
Assistant Secretary Vice President (2000-September 2004), Director (2000-September 2004) and Vice President
(since 2004) (1998-2000) of Merrill Lynch Investment Management. An officer of 102 portfolios in the
Age: 43 OppenheimerFunds complex.
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since October 2003)
Assistant Secretary of the Manager; Vice President (since 1999) and Assistant Secretary (since October 2003) of
(since 2001) the Distributor; Assistant Secretary of Centennial Asset Management Corporation (since October
Age: 42 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 102 portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE UPON
REQUEST, BY CALLING 1.800.525.7048.
54 | OPPENHEIMER QUEST BALANCED FUND
OPPENHEIMER SMALL- & MID- CAP VALUE FUND
TOP HOLDINGS AND ALLOCATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOP TEN COMMON STOCK INDUSTRIES
- --------------------------------------------------------------------------------
Insurance 6.4%
- --------------------------------------------------------------------------------
Software 5.6
- --------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels 5.3
- --------------------------------------------------------------------------------
Semiconductors & Semiconductor Equipment 4.9
- --------------------------------------------------------------------------------
Machinery 4.8
- --------------------------------------------------------------------------------
Health Care Providers & Services 4.6
- --------------------------------------------------------------------------------
Hotels, Restaurants & Leisure 4.3
- --------------------------------------------------------------------------------
Aerospace & Defense 3.9
- --------------------------------------------------------------------------------
Energy Traders 3.9
- --------------------------------------------------------------------------------
Capital Markets 3.7
Portfolio holdings and allocations are subject to change. Percentages are as of
October 31, 2007, and are based on net assets.
TOP TEN COMMON STOCK HOLDINGS
- --------------------------------------------------------------------------------
Carpenter Technology Corp. 1.7%
- --------------------------------------------------------------------------------
Joy Global, Inc. 1.7
- --------------------------------------------------------------------------------
Everest Re Group Ltd. 1.6
- --------------------------------------------------------------------------------
CMS Energy Corp. 1.6
- --------------------------------------------------------------------------------
Goodyear Tire & Rubber Co. (The) 1.6
- --------------------------------------------------------------------------------
National Financial Partners Corp. 1.6
- --------------------------------------------------------------------------------
THQ, Inc. 1.5
- --------------------------------------------------------------------------------
Cleco Corp. 1.5
- --------------------------------------------------------------------------------
Goodrich Corp. 1.5
- --------------------------------------------------------------------------------
McAfee, Inc. 1.4
Portfolio holdings and allocations are subject to change. Percentages are as of
October 31, 2007, and are based on net assets. For more current Fund holdings,
please visit www.oppenheimerfunds.com.
- --------------------------------------------------------------------------------
9 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
TOP HOLDINGS AND ALLOCATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECTOR ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Financials 16.7%
Industrials 15.3
Information Technology 14.9
Consumer Discretionary 14.8
Utilities 8.6
Energy 7.9
Health Care 7.4
Materials 6.9
Consumer Staples 5.3
Telecommunication Services 2.2
Portfolio holdings and allocations are subject to change. Percentages are as of
October 31, 2007, and are based on the total market value of common stocks.
- --------------------------------------------------------------------------------
10 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
HOW HAS THE FUND PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS, INC., OF
THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR ENDED OCTOBER 31, 2007, FOLLOWED
BY A GRAPHICAL COMPARISON OF THE FUND'S PERFORMANCE TO AN APPROPRIATE
BROAD-BASED MARKET INDEX.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. For the 12-month period ending
October 31, 2007, Oppenheimer Small- & Mid- Cap Value Fund outperformed the
Russell 2500 Value Index and the Lipper Mid-Cap Value Fund Index. Strong
security selection served as the primary driver for the Fund's significant
outperformance. In addition, the Fund benefited from its tilt towards mid-cap
stocks which outperformed small-cap stocks over the period.
In terms of market sectors, the best-performing sectors, on a relative
basis, were the industrials, materials and information technology while the
weakest performing sector was financials.
Over the past year, we have seen a shift in valuations between small and
mid-cap stocks, with mid-caps becoming more attractively valued. Given this, we
increased the Fund's market capitalization weighting, a decision that increased
performance as mid-cap stocks outperformed small-cap stocks.
The Fund's best relative gains were achieved by holdings within the
industrials, materials and information technology sectors. Within the
industrials sector, top contributors included Foster Wheeler Ltd. and Navistar
International Corp. International engineering, construction and engineering
specialist Foster Wheeler benefited as many energy companies continued to
heavily invest in new infrastructure projects. Navistar, a manufacturer and
marketer of medium and heavy trucks, excelled over the period.
In the materials sector, the Fund's holdings in The Mosaic Co. and Martin
Marietta Materials, Inc. added to performance. Mosaic, a producer of fertilizer,
advanced on higher demand and better prices for its products, which enabled the
company to increase prices. We sold our position in Mosaic and took profits.
Construction materials firm, Martin Marietta Materials, which produces
construction aggregates--crushed stone, gravel and sand--the materials used to
build roads and highways, also gained value. Over the period, the company posted
strong earnings growth due to better product pricing and the dominant role it
holds within its highly localized marketplace.
Within the information technology sector, top performers included Juniper
Networks, Inc. and Activision, Inc. Juniper Networks, a provider of
infrastructure and routers for Internet service providers and telephone
companies, posted strong results due to a highly successful new product cycle.
We exited our position and took profits. Activision, a video game publisher for
Sony Corp.'s Playstation and Microsoft Corp.'s Xbox, advanced on
11 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
strong sales. In addition, the company stands to benefit from increased demand
over the next several years as new versions of Playstation and Xbox are sold.
On the other hand, the Fund's performance was hindered by holdings
predominantly in the financials sector. Within the financials area, significant
detractors included our investments in online trading company, E*TRADE Financial
Corp. and commercial real estate and development company, CB Richard Ellis
Group, Inc. (which we sold). Although the Fund maintained an underweight
position in the sub-prime mortgage area, it did have exposure through E*TRADE.
Over the past few years, E*TRADE sought to diversify its business model and
entered the mortgage market. However, this move hurt the company as it was
negatively affected by credit concerns stemming from the sub-prime lending
market. CB Richard Ellis declined due to investor concerns over the possibility
that the credit problems in the residential real estate market will affect the
commercial market, causing a slowdown that would hurt companies such as CB
Richard Ellis.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each class of shares of the
Fund held until October 31, 2007. In the case of Class A, Class B and Class C
shares, performance is measured over a ten fiscal year period. In the case of
Class N shares, performance is measured from inception of the Class on March 1,
2001. In the case of Class Y shares, performance is measured from inception of
the Class on October 24, 2005. The Fund's performance reflects the deduction of
the maximum initial sales charge on Class A shares, the applicable contingent
deferred sales charge on Class B, Class C and Class N shares, and reinvestments
of all dividends and capital gains distributions. Past performance cannot
guarantee future results.
The Fund's performance is compared to that of the Russell 2500 Index and
the Russell 2000 Index. The Russell 2500 Index is a broad-based measure of
small- and mid- cap stocks. The Russell 2000 Index is an unmanaged index of
small-capitalization stocks. Index performance reflects the reinvestment of
income but does not consider the effect of transaction costs, and none of the
data in the graphs shows the effect of taxes. The Fund's performance reflects
the effects of the Fund's business and operating expenses. While index
comparisons may be useful to provide a benchmark for the Fund's performance, it
must be noted that the Fund's investments are not limited to the investments in
the index.
12 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Small- & Mid- Cap Value Fund (Class A)
Russell 2500 Index
Russell 2000 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Small- &
Mid- Cap Value Fund
(Class A) Russell 2500 Index Russell 2000 Index
10/31/1997 $ 9,425 $10,000 $10,000
01/31/1998 $ 9,336 $10,078 $ 9,950
04/30/1998 $10,252 $11,327 $11,188
07/31/1998 $ 8,766 $10,071 $ 9,749
10/31/1998 $ 8,007 $ 9,230 $ 8,816
01/31/1999 $ 8,199 $10,257 $ 9,983
04/30/1999 $ 8,529 $10,663 $10,152
07/31/1999 $ 8,969 $11,168 $10,471
10/31/1999 $ 8,037 $10,892 $10,127
01/31/2000 $ 8,190 $12,461 $11,754
04/30/2000 $ 8,744 $13,288 $12,023
07/31/2000 $ 9,490 $13,138 $11,913
10/31/2000 $10,159 $13,426 $11,889
01/31/2001 $10,442 $13,736 $12,188
04/30/2001 $10,261 $13,219 $11,679
07/31/2001 $10,634 $13,316 $11,709
10/31/2001 $ 9,852 $11,793 $10,379
01/31/2002 $11,187 $13,294 $11,750
04/30/2002 $12,195 $13,929 $12,459
07/31/2002 $ 9,927 $11,236 $ 9,606
10/31/2002 $ 9,709 $10,716 $ 9,179
01/31/2003 $ 9,486 $10,772 $ 9,180
04/30/2003 $10,109 $11,559 $ 9,872
07/31/2003 $11,633 $13,634 $11,826
10/31/2003 $13,217 $15,183 $13,159
01/31/2004 $14,817 $16,689 $14,506
04/30/2004 $14,801 $16,230 $14,020
07/31/2004 $14,732 $16,111 $13,843
10/31/2004 $15,980 $17,056 $14,702
01/31/2005 $17,849 $18,408 $15,764
04/30/2005 $17,361 $17,620 $14,681
07/31/2005 $20,069 $20,423 $17,274
10/31/2005 $19,474 $19,598 $16,479
01/31/2006 $21,700 $22,049 $18,742
04/30/2006 $22,421 $22,967 $19,594
07/31/2006 $20,847 $21,204 $18,007
10/31/2006 $22,987 $23,064 $19,771
01/31/2007 $25,001 $24,566 $20,700
04/30/2007 $26,964 $25,409 $21,128
07/31/2007 $26,675 $24,501 $20,189
10/31/2007 $28,086 $25,995 $21,604
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE FUND AT
10/31/07
1-Year 15.16% 5-Year 22.21% 10-Year 10.88%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
BECAUSE CLASS B SHARES CONVERT TO CLASS A SHARES 72 MONTHS AFTER PURCHASE, THE
10-YEAR RETURN FOR CLASS B USES CLASS A PERFORMANCE FOR THE PERIOD AFTER
CONVERSION. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 18 FOR FURTHER
INFORMATION.
13 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Small- & Mid- Cap Value Fund (Class B)
Russell 2500 Index
Russell 2000 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Small- &
Mid- Cap Value Fund
(Class B) Russell 2500 Index Russell 2000 Index
10/31/1997 $10,000 $10,000 $10,000
01/31/1998 $ 9,889 $10,078 $ 9,950
04/30/1998 $10,848 $11,327 $11,188
07/31/1998 $ 9,261 $10,071 $ 9,749
10/31/1998 $ 8,453 $ 9,230 $ 8,816
01/31/1999 $ 8,642 $10,257 $ 9,983
04/30/1999 $ 8,979 $10,663 $10,152
07/31/1999 $ 9,430 $11,168 $10,471
10/31/1999 $ 8,440 $10,892 $10,127
01/31/2000 $ 8,585 $12,461 $11,754
04/30/2000 $ 9,156 $13,288 $12,023
07/31/2000 $ 9,923 $13,138 $11,913
10/31/2000 $10,613 $13,426 $11,889
01/31/2001 $10,894 $13,736 $12,188
04/30/2001 $10,685 $13,219 $11,679
07/31/2001 $11,064 $13,316 $11,709
10/31/2001 $10,230 $11,793 $10,379
01/31/2002 $11,600 $13,294 $11,750
04/30/2002 $12,624 $13,929 $12,459
07/31/2002 $10,262 $11,236 $ 9,606
10/31/2002 $10,020 $10,716 $ 9,179
01/31/2003 $ 9,772 $10,772 $ 9,180
04/30/2003 $10,394 $11,559 $ 9,872
07/31/2003 $11,935 $13,634 $11,826
10/31/2003 $13,549 $15,183 $13,159
01/31/2004 $15,188 $16,689 $14,506
04/30/2004 $15,172 $16,230 $14,020
07/31/2004 $15,101 $16,111 $13,843
10/31/2004 $16,381 $17,056 $14,702
01/31/2005 $18,297 $18,408 $15,764
04/30/2005 $17,796 $17,620 $14,681
07/31/2005 $20,572 $20,423 $17,274
10/31/2005 $19,963 $19,598 $16,479
01/31/2006 $22,244 $22,049 $18,742
04/30/2006 $22,984 $22,967 $19,594
07/31/2006 $21,370 $21,204 $18,007
10/31/2006 $23,564 $23,064 $19,771
01/31/2007 $25,628 $24,566 $20,700
04/30/2007 $27,640 $25,409 $21,128
07/31/2007 $27,344 $24,501 $20,189
10/31/2007 $28,792 $25,995 $21,604
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE FUND AT
10/31/07
1-Year 16.18% 5-Year 22.49% 10-Year 11.15%
14 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Small- & Mid- Cap Value Fund (Class C)
Russell 2500 Index
Russell 2000 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Small- &
Mid- Cap Value Fund
(Class C) Russell 2500 Index Russell 2000 Index
10/31/1997 $10,000 $10,000 $10,000
01/31/1998 $ 9,893 $10,078 $ 9,950
04/30/1998 $10,854 $11,327 $11,188
07/31/1998 $ 9,265 $10,071 $ 9,749
10/31/1998 $ 8,455 $ 9,230 $ 8,816
01/31/1999 $ 8,649 $10,257 $ 9,983
04/30/1999 $ 8,982 $10,663 $10,152
07/31/1999 $ 9,434 $11,168 $10,471
10/31/1999 $ 8,441 $10,892 $10,127
01/31/2000 $ 8,592 $12,461 $11,754
04/30/2000 $ 9,164 $13,288 $12,023
07/31/2000 $ 9,933 $13,138 $11,913
10/31/2000 $10,618 $13,426 $11,889
01/31/2001 $10,900 $13,736 $12,188
04/30/2001 $10,692 $13,219 $11,679
07/31/2001 $11,065 $13,316 $11,709
10/31/2001 $10,235 $11,793 $10,379
01/31/2002 $11,608 $13,294 $11,750
04/30/2002 $12,634 $13,929 $12,459
07/31/2002 $10,262 $11,236 $ 9,606
10/31/2002 $10,024 $10,716 $ 9,179
01/31/2003 $ 9,776 $10,772 $ 9,180
04/30/2003 $10,399 $11,559 $ 9,872
07/31/2003 $11,944 $13,634 $11,826
10/31/2003 $13,544 $15,183 $13,159
01/31/2004 $15,154 $16,689 $14,506
04/30/2004 $15,107 $16,230 $14,020
07/31/2004 $15,003 $16,111 $13,843
10/31/2004 $16,246 $17,056 $14,702
01/31/2005 $18,107 $18,408 $15,764
04/30/2005 $17,582 $17,620 $14,681
07/31/2005 $20,275 $20,423 $17,274
10/31/2005 $19,633 $19,598 $16,479
01/31/2006 $21,838 $22,049 $18,742
04/30/2006 $22,521 $22,967 $19,594
07/31/2006 $20,900 $21,204 $18,007
10/31/2006 $23,003 $23,064 $19,771
01/31/2007 $24,971 $24,566 $20,700
04/30/2007 $26,875 $25,409 $21,128
07/31/2007 $26,538 $24,501 $20,189
10/31/2007 $27,892 $25,995 $21,604
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE FUND AT
10/31/07
1-Year 20.25% 5-Year 22.71% 10-Year 10.80%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
BECAUSE CLASS B SHARES CONVERT TO CLASS A SHARES 72 MONTHS AFTER PURCHASE, THE
10-YEAR RETURN FOR CLASS B USES CLASS A PERFORMANCE FOR THE PERIOD AFTER
CONVERSION. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 18 FOR FURTHER
INFORMATION.
15 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Small- & Mid- Cap Value Fund (Class N)
Russell 2500 Index
Russell 2000 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Small- &
Mid- Cap Value Fund
(Class N) Russell 2500 Index Russell 2000 Index
03/01/2001 $10,000 $10,000 $10,000
04/30/2001 $10,383 $10,286 $10,255
07/31/2001 $10,761 $10,362 $10,281
10/31/2001 $ 9,964 $ 9,176 $ 9,114
01/31/2002 $11,311 $10,344 $10,317
04/30/2002 $12,326 $10,838 $10,940
07/31/2002 $10,030 $ 8,743 $ 8,435
10/31/2002 $ 9,804 $ 8,338 $ 8,060
01/31/2003 $ 9,574 $ 8,382 $ 8,061
04/30/2003 $10,199 $ 8,994 $ 8,668
07/31/2003 $11,726 $10,609 $10,384
10/31/2003 $13,315 $11,814 $11,555
01/31/2004 $14,918 $12,986 $12,738
04/30/2004 $14,854 $12,629 $12,310
07/31/2004 $14,773 $12,536 $12,155
10/31/2004 $16,016 $13,272 $12,910
01/31/2005 $17,876 $14,323 $13,842
04/30/2005 $17,369 $13,710 $12,891
07/31/2005 $20,054 $15,892 $15,168
10/31/2005 $19,446 $15,249 $14,470
01/31/2006 $21,654 $17,156 $16,457
04/30/2006 $22,354 $17,871 $17,205
07/31/2006 $20,770 $16,499 $15,811
10/31/2006 $22,879 $17,946 $17,360
01/31/2007 $24,857 $19,115 $18,176
04/30/2007 $26,785 $19,771 $18,552
07/31/2007 $26,478 $19,065 $17,728
10/31/2007 $27,846 $20,227 $18,970
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE FUND AT
10/31/07
1-Year 20.71% 5-Year 23.22% Since Inception (3/1/01) 16.60%
16 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
CLASS Y SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Small- & Mid- Cap Value Fund (Class Y)
Russell 2500 Index
Russell 2000 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Small- &
Mid- Cap Value Fund
(Class Y) Russell 2500 Index Russell 2000 Index
10/24/2005 $10,000 $10,000 $10,000
10/31/2005 $ 9,910 $10,000 $10,000
01/31/2006 $11,058 $11,251 $11,374
04/30/2006 $11,438 $11,719 $11,891
07/31/2006 $10,650 $10,820 $10,927
10/31/2006 $11,758 $11,769 $11,998
01/31/2007 $12,799 $12,535 $12,561
04/30/2007 $13,817 $12,965 $12,821
07/31/2007 $13,684 $12,502 $12,252
10/31/2007 $14,418 $13,264 $13,110
AVERAGE ANNUAL TOTAL RETURNS OF CLASS Y SHARES OF THE FUND AT 10/31/07
1-Year 22.63% 5-Year N/A Since Inception (10/24/05) 19.86%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
BECAUSE CLASS B SHARES CONVERT TO CLASS A SHARES 72 MONTHS AFTER PURCHASE, THE
10-YEAR RETURN FOR CLASS B USES CLASS A PERFORMANCE FOR THE PERIOD AFTER
CONVERSION. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 18 FOR FURTHER
INFORMATION.
17 | OPPENHEIMER SMALL- & MID- CAP VALUE 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 Fund's total returns shown do
not reflect the deduction of income taxes on an individual's investment. Taxes
may reduce your actual investment returns on income or gains paid by the Fund or
any gains you may realize if you sell your shares.
INVESTORS SHOULD CONSIDER THE FUND'S INVESTMENT OBJECTIVES, RISKS, AND OTHER
CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE FUND'S PROSPECTUS CONTAINS
THIS AND OTHER INFORMATION ABOUT THE FUND, AND MAY BE OBTAINED BY ASKING YOUR
FINANCIAL ADVISOR, CALLING US AT 1.800.525.7048 OR VISITING OUR WEBSITE AT
WWW.OPPENHEIMERFUNDS.COM. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
The Fund's investment strategy and focus can change over time. The mention of
specific fund holdings does not constitute a recommendation by OppenheimerFunds,
Inc.
CLASS A shares of the Fund were first publicly offered on 1/3/89. Unless
otherwise noted, Class A returns include the current maximum initial sales
charge of 5.75%. Class A shares are subject to a maximum annual 0.25%
asset-based sales charge. The asset-based sales charge is subject to a voluntary
waiver of a portion or all of the charge as described in the Prospectus, and the
Board of Trustees has set the rate at zero.
CLASS B shares of the Fund were first publicly offered on 9/1/93. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charges of 5% (1-year) and 2% (5-year). Because Class B shares convert to
Class A shares 72 months after purchase, the 10-year return for Class B does not
include any contingent deferred sales charges on redemption and uses Class A
performance for the period after conversion. Class B shares are subject to an
annual 0.75% asset-based sales charge.
CLASS C shares of the Fund were first publicly offered on 9/1/93. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
CLASS N shares of the Fund were first publicly offered on 3/1/01. Class N shares
are offered only through retirement plans. Unless
18 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
otherwise noted, Class N returns include the contingent deferred sales charge of
1% for the 1-year period. Class N shares are subject to an annual 0.25%
asset-based sales charge.
CLASS Y shares of the Fund were first publicly offered on 10/24/05. Class Y
shares are offered only to certain institutional investors under special
agreement with the Distributor.
An explanation of the calculation of performance is in the Fund's Statement of
Additional Information.
19 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include sales charges (loads) on purchase payments,
contingent deferred sales charges on redemptions; and redemption fees, if any;
and (2) ongoing costs, including management fees; distribution and service fees;
and other Fund expenses. These examples are intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended October 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 Fund's actual expense ratio for each class of shares, and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front-end
or contingent deferred sales charges (loads), redemption fees, or a $12.00 fee
imposed annually on accounts valued at less than $500.00 (subject to exceptions
20 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
described in the Statement of Additional Information). Therefore, the
"hypothetical" lines of the table are useful in comparing ongoing costs only,
and will not help you determine the relative total costs of owning different
funds. In addition, if these transactional costs were included, your costs would
have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
5/1/07 10/31/07 OCTOBER 31, 2007
- --------------------------------------------------------------------------------
Class A Actual $1,000.00 $1,041.70 $5.52
- --------------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,019.81 5.46
- --------------------------------------------------------------------------------
Class B Actual 1,000.00 1,037.30 9.75
- --------------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,015.68 9.65
- --------------------------------------------------------------------------------
Class C Actual 1,000.00 1,037.90 9.44
- --------------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,015.98 9.34
- --------------------------------------------------------------------------------
Class N Actual 1,000.00 1,039.60 7.38
- --------------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,018.00 7.30
- --------------------------------------------------------------------------------
Class Y Actual 1,000.00 1,043.50 3.87
- --------------------------------------------------------------------------------
Class Y Hypothetical 1,000.00 1,021.42 3.83
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios,
excluding indirect expenses from affiliated fund, based on the 6-month period
ended October 31, 2007 are as follows:
CLASS EXPENSE RATIOS
- -----------------------------
Class A 1.07%
- -----------------------------
Class B 1.89
- -----------------------------
Class C 1.83
- -----------------------------
Class N 1.43
- -----------------------------
Class Y 0.75
The expense ratios reflect reduction to custodian expenses and voluntary waivers
or reimbursements by the Fund's Manager that can be terminated at any time,
without advance notice. The "Financial Highlights" tables in the Fund's
financial statements, included in this report, also show the gross expense
ratios, without such waivers or reimbursements and reduction to custodian
expenses, if applicable.
- --------------------------------------------------------------------------------
21 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
STATEMENT OF INVESTMENTS October 31, 2007
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS--96.2%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--14.3%
- --------------------------------------------------------------------------------
AUTO COMPONENTS--1.6%
Goodyear Tire &
Rubber Co. (The) 1 2,750,000 $ 82,912,500
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--4.3%
Gaylord
Entertainment
Co., Cl. A 1 1,000,000 54,480,000
- --------------------------------------------------------------------------------
Panera Bread Co.,
Cl. A 1 1,000,000 40,990,000
- --------------------------------------------------------------------------------
Penn National
Gaming, Inc. 1 700,000 43,225,000
- --------------------------------------------------------------------------------
Pinnacle
Entertainment, Inc. 1 2,000,000 58,400,000
- --------------------------------------------------------------------------------
Scientific Games
Corp., Cl. A 1 800,000 28,920,000
----------------
226,015,000
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES--0.8%
Jarden Corp. 1 1,200,000 42,624,000
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--0.2%
ValueVision Media,
Inc., Cl. A 1 1,750,000 9,047,500
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--1.8%
Brunswick Corp. 1,325,000 29,560,750
- --------------------------------------------------------------------------------
Mattel, Inc. 3,000,000 62,670,000
----------------
92,230,750
- --------------------------------------------------------------------------------
MEDIA--2.8%
Cablevision Systems
Corp. New York
Group, Cl. A 1 500,000 14,665,000
- --------------------------------------------------------------------------------
Cinemark Holdings,
Inc. 1,500,000 25,815,000
- --------------------------------------------------------------------------------
Liberty Global, Inc.,
Series A 1 1,350,000 52,987,500
- --------------------------------------------------------------------------------
Liberty Global, Inc.,
Series C 1 1,400,000 51,352,000
----------------
144,819,500
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--2.8%
Advance Auto
Parts, Inc. 1,600,000 54,592,000
SHARES VALUE
- --------------------------------------------------------------------------------
SPECIALTY RETAIL Continued
OfficeMax, Inc. 1,650,000 $ 52,222,500
- --------------------------------------------------------------------------------
Urban Outfitters,
Inc. 1 1,500,000 37,905,000
----------------
144,719,500
- --------------------------------------------------------------------------------
CONSUMER STAPLES--5.1%
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--2.0%
Costco Wholesale
Corp. 400,000 26,904,000
- --------------------------------------------------------------------------------
Longs Drug Stores, Inc. 525,000 27,567,750
- --------------------------------------------------------------------------------
Pantry, Inc. (The) 1,2 1,800,000 50,436,000
----------------
104,907,750
- --------------------------------------------------------------------------------
FOOD PRODUCTS--1.8%
Chiquita Brands
International, Inc. 1,2 2,250,000 42,187,500
- --------------------------------------------------------------------------------
ConAgra Foods, Inc. 2,200,000 52,206,000
----------------
94,393,500
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS--1.3%
Herbalife Ltd. 1,500,000 66,135,000
- --------------------------------------------------------------------------------
ENERGY--7.6%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--2.3%
Exterran Holdings,
Inc. 1 625,000 52,625,000
- --------------------------------------------------------------------------------
National Oilwell
Varco, Inc. 1 400,000 29,296,000
- --------------------------------------------------------------------------------
Weatherford
International Ltd. 1 600,000 38,946,000
----------------
120,867,000
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS--5.3%
Capital Product
Partners LP 2 1,000,000 26,910,000
- --------------------------------------------------------------------------------
Continental
Resources, Inc. 1 1,750,000 41,142,500
- --------------------------------------------------------------------------------
CVR Energy, Inc. 1 1,000,000 22,800,000
- --------------------------------------------------------------------------------
Delta Petroleum
Corp. 1 2,000,000 37,400,000
- --------------------------------------------------------------------------------
Kinder Morgan
Management LLC 1 1 36
- --------------------------------------------------------------------------------
Murphy Oil Corp. 675,000 49,700,250
22 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
SHARES VALUE
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS Continued
Peabody Energy
Corp. 750,000 $ 41,812,500
- --------------------------------------------------------------------------------
Range Resources
Corp. 1,250,000 56,162,500
----------------
275,927,786
- --------------------------------------------------------------------------------
FINANCIALS--16.1%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--3.7%
Affiliated Managers
Group, Inc. 1 500,000 65,775,000
- --------------------------------------------------------------------------------
E*TRADE Financial
Corp. 1 6,670,000 74,303,800
- --------------------------------------------------------------------------------
Investment
Technology
Group, Inc. 1 1,300,000 54,470,000
----------------
194,548,800
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--2.9%
Colonial BancGroup,
Inc. (The) 2,600,000 49,868,000
- --------------------------------------------------------------------------------
East West Bancorp,
Inc. 1,650,000 55,671,000
- --------------------------------------------------------------------------------
Sterling Financial
Corp., Western US 2,000,000 45,000,000
----------------
150,539,000
- --------------------------------------------------------------------------------
INSURANCE--6.4%
ACE Ltd. 550,000 33,335,500
- --------------------------------------------------------------------------------
Everest Re Group
Ltd. 800,000 85,232,000
- --------------------------------------------------------------------------------
Fidelity National Title
Group, Inc., Cl. A 1,650,000 25,393,500
- --------------------------------------------------------------------------------
National Financial
Partners Corp. 1,475,000 80,638,250
- --------------------------------------------------------------------------------
Platinum
Underwriters
Holdings Ltd. 288,800 10,396,800
- --------------------------------------------------------------------------------
Protective Life Corp. 1,500,000 64,305,000
- --------------------------------------------------------------------------------
Validus Holdings
Ltd. 1 1,200,000 31,080,000
----------------
330,381,050
SHARES VALUE
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS--1.7%
American Financial
Realty Trust 2,500,000 $ 16,850,000
- --------------------------------------------------------------------------------
BioMed Realty Trust,
Inc. 1,100,000 26,279,000
- --------------------------------------------------------------------------------
DuPont Fabros
Technology, Inc. 1 750,000 16,110,000
- --------------------------------------------------------------------------------
General Growth
Properties, Inc. 500,000 27,180,000
----------------
86,419,000
- --------------------------------------------------------------------------------
REAL ESTATE MANAGEMENT & DEVELOPMENT--0.1%
Meruelo Maddux
Properties, Inc. 1 1,000,000 4,810,000
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--1.3%
NewAlliance
Bancshares, Inc. 5,000,000 69,950,000
- --------------------------------------------------------------------------------
HEALTH CARE--7.1%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--0.4%
Vanda Pharmaceuticals,
Inc. 1,2 1,600,000 24,000,000
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--1.3%
Hospira, Inc. 1 1,600,000 66,128,000
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--4.6%
Community Health
Systems, Inc. 1 1,500,000 49,395,000
- --------------------------------------------------------------------------------
DaVita, Inc. 1 1,000,000 65,190,000
- --------------------------------------------------------------------------------
Health Net, Inc. 1 1,250,000 67,012,500
- --------------------------------------------------------------------------------
Medco Health
Solutions, Inc. 1 600,000 56,628,000
----------------
238,225,500
- --------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES--0.8%
Thermo Fisher
Scientific, Inc. 1 750,000 44,107,500
- --------------------------------------------------------------------------------
INDUSTRIALS--14.8%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--3.9%
Alliant Techsystems,
Inc. 1 500,000 55,195,000
- --------------------------------------------------------------------------------
Goodrich Corp. 1,125,000 78,367,500
- --------------------------------------------------------------------------------
Spirit Aerosystems
Holdings, Inc., Cl. A 1 2,000,000 69,440,000
----------------
203,002,500
23 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS--0.6%
Atlas Air Worldwide
Holdings, Inc. 1 540,000 $ 31,638,600
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.3%
Information Services
Group, Inc. 1,2 2,300,000 17,342,000
- --------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING--1.1%
Foster Wheeler Ltd. 1 200,000 29,650,000
- --------------------------------------------------------------------------------
KBR, Inc. 1 650,000 27,872,000
----------------
57,522,000
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--2.2%
AMETEK, Inc. 1,400,000 65,800,000
- --------------------------------------------------------------------------------
Cooper Industries
Ltd., Cl. A 900,000 47,151,000
----------------
112,951,000
- --------------------------------------------------------------------------------
MACHINERY--4.8%
Greenbrier Cos., Inc. 2 1,600,000 42,736,000
- --------------------------------------------------------------------------------
Joy Global, Inc. 1,500,000 87,090,000
- --------------------------------------------------------------------------------
Kaydon Corp. 1,200,000 64,548,000
- --------------------------------------------------------------------------------
Navistar International
Corp. 1 850,000 53,550,000
----------------
247,924,000
- --------------------------------------------------------------------------------
MARINE--1.4%
Eagle Bulk Shipping,
Inc. 1,600,000 54,544,000
- --------------------------------------------------------------------------------
Navios Maritime
Holdings, Inc. 850,000 15,359,500
----------------
69,903,500
- --------------------------------------------------------------------------------
ROAD & RAIL--0.5%
Hunt (J.B.) Transport
Services, Inc. 1,000,000 27,720,000
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--14.3%
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--0.2%
Seagate Technology 500,000 13,920,000
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--2.4%
Agilent Technologies,
Inc. 1 1,800,000 66,330,000
- --------------------------------------------------------------------------------
Amphenol Corp.,
Cl. A 1,300,000 57,551,000
----------------
123,881,000
SHARES VALUE
- --------------------------------------------------------------------------------
IT SERVICES--1.2%
Affiliated Computer
Services, Inc., Cl. A 1 1,200,000 $ 60,792,000
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT--4.9%
ASML Holding NV 1 1,500,000 52,380,000
- --------------------------------------------------------------------------------
FormFactor, Inc. 1 1,000,000 39,110,000
- --------------------------------------------------------------------------------
Lam Research Corp. 1 1,050,000 52,710,000
- --------------------------------------------------------------------------------
Maxim Integrated
Products, Inc. 2,000,000 54,200,000
- --------------------------------------------------------------------------------
Varian Semiconductor
Equipment Associates,
Inc. 1 1,200,000 55,224,000
----------------
253,624,000
- --------------------------------------------------------------------------------
SOFTWARE--5.6%
Activision, Inc. 1 1,000,000 23,650,000
- --------------------------------------------------------------------------------
Amdocs Ltd. 1 1,500,000 51,600,000
- --------------------------------------------------------------------------------
Electronic Arts, Inc. 1 1,000,000 61,120,000
- --------------------------------------------------------------------------------
McAfee, Inc. 1 1,800,000 74,430,000
- --------------------------------------------------------------------------------
THQ, Inc. 1 2,961,984 80,240,146
----------------
291,040,146
- --------------------------------------------------------------------------------
MATERIALS--6.6%
- --------------------------------------------------------------------------------
CHEMICALS--3.2%
Albemarle Corp. 1,025,000 48,954,000
- --------------------------------------------------------------------------------
FMC Corp. 850,000 48,875,000
- --------------------------------------------------------------------------------
Lubrizol Corp. (The) 1,000,000 67,880,000
----------------
165,709,000
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--1.7%
Martin Marietta
Materials, Inc. 275,000 35,571,250
- --------------------------------------------------------------------------------
Texas Industries, Inc. 700,000 51,142,000
----------------
86,713,250
- --------------------------------------------------------------------------------
METALS & MINING--1.7%
Carpenter Technology
Corp. 625,000 90,568,750
24 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
SHARES VALUE
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--2.1%
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--2.1%
Crown Castle
International Corp. 1 1,500,000 $ 61,605,000
- --------------------------------------------------------------------------------
NII Holdings, Inc. 1 800,000 46,400,000
----------------
108,005,000
- --------------------------------------------------------------------------------
UTILITIES--8.2%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--1.5%
Cleco Corp. 2 3,000,000 79,050,000
- --------------------------------------------------------------------------------
ENERGY TRADERS--3.9%
AES Corp. (The) 1 3,000,000 64,230,000
- --------------------------------------------------------------------------------
Dynegy, Inc., Cl. A 1 5,000,000 46,050,000
- --------------------------------------------------------------------------------
Mirant Corp. 1 850,000 36,006,000
- --------------------------------------------------------------------------------
NRG Energy, Inc. 1 1,200,000 54,792,000
----------------
201,078,000
- --------------------------------------------------------------------------------
GAS UTILITIES--1.2%
Southern Union Co. 2,000,000 63,000,000
- --------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--1.6%
CMS Energy Corp. 5,000,000 84,850,000
----------------
Total Common Stocks
(Cost $4,284,959,423) 5,003,943,382
UNITS VALUE
- --------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.1%
- --------------------------------------------------------------------------------
Information Services
Group, Inc. Wts.,
Exp. 1/31/11 1
(Cost $2,212,394) 2,200,000 $ 2,860,000
SHARES
- --------------------------------------------------------------------------------
INVESTMENTS IN AFFILIATED COMPANIES--2.4%
- --------------------------------------------------------------------------------
Oppenheimer
Institutional Money
Market Fund,
Cl. E, 5.20% 2,3
(Cost $125,541,232) 125,541,232 125,541,232
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS,
AT VALUE
(COST $4,412,713,049) 98.7% 5,132,344,614
- --------------------------------------------------------------------------------
OTHER ASSETS
NET OF LIABILITIES 1.3 69,215,603
-------------------------------
NET ASSETS 100.0% $ 5,201,560,217
===============================
25 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended October 31, 2007, by virtue of the Fund owning at
least 5% of the voting securities of the issuer or as a result of the Fund 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
OCTOBER 31, 2006 ADDITIONS REDUCTIONS OCTOBER 31, 2007
- --------------------------------------------------------------------------------------------------------------------------
Capital Product Partners LP -- 1,230,600 230,600 1,000,000
Chiquita Brands International, Inc. -- 2,500,000 250,000 2,250,000
Cleco Corp. -- 3,300,000 300,000 3,000,000
Fidelity National Title Group, Inc., Cl. A a 2,250,000 732,387 1,332,387 1,650,000
Granahan McCourt Acquisition Corp. 1,350,000 -- 1,350,000 --
Greenbrier Cos., Inc. -- 1,600,000 -- 1,600,000
Grubb & Ellis Co. 2,000,000 -- 2,000,000 --
Information Services Group, Inc. -- 2,300,000 b -- 2,300,000
Oppenheimer Institutional Money Market Fund, Cl. E 165,612,944 2,288,993,807 2,329,065,519 125,541,232
Pantry, Inc. (The) -- 1,828,200 28,200 1,800,000
ValueVision Media, Inc., Cl. A a 2,500,000 -- 750,000 1,750,000
Vanda Pharmaceuticals, Inc. -- 1,600,000 -- 1,600,000
DIVIDEND REALIZED
VALUE INCOME GAIN (LOSS)
- --------------------------------------------------------------------------------------------------------------------------
Capital Product Partners LP $ 26,910,000 $ 311,337 $ 1,049,285
Chiquita Brands International, Inc. 42,187,500 -- 708,023
Cleco Corp. 79,050,000 1,417,500 (1,476,200)
Fidelity National Title Group, Inc., Cl. A a -- c 1,949,980 5,407,905
Granahan McCourt Acquisition Corp. -- -- 524,862
Greenbrier Cos., Inc. 42,736,000 324,189 --
Grubb & Ellis Co. -- -- 4,332,614
Information Services Group, Inc. 17,342,000 -- --
Oppenheimer Institutional Money Market Fund, Cl. E 125,541,232 9,957,625 --
Pantry, Inc. (The) 50,436,000 -- (104,242)
ValueVision Media, Inc., Cl. A a -- c -- (5,345,426)
Vanda Pharmaceuticals, Inc. 24,000,000 -- --
--------------------------------------------------
$ 408,202,732 $ 13,960,631 $ 5,096,821
==================================================
a. No longer an affiliate as of October 31, 2007.
b. All or a portion is the result of a corporate action.
c. The security is no longer an affiliate, therefore, the value has been
excluded from this table.
3. Rate shown is the 7-day yield as of October 31, 2007.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES October 31, 2007
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
ASSETS
- ---------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $3,961,684,124) $ 4,724,141,882
Affiliated companies (cost $451,028,925) 408,202,732
----------------
5,132,344,614
- ---------------------------------------------------------------------------------------------------
Cash 1,258,932
- ---------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 123,557,663
Shares of beneficial interest sold 3,380,770
Dividends 3,001,900
Other 155,530
----------------
Total assets 5,263,699,409
- ---------------------------------------------------------------------------------------------------
LIABILITIES
- ---------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 47,673,621
Shares of beneficial interest redeemed 11,747,289
Distribution and service plan fees 981,668
Transfer and shareholder servicing agent fees 907,445
Trustees' compensation 426,971
Shareholder communications 321,623
Other 80,575
----------------
Total liabilities 62,139,192
- ---------------------------------------------------------------------------------------------------
NET ASSETS $ 5,201,560,217
================
- ---------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ---------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 1,251,884
- ---------------------------------------------------------------------------------------------------
Additional paid-in capital 4,036,641,331
- ---------------------------------------------------------------------------------------------------
Accumulated net investment loss (452,996)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 444,488,433
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 719,631,565
----------------
NET ASSETS $ 5,201,560,217
================
27 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES Continued
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- ---------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$3,530,371,225 and 82,524,488 shares of beneficial interest outstanding) $42.78
Maximum offering price per share (net asset value plus sales charge of
5.75% of offering price) $45.39
- ---------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $367,687,957
and 9,650,390 shares of beneficial interest outstanding) $38.10
- ---------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $812,430,424
and 21,326,336 shares of beneficial interest outstanding) $38.10
- ---------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $397,074,857
and 9,509,671 shares of beneficial interest outstanding) $41.75
- ---------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $93,995,754 and 2,177,525 shares of beneficial interest outstanding) $43.17
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
STATEMENT OF OPERATIONS For the Year Ended October 31, 2007
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ---------------------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $60,157) $ 27,233,380
Affiliated companies 13,960,631
- ---------------------------------------------------------------------------------------------------
Interest 204,743
- ---------------------------------------------------------------------------------------------------
Other income 38,305
----------------
Total investment income 41,437,059
- ---------------------------------------------------------------------------------------------------
EXPENSES
- ---------------------------------------------------------------------------------------------------
Management fees 28,660,705
- ---------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 7,676,074
Class B 3,703,196
Class C 7,246,805
Class N 1,625,041
- ---------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 6,059,449
Class B 875,890
Class C 1,406,822
Class N 996,458
Class Y 56,932
- ---------------------------------------------------------------------------------------------------
Shareholder communications:
Class A 429,606
Class B 123,478
Class C 122,409
Class N 21,528
Class Y 256
- ---------------------------------------------------------------------------------------------------
Trustees' compensation 245,188
- ---------------------------------------------------------------------------------------------------
Custodian fees and expenses 37,255
- ---------------------------------------------------------------------------------------------------
Administration service fees 1,500
- ---------------------------------------------------------------------------------------------------
Other 454,458
----------------
Total expenses 59,743,050
Less reduction to custodian expenses (7,866)
Less waivers and reimbursements of expenses (187,924)
----------------
Net expenses 59,547,260
- ---------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (18,110,201)
29 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
STATEMENT OF OPERATIONS Continued
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
- ---------------------------------------------------------------------------------------------------
Net realized gain on:
Investments:
Unaffiliated companies $ 528,429,659
Affiliated companies 5,096,821
Closing and expiration of option contracts written 241,092
Foreign currency transactions 814,464
----------------
Net realized gain 534,582,036
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on:
Investments 319,583,269
Option contracts written 70,006
----------------
Net change in unrealized appreciation 319,653,275
- ---------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 836,125,110
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 2007 2006
- -------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------
Net investment loss $ (18,110,201) $ (2,708,503)
- -------------------------------------------------------------------------------------------------------------------------
Net realized gain 534,582,036 222,620,620
- -------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 319,653,275 209,711,407
--------------------------------
Net increase in net assets resulting from operations 836,125,110 429,623,524
- -------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (134,183,398) (77,804,945)
Class B (20,095,320) (16,849,275)
Class C (34,120,436) (19,268,301)
Class N (13,524,392) (6,894,529)
Class Y (2,073,838) (927,666)
--------------------------------
(203,997,384) (121,744,716)
- -------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest transactions:
Class A 747,231,246 833,598,110
Class B (8,849,004) 24,936,974
Class C 177,562,311 205,626,330
Class N 124,137,481 107,130,883
Class Y 50,475,978 33,195,013
--------------------------------
1,090,558,012 1,204,487,310
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------
Total increase 1,722,685,738 1,512,366,118
- -------------------------------------------------------------------------------------------------------------------------
Beginning of period 3,478,874,479 1,966,508,361
--------------------------------
End of period (including accumulated net investment loss
of $452,996 and $277,699, respectively) $5,201,560,217 $3,478,874,479
================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED OCTOBER 31, 2007 2006 2005 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
Net asset value, beginning of period $ 36.95 $ 33.08 $ 30.08 $ 26.11 $ 19.18
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income (loss) (.08) 1 .05 1 (.04) 1 (.17) 1 (.04)
Net realized and unrealized gain 7.97 5.69 6.22 5.42 6.97
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 7.89 5.74 6.18 5.25 6.93
- ---------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Distributions from net realized gain (2.06) (1.87) (3.18) (1.28) --
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 42.78 $ 36.95 $ 33.08 $ 30.08 $ 26.11
==========================================================================
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 22.18% 18.04% 21.87% 20.90% 36.13%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 3,530,371 $ 2,343,715 $ 1,298,204 $543,999 $330,215
- ---------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 3,150,544 $ 1,884,099 $ 893,501 $436,617 $245,319
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss) (0.19)% 0.13% (0.11)% (0.61)% (0.12)%
Total expenses 1.08% 4 1.14% 4 1.23% 1.35% 1.59%
Expenses after payments, waivers and/or
reimbursements and reduction to custodian
expenses 1.08% 1.14% 1.23% 1.35% 1.56%
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 115% 136% 121% 163% 163%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
3. Annualized for periods less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended October 31, 2007 1.08%
Year Ended October 31, 2006 1.14%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
CLASS B YEAR ENDED OCTOBER 31, 2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 33.38 $ 30.29 $ 28.01 $ 24.59 $ 18.20
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.36) 1 (.22) 1 (.29) 1 (.37) 1 (.17)
Net realized and unrealized gain 7.14 5.18 5.75 5.07 6.56
------------------------------------------------------------------------
Total from investment operations 6.78 4.96 5.46 4.70 6.39
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain (2.06) (1.87) (3.18) (1.28) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 38.10 $ 33.38 $ 30.29 $ 28.01 $ 24.59
========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 21.18% 17.08% 20.82% 19.91% 35.11%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 367,688 $ 327,908 $ 272,643 $ 198,971 $ 171,896
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 370,633 $ 307,618 $ 243,754 $ 190,251 $ 137,734
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment loss (1.00)% (0.71)% (0.98)% (1.43)% (0.85)%
Total expenses 1.90% 4 1.97% 4 2.09% 2.18% 2.42%
Expenses after payments, waivers and/or
reimbursements and reduction to custodian
expenses 1.90% 1.97% 2.09% 2.18% 2.29%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 115% 136% 121% 163% 163%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
3. Annualized for periods less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended October 31, 2007 1.90%
Year Ended October 31, 2006 1.97%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS C YEAR ENDED OCTOBER 31, 2007 2006 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 33.36 $ 30.25 $ 27.97 $ 24.55 $ 18.17
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.34) 1 (.20) 1 (.27) 1 (.37) 1 (.13)
Net realized and unrealized gain 7.14 5.18 5.73 5.07 6.51
---------------------------------------------------------------
Total from investment operations 6.80 4.98 5.46 4.70 6.38
- ----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain (2.06) (1.87) (3.18) (1.28) --
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 38.10 $ 33.36 $ 30.25 $ 27.97 $ 24.55
===============================================================
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 21.25% 17.17% 20.85% 19.95% 35.11%
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $812,430 $542,273 $292,689 $ 122,329 $ 71,779
- ----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $725,723 $429,214 $199,650 $ 96,555 $ 53,649
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment loss (0.95)% (0.64)% (0.91)% (1.42)% (0.85)%
Total expenses 1.84% 4 1.92% 4 2.03% 2.16% 2.40%
Expenses after payments, waivers and/or
reimbursements and reduction to custodian
expenses 1.84% 1.92% 2.03% 2.16% 2.30%
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 115% 136% 121% 163% 163%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
3. Annualized for periods less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended October 31, 2007 1.84%
Year Ended October 31, 2006 1.92%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
34 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
CLASS N YEAR ENDED OCTOBER 31, 2007 2006 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 36.24 $ 32.58 $ 29.77 $ 25.98 $ 19.13
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.22) 1 (.08) 1 (.14) 1 (.26) 1 (.11)
Net realized and unrealized gain 7.79 5.61 6.13 5.33 6.96
---------------------------------------------------------------
Total from investment operations 7.57 5.53 5.99 5.07 6.85
- ----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain (2.06) (1.87) (3.18) (1.28) --
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 41.75 $ 36.24 $ 32.58 $ 29.77 $ 25.98
===============================================================
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 21.71% 17.65% 21.42% 20.29% 35.81%
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $397,075 $229,340 $102,971 $ 36,322 $ 11,216
- ----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $325,526 $171,305 $ 68,779 $ 21,951 $ 6,722
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment loss (0.55)% (0.22)% (0.44)% (0.93)% (0.36)%
Total expenses 1.45% 4 1.50% 4 1.57% 1.70% 2.01%
Expenses after payments, waivers and/or
reimbursements and reduction to custodian
expenses 1.45% 1.50% 1.57% 1.66% 1.80%
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 115% 136% 121% 163% 163%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
3. Annualized for periods less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended October 31, 2007 1.45%
Year Ended October 31, 2006 1.50%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
35 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS Y YEAR ENDED OCTOBER 31, 2007 2006 2005 1
- ---------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 37.14 $ 33.08 $ 33.38
- ---------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) 2 .07 .26 -- 3
Net realized and unrealized gain (loss) 8.02 5.67 (.30)
--------------------------------------------
Total from investment operations 8.09 5.93 (.30)
- ---------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain (2.06) (1.87) --
- ---------------------------------------------------------------------------------------------------
Net asset value, end of period $ 43.17 $ 37.14 $ 33.08
============================================
- ---------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 4 22.63% 18.64% (0.90)
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 93,996 $ 35,638 $ 1
- ---------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 63,467 $ 12,164 $ 1
- ---------------------------------------------------------------------------------------------------
Ratios to average net assets: 5
Net investment income (loss) 0.18% 0.76% (0.32)%
Total expenses 0.72% 6,7,8 0.68% 6,7,8 0.90% 7
- ---------------------------------------------------------------------------------------------------
Portfolio turnover rate 115% 136% 121%
1. For the period from October 24, 2005 (inception of offering) to October 31,
2005.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Less than $0.005 per share.
4. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
5. Annualized for periods less than one full year.
6. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended October 31, 2007 0.72%
Year Ended October 31, 2006 0.68%
7. Reduction to custodian expenses less than 0.005%.
8. Voluntary waiver or reimbursement of indirect management fees less than
0.005%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
36 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Small- & Mid- Cap Value Fund (the Fund), a series of Oppenheimer
Quest For Value Funds, is an open-end management investment company registered
under the Investment Company Act of 1940, as amended. The Fund's investment
objective is to seek capital appreciation. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B, Class C, Class N and Class Y shares.
Class A shares are sold at their offering price, which is normally net asset
value plus a front-end sales charge. Class B, Class C and Class N shares are
sold without a front-end sales charge but may be subject to a contingent
deferred sales charge (CDSC). Class N shares are sold only through retirement
plans. Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC, however, the institutional investor
may impose charges on those accounts. All classes of shares have identical
rights and voting privileges with respect to the Fund in general and exclusive
voting rights on matters that affect that class alone. Earnings, net assets and
net asset value per share may differ due to each class having its own expenses,
such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares six
years after the date of purchase. The Fund assesses a 2% fee on the proceeds of
fund shares that are redeemed (either by selling or exchanging to another
Oppenheimer fund) within 30 days of their purchase. The fee, which is retained
by the Fund, is accounted for as an addition to paid-in capital.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ(R) are valued based on the
closing price provided by NASDAQ prior to the time when the Fund's assets are
valued. In the absence of a sale, the security is valued at the last sale price
on the prior trading day, if it is within the spread of the closing "bid" and
"asked" prices, and if not, at the closing bid price. Securities traded on
foreign exchanges are valued based on the last sale price on the principal
exchange on which the security is traded, as identified by the portfolio pricing
service, prior to the time when the Fund's assets are valued. In the absence of
a sale, the security is valued at the official closing price on the principal
exchange. Corporate, government and municipal debt instruments
37 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
having a remaining maturity in excess of sixty days and all mortgage-backed
securities will be valued at the mean between the "bid" and "asked" prices.
Futures contracts traded on a commodities or futures exchange will be valued at
the final settlement price or official closing price on the principal exchange
as reported by such principal exchange at its trading session ending at, or most
recently prior to, the time when the Fund's assets are valued. Options are
valued daily based upon the last sale price on the principal exchange on which
the option is traded. Securities (including restricted securities) for which
market quotations are not readily available are valued at their fair value.
Foreign and domestic securities whose values have been materially affected by
what the Manager identifies as a significant event occurring before the Fund's
assets are valued but after the close of their respective exchanges will be fair
valued. Fair value is determined in good faith using consistently applied
procedures under the supervision of the Board of Trustees. Investments in
open-end registered investment companies (including affiliated funds) are valued
at that fund's net asset value. Short-term "money market type" debt securities
with remaining maturities of sixty days or less are valued at amortized cost
(which approximates market value).
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of the New
York Stock Exchange (the "Exchange"), normally 4:00 P.M. Eastern time, on each
day the Exchange is open for business. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Fund is permitted
to invest daily available cash balances in an affiliated money market fund. The
Fund 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
38 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
fund under the Investment Company Act of 1940, as amended. The Manager is also
the investment advisor of IMMF. The Fund's investment in IMMF is included in the
Statement of Investments, if applicable. As a shareholder, the Fund is subject
to its proportional share of IMMF's Class E expenses, including its management
fee. The Manager will waive fees and/or reimburse Fund expenses in an amount
equal to the indirect management fees incurred through the Fund's investment in
IMMF.
- --------------------------------------------------------------------------------
INVESTMENTS WITH OFF-BALANCE SHEET RISK. The Fund 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 Fund'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 Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
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
-----------------------------------------------------------------------
$ 171,052,463 $ 282,654,877 $ -- $ 710,412,657
1. During the fiscal year ended October 31, 2007, the Fund did not utilize any
capital loss carryforward.
2. During the fiscal year ended October 31, 2006, the Fund 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 Fund.
39 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
Accordingly, the following amounts have been reclassified for October 31, 2007.
Net assets of the Fund were unaffected by the reclassifications.
REDUCTION TO REDUCTION TO
ACCUMULATED ACCUMULATED NET
INCREASE TO NET INVESTMENT REALIZED GAIN
PAID-IN CAPITAL LOSS ON INVESTMENTS 3
----------------------------------------------------
$ 54,724,179 $ 17,934,904 $ 72,659,083
3. $54,724,179, including $37,752,148 of long-term capital gain, was distributed
in connection with Fund share redemptions.
The tax character of distributions paid during the years ended October 31, 2007
and October 31, 2006 was as follows:
YEAR ENDED YEAR ENDED
OCTOBER 31, 2007 OCTOBER 31, 2006
----------------------------------------------------------------
Distributions paid from:
Ordinary income $ 110,658,381 $ 73,885,502
Long-term capital gain 93,339,003 47,859,214
------------------------------------
Total $ 203,997,384 $ 121,744,716
====================================
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of October 31, 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 $4,421,931,957
===============
Gross unrealized appreciation $ 900,318,088
Gross unrealized depreciation (189,905,431)
---------------
Net unrealized appreciation $ 710,412,657
===============
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for the
Fund's independent trustees. Benefits are based on years of service and fees
paid to each trustee during the years of service. During the year ended October
31, 2007, the Fund's projected benefit obligations were increased by $164,059
and payments of $8,591 were made to retired trustees, resulting in an
accumulated liability of $425,574 as of October 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 Fund.
For purposes of determining the amount owed to the Trustee under the plan,
deferred amounts are treated as though equal dollar amounts had been invested in
shares of the Fund or in other Oppenheimer funds selected by the Trustee. The
Fund purchases shares of the funds selected for deferral by the Trustee in
amounts equal to his or her deemed investment, resulting in a Fund
40 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
asset equal to the deferred compensation liability. Such assets are included as
a component of "Other" within the asset section of the Statement of Assets and
Liabilities. Deferral of trustees' fees under the plan will not affect the net
assets of the Fund, and will not materially affect the Fund's assets,
liabilities or net investment income per share. Amounts will be deferred until
distributed in accordance to the 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 Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
41 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.01 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED OCTOBER 31, 2007 YEAR ENDED OCTOBER 31, 2006
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------
CLASS A
Sold 35,296,465 $1,413,973,807 37,106,616 $ 1,282,205,333
Dividends and/or
distributions reinvested 3,138,182 116,865,940 2,094,799 68,918,902
Redeemed (19,334,484) (783,608,501) 1 (15,026,011) (517,526,125) 2
-------------------------------------------------------------------
Net increase 19,100,163 $ 747,231,246 24,175,404 $ 833,598,110
===================================================================
- -----------------------------------------------------------------------------------------------------
CLASS B
Sold 2,354,173 $ 83,945,046 3,195,736 $ 100,252,356
Dividends and/or
distributions reinvested 536,345 17,919,301 505,807 15,143,846
Redeemed (3,063,581) (110,713,351) 1 (2,880,075) (90,459,228) 2
-------------------------------------------------------------------
Net increase (decrease) (173,063) $ (8,849,004) 821,468 $ 24,936,974
===================================================================
- -----------------------------------------------------------------------------------------------------
CLASS C
Sold 8,127,707 $ 289,824,285 8,543,881 $ 267,752,421
Dividends and/or
distributions reinvested 704,284 23,516,054 473,830 14,172,254
Redeemed (3,761,916) (135,778,028) 1 (2,436,172) (76,298,345) 2
-------------------------------------------------------------------
Net increase 5,070,075 $ 177,562,311 6,581,539 $ 205,626,330
===================================================================
- -----------------------------------------------------------------------------------------------------
CLASS N
Sold 5,367,554 $ 211,159,602 4,522,723 $ 153,395,550
Dividends and/or
distributions reinvested 305,817 11,153,148 184,925 5,986,033
Redeemed (2,492,279) (98,175,269) 1 (1,539,472) (52,250,700) 2
-------------------------------------------------------------------
Net increase 3,181,092 $ 124,137,481 3,168,176 $ 107,130,883
===================================================================
- -----------------------------------------------------------------------------------------------------
CLASS Y
Sold 1,491,531 $ 61,957,864 1,347,807 $ 46,153,192
Dividends and/or
distributions reinvested 55,375 2,073,776 28,178 927,610
Redeemed (329,064) (13,555,662) 1 (416,332) (13,885,789) 2
-------------------------------------------------------------------
Net increase 1,217,842 $ 50,475,978 959,653 $ 33,195,013
===================================================================
1. Net of redemption fees of $55,972, $6,585, $12,893, $5,783 and $1,128 for
Class A, Class B, Class C, Class N and Class Y, respectively.
2. Net of redemption fees of $25,973, $4,241, $5,917, $2,361 and $168 for Class
A, Class B, Class C, Class N and Class Y, respectively.
42 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and investments in IMMF, for the year ended October
31, 2007, were as follows:
PURCHASES SALES
-------------------------------------------------------------
Investment securities $5,931,141,374 $5,072,729,285
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of average net assets as shown in the following table:
FEE SCHEDULE EFFECTIVE SEPT. 1, 2007 FEE SCHEDULE FROM NOV. 1, 2006 TO AUG. 31, 2007
- ---------------------------------------------------------------------------------------------
Up to $400 million 0.80% Up to $400 million 0.80%
Next $400 million 0.75 Next $400 million 0.75
Next $1.2 billion 0.60 Next $1.2 billion 0.60
Next $4 billion 0.58 Over $2.0 billion 0.58
Over $6.0 billion 0.56
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended October 31, 2007, the Fund paid
$9,181,792 to OFS for services to the Fund.
Additionally, Class Y shares are subject to minimum fees of $10,000 per
annum for assets of $10 million or more. The Class Y shares are subject to the
minimum fees in the event that the per account fee does not equal or exceed the
applicable minimum fees. OFS may voluntarily waive the minimum fees.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a
Distribution and Service Plan for Class A shares. Under the plan, the Fund pays
a service fee to the Distributor of up to 0.25% of the average annual net assets
of Class A shares. The Distributor currently uses all of those fees to pay
dealers, brokers, banks and other financial institutions periodically for
providing personal services and maintenance of accounts of their customers that
hold Class A shares. Under the plan, the Fund may also pay an asset-based sales
charge to the Distributor. Beginning January 1, 2003, the Board of Trustees set
the annual asset-based sales charge rate at zero. Fees incurred by the Fund
under the plan are detailed in the Statement of Operations.
43 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class N
shares to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% on Class B and
Class C shares and 0.25% on Class N shares. The Distributor also receives a
service fee of 0.25% per year under each plan. If either the Class B, Class C or
Class N plan is terminated by the Fund or by the shareholders of a class, the
Board of Trustees and its independent trustees must determine whether the
Distributor shall be entitled to payment from the Fund of all or a portion of
the service fee and/or asset-based sales charge in respect to shares sold prior
to the effective date of such termination. The Distributor determines its
uncompensated expenses under the plan at calendar quarter ends. The
Distributor's aggregate uncompensated expenses under the plan at September 30,
2007 for Class B, Class C and Class N shares were $2,217,741, $7,960,908 and
$2,765,202, respectively. Fees incurred by the Fund under the plans are detailed
in the Statement of Operations.
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption proceeds
prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the following table for the period
indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- ----------------------------------------------------------------------------------------------------
October 31, 2007 $1,483,755 $36,497 $466,399 $102,489 $27,287
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. This undertaking may be amended or
withdrawn at any time.
The Manager will waive fees and/or reimburse Fund expenses in an amount
equal to the indirect management fees incurred through the Fund's investment in
IMMF. During the year ended October 31, 2007, the Manager waived $187,924 for
IMMF management fees.
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts to settle specific purchases or sales of securities
denominated in a foreign currency and for protection from adverse exchange rate
fluctuation. Risks to the Fund include the potential inability of the
counterparty to meet the terms of the contract.
44 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using prevailing foreign currency exchange rates.
Unrealized appreciation and depreciation on foreign currency contracts are
reported in the Statement of Assets and Liabilities as a receivable or payable
and in the Statement of Operations with the change in unrealized appreciation or
depreciation.
The Fund may realize a gain or loss upon the closing or settlement of the
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.
As of October 31, 2007, the Fund had no outstanding foreign currency
contracts.
- --------------------------------------------------------------------------------
6. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call options to
hedge against adverse movements in the value of portfolio holdings. When an
option is written, the Fund receives a premium and becomes obligated to sell or
purchase the underlying security at a fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call or put options are noted
in the Statement of Investments where applicable. Contracts subject to call or
put, expiration date, exercise price, premium received and market value are
detailed in a note to the Statement of Investments. Options written are reported
as a liability in the Statement of Assets and Liabilities. Realized gains and
losses are reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur
a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. The Fund also has the additional risk of not
being able to enter into a closing transaction if a liquid secondary market does
not exist.
45 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. OPTION ACTIVITY Continued
Written option activity for the year ended October 31, 2007 was as follows:
PUT OPTIONS
-----------
NUMBER OF AMOUNT OF
CONTRACTS PREMIUMS
------------------------------------------------------
Options outstanding as of
October 31, 2006 10,000 $ 179,994
Options written 5,000 61,098
Options expired (15,000) (241,092)
-----------------------
Options outstanding as of
October 31, 2007 -- $ --
=======================
- --------------------------------------------------------------------------------
7. RECENT ACCOUNTING PRONOUNCEMENT
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 Fund's tax returns to determine whether it
is "more-likely-than-not" that tax positions taken in the Fund'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
October 31, 2007, the Manager has evaluated the implications of FIN 48 and does
not currently anticipate a material impact to the Fund's financial statements.
The Manager will continue to monitor the Fund's tax positions prospectively for
potential future impacts.
In September 2006, ("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 October 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.
46 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
- --------------------------------------------------------------------------------
8. SUBSEQUENT EVENT
On November 19, 2007, the Fund's Board of Trustees voted to freeze participation
in the retirement plan for the Board's independent trustees by not adding new
participants to the plan after December 31, 2007. Active independent trustees
who have accrued benefits under the plan prior to the freeze date will elect a
distribution method with respect to their benefits. Benefits already accrued
under the plan for Trustees who were participants prior to that freeze date are
not affected.
47 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER QUEST FOR VALUE FUNDS:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Small- & Mid- Cap Value Fund, (one of the portfolios constituting
the Oppenheimer Quest For Value Funds), including the statement of investments,
as of October 31, 2007, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the five-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of October 31, 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
Oppenheimer Small- & Mid- Cap Value Fund as of October 31, 2007, the results of
its operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with U.S.
generally accepted accounting principles.
KPMG LLP
Denver, Colorado
December 13, 2007
48 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2008, if applicable, shareholders of record will receive information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2007. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Capital gain distributions of $0.9424 per share were paid to Class A,
Class B, Class C, Class N and Class Y shareholders, respectively, on December 8,
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 Fund during the fiscal year ended October
31, 2007 which are not designated as capital gain distributions should be
multiplied by 12.06% to arrive at the amount eligible for the corporate
dividend-received deduction.
A portion, if any, of the dividends paid by the Fund during the fiscal
year ended October 31, 2007 which are not designated as capital gain
distributions are eligible for lower individual income tax rates to the extent
that the Fund has received qualified dividend income as stipulated by recent tax
legislation. $25,242,495 of the Fund's fiscal year taxable income may be
eligible for the lower individual income tax rates. In early 2008, shareholders
of record will receive 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 October 31, 2007, $188,578,127 or 100% of the short-term capital gain
distribution paid by the Fund qualifies as a short-term capital gain dividend.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance
49 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free .at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
50 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services by the Manager and its affiliates,
(v) the extent to which economies of scale are realized as the Fund grows and
whether fee levels reflect these economies of scale for Fund investors and (vi)
other benefits to the Manager from its relationship with the Fund. The Board was
aware that there are alternatives to retaining the Manager.
NATURE, QUALITY, 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 manager and
the Manager's investment team, who provide research, analysis and other advisory
services in regard to the Fund's investments; securities trading services;
oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
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.
51 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
BOARD APPROVAL OF THE FUND'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 John
Damian, the portfolio manager for the Fund, and the Manager's Value investment
team and analysts. 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 other retail front-end load and no-load
mid-cap value funds advised by the Manager and by other investment advisers. The
Board noted that the Fund's one-year, three-year, and ten-year performance were
better than its peer group median. However its five-year performance was 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 considered 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 mid-cap value funds and mid-cap core
funds and other funds with comparable asset levels and distribution features.
The Board noted that the Fund's contractual and actual management fees and total
expenses are lower than its peer group median.
ECONOMIES OF SCALE. The Board reviewed the extent to which the Manager may
realize economies of scale in managing and supporting the Fund, the extent to
which those
52 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
economies of scale benefit the Fund's shareholders and the current level of Fund
assets in relation to the Fund's breakpoint schedule for its management fees.
The Board also noted the Fund's breakpoints, which are intended to share
economies of scale that may exist as the Fund grows with its shareholders. Based
on this evaluation, the Board requested and the Manager agreed to a revised
breakpoint schedule that effective September 1, 2007, the Fund pays the Manager
at the following annual rates that decline as the Fund's assets grow: 0.80% of
the first $400 million of average annual net assets of the Fund, 0.75% of the
next $400 million, 0.60% of the next $1.2 billion, 0.58% of the next $4 billion,
and 0.56% of average annual net assets in excess of $6 billion.
BENEFITS TO THE MANAGER. The Board considered information regarding the
Manager's costs in serving as the Fund's investment adviser, including the costs
associated with the personnel and systems necessary to manage the Fund, and
information regarding the Manager's profitability from its relationship with the
Fund. The Board considered that the Manager must be able to pay and retain
experienced professional personnel at competitive rates to provide services to
the Fund and that maintaining the financial viability of the Manager is
important in order for the Manager to continue to provide significant services
to the Fund and its shareholders. In addition to considering the profits
realized by the Manager, the Board considered information regarding the direct
and indirect benefits the Manager receives as a result of its relationship with
the Fund, including compensation paid to the Manager's affiliates for services
provided and research provided to the Manager in connection with permissible
brokerage arrangements (soft dollar arrangements).
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and the independent Trustees. Fund counsel is independent of the
Manager within the meaning and intent of the Securities and Exchange Commission
Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
concluded that the nature, extent and quality of the services provided to the
Fund by the Manager are a benefit to the Fund and in the best interest of the
Fund's shareholders and that the amount and structure of the compensation
received by the Manager and its affiliates are reasonable in relation to the
services provided. Accordingly, the Board elected to continue the Agreement for
another year. In arriving at this decision, the Board did not single out any
factor or factors as being more important than others, but considered all of the
factors together. The Board judged the terms and conditions of the Agreement,
including the management fee, in light of all of the surrounding circumstances.
53 | OPPENHEIMER SMALL- & MID- CAP VALUE 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.
THOMAS W. COURTNEY, Principal of Courtney Associates, Inc. (venture capital firm) (since 1982); General Partner
Chairman of the Board of of Trivest Venture Fund (private venture capital fund); President of Investment Counseling
Trustees (since 2001), Federated Investors, Inc. (1973-1982); Trustee of the following open-end investment
Trustee (since 1987) companies: Cash Assets Trust (1984), Premier VIT (formerly PIMCO Advisors VIT), Tax Free
Age: 74 Trust of Arizona (since 1984) and four funds for the Hawaiian Tax Free Trust. Oversees 10
portfolios in the OppenheimerFunds complex.
DAVID K. DOWNES, President, Chief Executive Officer and Board Member of CRAFund Advisors, Inc. (investment
Trustee (since 2005) management company) (since January 2004); President of The Community Reinvestment Act
Age: 67 Qualified Investment Fund (investment management company) (since January 2004);
Independent Chairman of the Board of Trustees of Quaker Investment Trust (registered
investment company) (since January 2004); Director of Internet Capital Group (information
technology company) (since October 2003); Chief Operating Officer and Chief Financial
Officer of Lincoln National Investment Companies, Inc. (subsidiary of Lincoln National
Corporation, a publicly traded company) and Delaware Investments U.S., Inc. (investment
management subsidiary of Lincoln National Corporation) (1993-2003); President, Chief
Executive Officer and Trustee of Delaware Investment Family of Funds (1993-2003); President
and Board Member of Lincoln National Convertible Securities Funds, Inc. and the Lincoln
National Income Funds, TDC (1993-2003); Chairman and Chief Executive Officer of Retirement
Financial Services, Inc. (registered transfer agent and investment adviser and subsidiary of
Delaware Investments U.S., Inc.) (1993-2003); President and Chief Executive Officer of
Delaware Service Company, Inc. (1995-2003); Chief Administrative Officer, Chief Financial
Officer, Vice Chairman and Director of Equitable Capital Management Corporation (investment
subsidiary of Equitable Life Assurance Society) (1985-1992); Corporate Controller of Merrill
Lynch & Company (financial services holding company) (1977-1985); held the following
positions at the Colonial Penn Group, Inc. (insurance company): Corporate Budget Director
(1974-1977), Assistant Treasurer (1972-1974) and Director of Corporate Taxes (1969-1972);
held the following positions at Price Waterhouse & Company (financial services firm): Tax
Manager (1967-1969), Tax Senior (1965-1967) and Staff Accountant (1963-1965); United States
Marine Corps (1957-1959). Oversees 63 portfolios in the OppenheimerFunds complex.
ROBERT G. GALLI, A director or trustee of other Oppenheimer funds. Oversees 63 portfolios in the
Trustee (since 1998) OppenheimerFunds complex.
Age: 74
LACY B. HERRMANN, Founder and Chairman Emeritus of Aquila Group of Funds (open-end investment company)
Trustee (since 1987) (since December 2004); Chairman of Aquila Management Corporation and Aquila Investment
Age: 78 Management LLC (since August 1984); Chief Executive Officer and President of Aquila
Management Corporation (August 1984-December 1994); Vice President, Director and Secretary
of Aquila Distributors, Inc. (distributor of Aquila Management Corporation); Treasurer of
Aquila Distributors, Inc.; President and Chairman of the Board of Trustees of Capital Cash
Management Trust ("CCMT"); President and Director of STCM Management Company, Inc. (sponsor
and adviser to CCMT); Chairman,
54 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
LACY B. HERRMANN, President and Director of InCap Management Corporation; Sub-Advisor and Administrator of
Continued Prime Cash Fund & Short Term Asset Reserves; Director of OCC Cash Reserves, Inc. (open-end
investment company) (June 2003-December 2004); Trustee of Premier VIT (formerly PIMCO
Advisors VIT) (investment company) (since 1994); Trustee of OCC Accumulation Trust
(open-end investment company) (until December 2004); Trustee Emeritus of Brown University
(since June 1983). Oversees 10 portfolios in the OppenheimerFunds complex.
BRIAN F. WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since September 1995); Director of
Trustee (since 2001) Special Value Opportunities Fund, LLC (registered investment company) (since September
Age: 64 2004); Member of Zurich Financial Services Investment Advisory Board (insurance) (since
October 2004); Chairman (since August 2007) and Trustee (since August 1991) of the Board of
Governing Trustees of The Jackson Laboratory (non-profit); 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); 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 63 portfolios in the OppenheimerFunds complex.
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE MR. MURPHY IS AN "INTERESTED TRUSTEE" BECAUSE HE IS AFFILIATED WITH THE MANAGER BY VIRTUE OF
AND OFFICER HIS POSITIONS AS AN OFFICER AND DIRECTOR OF THE MANAGER, AND AS A SHAREHOLDER OF ITS PARENT
COMPANY. THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH
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.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director of the Manager (since June 2001); President
Trustee (since 2005) and of the Manager (September 2000-March 2007); President and director or trustee of other
President and Principal Oppenheimer funds; President and Director of Oppenheimer Acquisition Corp. ("OAC") (the
Executive Officer (since 2001) Manager's parent holding company) and of Oppenheimer Partnership Holdings, Inc. (holding
Age: 58 company subsidiary of the Manager) (since July 2001); Director of OppenheimerFunds
Distributor, Inc. (subsidiary of the Manager) (November 2001-December 2006); 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 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 company parent of Babson Capital Management LLC) (since June 1995);
Chairman (since October 2007) and Member of the Investment Company Institute's Board of
Governors (since October 2003). Oversees 102 portfolios in the OppenheimerFunds complex.
55 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
TRUSTEES AND OFFICERS Unaudited / Continued
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OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. DAMIAN, ZACK,
THE FUND 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.
JOHN DAMIAN, Vice President of the Manager (since September 2001); Senior Analyst/Director for Citigroup
Vice President and Portfolio Asset Management (November 1999-September 2001); Senior Research Analyst for Pzena
Manager (since 2005) Investment Management (October 1997-November 1999). An officer of 2 portfolios in the
Age: 39 OppenheimerFunds complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief
Vice President and Chief Compliance Officer of the Manager, OppenheimerFunds Distributor, Inc., Centennial Asset
Compliance Officer Management and Shareholder Services, Inc. (since March 2004); Vice President of
(since 2004) OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and Shareholder
Age: 57 Services, Inc. (since June 1983). Former Vice President and Director of Internal Audit of
the Manager (1997-February 2004). An officer of 102 portfolios in the 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, Inc. and Oppenheimer
Officer (since 1999) Partnership Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since March
Age: 48 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). An officer of 102 portfolios in
the OppenheimerFunds complex.
BRIAN PETERSEN, Vice President of the Manager (since February 2007); Assistant Vice President of the
Assistant Treasurer Manager (August 2002-February 2007); Manager/Financial Product Accounting of the Manager
(since 2004) (November 1998-July 2002). An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 37
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). An officer of 102 portfolios in the
Age: 37 OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the
Secretary (since 2001) Manager; General Counsel and Director of the Distributor (since December 2001); General
Age: 59 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
56 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
ROBERT G. ZACK, September 1997) and Director (since November 2001) of OppenheimerFunds International Ltd.
Continued 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 International
Distributor Limited (since December 2003); Senior Vice President (May 1985-December 2003).
An officer of 102 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). An officer
(since 2004) of 102 portfolios in the OppenheimerFunds complex.
Age: 39
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since September 2004);
Assistant Secretary First Vice President (2000-September 2004), Director (2000-September 2004) and Vice
(since 2004) President (1998-2000) of Merrill Lynch Investment Management. An officer of 102 portfolios
Age: 43 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: 42 (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 102 portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE UPON
REQUEST, BY CALLING 1.800.525.7048.
57 | OPPENHEIMER SMALL- & MID- CAP VALUE FUND
OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
TOP HOLDINGS AND ALLOCATIONS
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TOP TEN COMMON STOCK INDUSTRIES
- --------------------------------------------------------------------------------
Software 10.4%
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Media 5.2
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Tobacco 5.0
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Oil, Gas & Consumable Fuels 4.2
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Capital Markets 4.0
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Aerospace & Defense 4.0
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Pharmaceuticals 3.4
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Metals & Mining 2.6
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Food Products 2.4
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Internet Software & Services 2.4
Portfolio holdings and allocations are subject to change. Percentages are as of
October 31, 2007, and are based on net assets.
TOP TEN COMMON STOCK HOLDINGS
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Take-Two Interactive Software, Inc. 6.0%
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Altria Group, Inc. 3.1
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UBS AG 2.8
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Liberty Global, Inc., Series C 2.6
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Microsoft Corp. 2.3
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Nestle SA 2.0
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Liberty Global, Inc., Series A 2.0
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Exxon Mobil Corp. 1.9
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Loews Corp./Carolina Group 1.9
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United Technologies Corp. 1.8
Portfolio holdings and allocations are subject to change. Percentages are as of
October 31, 2007, and are based on net assets.
For up-to-date Top 10 Fund Holdings, please visit www.oppenheimerfunds.com.
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7 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
TOP HOLDINGS AND ALLOCATIONS
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PORTFOLIO ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Stocks 68.9%
Cash Equivalents 28.4
Structured Securities 2.0
Convertible Corporate Bonds and Notes 0.7
Portfolio holdings and allocations are subject to change. Percentages are as of
October 31, 2007, and are based on the total market value of investments.
- --------------------------------------------------------------------------------
8 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
HOW HAS THE FUND PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS, INC., OF
THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR ENDED OCTOBER 31, 2007, FOLLOWED
BY A GRAPHICAL COMPARISON OF THE FUND'S PERFORMANCE TO AN APPROPRIATE
BROAD-BASED MARKET INDEX.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. Oppenheimer Quest Opportunity Value
Fund's Class A shares (without sales charge) generated a total return of 19.65%
for the 12 months ended October 31, 2007, outperforming the S&P 500 Index by a
sizable margin while limiting the risks and volatility associated with stocks.
On average, we allocated the majority of assets in equities, allocating the
remainder to fixed-income securities and short positions. The short positions
and the equity portfolio were the strongest contributors to performance; the
fixed-income portfolio made a more moderate contribution while greatly
restraining overall portfolio volatility.
Throughout the reporting period, we had a cautiously optimistic outlook
for stocks and a bearish outlook for bonds, particularly mortgage-backed
securities (MBS). In keeping with these viewpoints, we invested the Fund's
fixed-income allocation primarily in money market instruments, which offered
yields nearly as attractive as those available from longer-term fixed-income
securities but entailed considerably less risk.
We started the period convinced that yields on low-quality mortgage loans
(i.e., sub-prime MBS) were too low to adequately reflect the relative risk
entailed; it would only be a matter of time before rising defaults on subprime
mortgages caused these yields to rise (and prices, which move opposite to
yields, to fall). Pairing a specially structured investment product with a
hedging strategy, we positioned the Fund to take advantage of that eventuality
while putting no capital at risk. This transaction was one of the largest single
contributors to performance in the second half, after prices for subprime MBS
declined as much as 40% or more.
The other major contributors to performance were several of the largest
equity positions, including cable operator Liberty Global, Inc., video-game
designer Take-Two Interactive Software, Inc., industrial firm Siemens AG and
Companhia Vale do Rio Doce (CVRD), a Brazilian iron ore-mining company. We
attribute the advance for Liberty Global to the company's dominant position in
the European and Japanese cable markets, and to deploying its considerable free
cash flow to aggressively buy back its own stock.
9 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
FUND PERFORMANCE DISCUSSION
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Siemens was a case where improved leadership paid off handsomely.
Management at the company, which is one of the world's largest electrical
engineering and electronics firms, has placed greater emphasis on
shareholder-friendly practices in recent years and is reaping the benefit now,
in the form of more investor support for its stock.
Finally, our investment in CVRD more than doubled in value during the
period. In a strong global economy, with many emerging nations investing heavily
in infrastructure building, demand for iron ore, the raw material for making
steel, is at an all-time high. This has given the company, one of the world's
largest iron ore producers, considerable pricing power.
The strong global economy also fueled record demand for energy products
and made energy one of the strongest sectors of the S&P 500 during the period.
Despite this, we opted to underweight energy stocks, making energy the one
sector where the Fund lagged the index. In our view, the elevated level of oil
prices is untenable over the long term. We feel the risk of a price correction
was (and is) fairly large and prefer to take a conservative approach, owning
companies that may hold up better in an environment of lower energy prices, such
as major integrated oil companies.
We continue to seek out stocks that have superior relative potential to
achieve earnings growth in the coming three years while employing fixed-income
and alternative investment strategies to manage portfolio risk.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each class of shares of the
Fund held until October 31, 2007. In the case of Class A, Class B, Class C and
Class Y shares, performance is measured over a ten fiscal year period. In the
case of Class N shares, performance is measured from inception of the Class on
March 1, 2001. The Fund's performance reflects the deduction of the maximum
initial sales charge on Class A shares, the applicable contingent deferred sales
charge on Class B, Class C and Class N shares, and reinvestments of all
dividends and capital gains distributions. Past performance cannot guarantee
future results.
The Fund's performance is compared to the performance of the S&P 500
Index, a broad-based index of equity securities widely regarded as a general
measure of the performance of the U.S. equity securities market. Index
performance reflects the reinvestment of income but does not consider the effect
of transaction costs, and none of the data in the graphs shows the effect of
taxes. The Fund's performance reflects the effects of the Fund's business and
operating expenses. While index comparisons may be useful to provide a benchmark
for the Fund's performance, it must be noted that the Fund's investments are not
limited to the investments in the index.
10 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Quest Opportunity Value Fund(SM) (Class A)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Quest Opportunity
Value Fund(SM) (Class A) S&P 500 Index
10/31/1997 $ 9,425 $10,000
01/31/1998 $ 9,731 $10,760
04/30/1998 $10,727 $12,250
07/31/1998 $10,297 $12,396
10/31/1998 $ 9,974 $12,201
01/31/1999 $10,365 $14,258
04/30/1999 $11,532 $14,924
07/31/1999 $11,227 $14,900
10/31/1999 $11,602 $15,332
01/31/2000 $11,213 $15,732
04/30/2000 $11,243 $16,434
07/31/2000 $10,895 $16,236
10/31/2000 $11,928 $16,264
01/31/2001 $12,503 $15,590
04/30/2001 $12,684 $14,303
07/31/2001 $12,625 $13,910
10/31/2001 $11,595 $12,216
01/31/2002 $11,796 $13,075
04/30/2002 $11,589 $12,499
07/31/2002 $10,348 $10,625
10/31/2002 $ 9,902 $10,372
01/31/2003 $ 9,684 $10,067
04/30/2003 $10,036 $10,836
07/31/2003 $10,721 $11,756
10/31/2003 $11,357 $12,528
01/31/2004 $12,213 $13,545
04/30/2004 $11,826 $13,314
07/31/2004 $12,042 $13,303
10/31/2004 $12,300 $13,707
01/31/2005 $12,977 $14,387
04/30/2005 $12,863 $14,157
07/31/2005 $13,421 $15,171
10/31/2005 $13,258 $14,902
01/31/2006 $13,621 $15,880
04/30/2006 $13,729 $16,337
07/31/2006 $13,353 $15,987
10/31/2006 $14,186 $17,335
01/31/2007 $15,093 $18,182
04/30/2007 $15,614 $18,825
07/31/2007 $15,986 $18,565
10/31/2007 $16,974 $19,857
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE FUND AT
10/31/07
1-Year 12.77% 5-Year 10.07% 10-Year 5.43%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. BECAUSE CLASS B SHARES CONVERT TO
CLASS A SHARES 72 MONTHS AFTER PURCHASE, THE 10-YEAR RETURN FOR CLASS B USES
CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 16 FOR FURTHER
INFORMATION.
11 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Quest Opportunity Value Fund(SM) (Class B)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Quest Opportunity
Value Fund(SM) (Class B) S&P 500 Index
10/31/1997 $10,000 $10,000
01/31/1998 $10,314 $10,760
04/30/1998 $11,356 $12,250
07/31/1998 $10,885 $12,396
10/31/1998 $10,529 $12,201
01/31/1999 $10,931 $14,258
04/30/1999 $12,147 $14,924
07/31/1999 $11,808 $14,900
10/31/1999 $12,184 $15,332
01/31/2000 $11,759 $15,732
04/30/2000 $11,774 $16,434
07/31/2000 $11,392 $16,236
10/31/2000 $12,456 $16,264
01/31/2001 $13,032 $15,590
04/30/2001 $13,205 $14,303
07/31/2001 $13,122 $13,910
10/31/2001 $12,032 $12,216
01/31/2002 $12,222 $13,075
04/30/2002 $11,984 $12,499
07/31/2002 $10,686 $10,625
10/31/2002 $10,207 $10,372
01/31/2003 $ 9,966 $10,067
04/30/2003 $10,306 $10,836
07/31/2003 $10,991 $11,756
10/31/2003 $11,625 $12,528
01/31/2004 $12,500 $13,545
04/30/2004 $12,104 $13,314
07/31/2004 $12,326 $13,303
10/31/2004 $12,590 $13,707
01/31/2005 $13,283 $14,387
04/30/2005 $13,167 $14,157
07/31/2005 $13,737 $15,171
10/31/2005 $13,571 $14,902
01/31/2006 $13,942 $15,880
04/30/2006 $14,053 $16,337
07/31/2006 $13,667 $15,987
10/31/2006 $14,520 $17,335
01/31/2007 $15,449 $18,182
04/30/2007 $15,982 $18,825
07/31/2007 $16,363 $18,565
10/31/2007 $17,374 $19,857
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE FUND AT
10/31/07
1-Year 13.74% 5-Year 10.27% 10-Year 5.68%
12 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Quest Opportunity Value Fund(SM) (Class C)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Quest Opportunity
Value Fund(SM) (Class C) S&P 500 Index
10/31/1997 $10,000 $10,000
01/31/1998 $10,314 $10,760
04/30/1998 $11,356 $12,250
07/31/1998 $10,885 $12,396
10/31/1998 $10,529 $12,201
01/31/1999 $10,929 $14,258
04/30/1999 $12,146 $14,924
07/31/1999 $11,810 $14,900
10/31/1999 $12,186 $15,332
01/31/2000 $11,761 $15,732
04/30/2000 $11,779 $16,434
07/31/2000 $11,401 $16,236
10/31/2000 $12,461 $16,264
01/31/2001 $13,042 $15,590
04/30/2001 $13,212 $14,303
07/31/2001 $13,129 $13,910
10/31/2001 $12,041 $12,216
01/31/2002 $12,231 $13,075
04/30/2002 $11,997 $12,499
07/31/2002 $10,696 $10,625
10/31/2002 $10,217 $10,372
01/31/2003 $ 9,974 $10,067
04/30/2003 $10,320 $10,836
07/31/2003 $11,003 $11,756
10/31/2003 $11,634 $12,528
01/31/2004 $12,488 $13,545
04/30/2004 $12,071 $13,314
07/31/2004 $12,266 $13,303
10/31/2004 $12,504 $13,707
01/31/2005 $13,174 $14,387
04/30/2005 $13,033 $14,157
07/31/2005 $13,566 $15,171
10/31/2005 $13,379 $14,902
01/31/2006 $13,721 $15,880
04/30/2006 $13,804 $16,337
07/31/2006 $13,401 $15,987
10/31/2006 $14,212 $17,335
01/31/2007 $15,090 $18,182
04/30/2007 $15,580 $18,825
07/31/2007 $15,920 $18,565
10/31/2007 $16,875 $19,857
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE FUND AT
10/31/07
1-Year 17.73% 5-Year 10.56% 10-Year 5.37%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. BECAUSE CLASS B SHARES CONVERT TO
CLASS A SHARES 72 MONTHS AFTER PURCHASE, THE 10-YEAR RETURN FOR CLASS B USES
CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 16 FOR FURTHER
INFORMATION.
13 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Quest Opportunity Value Fund(SM) (Class N)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Quest Opportunity
Value Fund(SM) (Class N) S&P 500 Index
03/01/2001 $10,000 $10,000
04/30/2001 $10,221 $10,094
07/31/2001 $10,170 $ 9,817
10/31/2001 $ 9,337 $ 8,621
01/31/2002 $ 9,496 $ 9,227
04/30/2002 $ 9,326 $ 8,821
07/31/2002 $ 8,327 $ 7,499
10/31/2002 $ 7,957 $ 7,320
01/31/2003 $ 7,772 $ 7,104
04/30/2003 $ 8,054 $ 7,647
07/31/2003 $ 8,599 $ 8,296
10/31/2003 $ 9,102 $ 8,841
01/31/2004 $ 9,779 $ 9,559
04/30/2004 $ 9,461 $ 9,396
07/31/2004 $ 9,623 $ 9,388
10/31/2004 $ 9,819 $ 9,674
01/31/2005 $10,351 $10,154
04/30/2005 $10,250 $ 9,991
07/31/2005 $10,683 $10,707
10/31/2005 $10,545 $10,517
01/31/2006 $10,825 $11,207
04/30/2006 $10,901 $11,530
07/31/2006 $10,594 $11,282
10/31/2006 $11,246 $12,234
01/31/2007 $11,954 $12,832
04/30/2007 $12,356 $13,285
07/31/2007 $12,639 $13,102
10/31/2007 $13,412 $14,014
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE FUND AT
10/31/07
1-Year 18.26% 5-Year 11.01% Since Inception (3/1/01) 4.50%
14 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
CLASS Y SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Quest Opportunity Value Fund(SM) (Class Y)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Quest Opportunity
Value Fund(SM) (Class Y) S&P 500 Index
10/31/1997 $10,000 $10,000
01/31/1998 $10,336 $10,760
04/30/1998 $11,410 $12,250
07/31/1998 $10,969 $12,396
10/31/1998 $10,638 $12,201
01/31/1999 $11,058 $14,258
04/30/1999 $12,310 $14,924
07/31/1999 $12,001 $14,900
10/31/1999 $12,418 $15,332
01/31/2000 $12,017 $15,732
04/30/2000 $12,056 $16,434
07/31/2000 $11,701 $16,236
10/31/2000 $12,828 $16,264
01/31/2001 $13,455 $15,590
04/30/2001 $13,666 $14,303
07/31/2001 $13,606 $13,910
10/31/2001 $12,510 $12,216
01/31/2002 $12,740 $13,075
04/30/2002 $12,522 $12,499
07/31/2002 $11,193 $10,625
10/31/2002 $10,716 $10,372
01/31/2003 $10,491 $10,067
04/30/2003 $10,875 $10,836
07/31/2003 $11,624 $11,756
10/31/2003 $12,320 $12,528
01/31/2004 $13,250 $13,545
04/30/2004 $12,835 $13,314
07/31/2004 $13,073 $13,303
10/31/2004 $13,357 $13,707
01/31/2005 $14,101 $14,387
04/30/2005 $13,982 $14,157
07/31/2005 $14,591 $15,171
10/31/2005 $14,423 $14,902
01/31/2006 $14,824 $15,880
04/30/2006 $14,947 $16,337
07/31/2006 $14,548 $15,987
10/31/2006 $15,462 $17,335
01/31/2007 $16,457 $18,182
04/30/2007 $17,028 $18,825
07/31/2007 $17,443 $18,565
10/31/2007 $18,531 $19,857
AVERAGE ANNUAL TOTAL RETURNS OF CLASS Y SHARES OF THE FUND AT 10/31/07
1-Year 19.85% 5-Year 11.58% 10-Year 6.36%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. BECAUSE CLASS B SHARES CONVERT TO
CLASS A SHARES 72 MONTHS AFTER PURCHASE, THE 10-YEAR RETURN FOR CLASS B USES
CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 16 FOR FURTHER
INFORMATION.
15 | OPPENHEIMER QUEST OPPORTUNITY VALUE 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 Fund's total returns shown do
not reflect the deduction of income taxes on an individual's investment. Taxes
may reduce your actual investment returns on income or gains paid by the Fund or
any gains you may realize if you sell your shares.
INVESTORS SHOULD CONSIDER THE FUND'S INVESTMENT OBJECTIVES, RISKS, AND OTHER
CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE FUND'S PROSPECTUS CONTAINS
THIS AND OTHER INFORMATION ABOUT THE FUND, AND MAY BE OBTAINED BY ASKING YOUR
FINANCIAL ADVISOR, CALLING US AT 1.800.525.7048 OR VISITING OUR WEBSITE AT
WWW.OPPENHEIMERFUNDS.COM. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
The Fund's investment strategy and focus can change over time. The mention of
specific fund holdings does not constitute a recommendation by OppenheimerFunds,
Inc.
OppenheimerFunds, Inc. became the Fund's advisor on 11/22/95, and assumed
responsibility for the Fund's portfolio stock selection on 1/1/05. The Fund's
subadvisor prior to 1/1/05 was OpCap Advisors, which was the Fund's advisor
prior to 11/22/95.
CLASS A shares of the Fund were first publicly offered on 1/3/89. Unless
otherwise noted, Class A returns include the current maximum initial sales
charge of 5.75%. There is a voluntary waiver of a portion of the Class A
asset-based sales charge as described in the Prospectus.
CLASS B shares of the Fund were first publicly offered on 9/1/93. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charges of 5% (1-year) and 2% (5-year). Because Class B shares convert to
Class A shares 72 months after purchase, the 10-year return for Class B uses
Class A performance for the period after conversion. Class B shares are subject
to an annual 0.75% asset-based sales charge.
CLASS C shares of the Fund were first publicly offered on 9/1/93. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
16 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
CLASS N shares of the Fund were first publicly offered on 3/1/01. Class N shares
are offered only through retirement plans. Unless otherwise noted, Class N
returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
CLASS Y shares of the Fund were first publicly offered on 12/16/96. Class Y
shares are offered only to certain institutional investors under special
agreement with the Distributor.
An explanation of the calculation of performance is in the Fund's Statement of
Additional Information.
17 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include sales charges (loads) on purchase payments,
contingent deferred sales charges on redemptions; and redemption fees, if any;
and (2) ongoing costs, including management fees; distribution and service fees;
and other Fund expenses. These examples are intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended October 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 Fund's actual expense ratio for each class of shares, and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front-end
or contingent deferred sales charges (loads), or a $12.00 fee imposed annually
on accounts valued at less than $500.00 (subject to exceptions described in
18 | OPPENHEIMER QUEST OPPORTUNITY VALUE 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
5/1/07 10/31/07 OCTOBER 31, 2007
- ------------------------------------------------------------------------------
Class A Actual $1,000.00 $1,087.10 $ 7.28
- ------------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,018.25 7.04
- ------------------------------------------------------------------------------
Class B Actual 1,000.00 1,082.80 11.29
- ------------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,014.42 10.92
- ------------------------------------------------------------------------------
Class C Actual 1,000.00 1,083.10 11.24
- ------------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,014.47 10.87
- ------------------------------------------------------------------------------
Class N Actual 1,000.00 1,085.40 8.81
- ------------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,016.79 8.52
- ------------------------------------------------------------------------------
Class Y Actual 1,000.00 1,088.30 6.39
- ------------------------------------------------------------------------------
Class Y Hypothetical 1,000.00 1,019.11 6.18
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios,
excluding indirect expenses from affiliated fund, based on the 6-month period
ended October 31, 2007 are as follows:
CLASS EXPENSE RATIOS
- -----------------------------
Class A 1.38%
- -----------------------------
Class B 2.14
- -----------------------------
Class C 2.13
- -----------------------------
Class N 1.67
- -----------------------------
Class Y 1.21
The expense ratios reflect reduction to custodian expenses and voluntary waivers
or reimbursements by the Fund's Manager and Transfer Agent that can be
terminated at any time, without advance notice. The "Financial Highlights"
tables in the Fund's financial statements, included in this report, also show
the gross expense ratios, without such waivers or reimbursements and reduction
to custodian expenses, if applicable.
- --------------------------------------------------------------------------------
19 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
STATEMENT OF INVESTMENTS October 31, 2007
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS--64.7%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--6.3%
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--0.9%
Liberty Media
Holding Corp.
- -Interactive, Series A 1 598,950 $ 12,715,709
- --------------------------------------------------------------------------------
MEDIA--5.2%
Comcast Corp., Cl. A 1 402,000 8,462,100
- --------------------------------------------------------------------------------
Liberty Global, Inc.,
Series A 1 758,258 29,761,627
- --------------------------------------------------------------------------------
Liberty Global, Inc.,
Series C 1 1,058,628 38,830,475
---------------
77,054,202
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--0.2%
Office Depot, Inc. 1 144,200 2,705,192
- --------------------------------------------------------------------------------
CONSUMER STAPLES--8.9%
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--1.5%
Costco Wholesale
Corp. 2 325,400 21,886,404
- --------------------------------------------------------------------------------
FOOD PRODUCTS--2.4%
ConAgra Foods, Inc. 259,400 6,155,562
- --------------------------------------------------------------------------------
Nestle SA 64,931 29,959,962
---------------
36,115,524
- --------------------------------------------------------------------------------
TOBACCO--5.0%
Altria Group, Inc. 2 625,600 45,625,008
- --------------------------------------------------------------------------------
Loews Corp./Carolina
Group 2 326,400 27,998,592
---------------
73,623,600
- --------------------------------------------------------------------------------
ENERGY--4.2%
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS--4.2%
BP plc, ADR 143,900 11,222,761
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 2 311,900 28,691,681
- --------------------------------------------------------------------------------
Petroleo Brasileiro
SA, ADR 232,400 22,224,412
---------------
62,138,854
SHARES VALUE
- --------------------------------------------------------------------------------
FINANCIALS--9.8%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--4.0%
E*TRADE Financial
Corp. 1 1,591,000 $ 17,723,740
- --------------------------------------------------------------------------------
UBS AG 768,080 41,223,318
---------------
58,947,058
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--1.7%
Wachovia Corp. 2 552,800 25,279,544
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--1.6%
Bank of America
Corp. 481,800 23,261,304
- --------------------------------------------------------------------------------
INSURANCE--2.0%
Ambac Financial
Group, Inc. 129,200 4,758,436
- --------------------------------------------------------------------------------
Everest Re Group
Ltd. 118,600 12,635,644
- --------------------------------------------------------------------------------
National Financial
Partners Corp. 150,200 8,211,434
- --------------------------------------------------------------------------------
Platinum
Underwriters
Holdings Ltd. 120,000 4,320,000
---------------
29,925,514
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--0.5%
Freddie Mac 2 143,370 7,488,215
- --------------------------------------------------------------------------------
HEALTH CARE--7.3%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--1.9%
deCODE genetics,
Inc. 1 555,100 1,898,442
- --------------------------------------------------------------------------------
Human Genome
Sciences, Inc. 1 749,800 7,093,108
- --------------------------------------------------------------------------------
Orexigen
Therapeutics, Inc. 1 484,880 7,098,643
- --------------------------------------------------------------------------------
Vanda
Pharmaceuticals,
Inc. 1 827,760 12,416,400
---------------
28,506,593
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.3%
Zimmer Holdings,
Inc. 1 63,000 4,377,870
20 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
SHARES VALUE
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--1.7%
Medco Health
Solutions, Inc. 1 61,200 $ 5,776,056
- --------------------------------------------------------------------------------
Skilled Healthcare
Group, Inc., Cl. A 1 270,800 4,435,704
- --------------------------------------------------------------------------------
WellPoint, Inc. 1,2 177,700 14,079,171
---------------
24,290,931
- --------------------------------------------------------------------------------
PHARMACEUTICALS--3.4%
Abbott Laboratories 165,600 9,045,072
- --------------------------------------------------------------------------------
Medicines Co. (The) 1 530,400 10,157,160
- --------------------------------------------------------------------------------
Novartis AG, ADR 416,400 22,139,988
- --------------------------------------------------------------------------------
Schering-Plough
Corp. 305,400 9,320,808
---------------
50,663,028
- --------------------------------------------------------------------------------
INDUSTRIALS--6.1%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--4.0%
Boeing Co. 182,000 17,943,380
- --------------------------------------------------------------------------------
Orbital Sciences
Corp. 1 212,000 5,412,360
- --------------------------------------------------------------------------------
Spirit Aerosystems
Holdings, Inc., Cl. A 1 257,250 8,931,720
- --------------------------------------------------------------------------------
United Technologies
Corp. 2 347,600 26,622,684
---------------
58,910,144
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.2%
Sinomem Technology
Ltd. 1 3,107,000 2,766,585
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--1.3%
Siemens AG,
Sponsored ADR 148,000 20,182,760
- --------------------------------------------------------------------------------
MACHINERY--0.6%
Navistar International
Corp. 1 133,700 8,423,100
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--16.6%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--1.6%
Cisco Systems, Inc. 1,2 553,900 18,311,934
- --------------------------------------------------------------------------------
QUALCOMM, Inc. 111,500 4,764,395
---------------
23,076,329
SHARES VALUE
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--1.1%
International Business
Machines Corp. 142,800 $ 16,581,936
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--2.4%
eBay, Inc. 1,2 419,900 15,158,390
- --------------------------------------------------------------------------------
Google, Inc., Cl. A 1 12,800 9,049,600
- --------------------------------------------------------------------------------
Yahoo!, Inc. 1 356,200 11,077,820
---------------
35,285,810
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--
1.1%
Texas Instruments,
Inc. 510,100 16,629,260
- --------------------------------------------------------------------------------
SOFTWARE--10.4%
Microsoft Corp. 2 914,000 33,644,340
- --------------------------------------------------------------------------------
Novell, Inc. 1,2 1,186,600 8,970,696
- --------------------------------------------------------------------------------
Synopsys, Inc. 1 784,600 22,172,796
- --------------------------------------------------------------------------------
Take-Two Interactive
Software, Inc. 1,2,4 4,722,550 88,689,489
---------------
153,477,321
- --------------------------------------------------------------------------------
MATERIALS--3.5%
- --------------------------------------------------------------------------------
CHEMICALS--0.3%
Lubrizol Corp. (The) 75,100 5,097,788
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--0.6%
Texas Industries, Inc. 53,300 3,894,098
- --------------------------------------------------------------------------------
Vulcan Materials Co. 51,800 4,429,418
---------------
8,323,516
- --------------------------------------------------------------------------------
METALS & MINING--2.6%
Carpenter Technology
Corp. 76,600 11,100,106
- --------------------------------------------------------------------------------
Companhia Vale do
Rio Doce, Sponsored
ADR 615,400 19,428,178
- --------------------------------------------------------------------------------
Usinas Siderurgicas
de Minas Gerais SA 100,000 8,389,911
---------------
38,918,195
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--0.9%
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.9%
Sprint Nextel Corp. 799,400 13,669,740
21 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
UTILITIES--1.1%
- --------------------------------------------------------------------------------
ENERGY TRADERS--1.1%
AES Corp. (The) 1,2 468,800 $ 10,037,008
- --------------------------------------------------------------------------------
Dynegy, Inc., Cl. A 1 624,500 5,751,644
---------------
15,788,652
---------------
Total Common Stocks
(Cost $783,376,136) 956,110,678
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS AND NOTES--0.6%
- --------------------------------------------------------------------------------
Conseco, Inc., 3.50%
Cv. Sr. Unsec. Bonds,
9/30/35 5
(Cost $9,764,723) $10,000,000 9,225,000
PRINCIPAL
AMOUNT/
SHARES
- --------------------------------------------------------------------------------
STRUCTURED SECURITIES--1.9%
- --------------------------------------------------------------------------------
Fhu-Jin Ltd.
Catastrophe Linked
Nts., Cl. B, 9.26%,
8/10/11 5,6 3,000,000 3,065,220
- --------------------------------------------------------------------------------
Fremantle Ltd.
Catastrophe Linked
Nts., Cl. B, 7.238%,
6/28/10 5,6 1,000,000 1,008,950
- --------------------------------------------------------------------------------
Goldman Sachs
Group, Inc. (The),
Office Depot,
Inc./OfficeMax, Inc.
Cv. Linked Nts.,
17.10%, 11/26/07 7 200,000 11,547,800
- --------------------------------------------------------------------------------
Successor Cal Quake
Parametric Ltd.
Catastrophe Linked
Nts., Cl. A-I, 12.948%,
6/6/08 5,7 3,000,000 3,029,850
PRINCIPAL
AMOUNT/
SHARES VALUE
- --------------------------------------------------------------------------------
STRUCTURED SECURITIES Continued
- --------------------------------------------------------------------------------
Successor Euro Wind
Ltd. Catastrophe
Linked Nts., Cl. A-I,
10.948%, 6/6/08 5,6 $ 3,000,000 $ 2,977,950
- --------------------------------------------------------------------------------
Successor Hurricane
Modeled Ltd.
Catastrophe Linked
Nts., Cl. B-I, 16.348%,
12/6/07 5,7 3,000,000 3,022,350
- --------------------------------------------------------------------------------
Successor Japan
Quake Ltd.
Catastrophe
Linked Nts., Cl. A-I,
9.948%, 6/6/08 5,6 3,000,000 3,021,900
---------------
Total Structured Securities
(Cost $36,000,000) 27,674,020
SHARES
- --------------------------------------------------------------------------------
INVESTMENTS IN AFFILIATED COMPANIES--26.6%
- --------------------------------------------------------------------------------
Oppenheimer
Institutional Money
Market Fund, Cl. E,
5.20% 3,4
(Cost $393,707,214) 393,707,214 393,707,214
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS,
AT VALUE
(COST $1,222,848,073) 93.8% 1,386,716,912
- --------------------------------------------------------------------------------
OTHER ASSETS
NET OF
LIABILITIES 6.2 91,633,799
-----------------------------
NET ASSETS 100.0% $1,478,350,711
=============================
22 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. All or a portion of the security was segregated by the Fund in the amount of
$207,838,472 along with cash in the amount of $196,500,175, of which represented
160.17% of the market value of securities sold short. See Note 1 of accompanying
Notes.
3. Rate shown is the 7-day yield as of October 31, 2007.
4. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended October 31, 2007, by virtue of the Fund owning at
least 5% of the voting securities of the issuer or as a result of the Fund and
the issuer having the same investment advisor. Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES SHARES
OCTOBER 31, GROSS GROSS OCTOBER 31,
2006 ADDITIONS REDUCTIONS 2007
- -------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional
Money Market Fund, Cl. E 411,573,319 691,125,368 708,991,473 393,707,214
Take-Two Interactive Software, Inc. 4,722,550 -- -- 4,722,550
DIVIDEND
VALUE INCOME
- -------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional
Money Market Fund, Cl. E $ 393,707,214 $ 20,830,492
Take-Two Interactive Software, Inc. 88,689,489 --
------------------------------
$ 482,396,703 $ 20,830,492
==============================
5. Represents the current interest rate for a variable or increasing rate
security.
6. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $10,074,020 or 0.68% of the Fund's net
assets as of October 31, 2007.
7. Illiquid security. The aggregate value of illiquid securities as of October
31, 2007 was $17,600,000, which represents 1.19% of the Fund's net assets. See
Note 8 of accompanying Notes.
A sufficient amount of liquid assets has been designated to cover outstanding
written put options, as follows:
CONTRACTS EXPIRATION EXERCISE PREMIUM
SUBJECT TO PUT DATES PRICE RECEIVED VALUE
- -----------------------------------------------------------------------------------------------------------------
Capital One Financial Corp. 500 1/21/08 $ 65 $ 129,996 $ 210,000
Countrywide Financial Corp. 4,000 1/21/08 25 587,982 3,800,000
E*TRADE Financial Corp. 1,518 1/21/08 20 169,813 1,335,840
WellPoint, Inc. 550 1/21/08 65 61,598 11,000
-------------------------
$ 949,389 $ 5,356,840
=========================
23 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
COMMON STOCK SECURITIES SOLD SHORT--(17.1)%
- --------------------------------------------------------------------------------------------------------------------
Alcon, Inc. (37,660) $ (5,732,229)
- --------------------------------------------------------------------------------------------------------------------
Big Lots, Inc. 1 (100,000) (2,398,000)
- --------------------------------------------------------------------------------------------------------------------
Fidelity NASDAQ Composite Index-Tracking Stock (1,403,600) (157,245,308)
- --------------------------------------------------------------------------------------------------------------------
PowerShares QQQ (1,582,200) (87,068,466)
---------------
Total Common Stock Securities Sold Short (Proceeds $196,310,455) $ (252,444,003)
===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES October 31, 2007
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $727,176,371) $ 904,320,209
Affiliated companies (cost $495,671,702) 482,396,703
----------------
1,386,716,912
- -----------------------------------------------------------------------------------------------------------
Cash 1,011,000
- -----------------------------------------------------------------------------------------------------------
Cash used for collateral on options 20,825,000
- -----------------------------------------------------------------------------------------------------------
Deposits with broker for securities sold short 196,310,455
- -----------------------------------------------------------------------------------------------------------
Swaps, at value 156,907,958
- -----------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 46,888,782
Interest and dividends 4,273,842
Other 61,950
----------------
Total assets 1,812,995,899
- -----------------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------
Short positions, at value (proceeds of $196,310,455)--
see accompanying statement of investments 252,444,003
- -----------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $949,389)--
see accompanying statement of investments 5,356,840
- -----------------------------------------------------------------------------------------------------------
Swaps, at value 48,107,121
- -----------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Due to custodian 16,978,635
Investments purchased 8,007,448
Shares of beneficial interest redeemed 2,666,503
Distribution and service plan fees 298,117
Transfer and shareholder servicing agent fees 244,298
Trustees' compensation 233,497
Shareholder communications 225,963
Other 82,763
----------------
Total liabilities 334,645,188
- -----------------------------------------------------------------------------------------------------------
NET ASSETS $ 1,478,350,711
================
- -----------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 435,718
- -----------------------------------------------------------------------------------------------------------
Additional paid-in capital 1,172,293,566
- -----------------------------------------------------------------------------------------------------------
Accumulated net investment loss (1,047,177)
- -----------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 94,489,765
- -----------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets
and liabilities denominated in foreign currencies 212,178,839
----------------
NET ASSETS $ 1,478,350,711
================
25 | OPPENHEIMER QUEST OPPORTUNITY VALUE 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 $1,164,793,341
and 34,045,049 shares of beneficial interest outstanding) $ 34.21
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $ 36.30
- -----------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $136,745,470 and 4,165,895 shares
of beneficial interest outstanding) $ 32.82
- -----------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $140,021,649 and 4,277,526 shares
of beneficial interest outstanding) $ 32.73
- -----------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $22,006,734 and 653,394 shares
of beneficial interest outstanding) $ 33.68
- -----------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $14,783,517 and 429,892 shares of beneficial interest outstanding) $ 34.39
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
STATEMENT OF OPERATIONS For the Year Ended October 31, 2007
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $604,176) $ 13,357,420
Affiliated companies 20,830,492
- ------------------------------------------------------------------------------------------------
Interest 9,352,309
- ------------------------------------------------------------------------------------------------
Portfolio lending fees 104,190
- ------------------------------------------------------------------------------------------------
Other income 43,845
-------------
Total investment income 43,688,256
- ------------------------------------------------------------------------------------------------
EXPENSES
- ------------------------------------------------------------------------------------------------
Management fees 12,218,314
- ------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 2,801,255
Class B 1,462,866
Class C 1,393,970
Class N 104,801
- ------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 2,262,259
Class B 258,835
Class C 283,515
Class N 60,435
Class Y 48,740
- ------------------------------------------------------------------------------------------------
Shareholder communications:
Class A 300,144
Class B 87,059
Class C 35,690
Class N 3,313
Class Y 70
- ------------------------------------------------------------------------------------------------
Dividends on short sales (net of foreign withholding taxes of $23,962) 1,209,551
- ------------------------------------------------------------------------------------------------
Trustees' compensation 47,170
- ------------------------------------------------------------------------------------------------
Custodian fees and expenses 35,165
- ------------------------------------------------------------------------------------------------
Administration service fees 1,500
- ------------------------------------------------------------------------------------------------
Other 163,657
-------------
Total expenses 22,778,309
Less reduction to custodian expenses (5,085)
Less waivers and reimbursements of expenses (395,918)
-------------
Net expenses 22,377,306
- ------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 21,310,950
27 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
STATEMENT OF OPERATIONS Continued
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ------------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments from unaffiliated companies (including premiums on options exercised) $107,942,377
Closing and expiration of option contracts written 536,640
Foreign currency transactions 1,478,331
Short positions 555,867
Swap contracts (21,467,765)
Increase from payment by affiliates 168,673
-------------
Net realized gain 89,214,123
- ------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments 71,681,715
Translation of assets and liabilities denominated in foreign currencies 4,189,918
Option contracts written (4,398,304)
Short positions (42,330,181)
Swap contracts 122,088,116
-------------
Net change in unrealized appreciation 151,231,264
- ------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $261,756,337
=============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 2007 2006
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 21,310,950 $ 17,197,289
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain 89,214,123 71,658,150
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 151,231,264 15,039,005
-------------------------------------
Net increase in net assets resulting from operations 261,756,337 103,894,444
- ------------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (14,746,168) (10,046,614)
Class B (809,496) --
Class C (806,208) --
Class N (190,528) (100,954)
Class Y (214,516) (250,160)
-------------------------------------
(16,766,916) (10,397,728)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (46,068,957) (175,983,423)
Class B (6,486,147) (27,064,716)
Class C (5,923,177) (22,974,652)
Class N (876,962) (3,378,288)
Class Y (626,139) (3,563,267)
-------------------------------------
(59,981,382) (232,964,346)
- ------------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from beneficial interest transactions:
Class A (126,775,122) (127,453,722)
Class B (40,312,003) (35,046,955)
Class C (19,374,057) (18,827,596)
Class N (2,113,092) (2,203,146)
Class Y (4,950,598) (7,837,997)
-------------------------------------
(193,524,872) (191,369,416)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Total decrease (8,516,833) (330,837,046)
- ------------------------------------------------------------------------------------------------------------------------------------
Beginning of period 1,486,867,544 1,817,704,590
-------------------------------------
End of period (including accumulated net investment income
(loss) of $(1,047,177) and $13,431,756, respectively) $ 1,478,350,711 $1,486,867,544
=====================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED OCTOBER 31, 2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 30.15 $ 32.58 $ 32.41 $ 30.00 $ 26.41
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .51 1 .36 1 .17 1 .07 1 .14
Net realized and unrealized gain 5.17 1.67 2.27 2.41 3.71
---------------------------------------------------------------------------
Total from investment operations 5.68 2.03 2.44 2.48 3.85
- -------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.39) (.24) (.04) (.07) (.26)
Distributions from net realized gain (1.23) (4.22) (2.23) -- --
---------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (1.62) (4.46) (2.27) (.07) (.26)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 34.21 $ 30.15 $ 32.58 $ 32.41 $ 30.00
===========================================================================
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 19.65% 7.00% 7.79% 8.30% 14.70%
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 1,164,793 $ 1,146,503 $ 1,378,475 $ 1,459,053 $ 1,429,157
- -------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 1,142,058 $ 1,238,504 $ 1,465,797 $ 1,497,594 $ 1,292,117
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.61% 1.22% 0.53% 0.23% 0.53%
Total expenses 1.40% 4 1.43% 4 1.33% 1.32% 1.44%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 1.37% 1.43% 1.28% 1.32% 1.44%
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51% 66% 100% 64% 63%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
3. Annualized for periods less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended October 31, 2007 1.43%
Year Ended October 31, 2006 1.43%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
CLASS B YEAR ENDED OCTOBER 31, 2007 2006 2005 2004 2003
- --------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 28.97 $ 31.44 $ 31.55 $ 29.36 $ 25.79
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .26 1 .13 1 (.08) 1 (.17) 1 (.11)
Net realized and unrealized gain 4.97 1.62 2.20 2.36 3.68
----------------------------------------------------------------------------
Total from investment operations 5.23 1.75 2.12 2.19 3.57
- --------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.15) -- -- -- --
Distributions from net realized gain (1.23) (4.22) (2.23) -- --
----------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (1.38) (4.22) (2.23) -- --
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 32.82 $ 28.97 $ 31.44 $ 31.55 $ 29.36
============================================================================
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 18.74% 6.22% 6.94% 7.46% 13.84%
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 136,745 $ 159,147 $ 210,856 $ 278,215 $ 424,121
- --------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 146,748 $ 178,815 $ 247,951 $ 342,847 $ 527,653
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss) 0.84% 0.47% (0.27)% (0.54)% (0.19)%
Total expenses 2.17% 4 2.18% 4 2.12% 2.11% 2.20%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 2.14% 2.18% 2.07% 2.11% 2.20%
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51% 66% 100% 64% 63%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
3. Annualized for periods less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended October 31, 2007 2.20%
Year Ended October 31, 2006 2.18%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS C YEAR ENDED OCTOBER 31, 2007 2006 2005 2004 2003
- --------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 28.91 $ 31.38 $ 31.48 $ 29.29 $ 25.77
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .26 1 .13 1 (.07) 1 (.16) 1 (.06)
Net realized and unrealized gain 4.96 1.62 2.20 2.35 3.63
----------------------------------------------------------------------------
Total from investment operations 5.22 1.75 2.13 2.19 3.57
- --------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income (.17) -- -- -- (.05)
Distributions from net realized gain (1.23) (4.22) (2.23) -- --
----------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (1.40) (4.22) (2.23) -- (.05)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 32.73 $ 28.91 $ 31.38 $ 31.48 $ 29.29
============================================================================
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 18.73% 6.23% 6.99% 7.48% 13.88%
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 140,022 $ 141,981 $ 174,735 $ 190,426 $ 205,336
- --------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 139,758 $ 154,404 $ 187,520 $ 203,073 $ 198,226
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss) 0.85% 0.47% (0.22)% (0.51)% (0.19)%
Total expenses 2.16% 4 2.18% 4 2.08% 2.06% 2.17%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 2.13% 2.18% 2.02% 2.06% 2.17%
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51% 66% 100% 64% 63%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
3. Annualized for periods less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended October 31, 2007 2.19%
Year Ended October 31, 2006 2.18%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
CLASS N YEAR ENDED OCTOBER 31, 2007 2006 2005 2004 2003
- --------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.68 $ 32.12 $ 32.06 $ 29.72 $ 26.21
- --------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .40 1 .25 1 .05 1 (.05) 1 .09
Net realized and unrealized gain 5.10 1.66 2.24 2.39 3.65
-----------------------------------------------------------
Total from investment operations 5.50 1.91 2.29 2.34 3.74
- --------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.27) (.13) -- -- 2 (.23)
Distributions from net realized gain (1.23) (4.22) (2.23) -- --
-----------------------------------------------------------
Total dividends and/or distributions
to shareholders (1.50) (4.35) (2.23) -- (.23)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 33.68 $ 29.68 $ 32.12 $ 32.06 $ 29.72
===========================================================
- --------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 19.26% 6.64% 7.39% 7.89% 14.39%
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $22,007 $21,431 $25,539 $26,382 $19,538
- --------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $21,086 $24,755 $27,162 $23,702 $17,677
- --------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income (loss) 1.28% 0.87% 0.17% (0.15)% 0.23%
Total expenses 1.73% 5 1.77% 5 1.69% 1.73% 2.14%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 1.70% 1.77% 1.64% 1.69% 1.73%
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51% 66% 100% 64% 63%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Less than $0.005 per share.
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 less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
4. Annualized for periods less than one full year.
5. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended October 31, 2007 1.76%
Year Ended October 31, 2006 1.77%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS Y YEAR ENDED OCTOBER 31, 2007 2006 2005 2004 2003
- --------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 30.28 $ 32.70 $ 32.52 $ 30.11 $ 26.53
- --------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .56 1 .41 1 .22 1 .12 1 .20
Net realized and unrealized gain 5.20 1.69 2.28 2.41 3.72
-----------------------------------------------------------
Total from investment operations 5.76 2.10 2.50 2.53 3.92
- --------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.42) (.30) (.09) (.12) (.34)
Distributions from net realized gain (1.23) (4.22) (2.23) -- --
-----------------------------------------------------------
Total dividends and/or distributions
to shareholders (1.65) (4.52) (2.32) (.12) (.34)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 34.39 $ 30.28 $ 32.70 $ 32.52 $ 30.11
===========================================================
- --------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 19.85% 7.21% 7.98% 8.42% 14.97%
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $14,784 $17,806 $28,100 $30,831 $30,124
- --------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $15,189 $23,687 $29,815 $30,649 $27,078
- --------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.77% 1.39% 0.69% 0.38% 0.74%
Total expenses 1.25% 4 1.24% 4 1.17% 1.16% 1.33%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 1.21% 1.23% 1.12% 1.16% 1.23%
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51% 66% 100% 64% 63%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
3 Annualized for periods less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended October 31, 2007 1.28%
Year Ended October 31, 2006 1.24%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
34 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Quest Opportunity Value Fund (the Fund), a series of Oppenheimer
Quest For Value Funds, is an open-end management investment company registered
under the Investment Company Act of 1940, as amended. The Fund's investment
objective is to seek growth of capital. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B, Class C, Class N and Class Y shares.
Class A shares are sold at their offering price, which is normally net asset
value plus a front-end sales charge. Class B, Class C and Class N shares are
sold without a front-end sales charge but may be subject to a contingent
deferred sales charge (CDSC). Class N shares are sold only through retirement
plans. Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC, however, the institutional investor
may impose charges on those accounts. All classes of shares have identical
rights and voting privileges with respect to the Fund in general and exclusive
voting rights on matters that affect that class alone. Earnings, net assets and
net asset value per share may differ due to each class having its own expenses,
such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares six
years after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ(R) are valued based on the
closing price provided by NASDAQ prior to the time when the Fund's assets are
valued. In the absence of a sale, the security is valued at the last sale price
on the prior trading day, if it is within the spread of the closing "bid" and
"asked" prices, and if not, at the closing bid price. Securities traded on
foreign exchanges are valued based on the last sale price on the principal
exchange on which the security is traded, as identified by the portfolio pricing
service, prior to the time when the Fund's assets are valued. In the absence of
a sale, the security is valued at the official closing price on the principal
exchange. Corporate, government and municipal debt instruments having a
remaining maturity in excess of sixty days and all mortgage-backed securities
will be valued at the mean between the "bid" and "asked" prices. Futures
contracts traded on a commodities or futures exchange will be valued at the
final settlement price or official closing price on the principal exchange as
reported by such principal exchange at its
35 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
trading session ending at, or most recently prior to, the time when the Fund's
assets are valued. Options are valued daily based upon the last sale price on
the principal exchange on which the option is traded. Securities (including
restricted securities) for which market quotations are not readily available are
valued at their fair value. Foreign and domestic securities whose values have
been materially affected by what the Manager identifies as a significant event
occurring before the Fund's assets are valued but after the close of their
respective exchanges will be fair valued. Fair value is determined in good faith
using consistently applied procedures under the supervision of the Board of
Trustees. Investments in open-end registered investment companies (including
affiliated funds) are valued at that fund's net asset value. Short-term "money
market type" debt securities with remaining maturities of sixty days or less are
valued at amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
STRUCTURED SECURITIES. The Fund invests in structured securities whose market
values, interest rates and/or redemption prices are linked to the performance of
underlying foreign currencies, interest rate spreads, stock market indices,
prices of individual securities, commodities or other financial instruments or
the occurrence of other specific events. The structured securities are often
leveraged, increasing the volatility of each securities' market value relative
to the change in the underlying linked financial element or event. Fluctuations
in value of these securities are recorded as unrealized gains and losses in the
accompanying Statement of Operations. The Fund records a realized gain or loss
when a structured security is sold, matures or expires.
- --------------------------------------------------------------------------------
SECURITIES SOLD SHORT. The Fund sells securities that it does not own, and it
will therefore be obligated to purchase such securities at a future date. Upon
entering into a short position, the Fund records the proceeds as a deposit with
the broker in its Statement of Assets and Liabilities. The value of the open
short position is recorded as a liability, and the Fund records an unrealized
gain or loss to the extent of the difference between the proceeds received and
the value of the open short position. The Fund records a realized gain or loss
when the short position is closed out. By entering into short sales, the Fund
bears the market risk of increases in value of the security sold short in excess
of the proceeds received. Until the security is replaced, the Fund is required
to pay the lender any dividend or interest earned. Dividend expense on short
sales is treated as an expense in the Statement of Operations.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of the New
York Stock Exchange (the "Exchange"), normally 4:00 P.M. Eastern time, on each
day the Exchange is open for business. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.
36 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Fund is permitted
to invest daily available cash balances in an affiliated money market fund. The
Fund 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 Fund's
investment in IMMF is included in the Statement of Investments, if applicable.
As a shareholder, the Fund is subject to its proportional share of IMMF's Class
E expenses, including its management fee. The Manager will waive fees and/or
reimburse Fund expenses in an amount equal to the indirect management fees
incurred through the Fund's investment in IMMF.
- --------------------------------------------------------------------------------
INVESTMENTS WITH OFF-BALANCE SHEET RISK. The Fund 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 Fund'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 Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
37 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
NET UNREALIZED
APPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2,3 TAX PURPOSES
------------------------------------------------------------------------
$130,429,172 $74,829,292 $169,405 $100,774,186
1. The Fund had $169,405 of straddle losses which were deferred.
2. During the fiscal year ended October 31, 2007, the Fund did not utilize any
capital loss carryforward.
3. During the fiscal year ended October 31, 2006, the Fund 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 Fund. Accordingly, the
following amounts have been reclassified for October 31, 2007. Net assets of the
Fund were unaffected by the reclassifications.
REDUCTION TO INCREASE TO
ACCUMULATED ACCUMULATED NET
INCREASE TO NET INVESTMENT REALIZED GAIN
PAID-IN CAPITAL INCOME ON INVESTMENTS 4
------------------------------------------------------------------------
$10,723,697 $19,022,967 $8,299,270
4. $10,723,697, including $8,903,107 of long-term capital gain, was distributed
in connection with Fund share redemptions.
The tax character of distributions paid during the years ended October 31, 2007
and October 31, 2006 was as follows:
YEAR ENDED YEAR ENDED
OCTOBER 31, 2007 OCTOBER 31, 2006
------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 38,205,589 $ 73,736,564
Long-term capital gain 38,542,709 169,625,510
-------------------------------------
Total $ 76,748,298 $ 243,362,074
=====================================
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of October 31, 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.
38 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
Federal tax cost of securities $ 1,225,451,890
Federal tax cost of other investments (88,459,008)
----------------
Total federal tax cost $ 1,136,992,882
================
Gross unrealized appreciation $ 260,389,702
Gross unrealized depreciation (159,615,516)
----------------
Net unrealized appreciation $ 100,774,186
================
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for the
Fund's independent trustees. Benefits are based on years of service and fees
paid to each trustee during the years of service. During the year ended October
31, 2007, the Fund's projected benefit obligations were increased by $8,917 and
payments of $12,453 were made to retired trustees, resulting in an accumulated
liability of $213,094 as of October 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 Fund.
For purposes of determining the amount owed to the Trustee under the plan,
deferred amounts are treated as though equal dollar amounts had been invested in
shares of the Fund or in other Oppenheimer funds selected by the Trustee. The
Fund purchases shares of the funds selected for deferral by the Trustee in
amounts equal to his or her deemed investment, resulting in a Fund asset equal
to the deferred compensation liability. Such assets are included as a component
of "Other" within the asset section of the Statement of Assets and Liabilities.
Deferral of trustees' fees under the plan will not affect the net assets of the
Fund, and will not materially affect the Fund's assets, liabilities or net
investment income per share. Amounts will be deferred until distributed in
accordance to the 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 Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
39 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.01 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED OCTOBER 31, 2007 YEAR ENDED OCTOBER 31, 2006
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------
CLASS A
Sold 2,510,817 $ 78,501,341 3,156,644 $ 92,608,542
Dividends and/or
distributions reinvested 1,935,781 57,666,925 6,108,760 174,466,185
Redeemed (8,427,993) (262,943,388) (13,548,536) (394,528,449)
------------------------------------------------------------
Net decrease (3,981,395) $(126,775,122) (4,283,132) $(127,453,722)
============================================================
- ---------------------------------------------------------------------------------------------
CLASS B
Sold 419,426 $ 12,661,988 623,703 $ 17,563,977
Dividends and/or
distributions reinvested 245,156 7,053,152 939,523 25,949,614
Redeemed (1,992,292) (60,027,143) (2,775,477) (78,560,546)
------------------------------------------------------------
Net decrease (1,327,710) $ (40,312,003) (1,212,251) $ (35,046,955)
============================================================
- ---------------------------------------------------------------------------------------------
CLASS C
Sold 296,492 $ 8,943,128 397,470 $ 11,161,293
Dividends and/or
distributions reinvested 216,370 6,207,650 760,831 20,976,105
Redeemed (1,147,201) (34,524,835) (1,813,917) (50,964,994)
------------------------------------------------------------
Net decrease (634,339) $ (19,374,057) (655,616) $ (18,827,596)
============================================================
40 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
YEAR ENDED OCTOBER 31, 2007 YEAR ENDED OCTOBER 31, 2006
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------
CLASS N
Sold 139,625 $ 4,317,651 187,209 $ 5,389,710
Dividends and/or
distributions reinvested 36,261 1,066,438 122,955 3,467,323
Redeemed (244,641) (7,497,181) (383,112) (11,060,179)
----------------------------------------------------------
Net decrease (68,755) $ (2,113,092) (72,948) $ (2,203,146)
==========================================================
- ---------------------------------------------------------------------------------------------
CLASS Y
Sold 111,107 $ 3,500,038 181,884 $ 5,332,127
Dividends and/or
distributions reinvested 28,115 840,655 133,197 3,813,427
Redeemed (297,418) (9,291,291) (586,333) (16,983,551)
----------------------------------------------------------
Net decrease (158,196) $ (4,950,598) (271,252) $ (7,837,997)
==========================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and investments in IMMF, for the year ended October
31, 2007, were as follows:
PURCHASES SALES
- --------------------------------------------------------------
Investment securities $431,222,771 $709,833,732
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of average net assets as shown in the following table:
FEE SCHEDULE
---------------------------------
Up to $1.0 billion 0.85%
Next $500 million 0.80
Next $500 million 0.75
Next $500 million 0.70
Next $500 million 0.65
Next $500 million 0.60
Next $500 million 0.55
Over $4.0 billion 0.50
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended October 31, 2007, the Fund paid
$2,964,962 to OFS for services to the Fund.
Additionally, Class Y shares are subject to minimum fees of $10,000 per
annum for assets of $10 million or more. The Class Y shares are subject to the
minimum fees in the event that the per account fee does not equal or exceed the
applicable minimum fees. OFS may voluntarily waive the minimum fees.
41 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a
Distribution and Service Plan for Class A shares. Under the plan, the Fund pays
a service fee to the Distributor of 0.25% of the average annual net assets of
Class A shares. The Distributor currently uses all of those fees to pay dealers,
brokers, banks and other financial institutions periodically for providing
personal services and maintenance of accounts of their customers that hold Class
A shares. Under the plan, the Fund may also pay an asset-based sales charge to
the Distributor. Beginning January 1, 2003, the Board of Trustees set the annual
asset-based sales charge rate at zero. Fees incurred by the Fund under the plan
are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class N
shares to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% on Class B and
Class C shares and 0.25% on Class N shares. The Distributor also receives a
service fee of 0.25% per year under each plan. If either the Class B, Class C or
Class N plan is terminated by the Fund or by the shareholders of a class, the
Board of Trustees and its independent trustees must determine whether the
Distributor shall be entitled to payment from the Fund of all or a portion of
the service fee and/or asset-based sales charge in respect to shares sold prior
to the effective date of such termination. The Distributor determines its
uncompensated expenses under the plan at calendar quarter ends. The
Distributor's aggregate uncompensated expenses under the plan at September 30,
2007 for Class C and Class N shares were $8,310,261 and $660,343, respectively.
Fees incurred by the Fund under the plans are detailed in the Statement of
Operations.
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption proceeds
prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the following table for the period
indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- ----------------------------------------------------------------------------------------------
October 31, 2007 $ 185,250 $ 6,484 $ 243,302 $ 5,150 $ 848
42 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. During the year ended October 31, 2007, OFS
waived $621 and $1,865 for Class N and Class Y shares, respectively. This
undertaking may be amended or withdrawn at any time.
The Manager will waive fees and/or reimburse Fund expenses in an amount
equal to the indirect management fees incurred through the Fund's investment in
IMMF. During the year ended October 31, 2007, the Manager waived $393,432 for
IMMF management fees.
The Distributor paid the Fund $1,580 in restitution as part of a
settlement with respect to an investigation of certain agreements between the
Distributor and various financial intermediaries that had selling agreements
with the Distributor. The payment increased the Fund's total returns by less
than 0.01%.
During the year ended October 31, 2007, the Manager voluntarily reimbursed
the Fund $167,093 for certain transactions. The payment increased the Fund's
total returns by less than 0.01%.
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts to settle specific purchases or sales of securities
denominated in a foreign currency and for protection from adverse exchange rate
fluctuation. Risks to the Fund include the potential inability of the
counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using prevailing foreign currency exchange rates.
Unrealized appreciation and depreciation on foreign currency contracts are
reported in the Statement of Assets and Liabilities as a receivable or payable
and in the Statement of Operations with the change in unrealized appreciation or
depreciation.
The Fund may realize a gain or loss upon the closing or settlement of the
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.
As of October 31, 2007, the Fund had no outstanding foreign currency
contracts.
- --------------------------------------------------------------------------------
6. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call options to
hedge against adverse movements in the value of portfolio holdings. When an
option is written, the Fund receives a premium and becomes obligated to sell or
purchase the underlying security at a fixed price, upon exercise of the option.
43 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. OPTION ACTIVITY Continued
Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call or put options are noted
in the Statement of Investments where applicable. Contracts subject to call or
put, expiration date, exercise price, premium received and market value are
detailed in a note to the Statement of Investments. Options written are reported
as a liability in the Statement of Assets and Liabilities. Realized gains and
losses are reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur
a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. The Fund also has the additional risk of not
being able to enter into a closing transaction if a liquid secondary market does
not exist.
Written option activity for the year ended October 31, 2007 was as follows:
CALL OPTIONS PUT OPTIONS
--------------------- ------------------------
NUMBER OF AMOUNT OF NUMBER OF AMOUNT OF
CONTRACTS PREMIUMS CONTRACTS PREMIUMS
- --------------------------------------------------------------------------------
Options outstanding as of
October 31, 2006 265 $ 139,253 -- $ --
Options written 1,430 488,191 7,050 1,003,324
Options closed or expired (1,695) (627,444) -- --
Options exercised -- -- (482) (53,935)
---------------------------------------------
Options outstanding as of
October 31, 2007 -- $ -- 6,568 $ 949,389
=============================================
- --------------------------------------------------------------------------------
7. CREDIT DEFAULT SWAP CONTRACTS
A credit default swap is a bilateral contract that enables an investor to buy or
sell protection against a defined-issuer credit event. The Fund may enter into
credit default swaps to hedge an existing position or to obtain exposure to a
security or market by purchasing or selling credit protection. The Fund may
enter into credit default swaps on a single security, or a basket of securities.
In a credit default swap contract, the purchaser of the contract will pay
a periodic interest fee, similar to an insurance premium, on the notional amount
of the swap contract to the counterparty (the seller of the contract). If there
is a credit event (for example, bankruptcy or a failure to timely pay interest
or principal), the purchaser will exercise the contract and will receive a
payment from the seller of the contract equal to the notional value of the
credit default swap contract less the value of the underlying security.
44 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
The periodic interest fees are accrued daily as a component of unrealized
appreciation (depreciation) and are recorded as realized gain (loss) upon
payment. In the event that the credit default swap is exercised due to a credit
event, the difference between the value of the underlying security and the
notional amount is recorded as realized gain (loss) and is included on the
Statement of Operations.
Credit default swaps are marked to market daily using primarily quotations
from counterparties and brokers. The value of the contracts is separately
disclosed on the Statement of Assets and Liabilities. The unrealized
appreciation (depreciation) related to the change in the valuation of the
notional amount of the swap is combined with the accrued interest due to (owed
by) the Fund at termination or settlement. The net change in this amount during
the period is included on the Statement of Operations.
Risks of credit default swaps include, but are not limited to, the cost of
paying for credit protection if there are no credit events, pricing transparency
when assessing the cost of a credit default swap, counterparty risk, adverse
pricing when purchasing bonds to satisfy its delivery obligation, and the need
to fund the delivery obligation (either cash or defaulted securities depending
on whether the Fund is the purchaser or seller of the credit default swap
contract, respectively).
Information regarding such credit default swaps as of October 31, 2007 is as
follows:
PAY/
BUY/SELL NOTIONAL RECEIVE
REFERENCE CREDIT AMOUNT FIXED TERMINATION
COUNTERPARTY ENTITY PROTECTION (000S) RATE DATES VALUE
- -------------------------------------------------------------------------------------------------------
Deutsche
Bank AG,
London
Branch:
Custom basket of
Asset-Backed Securities Sell $ 10,000 19.500% 11/25/39 $ (10,000,000)
Custom basket of
Asset-Backed Securities Buy 60,000 3.244 11/25/39 43,637,797
Custom basket of
Asset-Backed Securities Sell 20,000 15.423 4/25/36 (18,881,945)
Custom basket of
Asset-Backed Securities Buy 106,000 2.910 4/25/36 50,122,452
Custom basket of
Asset-Backed Securities Sell 20,500 19.250 7/25/45 (19,225,176)
Custom basket of
Asset-Backed Securities Buy 121,790 3.150 7/25/45 62,716,229
- -------------------------------------------------------------------------------------------------------
Lehman
Brothers
International,
Europe CDX.NA.IG.8 Index Buy 10,000 2.870 6/20/14 431,480
--------------
$ 108,800,837
==============
45 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
NOTES TO FINANCIAL STATEMENTS Continued
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8. ILLIQUID SECURITIES
As of October 31, 2007, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund will not invest more than 15% of its net assets (determined at the time of
purchase and reviewed periodically) in illiquid securities. Securities that are
illiquid are marked with the applicable footnote on the Statement of
Investments.
- --------------------------------------------------------------------------------
9. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of
securities, letters of credit or cash, against the loaned securities and
maintains collateral in an amount not less than 100% of the market value of the
loaned securities during the period of the loan. The market value of the loaned
securities is determined at the close of business each day. If the Fund is
undercollateralized at the close of business due to an increase in market value
of securities on loan, additional collateral is requested from the borrowing
counterparty and is delivered to the Fund on the next business day. Cash
collateral may be invested in approved investments and the Fund bears the risk
of any loss in value of these investments. The Fund retains a portion of the
interest earned from the collateral. If the borrower defaults on its obligation
to return the securities loaned because of insolvency or other reasons, the Fund
could experience delays and cost in recovering the securities loaned or in
gaining access to the collateral. The Fund continues to receive the economic
benefit of interest or dividends paid on the securities loaned in the form of a
substitute payment received from the borrower.
As of October 31, 2007, the Fund had no securities on loan.
- --------------------------------------------------------------------------------
10. RECENT ACCOUNTING PRONOUNCEMENT
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 Fund's tax returns to determine whether it
is "more-likely-than-not" that tax positions taken in the Fund'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
October 31, 2007, the Manager has evaluated the implications of FIN 48 and does
not currently anticipate a material impact to the Fund's financial statements.
The Manager will continue to monitor the Fund's tax positions prospectively for
potential future impacts.
46 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
In September 2006, ("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 October 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.
- --------------------------------------------------------------------------------
11. SUBSEQUENT EVENT
On November 19, 2007, the Fund's Board of Trustees voted to freeze participation
in the retirement plan for the Board's independent trustees by not adding new
participants to the plan after December 31, 2007. Active independent trustees
who have accrued benefits under the plan prior to the freeze date will elect a
distribution method with respect to their benefits. Benefits already accrued
under the plan for Trustees who were participants prior to that freeze date are
not affected.
47 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER QUEST FOR VALUE FUNDS:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Quest Opportunity Value Fund, (one of the portfolios constituting
the Oppenheimer Quest For Value Funds), including the statement of investments,
as of October 31, 2007, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the five-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of October 31, 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
Oppenheimer Quest Opportunity Value Fund as of October 31, 2007, the results of
its operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with U.S.
generally accepted accounting principles.
KPMG LLP
Denver, Colorado
December 13, 2007
48 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2008, if applicable, shareholders of record will receive information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2007. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Capital gain distributions of $0.7909 per share were paid to Class A,
Class B, Class C, Class N and Class Y shareholders, respectively, on December 8,
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 Fund during the fiscal year ended October
31, 2007 which are not designated as capital gain distributions should be
multiplied by 6.40% to arrive at the amount eligible for the corporate
dividend-received deduction.
A portion, if any, of the dividends paid by the Fund during the fiscal
year ended October 31, 2007 which are not designated as capital gain
distributions are eligible for lower individual income tax rates to the extent
that the Fund has received qualified dividend income as stipulated by recent tax
legislation. $14,667,111 of the Fund's fiscal year taxable income may be
eligible for the lower individual income tax rates. In early 2008, shareholders
of record will receive 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 October 31, 2007, $1,555,239 or 9.65% of the ordinary distributions
paid by the Fund qualifies as an interest related dividend and $24,255,971 or
100% of the short-term capital gain distribution paid by the Fund qualifies as a
short-term capital gain dividend.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
49 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
50 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
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- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services by the Manager and its affiliates,
(v) the extent to which economies of scale are realized as the Fund grows and
whether fee levels reflect these economies of scale for Fund investors and (vi)
other benefits to the Manager from its relationship with the Fund. The Board was
aware that there are alternatives to retaining the Manager.
NATURE AND EXTENT OF SERVICES. The Board considered information 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 manager and the
Manager's investment team, who provide research, analysis and other advisory
services in regard to the Fund's investments; securities trading services;
oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
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.
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
51 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
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 Emmanuel Ferreira, the portfolio manager for
the Fund, and the Manager's Value investment team and analysts. 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 other retail front-end load and no-load
flexible portfolio funds advised by the Manager and by other investment
advisers. The Board noted that the Fund's one-year, three-year, five-year and
ten-year 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 considered 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 flexible portfolio funds and other
funds with comparable asset levels and distribution features. The Board noted
that the Fund's contractual and actual management fees and total expenses are
higher than its peer group median. The Board also noted that, for each quarter
during the renewal period through August 31, 2008, the Manager has voluntarily
agreed to reduce its advisory fee rate by .10% of the Fund's average daily net
assets if the Funds trailing one-year total return performance, measured at the
end of the prior calendar quarter is in the fifth quintile of the Fund's Lipper
peer group. If the Fund's total return performance at the end of a subsequent
calendar quarter improves to the fourth
52 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
quintile of the Fund's Lipper peer group, the advisory fee reduction will be
..05% and if the Fund's total return performance in a subsequent calendar quarter
improves to the third or higher quintile of the Fund's Lipper peer group, the
advisory fee reduction will be terminated for the remainder of the renewal
period.
ECONOMIES OF SCALE. The Board reviewed the extent to which the Manager may
realize economies of scale in managing and supporting the Fund, the extent to
which those economies of scale benefit the Fund's shareholders and the current
level of Fund assets in relation to the Fund's breakpoint schedule for its
management fees. The Board also noted the Fund's breakpoints, which are intended
to share economies of scale that may exist as the Fund grows with its
shareholders.
BENEFITS TO THE MANAGER. The Board considered information regarding the
Manager's costs in serving as the Fund's investment adviser, including the costs
associated with the personnel and systems necessary to manage the Fund, and
information regarding the Manager's profitability from its relationship with the
Fund. The Board considered that the Manager must be able to pay and retain
experienced professional personnel at competitive rates to provide services to
the Fund and that maintaining the financial viability of the Manager is
important in order for the Manager to continue to provide significant services
to the Fund and its shareholders. In addition to considering the profits
realized by the Manager, the Board considered information regarding the direct
and indirect benefits the Manager receives as a result of its relationship with
the Fund, including compensation paid to the Manager's affiliates for services
provided and research provided to the Manager in connection with permissible
brokerage arrangements (soft dollar arrangements).
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and the independent Trustees. Fund counsel is independent of the
Manager within the meaning and intent of the Securities and Exchange Commission
Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
concluded that the nature, extent and quality of the services provided to the
Fund by the Manager are a benefit to the Fund and in the best interest of the
Fund's shareholders and that the amount and structure of the compensation
received by the Manager and its affiliates are reasonable in relation to the
services provided. Accordingly, the Board elected to continue the Agreement for
another year. In arriving at this decision, the Board did not single out any
factor or factors as being more important than others, but considered all of the
factors together. The Board judged the terms and conditions of the Agreement,
including the management fee, in light of all of the surrounding circumstances.
53 | OPPENHEIMER QUEST OPPORTUNITY VALUE 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.
THOMAS W. COURTNEY, Principal of Courtney Associates, Inc. (venture capital firm) (since 1982); General
Chairman of the Board of Partner of Trivest Venture Fund (private venture capital fund); President of
Trustees (since 2001), Investment Counseling Federated Investors, Inc. (1973-1982); Trustee of the
Trustee (since 1987) following open-end investment companies: Cash Assets Trust (1984), Premier VIT
Age: 74 (formerly PIMCO Advisors VIT), Tax Free Trust of Arizona (since 1984) and four
funds for the Hawaiian Tax Free Trust. Oversees 10 portfolios in the
OppenheimerFunds complex.
DAVID K. DOWNES, President, Chief Executive Officer and Board Member of CRAFund Advisors, Inc.
Trustee (since 2005) (investment management company) (since January 2004); President of The Community
Age: 67 Reinvestment Act Qualified Investment Fund (investment management company) (since
January 2004); Independent Chairman of the Board of Trustees of Quaker Investment
Trust (registered investment company) (since January 2004); Director of Internet
Capital Group (information technology company) (since October 2003); Chief
Operating Officer and Chief Financial Officer of Lincoln National Investment
Companies, Inc. (subsidiary of Lincoln National Corporation, a publicly traded
company) and Delaware Investments U.S., Inc. (investment management subsidiary of
Lincoln National Corporation) (1993-2003); President, Chief Executive Officer and
Trustee of Delaware Investment Family of Funds (1993-2003); President and Board
Member of Lincoln National Convertible Securities Funds, Inc. and the Lincoln
National Income Funds, TDC (1993-2003); Chairman and Chief Executive Officer of
Retirement Financial Services, Inc. (registered transfer agent and investment
adviser and subsidiary of Delaware Investments U.S., Inc.) (1993-2003); President
and Chief Executive Officer of Delaware Service Company, Inc. (1995-2003); Chief
Administrative Officer, Chief Financial Officer, Vice Chairman and Director of
Equitable Capital Management Corporation (investment subsidiary of Equitable Life
Assurance Society) (1985-1992); Corporate Controller of Merrill Lynch & Company
(financial services holding company) (1977-1985); held the following positions at
the Colonial Penn Group, Inc. (insurance company): Corporate Budget Director
(1974-1977), Assistant Treasurer (1972-1974) and Director of Corporate Taxes
(1969-1972); held the following positions at Price Waterhouse & Company (financial
services firm): Tax Manager (1967-1969), Tax Senior (1965-1967) and Staff
Accountant (1963-1965); United States Marine Corps (1957-1959). Oversees 63
portfolios in the OppenheimerFunds complex.
ROBERT G. GALLI, A director or trustee of other Oppenheimer funds. Oversees 63 portfolios in the
Trustee (since 1998) OppenheimerFunds complex.
Age: 74
LACY B. HERRMANN, Founder and Chairman Emeritus of Aquila Group of Funds (open-end investment
Trustee (since 1987) company) (since December 2004); Chairman of Aquila Management Corporation and
Age: 78 Aquila Investment Management LLC (since August 1984); Chief Executive Officer and
President of Aquila Management Corporation (August 1984-December 1994); Vice
President, Director and Secretary of Aquila Distributors, Inc. (distributor of
Aquila Management Corporation); Treasurer of Aquila Distributors, Inc.; President
and Chairman of the Board of Trustees of Capital Cash Management Trust ("CCMT");
President and Director of STCM Management Company, Inc. (sponsor and adviser to
CCMT); Chairman, President and Director of InCap Management Corporation;
Sub-Advisor and Administrator of Prime Cash Fund & Short Term Asset Reserves;
54 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
LACY B. HERRMANN, Director of OCC Cash Reserves, Inc. (open-end investment company) (June 2003-December 2004);
Continued Trustee of Premier VIT (formerly PIMCO Advisors VIT) (investment company) (since 1994); Trustee
of OCC Accumulation Trust (open-end investment company) (until December 2004); Trustee Emeritus
of Brown University (since June 1983). Oversees 10 portfolios in the OppenheimerFunds complex.
BRIAN F. WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since September 1995); Director of
Trustee (since 2001) Special Value Opportunities Fund, LLC (registered investment company) (since September 2004);
Age: 64 Member of Zurich Financial Services Investment Advisory Board (insurance) (since October 2004);
Chairman (since August 2007) and Trustee (since August 1991) of the Board of Governing Trustees
of The Jackson Laboratory (non-profit); 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); 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 63 portfolios
in the OppenheimerFunds complex.
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE MR. MURPHY IS AN "INTERESTED TRUSTEE" BECAUSE HE IS AFFILIATED WITH THE MANAGER BY VIRTUE OF
AND OFFICER HIS POSITIONS AS AN OFFICER AND DIRECTOR OF THE MANAGER, AND AS A SHAREHOLDER OF ITS PARENT
COMPANY. THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH
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.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director of the Manager (since June 2001); President of
Trustee (since 2005) and the Manager (September 2000-March 2007); President and director or trustee of other Oppenheimer
President and Principal funds; President and Director of Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent
Executive Officer (since 2001) holding company) and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of
Age: 58 the Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of
the Manager) (November 2001-December 2006); 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 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 company parent of Babson Capital Management
LLC) (since June 1995); Chairman (since October 2007) and Member of the Investment Company
Institute's Board of Governors (since October 2003). Oversees 102 portfolios in the
OppenheimerFunds complex.
55 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. FERREIRA, ZACK,
OF THE FUND 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.
EMMANUEL FERREIRA, Vice President of the Manager (since January 2003); Portfolio Manager at Lashire Investments
Vice President and Portfolio (July 1999-December 2002). An officer of 3 portfolios in the OppenheimerFunds complex.
Manager (since 2003)
Age: 40
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief
Vice President and Chief Compliance Officer of the Manager, OppenheimerFunds Distributor, Inc., Centennial Asset
Compliance Officer Management and Shareholder Services, Inc. (since March 2004); Vice President of
(since 2004) OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and Shareholder
Age: 57 Services, Inc. (since June 1983). Former Vice President and Director of Internal Audit of the
Manager (1997-February 2004). An officer of 102 portfolios in the 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, Inc. and Oppenheimer Partnership
Officer (since 1999) Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since March 2000),
Age: 48 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). An officer of 102 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 102 portfolios in the OppenheimerFunds complex.
Age: 37
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Financial Reporting and
Assistant Treasurer Compliance of First Data Corporation (April 2003-July 2004); Manager of Compliance of Berger
(since 2005) Financial Group LLC (May 2001-March 2003). An officer of 102 portfolios in the OppenheimerFunds
Age: 37 complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the
Secretary (since 2001) Manager; General Counsel and Director of the Distributor (since December 2001); General Counsel
Age: 59 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
56 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND
ROBERT G. ZACK, 2001); Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior Vice
Continued President and General Counsel of OFI Institutional Asset Management, Inc. (since November
2001); Director of OppenheimerFunds International Distributor Limited (since December 2003);
Senior Vice President (May 1985-December 2003). An officer of 102 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). An officer of
(since 2004) 102 portfolios in the OppenheimerFunds complex.
Age: 39
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since September 2004); First
Assistant Secretary Vice President (2000-September 2004), Director (2000-September 2004) and Vice President
(since 2004) (1998-2000) of Merrill Lynch Investment Management. An officer of 102 portfolios in the
Age: 43 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 2003)
(since 2001) of the Distributor; Assistant Secretary of Centennial Asset Management Corporation (since
Age: 42 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 102 portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE UPON
REQUEST, BY CALLING 1.800.525.7048.
57 | OPPENHEIMER QUEST OPPORTUNITY VALUE 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 David Downes, a
member of the Board's Audit Committee, is an audit committee financial expert
and that Mr. Downes is "independent" for purposes of this Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The principal accountant for the audit of the registrant's annual financial
statements billed $69,000 in fiscal 2007 and $72,500 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 $256,236 in fiscal 2007 and $216,204 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.
(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 to the registrant 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.
(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 $256,236 in fiscal 2007 and $216,204 in
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 AUDIT COMMITTEE PROVISIONS WITH RESPECT TO NOMINATIONS OF
DIRECTORS/TRUSTEES TO THE RESPECTIVE BOARDS
1. The Fund's Audit Committee (the "Committee") will evaluate potential Board
candidates to assess their qualifications. The Committee shall have the
authority, upon approval of the Board, to retain an executive search firm
to assist in this effort. The Committee may consider recommendations by
business and personal contacts of current Board members and by executive
search firms which the Committee may engage from time to time and may also
consider shareholder recommendations. The Committee may consider the advice
and recommendation of the Funds' investment manager and its affiliates in
making the selection.
2. The Committee shall screen candidates for Board membership. The Committee
has not established specific qualifications that it believes must be met by
a trustee nominee. In evaluating trustee nominees, the Committee considers,
among other things, an individual's background, skills, and experience;
whether the individual is an "interested person" as defined in the
Investment Company Act of 1940; and whether the individual would be deemed
an "audit committee financial expert" within the meaning of applicable SEC
rules. The Committee also considers whether the individual's background,
skills, and experience will complement the background, skills, and
experience of other nominees and will contribute to the Board. There are no
differences in the manner in which the Committee evaluates nominees for
trustees based on whether the nominee is recommended by a shareholder.
3. The Committee may consider nominations from shareholders for the Board at
such times as the Committee meets to consider new nominees for the Board.
The Committee shall have the sole discretion to determine the candidates to
present to the Board and, in such cases where required, to shareholders.
Recommendations for trustee nominees should, at a minimum, be accompanied
by the following:
o the name, address, and business, educational, and/or other pertinent
background of the person being recommended;
o a statement concerning whether the person is an "interested person" as
defined in the Investment Company Act of 1940;
o any other information that the Funds would be required to include in a
proxy statement concerning the person if he or she was nominated; and
o the name and address of the person submitting the recommendation and,
if that person is a shareholder, the period for which that person held
Fund shares.
The recommendation also can include any additional information which the
person submitting it believes would assist the Committee in evaluating the
recommendation.
4. Shareholders should note that a person who owns securities issued by
Massachusetts Mutual Life Insurance Company (the parent company of the
Funds' investment adviser) would be deemed an "interested person" under the
Investment Company Act of 1940. In addition, certain other relationships
with Massachusetts Mutual Life Insurance Company or its subsidiaries, with
registered broker-dealers, or with the Funds' outside legal counsel may
cause a person to be deemed an "interested person."
5. Before the Committee decides to nominate an individual as a trustee,
Committee members and other directors customarily interview the individual
in person. In addition, the individual customarily is asked to complete a
detailed questionnaire which is designed to elicit information which must
be disclosed under SEC and stock exchange rules and to determine whether
the individual is subject to any statutory disqualification from serving as
a trustee of a registered investment company.
ITEM 11. CONTROLS AND PROCEDURES.
Based on their evaluation of the registrant's disclosure controls and procedures
(as defined in rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR
270.30a-3(c)) as of 10/31/2007, 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 Quest for Value Funds
By: /s/ John V. Murphy
---------------------------
John V. Murphy
Principal Executive Officer
Date: 12/11/2007
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: 12/11/2007
By: /s/ Brian W. Wixted
---------------------------
Brian W. Wixted
Principal Financial Officer
Date: 12/11/2007