UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-21686
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Oppenheimer Portfolio Series
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(Exact name of registrant as specified in charter)
6803 South Tucson Way, Centennial, Colorado 80112-3924
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(Address of principal executive offices) (Zip code)
Robert G. Zack, Esq.
OppenheimerFunds, Inc.
Two World Financial Center, New York, New York 10281-1008
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(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 768-3200
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Date of fiscal year end: January 31
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Date of reporting period: 01/31/2008
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ITEM 1. REPORTS TO STOCKHOLDERS.
JANUARY 31, 2008
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Conservative Management
Investor Fund Commentaries
A Series of Oppenheimer Portfolio Series and
Annual Report
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MANAGEMENT COMMENTARIES
Market Recap and Outlook
Listing of Top Holdings
ANNUAL REPORT [GRAPHIC]
Portfolio Performance Discussion
Listing of Investments
Financial Statements
[LOGO] OPPENHEIMERFUNDS(R)
The Right Way to Invest
TOP HOLDINGS AND ALLOCATIONS
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ASSET CLASS ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Fixed Income Funds 68.4%
U.S. Equity Funds 15.7
Alternative Investment Funds 10.5
Global Equity Fund 5.1
Money Market Fund 0.3
Portfolio holdings and allocations are subject to change. Percentages are as of
January 31, 2008, and are based on the total market value of investments in
affiliated companies.
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9 | CONSERVATIVE INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
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HOW HAS THE PORTFOLIO PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS,
INC., OF THE PORTFOLIO'S PERFORMANCE DURING ITS FISCAL YEAR ENDED JANUARY 31,
2008, FOLLOWED BY A GRAPHICAL COMPARISON OF THE PORTFOLIO'S PERFORMANCE TO AN
APPROPRIATE BROAD-BASED MARKET INDEX.
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE. For its fiscal year ending
January 31, 2008, Conservative Investor Fund outperformed its equity benchmark,
the S&P 500 Index but underperformed its fixed income benchmark, the Lehman
Aggregate Bond Index. We attribute the Portfolio's performance to its
diversified structure, strong contributions from its underlying fixed income
funds and to the rebound in commodities, which the Portfolio has exposure to
through its allocation to Oppenheimer Commodity Strategy Total Return Fund's
Class Y shares.
In contrast, the Portfolio's allocations to Oppenheimer Real Estate Fund
and Oppenheimer Champion Income Fund, which were both hurt by the turmoil in the
sub-prime loan market, detracted from returns. Additionally, most of the
Portfolio's equity holdings posted weak performance, which hampered results.
With the exception of Oppenheimer Champion Income Fund, the Portfolio's
underlying fixed-income funds posted positive absolute results, and added to
performance. A top contributor to performance was Oppenheimer International Bond
Fund, which continued to benefit from an emphasis on investments from emerging
markets. Although the Portfolio's two largest holdings, Oppenheimer Core Bond
Fund and Oppenheimer Limited-Term Government Fund, posted weak relative
performance for the period, primarily due to the challenging investment
environment, each Fund posted positive absolute returns and contributed to the
Portfolio's results.
On the alternative investments side, the Portfolio's allocation to
Oppenheimer Commodity Strategy Total Return Fund's Class Y shares was a boon to
the Portfolio's performance. Oppenheimer Commodity Strategy Total Return Fund's
success can be attributed to the strength in commodity prices, especially in the
price of oil, which continued to rise due to strong global demand.
The single largest detractor from performance was the Portfolio's
allocation to Oppenheimer Real Estate Fund. The Fund's weak performance is
attributed to the combined effects of a deteriorating housing market, higher
energy prices and concerns in the credit markets. It is important to mention
that the negative effects that Oppenheimer Real Estate Fund had on the Portfolio
were reduced due to an annual rebalance that occurred at the start of the
period. The rebalance brought the Portfolio's allocation to Oppenheimer Real
Estate Fund's Class Y shares to slightly under the target level of 5%, which
prevented any additional exposure to the weakened Fund. In addition, the
Portfolio's exposure to the struggling high yield bond market through its
allocation to Oppenheimer Champion Income Fund's Class Y shares also detracted
from performance.
The Portfolio's allocation to equity funds also hampered returns. We
attribute the overall weakness in the Portfolio's equity component to the
intense volatility that gripped the capital markets over the last half of the
period. A top detractor was Oppenheimer Global Fund, which declined due to weak
stock selection. Although most of the
10 | CONSERVATIVE INVESTOR FUND
Portfolio's underlying equity funds posted negative performance, Oppenheimer
Capital Appreciation Fund delivered positive absolute returns and successfully
outperformed the broader equity market, as represented by the S&P 500 Index for
the period. When economic growth slows, earnings growth becomes more difficult
to achieve. As a result of this cyclical event, investors become risk adverse
and seek out larger, well-established companies, a situation that unfolded over
the period and aided Oppenheimer Capital Appreciation Fund's performance.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each class of shares of the
Portfolio held until January 31, 2008. Performance is measured from the
inception of Classes A, B, C, N and Y on April 5, 2005. The Portfolio's
performance reflects the deduction of the maximum initial sales charge on Class
A shares, the applicable contingent deferred sales charge on Class B, Class C
and Class N shares, and reinvestments of all dividends and capital gains
distributions. Past performance cannot guarantee future results.
The Portfolio's performance is compared to the performance of the Lehman
Aggregate Bond Index and the S&P 500 Index. The Lehman Aggregate Bond Index is
an index of U.S. Government and corporate bonds that includes reinvestment of
interest. The S&P 500 Index is a broad-based measure of domestic stock
performance that includes the reinvestment of dividends. Index performance
reflects the reinvestment of income but does not consider the effect of
transaction costs, and none of the data in the graphs shows the effect of taxes.
The Portfolio's performance reflects the effects of the Portfolio's business and
operating expenses. While index comparisons may be useful to provide a benchmark
for the Portfolio's performance, it must be noted that the Portfolio's
investments are not limited to the investments in the index.
11 | CONSERVATIVE INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
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CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Conservative Investor Fund (Class A)
S&P 500 Index
Lehman Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio
Series: Conservative Lehman Aggregate
Investor Fund (Class A) S&P 500 Index Bond Index
04/05/2005 $ 9,425 $10,000 $10,000
04/30/2005 $ 9,406 $ 9,810 $10,135
07/31/2005 $ 9,745 $10,514 $10,207
10/31/2005 $ 9,708 $10,327 $10,150
01/31/2006 $10,099 $11,005 $10,293
04/30/2006 $10,195 $11,322 $10,207
07/31/2006 $10,185 $11,079 $10,356
10/31/2006 $10,530 $12,013 $10,677
01/31/2007 $10,817 $12,600 $10,734
04/30/2007 $11,104 $13,046 $10,959
07/31/2007 $10,975 $12,865 $10,934
10/31/2007 $11,529 $13,761 $11,252
01/31/2008 $11,121 $12,309 $11,679
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/08
1-Year -3.10% Since Inception (4/5/05) 3.84%
12 | CONSERVATIVE INVESTOR FUND
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Conservative Investor Fund (Class B)
S&P 500 Index
Lehman Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio
Series: Conservative Lehman Aggregate
Investor Fund (Class B) S&P 500 Index Bond Index
04/05/2005 $10,000 $10,000 $10,000
04/30/2005 $ 9,970 $ 9,810 $10,135
07/31/2005 $10,320 $10,514 $10,207
10/31/2005 $10,250 $10,327 $10,150
01/31/2006 $10,644 $11,005 $10,293
04/30/2006 $10,725 $11,322 $10,207
07/31/2006 $10,694 $11,079 $10,356
10/31/2006 $11,039 $12,013 $10,677
01/31/2007 $11,312 $12,600 $10,734
04/30/2007 $11,583 $13,046 $10,959
07/31/2007 $11,426 $12,865 $10,934
10/31/2007 $11,978 $13,761 $11,252
01/31/2008 $11,230 $12,309 $11,679
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/08
1-Year -2.98% Since Inception (4/5/05) 4.20%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 3% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 17 FOR FURTHER
INFORMATION.
13 | CONSERVATIVE INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
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CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Conservative Investor Fund (Class C)
S&P 500 Index
Lehman Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio
Series: Conservative Lehman Aggregate
Investor Fund (Class C) S&P 500 Index Bond Index
04/05/2005 $10,000 $10,000 $10,000
04/30/2005 $ 9,970 $ 9,810 $10,135
07/31/2005 $10,310 $10,514 $10,207
10/31/2005 $10,250 $10,327 $10,150
01/31/2006 $10,637 $11,005 $10,293
04/30/2006 $10,728 $11,322 $10,207
07/31/2006 $10,698 $11,079 $10,356
10/31/2006 $11,033 $12,013 $10,677
01/31/2007 $11,304 $12,600 $10,734
04/30/2007 $11,586 $13,046 $10,959
07/31/2007 $11,429 $12,865 $10,934
10/31/2007 $11,982 $13,761 $11,252
01/31/2008 $11,524 $12,309 $11,679
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/08
1-Year 0.96% Since Inception (4/5/05) 5.15%
14 | CONSERVATIVE INVESTOR FUND
CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Conservative Investor Fund (Class N)
S&P 500 Index
Lehman Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio
Series: Conservative Lehman Aggregate
Investor Fund (Class N) S&P 500 Index Bond Index
04/05/2005 $10,000 $10,000 $10,000
04/30/2005 $10,135 $ 9,810 $ 9,980
07/31/2005 $10,207 $10,514 $10,340
10/31/2005 $10,150 $10,327 $10,290
01/31/2006 $10,293 $11,005 $10,697
04/30/2006 $10,207 $11,322 $10,789
07/31/2006 $10,356 $11,079 $10,779
10/31/2006 $10,677 $12,013 $11,135
01/31/2007 $10,734 $12,600 $11,429
04/30/2007 $10,959 $13,046 $11,723
07/31/2007 $10,934 $12,865 $11,576
10/31/2007 $11,252 $13,761 $12,142
01/31/2008 $11,679 $12,309 $11,708
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/08
1-Year 1.45% Since Inception (4/5/05) 5.75%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 3% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 17 FOR FURTHER
INFORMATION.
15 | CONSERVATIVE INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
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CLASS Y SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Conservative Investor Fund (Class Y)
S&P 500 Index
Lehman Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio
Series: Conservative Lehman Aggregate
Investor Fund (Class Y) S&P 500 Index Bond Index
04/05/2005 $10,000 $10,000 $10,000
04/30/2005 $ 9,980 $ 9,810 $10,135
07/31/2005 $10,350 $10,514 $10,207
10/31/2005 $10,320 $10,327 $10,150
01/31/2006 $10,734 $11,005 $10,293
04/30/2006 $10,846 $11,322 $10,207
07/31/2006 $10,846 $11,079 $10,356
10/31/2006 $11,223 $12,013 $10,677
01/31/2007 $11,539 $12,600 $10,734
04/30/2007 $11,855 $13,046 $10,959
07/31/2007 $11,728 $12,865 $10,934
10/31/2007 $12,329 $13,761 $11,252
01/31/2008 $11,903 $12,309 $11,679
AVERAGE ANNUAL TOTAL RETURNS OF CLASS Y SHARES OF THE PORTFOLIO AT 1/31/08
1-Year 3.15% Since Inception (4/5/05) 6.37%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 3% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 17 FOR FURTHER
INFORMATION.
16 | CONSERVATIVE INVESTOR FUND
NOTES
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Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. The Portfolio's total returns
shown do not reflect the deduction of income taxes on an individual's
investment. Taxes may reduce your actual investment returns on income or gains
paid by the Portfolio or any gains you may realize if you sell your shares.
INVESTORS SHOULD CONSIDER THE PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, AND
OTHER CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PORTFOLIO'S
PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT THE PORTFOLIO, AND MAY BE
OBTAINED BY ASKING YOUR FINANCIAL ADVISOR, CALLING US AT 1.800.525.7048 OR
VISITING OUR WEBSITE AT WWW.OPPENHEIMERFUNDS.COM. READ THE PROSPECTUS CAREFULLY
BEFORE INVESTING.
The Portfolio's investment strategy and focus can change over time. The mention
of specific fund holdings does not constitute a recommendation by
OppenheimerFunds, Inc.
CLASS A shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class A returns include the maximum initial sales charge of
5.75%.
CLASS B shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 3% (since inception). Class B shares are subject
to an annual 0.75% asset-based sales charge.
CLASS C shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
CLASS N shares of the Portfolio were first publicly offered on 4/5/05. Class N
shares are offered only through retirement plans. Unless otherwise noted, Class
N returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
17 | CONSERVATIVE INVESTOR FUND
NOTES
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CLASS Y shares of the Portfolio were first publicly offered on 4/5/05. Class Y
shares are offered only to certain institutional investors under special
agreements with the Distributor.
An explanation of the calculation of performance is in the Portfolio's Statement
of Additional Information.
18 | CONSERVATIVE INVESTOR FUND
PORTFOLIO EXPENSES
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PORTFOLIO EXPENSES. As a shareholder of the Portfolio, you incur two types of
costs: (1) transaction costs, which may include sales charges (loads) on
purchase payments, contingent deferred sales charges on redemptions; and
redemption fees (if applicable); and (2) ongoing costs, including management
fees; distribution and service fees; and other Portfolio expenses. These
examples are intended to help you understand your ongoing costs (in dollars) of
investing in the Portfolio and to compare these costs with the ongoing costs of
investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended January 31, 2008.
ACTUAL EXPENSES. The first section of the table provides information about
actual account values and actual expenses. You may use the information in this
section 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 first section
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 second section of the table
provides information about hypothetical account values and hypothetical expenses
based on the Portfolio's actual expense ratio for each class of shares, and an
assumed rate of return of 5% per year for each class before expenses, which is
not the actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Portfolio and other funds. To do so, compare this 5% hypothetical example
for the class of shares you hold with the 5% hypothetical examples that appear
in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front-end
or contingent deferred sales charges (loads), or a $12.00 fee imposed annually
on accounts valued at less than $500.00 (subject to exceptions described in
19 | CONSERVATIVE INVESTOR FUND
PORTFOLIO EXPENSES Continued
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the Statement of Additional Information). Therefore, the "hypothetical" section
of the table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
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BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
ACTUAL AUGUST 1, 2007 JANUARY 31, 2008 JANUARY 31, 2008
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Class A $ 1,000.00 $ 1,013.30 $ 1.78
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Class B 1,000.00 1,009.10 5.94
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Class C 1,000.00 1,008.30 5.84
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Class N 1,000.00 1,011.40 3.50
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Class Y 1,000.00 1,014.90 0.20
HYPOTHETICAL
(5% return before expenses)
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Class A 1,000.00 1,023.44 1.79
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Class B 1,000.00 1,019.31 5.97
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Class C 1,000.00 1,019.41 5.87
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Class N 1,000.00 1,021.73 3.52
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Class Y 1,000.00 1,025.00 0.20
Expenses are equal to the Portfolio's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios,
excluding all underlying fund expenses, on the 6-month period ended January 31,
2008 are as follows:
CLASS EXPENSE RATIOS
- ----------------------------
Class A 0.35%
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Class B 1.17
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Class C 1.15
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Class N 0.69
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Class Y 0.04
The expense ratios reflect reduction to custodian expenses and voluntary waivers
or reimbursements of expenses by the Portfolio's Manager that can be terminated
at any time, without advance notice. The "Financial Highlights" tables in the
Portfolio's financial statements, included in this report, also show the gross
expense ratios, without such waivers or reimbursements and reduction to
custodian expenses, if applicable.
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20 | CONSERVATIVE INVESTOR FUND
STATEMENT OF INVESTMENTS January 31, 2008
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SHARES VALUE
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INVESTMENT COMPANIES--99.1% 1
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ALTERNATIVE INVESTMENT FUNDS--10.4%
Oppenheimer Commodity Strategy Total Return Fund, Cl. Y 3,003,733 $ 22,618,106
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Oppenheimer Real Estate Fund, Cl. Y 942,921 18,122,931
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40,741,037
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FIXED INCOME FUNDS--67.8%
Oppenheimer Champion Income Fund, Cl. Y 4,973,921 42,527,022
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Oppenheimer Core Bond Fund, Cl. Y 12,965,949 131,474,726
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Oppenheimer International Bond Fund, Cl. Y 3,634,483 23,842,207
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Oppenheimer Limited-Term Government Fund, Cl. Y 6,837,271 68,304,337
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266,148,292
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GLOBAL EQUITY FUND--5.1%
Oppenheimer Global Fund, Cl. Y 300,157 20,029,465
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MONEY MARKET FUND--0.3%
Oppenheimer Institutional Money Market Fund, Cl. E, 4.54% 2 1,112,684 1,112,684
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U.S. EQUITY FUNDS--15.5%
Oppenheimer Capital Appreciation Fund, Cl. Y 430,901 20,790,964
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Oppenheimer Main Street Fund, Cl. Y 588,201 20,269,403
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Oppenheimer Value Fund, Cl. Y 818,623 19,884,358
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60,944,725
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TOTAL INVESTMENTS, AT VALUE (COST $395,904,451) 99.1% 388,976,203
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OTHER ASSETS NET OF LIABILITIES 0.9 3,537,792
---------------------------
NET ASSETS 100.0% $ 392,513,995
===========================
Industry classifications are unaudited.
21 | CONSERVATIVE INVESTOR FUND
STATEMENT OF INVESTMENTS Continued
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FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended January 31, 2008, by virtue of the Portfolio owning
at least 5% of the voting securities of the issuer or as a result of the
Portfolio and the issuer having the same investment adviser. Transactions during
the period in which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
JANUARY 31, 2007 ADDITIONS REDUCTIONS JANUARY 31, 2008
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Oppenheimer Capital Appreciation Fund, Cl. Y 231,332 224,236 24,667 430,901
Oppenheimer Champion Income Fund, Cl. Y 2,477,295 2,779,593 282,967 4,973,921
Oppenheimer Commodity Strategy Total
Return Fund, Cl. Y 1,441,991 2,038,432 476,690 3,003,733
Oppenheimer Core Bond Fund, Cl. Y 6,523,270 7,074,674 631,995 12,965,949
Oppenheimer Global Fund, Cl. Y 155,463 165,588 20,894 300,157
Oppenheimer Institutional Money
Market Fund, Cl. E 637,460 92,894,521 92,419,297 1,112,684
Oppenheimer International Bond Fund, Cl. Y 1,863,135 1,986,532 215,184 3,634,483
Oppenheimer Limited-Term Government
Fund, Cl. Y 3,414,211 3,755,936 332,876 6,837,271
Oppenheimer Main Street Fund, Cl. Y 280,537 343,117 35,453 588,201
Oppenheimer Real Estate Fund, Cl. Y 506,371 579,067 142,517 942,921
Oppenheimer Value Fund, Cl. Y 439,532 454,957 75,866 818,623
DIVIDEND REALIZED
VALUE INCOME GAIN (LOSS)
- ---------------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation Fund, Cl. Y $ 20,790,964 $ -- $ (36,009)
Oppenheimer Champion Income Fund, Cl. Y 42,527,022 2,407,069 (90,817)
Oppenheimer Commodity Strategy Total Return
Fund, Cl. Y 22,618,106 2,513,908 (228,456)
Oppenheimer Core Bond Fund, Cl. Y 131,474,726 4,060,773 (87,741)
Oppenheimer Global Fund, Cl. Y 20,029,465 358,425 (51,533)
Oppenheimer Institutional Money Market
Fund, Cl. E 1,112,684 33,052 --
Oppenheimer International Bond Fund, Cl. Y 23,842,207 1,333,396 (7,510)
Oppenheimer Limited-Term Government Fund, Cl. Y 68,304,337 2,432,064 (40,412)
Oppenheimer Main Street Fund, Cl. Y 20,269,403 1,089,054 (70,670)
Oppenheimer Real Estate Fund, Cl. Y 18,122,931 699,052 67,268
Oppenheimer Value Fund, Cl. Y 19,884,358 644,372 (44,212)
------------------------------------------------
$ 388,976,203 $ 15,571,165 $ (590,092)
================================================
2. Rate shown is the 7-day yield as of January 31, 2008.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 | CONSERVATIVE INVESTOR FUND
STATEMENT OF ASSETS AND LIABILITIES January 31, 2008
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments--
affiliated companies (cost $395,904,451) $ 388,976,203
- ------------------------------------------------------------------------------------------------
Cash 722,013
- ------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 4,837,235
Dividends 1,206,048
Other 6,004
---------------
Total assets 395,747,503
- ------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 2,413,720
Shares of beneficial interest redeemed 663,094
Distribution and service plan fees 76,727
Transfer and shareholder servicing agent fees 25,253
Shareholder communications 13,645
Trustees' compensation 12,748
Other 28,321
---------------
Total liabilities 3,233,508
- ------------------------------------------------------------------------------------------------
NET ASSETS $ 392,513,995
===============
- ------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 36,663
- ------------------------------------------------------------------------------------------------
Additional paid-in capital 396,268,296
- ------------------------------------------------------------------------------------------------
Accumulated net investment income 152,487
- ------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments 2,984,797
- ------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments (6,928,248)
---------------
NET ASSETS $ 392,513,995
===============
23 | CONSERVATIVE INVESTOR FUND
STATEMENT OF ASSETS AND LIABILITIES Continued
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- ------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$199,125,224 and 18,530,501 shares of beneficial interest outstanding) $ 10.75
Maximum offering price per share (net asset value plus sales charge of
5.75% of offering price) $ 11.41
- ------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $35,068,064
and 3,287,292 shares of beneficial interest outstanding) $ 10.67
- ------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $98,955,265
and 9,296,399 shares of beneficial interest outstanding) $ 10.64
- ------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $58,761,742
and 5,492,927 shares of beneficial interest outstanding) $ 10.70
- ------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $603,700 and 55,963 shares of beneficial interest outstanding) $ 10.79
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | CONSERVATIVE INVESTOR FUND
STATEMENT OF OPERATIONS For the Year Ended January 31, 2008
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------
Dividends from affiliated companies $ 15,571,165
- ------------------------------------------------------------------------------------------------
Interest 21,674
- ------------------------------------------------------------------------------------------------
Other income 1,304
---------------
Total investment income 15,594,143
- ------------------------------------------------------------------------------------------------
EXPENSES
- ------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 379,582
Class B 276,185
Class C 739,473
Class N 188,878
- ------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 119,396
Class B 36,355
Class C 91,075
Class N 57,890
Class Y 51
- ------------------------------------------------------------------------------------------------
Shareholder communications:
Class A 19,020
Class B 7,187
Class C 11,585
Class N 1,683
Class Y 22
- ------------------------------------------------------------------------------------------------
Trustees' compensation 8,061
- ------------------------------------------------------------------------------------------------
Custodian fees and expenses 1,584
- ------------------------------------------------------------------------------------------------
Other 40,058
---------------
Total expenses 1,978,085
Less reduction to custodian expenses (48)
Less waivers and reimbursements of expenses (635)
---------------
Net expenses 1,977,402
- ------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 13,616,741
- ------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments:
Affiliated companies (590,092)
Distributions received from affiliated companies 4,384,167
---------------
Net realized gain 3,794,075
- ------------------------------------------------------------------------------------------------
Net change in unrealized depreciation on investments (12,522,384)
- ------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 4,888,432
===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | CONSERVATIVE INVESTOR FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED JANUARY 31, 2008 2007
- -----------------------------------------------------------------------------------------------------------------
OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
Net investment income $ 13,616,741 $ 5,562,146
- -----------------------------------------------------------------------------------------------------------------
Net realized gain 3,794,075 1,186,431
- -----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (12,522,384) 4,526,707
--------------------------------
Net increase in net assets resulting from operations 4,888,432 11,275,284
- -----------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (7,251,696) (3,003,750)
Class B (1,017,520) (480,154)
Class C (3,039,227) (1,164,379)
Class N (1,836,835) (517,426)
Class Y (29,725) (3,818)
--------------------------------
(13,175,003) (5,169,527)
- -----------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (1,026,863) (155,287)
Class B (175,905) (31,426)
Class C (509,106) (73,612)
Class N (274,075) (28,428)
Class Y (3,952) (185)
--------------------------------
(1,989,901) (288,938)
- -----------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest transactions:
Class A 93,910,947 60,904,680
Class B 13,829,566 12,171,265
Class C 50,792,318 30,347,750
Class N 39,096,928 13,094,093
Class Y 504,155 31,178
--------------------------------
198,133,914 116,548,966
- -----------------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
Total increase 187,857,442 122,365,785
- -----------------------------------------------------------------------------------------------------------------
Beginning of period 204,656,553 82,290,768
--------------------------------
End of period (including accumulated net investment income
of $152,487 and $536,524, respectively) $ 392,513,995 $ 204,656,553
================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | CONSERVATIVE INVESTOR FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED JANUARY 31, 2008 2007 2006 1
- -----------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.93 $ 10.53 $ 10.00
- -----------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .55 .46 .38
Net realized and unrealized gain (loss) (.24) .29 .33
---------------------------------
Total from investment operations .31 .75 .71
- -----------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.43) (.33) (.18)
Distributions from net realized gain (.06) (.02) --
---------------------------------
Total dividends and/or distributions to shareholders (.49) (.35) (.18)
- -----------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.75 $ 10.93 $ 10.53
=================================
- -----------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 2.81% 7.11% 7.15%
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $199,125 $110,378 $46,318
- -----------------------------------------------------------------------------------------------
Average net assets (in thousands) $154,289 $ 76,542 $21,844
- -----------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 4.93% 4.24% 4.50%
Total expenses 5 0.35% 0.38% 0.53%
Expenses after payments, waivers and/or reimbursements
and reduction to custodian expenses 0.35% 0.38% 0.51%
- -----------------------------------------------------------------------------------------------
Portfolio turnover rate 10% 5% 11%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods less than one full year.
5. Total expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2008 0.91%
Year Ended January 31, 2007 0.98%
Period Ended January 31, 2006 1.19%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | CONSERVATIVE INVESTOR FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS B YEAR ENDED JANUARY 31, 2008 2007 2006 1
- -----------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.87 $ 10.49 $ 10.00
- -----------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .44 .36 .32
Net realized and unrealized gain (loss) (.22) .30 .32
---------------------------------
Total from investment operations .22 .66 .64
- -----------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.36) (.26) (.15)
Distributions from net realized gain (.06) (.02) --
---------------------------------
Total dividends and/or distributions to shareholders (.42) (.28) (.15)
- -----------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.67 $ 10.87 $ 10.49
=================================
- -----------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 1.93% 6.28% 6.44%
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 35,068 $ 21,991 $ 9,163
- -----------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 27,664 $ 15,882 $ 4,018
- -----------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 4.01% 3.36% 3.74%
Total expenses 5 1.18% 1.23% 1.39%
Expenses after payments, waivers and/or reimbursements
and reduction to custodian expenses 1.18% 1.23% 1.34%
- -----------------------------------------------------------------------------------------------
Portfolio turnover rate 10% 5% 11%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods less than one full year.
5. Total expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2008 1.74%
Year Ended January 31, 2007 1.83%
Period Ended January 31, 2006 2.05%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | CONSERVATIVE INVESTOR FUND
CLASS C YEAR ENDED JANUARY 31, 2008 2007 2006 1
- -----------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.85 $ 10.48 $ 10.00
- -----------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .46 .37 .32
Net realized and unrealized gain (loss) (.24) .29 .31
---------------------------------
Total from investment operations .22 .66 .63
- -----------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.37) (.27) (.15)
Distributions from net realized gain (.06) (.02) --
---------------------------------
Total dividends and/or distributions to shareholders (.43) (.29) (.15)
- -----------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.64 $ 10.85 $ 10.48
=================================
- -----------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 1.94% 6.28% 6.37%
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 98,955 $ 50,876 $19,145
- -----------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 74,109 $ 35,277 $ 7,647
- -----------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 4.15% 3.46% 3.78%
Total expenses 5 1.15% 1.19% 1.36%
Expenses after payments, waivers and/or reimbursements
and reduction to custodian expenses 1.15% 1.19% 1.33%
- -----------------------------------------------------------------------------------------------
Portfolio turnover rate 10% 5% 11%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods less than one full year.
5. Total expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2008 1.71%
Year Ended January 31, 2007 1.79%
Period Ended January 31, 2006 2.02%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | CONSERVATIVE INVESTOR FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS N YEAR ENDED JANUARY 31, 2008 2007 2006 1
- -----------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.90 $ 10.51 $ 10.00
- -----------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .53 .44 .41
Net realized and unrealized gain (loss) (.26) .28 .28
---------------------------------
Total from investment operations .27 .72 .69
- -----------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.41) (.31) (.18)
Distributions from net realized gain (.06) (.02) --
---------------------------------
Total dividends and/or distributions to shareholders (.47) (.33) (.18)
- -----------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.70 $ 10.90 $ 10.51
=================================
- -----------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 2.43% 6.84% 6.98%
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 58,762 $ 21,277 $ 7,569
- -----------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 37,891 $ 13,671 $ 2,231
- -----------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 4.74% 4.08% 4.82%
Total expenses 5 0.66% 0.66% 0.72%
Expenses after payments, waivers and/or reimbursements
and reduction to custodian expenses 0.66% 0.66% 0.71%
- -----------------------------------------------------------------------------------------------
Portfolio turnover rate 10% 5% 11%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods less than one full year.
5. Total expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2008 1.22%
Year Ended January 31, 2007 1.26%
Period Ended January 31, 2006 1.38%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30 | CONSERVATIVE INVESTOR FUND
CLASS Y YEAR ENDED JANUARY 31, 2008 2007 2006 1
- -----------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.96 $ 10.54 $ 10.00
- -----------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .64 .49 .38
Net realized and unrealized gain (loss) (.29) .30 .35
------------------------------
Total from investment operations .35 .79 .73
- -----------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.46) (.35) (.19)
Distributions from net realized gain (.06) (.02) --
------------------------------
Total dividends and/or distributions to shareholders (.52) (.37) (.19)
- -----------------------------------------------------------------------------------------
Net asset value, end of period $ 10.79 $ 10.96 $ 10.54
==============================
- -----------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 3.15% 7.50% 7.34%
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 604 $ 135 $ 96
- -----------------------------------------------------------------------------------------
Average net assets (in thousands) $ 385 $ 127 $ 71
- -----------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 5.70% 4.57% 4.42%
Total expenses 5 0.01% 0.06% 0.30%
Expenses after payments, waivers and/or reimbursements
and reduction to custodian expenses 0.01% 0.06% 0.25%
- -----------------------------------------------------------------------------------------
Portfolio turnover rate 10% 5% 11%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods less than one full year.
5. Total expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2008 0.57%
Year Ended January 31, 2007 0.66%
Period Ended January 31, 2006 0.96%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31 | CONSERVATIVE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Portfolio Series (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
Conservative Investor Fund (the "Portfolio") is a series of the Fund whose
investment objective is to seek current income with a secondary objective of
long-term growth of capital. The Portfolio is a special type of mutual fund
known as a "fund of funds" because it invests in other mutual funds. The
Portfolio normally invests in a portfolio consisting of a target weighted
allocation in Class A or Class Y shares of other Oppenheimer funds. The Fund's
investment adviser is OppenheimerFunds, Inc. (the "Manager").
The Portfolio offers Class A, Class B, Class C, Class N and Class Y
shares. Class A shares are sold at their offering price, which is normally net
asset value plus a front-end sales charge. Class B, Class C and Class N shares
are sold without a front-end sales charge but may be subject to a contingent
deferred sales charge ("CDSC"). Class N shares are sold only through retirement
plans. Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC, however, the institutional investor
may impose charges on those accounts. All classes of shares have identical
rights and voting privileges with respect to the Portfolio in general and
exclusive voting rights on matters that affect that class alone. Earnings, net
assets and net asset value per share may differ due to each class having its own
expenses, such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares 72
months after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Portfolio.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Portfolio calculates the net asset value of each class
of its shares based upon the net asset value of the applicable Underlying Fund.
For each Underlying Fund, the net asset value per share for a class of shares is
determined as of the close of the New York Stock Exchange (the "Exchange"),
normally 4:00 P. M. Eastern time, on each day the Exchange is open for trading
by dividing the value of the Underlying Fund's net assets attributable to that
class by the number of outstanding shares of that class on that day. To
determine net asset values, the Underlying Fund's assets are valued primarily on
the basis of current market quotations. Securities for which market quotations
are not readily available are valued at their fair value. Securities whose
values have been materially affected by what the Manager identifies as a
significant event occurring before the Underlying 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 Underlying Fund's Board of Trustees. "Money market-type" debt
instruments with remaining maturities of sixty days
32 | CONSERVATIVE INVESTOR FUND
or less are valued at cost adjusted by the amortization of discount or premium
to maturity (amortized cost), which approximates market value.
- --------------------------------------------------------------------------------
RISKS OF INVESTING IN THE UNDERLYING FUNDS. Each of the Underlying Funds in
which the Portfolio invests has its own investment risks, and those risks can
affect the value of the Portfolio's investments and therefore the value of the
Portfolio's shares. To the extent that the Portfolio invests more of its assets
in one Underlying Fund than in another, the Portfolio will have greater exposure
to the risks of that Underlying Fund.
- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Portfolio is
permitted to invest daily available cash balances in an affiliated money market
fund. The Portfolio may invest the available cash in Class E shares of
Oppenheimer Institutional Money Market Fund ("IMMF") to seek current income
while preserving liquidity. 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 adviser of IMMF. The
Portfolio's investment in IMMF is included in the Statement of Investments. As a
shareholder, the Portfolio is subject to its proportional share of IMMF's Class
E expenses, including its management fee. The Manager will waive fees and/or
reimburse Portfolio expenses in an amount equal to the indirect management fees
incurred through the Portfolio's investment in IMMF.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Portfolio intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders. Therefore, no federal income or excise tax provision is
required. The Portfolio files income tax returns in U.S. federal and applicable
state jurisdictions. The statute of limitations on the Portfolio's tax return
filings generally remain open for the three preceding fiscal reporting period
ends.
The tax components of capital shown in the following table represent
distribution requirements the Portfolio must satisfy under the income tax
regulations, losses the Portfolio may be able to offset against income and gains
realized in future years and unrealized appreciation or depreciation of
securities and other investments for federal income tax purposes.
33 | CONSERVATIVE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
NET UNREALIZED
DEPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD TAX PURPOSES
------------------------------------------------------------------
$ 164,768 $ 3,399,366 $ -- $ 7,342,819
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Portfolio.
Accordingly, the following amounts have been reclassified for January 31, 2008.
Net assets of the Portfolio were unaffected by the reclassifications.
INCREASE TO
REDUCTION TO ACCUMULATED NET
INCREASE TO ACCUMULATED NET REALIZED GAIN
PAID-IN CAPITAL INVESTMENT INCOME ON INVESTMENTS 1
---------------------------------------------------------------
$ 651,532 $ 825,775 $ 174,243
1. $651,532, all of which was long-term capital gain, was distributed in
connection with Portfolio share redemptions.
The tax character of distributions paid during the years ended January 31, 2008
and January 31, 2007 was as follows:
YEAR ENDED YEAR ENDED
JANUARY 31, 2008 JANUARY 31, 2007
---------------------------------------------------------------
Distributions paid from:
Ordinary income $ 14,107,188 $ 5,169,527
Long-term capital gain 1,057,716 288,938
------------------------------------
Total $ 15,164,904 $ 5,458,465
====================================
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of January 31, 2008 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 $ 396,319,022
==============
Gross unrealized appreciation $ 4,348,669
Gross unrealized depreciation (11,691,488)
--------------
Net unrealized depreciation $ (7,342,819)
==============
34 | CONSERVATIVE INVESTOR FUND
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Portfolio has adopted an unfunded retirement plan
(the "Plan") for the Portfolio's independent trustees. Benefits are based on
years of service and fees paid to each trustee during their period of service.
The Plan was frozen with respect to adding new participants effective December
31, 2006 (the "Freeze Date") and existing Plan Participants as of the Freeze
Date will continue to receive accrued benefits under the Plan. Active
independent trustees as of the Freeze Date have each elected a distribution
method with respect to their benefits under the Plan. During the year ended
January 31, 2008, the Portfolio's projected benefit obligations, payments to
retired trustees and accumulated liability were as follows:
Projected Benefit Obligations Increased $ 3,126
Payments Made to Retired Trustees 4,094
Accumulated Liability as of January 31, 2008 8,767
The Board of Trustees has adopted a compensation deferral plan for independent
trustees that enables trustees to elect to defer receipt of all or a portion of
the annual compensation they are entitled to receive from the Portfolio. For
purposes of determining the amount owed to the Trustee under the plan, deferred
amounts are treated as though equal dollar amounts had been invested in shares
of the Portfolio or in other Oppenheimer funds selected by the Trustee. The
Portfolio purchases shares of the funds selected for deferral by the Trustee in
amounts equal to his or her deemed investment, resulting in a Portfolio asset
equal to the deferred compensation liability. Such assets are included as a
component of "Other" within the asset section of the Statement of Assets and
Liabilities. Deferral of trustees' fees under the plan will not affect the net
assets of the Portfolio, and will not materially affect the Portfolio's assets,
liabilities or net investment income per share. Amounts will be deferred until
distributed in accordance to the compensation deferral plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations and
may differ from U.S. generally accepted accounting principles, are recorded on
the ex-dividend date. Income and capital gain distributions, if any, are
declared and paid annually or at other times as deemed necessary by the Manager.
- --------------------------------------------------------------------------------
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 is recognized on an accrual basis. Market discount and
premium, which are included in interest income on the Statement of Operations,
are amortized or accreted daily.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Portfolio on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder
35 | CONSERVATIVE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
redemption activity. The Portfolio pays interest to its custodian on such cash
overdrafts, to the extent they are not offset by positive cash balances
maintained by the Portfolio, at a rate equal to the Federal Funds Rate plus
0.50%. The "Reduction to custodian expenses" line item, if applicable,
represents earnings on cash balances maintained by the Portfolio during the
period. Such interest expense and other custodian fees may be paid with these
earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Portfolio's organizational documents provide current and
former trustees and officers with a limited indemnification against liabilities
arising in connection with the performance of their duties to the Portfolio. In
the normal course of business, the Portfolio may also enter into contracts that
provide general indemnifications. The Portfolio's maximum exposure under these
arrangements is unknown as this would be dependent on future claims that may be
made against the Portfolio. The risk of material loss from such claims is
considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Portfolio has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED JANUARY 31, 2008 YEAR ENDED JANUARY 31, 2007
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------
CLASS A
Sold 12,148,307 $ 135,563,875 6,963,555 $ 74,510,538
Dividends and/or
distributions reinvested 690,645 7,559,691 273,173 2,955,734
Redeemed (4,406,363) (49,212,619) (1,539,439) (16,561,592)
---------------------------------------------------------------------
Net increase 8,432,589 $ 93,910,947 5,697,289 $ 60,904,680
=====================================================================
- --------------------------------------------------------------------------------------------------
CLASS B
Sold 2,029,631 $ 22,343,722 1,545,034 $ 16,399,320
Dividends and/or
distributions reinvested 105,016 1,140,471 44,717 481,607
Redeemed (870,723) (9,654,627) (439,932) (4,709,662)
---------------------------------------------------------------------
Net increase 1,263,924 $ 13,829,566 1,149,819 $ 12,171,265
=====================================================================
36 | CONSERVATIVE INVESTOR FUND
YEAR ENDED JANUARY 31, 2008 YEAR ENDED JANUARY 31, 2007
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------
CLASS C
Sold 6,283,929 $ 69,461,639 3,733,906 $ 39,648,370
Dividends and/or
distributions reinvested 294,395 3,191,243 104,459 1,122,933
Redeemed (1,969,339) (21,860,564) (977,406) (10,423,553)
---------------------------------------------------------------------
Net increase 4,608,985 $ 50,792,318 2,860,959 $ 30,347,750
=====================================================================
- --------------------------------------------------------------------------------------------------
CLASS N
Sold 5,418,049 $ 60,119,664 1,890,946 $ 20,227,682
Dividends and/or
distributions reinvested 166,742 1,815,822 43,968 474,413
Redeemed (2,044,399) (22,838,558) (702,789) (7,608,002)
---------------------------------------------------------------------
Net increase 3,540,392 $ 39,096,928 1,232,125 $ 13,094,093
=====================================================================
- --------------------------------------------------------------------------------------------------
CLASS Y
Sold 70,557 $ 802,208 11,192 $ 118,410
Dividends and/or
distributions reinvested 2,971 32,626 366 3,967
Redeemed (29,847) (330,679) (8,365) (91,199)
---------------------------------------------------------------------
Net increase 43,681 $ 504,155 3,193 $ 31,178
=====================================================================
- --------------------------------------------------------------------------------
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 January
31, 2008, were as follows:
PURCHASES SALES
- --------------------------------------------------------------------------------
Investment securities $ 224,502,607 $ 27,740,572
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the investment advisory agreement, the Manager does not
charge a management fee, but rather collects indirect management fees from
investments in the Underlying Funds. The weighted indirect management fees
collected from the Underlying Funds, as a percent of average daily net assets of
the Portfolio for the year ended January 31, 2008 was 0.53%.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services ("OFS"), a division of the
Manager, acts as the transfer and shareholder servicing agent for the Portfolio.
The Portfolio pays OFS a per account fee. For the year ended January 31, 2008,
the Portfolio paid $294,943 to OFS for services to the Portfolio.
Additionally, Class Y shares are subject to minimum fees of $10,000 annually
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.
37 | CONSERVATIVE INVESTOR 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 Portfolio, OppenheimerFunds Distributor, Inc. (the
"Distributor") acts as the Portfolio's principal underwriter in the continuous
public offering of the Portfolio's classes of shares.
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Portfolio has adopted a Service Plan (the
"Plan") for Class A shares under Rule 12b-1 of the Investment Company Act of
1940. Under the Plan, the Portfolio reimburses the Distributor for a portion of
its costs incurred for services provided to accounts that hold Class A shares.
Reimbursement is made periodically at an annual rate of up to 0.25% of the
average annual net assets of Class A shares of the Portfolio. The Distributor
currently uses all of those fees to pay dealers, brokers, banks and other
financial institutions periodically for providing personal service and
maintenance of accounts of their customers that hold Class A shares. Any
unreimbursed expenses the Distributor incurs with respect to Class A shares in
any fiscal year cannot be recovered in subsequent periods. Fees incurred by the
Portfolio under the Plan are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The
Portfolio has adopted Distribution and Service Plans (the "Plans") for Class B,
Class C and Class N shares under Rule 12b-1 of the Investment Company Act of
1940 to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the Plans, the
Portfolio pays the Distributor an annual asset-based sales charge of 0.75% on
Class B and Class C shares and 0.25% on Class N shares. The Distributor also
receives a service fee of 0.25% per year under each plan. If either the Class B,
Class C or Class N plan is terminated by the Portfolio or by the shareholders of
a class, the Board of Trustees and its independent trustees must determine
whether the Distributor shall be entitled to payment from the Portfolio of all
or a portion of the service fee and/or asset-based sales charge in respect to
shares sold prior to the effective date of such termination. The Distributor's
aggregate uncompensated expenses under the Plans at December 31, 2007 for Class
B, Class C and Class N shares were $477,126, $664,401 and $542,602,
respectively. Fees incurred by the Portfolio under the Plans are detailed in the
Statement of Operations.
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
("CDSC") do not represent expenses of the Portfolio. They are deducted from the
proceeds of sales of Portfolio shares prior to investment or from redemption
proceeds prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the following table for the period
indicated.
38 | CONSERVATIVE INVESTOR FUND
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- --------------------------------------------------------------------------------------------------
January 31, 2008 $ 457,448 $ 1,129 $ 60,609 $ 26,919 $ 6,227
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. The Manager has voluntarily agreed to a
total expense limitation on the aggregate amount of combined direct
(fund-of-funds level) and indirect expense so that "Total expenses" as a
percentage of average daily net assets will not exceed the following annual
rates: 1.25%, 2.00%, 2.00%, 1.50% and 1.00%, for Class A, Class B, Class C,
Class N and Class Y, respectively. The Manager may modify or terminate this
undertaking at any time without notice to shareholders. These expense
limitations do not include extraordinary expenses and other expenses not
incurred in the ordinary course of the Portfolio's business. Notwithstanding the
foregoing limits, the Manager is not required to waive or reimburse Portfolio
expenses in excess of indirect management fees earned from investments in
Underlying Funds to assure that expenses do not exceed those limits.
OFS has voluntarily agreed to limit transfer and shareholder servicing
agent fees for all classes to 0.35% of average annual net assets per class. This
undertaking may be amended or withdrawn at any time.
The Manager will waive fees and/or reimburse Portfolio expenses in an
amount equal to the indirect management fees incurred through the Portfolio's
investment in IMMF. During the year ended January 31, 2008, the Manager waived
$635 for IMMF management fees.
- --------------------------------------------------------------------------------
5. RECENT ACCOUNTING PRONOUNCEMENT
In September 2006, Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 157, Fair Value
Measurements. This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and expands
disclosures about fair value measurements. SFAS No. 157 applies to fair value
measurements already required or permitted by existing standards. SFAS No. 157
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. As of January
31, 2008, 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.
39 | CONSERVATIVE INVESTOR FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER PORTFOLIO SERIES:
We have audited the accompanying statement of assets and liabilities of
Conservative Investor Fund (one of the portfolios constituting the Oppenheimer
Portfolio Series), including the statement of investments, as of January 31,
2008, 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 two-year
period then ended and for the period April 5, 2005 (commencement of operations)
to January 31, 2006. These financial statements and financial highlights are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of January 31, 2008, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Conservative Investor Fund as of January 31, 2008, 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 two-year period then ended and for the period April 5, 2005
(commencement of operations) to January 31, 2006, in conformity with U.S.
generally accepted accounting principles.
/s/ KPMG LLP
Denver, Colorado
March 13, 2008
40 | CONSERVATIVE INVESTOR FUND
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2008, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Portfolio during
calendar year 2007. Regulations of the U.S. Treasury Department require the
Portfolio to report this information to the Internal Revenue Service.
Capital gain distributions of $0.0327 per share were paid to Class A,
Class B, Class C, Class N and Class Y shareholders, respectively, on December
31, 2007. Whether received in stock or in cash, the capital gain distribution
should be treated by shareholders as a gain from the sale of the capital assets
held for more than one year (long-term capital gains).
Dividends, if any, paid by the Portfolio during the fiscal year ended
January 31, 2008 which are not designated as capital gain distributions should
be multiplied by 5.81% to arrive at the amount eligible for the corporate
dividend-received deduction.
A portion, if any, of the dividends paid by the Portfolio during the
fiscal year ended January 31, 2008 which are not designated as capital gain
distributions are eligible for lower individual income tax rates to the extent
that the Portfolio has received qualified dividend income as stipulated by
recent tax legislation. $1,067,330 of the Portfolio's fiscal year taxable income
may be eligible for the lower individual income tax rates. In early 2008,
shareholders of record received information regarding the percentage of
distributions that are eligible for lower individual income tax rates.
Recent tax legislation allows a regulated investment company to designate
distributions not designated as capital gain distributions, as either interest
related dividends or short-term capital gain dividends, both of which are exempt
from the U.S. withholding tax applicable to non U.S. taxpayers. For the fiscal
year ended January 31, 2008, $18,928 or 0.14% of the ordinary distributions paid
by the Portfolio qualifies as an interest related dividend and $106,410 or
11.42% of the short-term capital gain distribution paid and to be paid by the
Portfolio qualifies as a short-term capital gain dividend.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Portfolio to the Internal Revenue Service.
Because of the complexity of the federal regulations which may affect your
individual tax return and the many variations in state and local tax
regulations, we recommend that you consult your tax advisor for specific
guidance.
41 | CONSERVATIVE INVESTOR FUND
BOARD APPROVAL OF THE PORTFOLIO'S
INVESTMENT ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew Conservative
Investor Fund's (the "Fund" or the "Fund's") investment advisory agreement (the
"Agreement"). The Investment Company Act of 1940, as amended, requires that the
Board request and evaluate, and that the Manager provide, such information as
may be reasonably necessary to evaluate the terms of the Agreement. The Board
employs an independent consultant to prepare a report that provides information,
including comparative information, that the Board requests for that purpose. In
addition, the Board receives information throughout the year regarding Fund
services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services by the Manager and its affiliates,
(v) the extent to which economies of scale are realized as the Fund grows and
whether fee levels reflect these economies of scale for Fund investors and (vi)
other benefits to the Manager from its relationship with the Fund. The Board was
aware that there are alternatives to retaining the Manager.
NATURE AND EXTENT OF SERVICES. The Board considered information about the
nature and extent of the services provided to the Fund and information regarding
the Manager's key personnel who provide such services. The Manager's duties
include providing the Fund with the services of the portfolio managers and the
Manager's asset allocation team, who provide research, analysis and other
advisory services in regard to the Fund's investments; oversight of third party
service providers; monitoring compliance with applicable Fund policies and
procedures and adherence to the Fund's investment restrictions. The Manager is
responsible for providing certain administrative services to the Fund as well.
Those services include providing and supervising all administrative and clerical
personnel who are necessary in order to provide effective corporate
administration for the Fund; compiling and maintaining records with respect to
the Fund's operations; preparing and filing reports required by the Securities
and Exchange Commission; preparing periodic reports regarding the operations of
the Fund for its shareholders; preparing proxy materials for shareholder
meetings; and preparing the registration statements required by Federal and
state securities laws for the sale of the Fund's shares. The Manager also
provides the Fund with office space, facilities and equipment.
42 | CONSERVATIVE INVESTOR FUND
QUALITY OF SERVICES. The Board also considered the quality of the services
provided and the quality of the Manager's resources that are available to the
Fund. The Board took account of the fact that the Manager has had over forty
years of experience as an investment adviser and that its assets under
management rank it among the top mutual fund managers in the United States. The
Board evaluated the Manager's administrative, accounting, legal and compliance
services, and information the Board has received regarding the experience and
professional qualifications of the Manager's personnel and the size and
functions of its staff. In its evaluation of the quality of the portfolio
management services provided, the Board considered the experience of Rudi W.
Schadt, Jerry Webman, Kurt Wolfgruber and Christopher Leavy, the portfolio
managers of the Fund, and the experience of the portfolio managers and the
investment performance of the investment companies in which the Fund may invest
(the "Underlying Funds"). 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 regular quarterly 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 mixed-asset target allocation conservative funds of
funds advised by other investment advisers. The Board noted that the Fund's
one-year and since inception performance were better than its peer group median.
MANAGEMENT FEES AND EXPENSES. The Board reviewed the fees paid to the
Manager and its affiliates and the other expenses borne by the Fund. The Board
noted that the Fund does not pay a direct management fee but that the Fund
indirectly bears its share of the management fees of the Underlying Funds. 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
conservative funds of funds and other funds of funds with comparable asset
43 | CONSERVATIVE INVESTOR FUND
BOARD APPROVAL OF THE PORTFOLIO'S
INVESTMENT ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
levels and distribution features. The Board noted that the Manager has agreed to
voluntarily limit the aggregate amount of combined direct (fund-of-funds level)
and indirect expense so that as a percentage of average daily net assets they
will not exceed the following annual rates: 1.25% for Class A, 2.00% for Class
B, 2.00% for Class C, 1.50% for Class N and 1.00% for Class Y. The Manager may
modify or terminate this undertaking at any time without notice to shareholders.
The Board noted that the Fund does not pay a management fee and that the Fund's
total expenses are higher than its peer group median.
ECONOMIES OF SCALE. The Board considered the extent to which the Manager
may realize economies of scale in managing and supporting the Fund and the
Underlying Funds, and the extent to which those economies of scale would benefit
the Fund's 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 and its affiliates for
services provided to the Fund and to the Underlying Funds.
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and the independent Trustees. Fund counsel is independent of the
Manager within the meaning and intent of the Securities and Exchange Commission
Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
concluded that the nature, extent and quality of the services provided to the
Fund by the Manager are a benefit to the Fund and in the best interest of the
Fund's shareholders and that the amount and structure of the compensation
received by the Manager and its affiliates are reasonable in relation to the
services provided. Accordingly, the Board elected to continue the Agreement for
another year. In arriving at this decision, the Board did not single out any
factor or factors as being more important than others, but considered all of the
factors together. The Board judged the terms and conditions of the Agreement,
including the management fee, in light of all of the surrounding circumstances.
44 | CONSERVATIVE INVESTOR FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
45 | CONSERVATIVE INVESTOR FUND
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS
FUND, LENGTH OF SERVICE, AGE HELD; NUMBER OF PORTFOLIOS IN THE FUND COMPLEX CURRENTLY OVERSEEN
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, COLORADO
TRUSTEES 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION,
RETIREMENT, DEATH OR REMOVAL.
BRIAN F. WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since September 1995-December 2007);
Chairman of the Board Director of Special Value Opportunities Fund, LLC (registered investment company) (affiliate of
of Trustees (since 2007) the Manager's parent company) (since September 2004); Member of Zurich Financial Investment
and Trustee (since 2005) Management Advisory Council (insurance) (since October 2004); Chairman (since August 2007) and
Age: 64 Trustee (since August 1991) of the Board of Trustees of the Jackson Laboratory (non-profit);
Treasurer and 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). Oversees 66 portfolios in the OppenheimerFunds complex.
DAVID K. DOWNES, President, Chief Executive Officer and Board Member of CRAFund Advisors, Inc. (investment
Trustee (since 2007) management company) (since January 2004); President of The Community Reinvestment Act Qualified
Age: 68 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 66 portfolios
in the OppenheimerFunds complex.
MATTHEW P. FINK, Trustee of the Committee for Economic Development (policy research foundation) (since 2005);
Trustee (since 2005) Director of ICI Education Foundation (education foundation) (October 1991-August 2006); President
Age: 67 of the Investment Company Institute (trade association) (October 1991-June 2004); Director of ICI
Mutual Insurance Company (insurance company) (October 1991-June 2004). Oversees 56 portfolios in
the OppenheimerFunds complex.
46 | CONSERVATIVE INVESTOR FUND
ROBERT G. GALLI, A director or trustee of other Oppenheimer funds. Oversees 66 portfolios in the OppenheimerFunds
Trustee (since 2005) complex.
Age: 74
PHILLIP A. GRIFFITHS, Distinguished Presidential Fellow for International Affairs (since 2002) and Member (since 1979)
Trustee (since 2005) of the National Academy of Sciences; Council on Foreign Relations (since 2002); Director of GSI
Age: 69 Lumonics Inc. (precision medical equipment supplier) (since 2001); Senior Advisor of The Andrew
W. Mellon Foundation (since 2001); Chair of Science Initiative Group (since 1999); Member of the
American Philosophical Society (since 1996); Trustee of Woodward Academy (since 1983); Foreign
Associate of Third World Academy of Sciences; Director of the Institute for Advanced Study
(1991-2004); Director of Bankers Trust New York Corporation (1994-1999); Provost at Duke
University (1983-1991). Oversees 56 portfolios in the OppenheimerFunds complex.
MARY F. MILLER, Trustee of the American Symphony Orchestra (not-for-profit) (since October 1998); and Senior Vice
Trustee (since 2005) President and General Auditor of American Express Company (financial services company) (July
Age: 65 1998-February 2003). Oversees 56 portfolios in the OppenheimerFunds complex.
JOEL W. MOTLEY, Managing Director of Public Capital Advisors, LLC (privately-held financial advisor) (since
Trustee (since 2005) January 2006); Director of Columbia Equity Financial Corp. (privately-held financial advisor)
Age: 55 (since 2002); Managing Director of Carmona Motley, Inc. (privately-held financial advisor) (since
January 2002); Managing Director of Carmona Motley Hoffman Inc. (privately-held financial advisor)
(January 1998-December 2001); Member of the Finance and Budget Committee of the Council on Foreign
Relations, Member of the Investment Committee of the Episcopal Church of America, Member of the
Investment Committee and Board of Human Rights Watch and the Investment Committee of Historic
Hudson Valley. Oversees 56 portfolios in the OppenheimerFunds complex.
RUSSELL S. REYNOLDS, JR., Chairman of RSR Partners (formerly "The Directorship Search Group, Inc.") (corporate governance
Trustee (since 2005) consulting and executive recruiting) (since 1993); Life Trustee of International House (non-profit
Age: 76 educational organization); Former Trustee of The Historical Society of the Town of Greenwich;
Former Director of Greenwich Hospital Association. Oversees 56 portfolios in the OppenheimerFunds
complex.
JOSEPH M. WIKLER, Director of the following medical device companies: Medintec (since 1992) and Cathco (since 1996);
Trustee (since 2005) Director of Lakes Environmental Association (environmental protection organization) (since
Age: 67 1996); Member of the Investment Committee of the Associated Jewish Charities of Baltimore (since
1994); Director of Fortis/Hartford mutual funds (1994-December 2001); Director of C-TASC (a
privately held bio-statistics company) (since May 2007). Oversees 56 portfolios in the
OppenheimerFunds complex.
PETER I. WOLD, President of Wold Oil Properties, Inc. (oil and gas exploration and production company) (since
Trustee (since 2005) 1994); Vice President of American Talc Company, Inc. (talc mining and milling) (since 1999);
Age: 60 Managing Member of Hole-in-the-Wall Ranch (cattle ranching) (since 1979); Vice President,
Secretary and Treasurer of Wold Trona Company, Inc. (soda ash processing and production)
(1996-2006); Director and Chairman of the Denver Branch of the Federal Reserve Bank of Kansas City
(1993-1999); and Director of PacifiCorp. (electric utility) (1995-1999). Oversees 56 portfolios
in the OppenheimerFunds complex.
47 | CONSERVATIVE INVESTOR FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW YORK,
AND OFFICER NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS
RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS
RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS
POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director of the Manager (since June 2001); President of the
President and Principal Manager (September 2000-March 2007); President and director or trustee of other Oppenheimer funds;
Executive Officer and Trustee President and Director of Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent holding
(since 2005) company) and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the Manager)
Age: 58 (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
105 portfolios in the OppenheimerFunds complex.
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. LEAVY, SCHADT,
THE PORTFOLIO WEBMAN, WOLFGRUBER, ZACK, GILLESPIE AND MS. BLOOMBERG, TWO WORLD FINANCIAL CENTER, 225 LIBERTY
STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY, WIXTED, PETERSEN, SZILAGYI AND MS.
IVES, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE
TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
CHRISTOPHER LEAVY, Director of Equities of the Manager (since January 2007); Senior Vice President of the Manager
Vice President and Portfolio (since September 2000). Portfolio manager of Morgan Stanley Dean Witter Investment Management
Manager (since 2007) (1997-September 2000). A portfolio manager and officer of 15 portfolios in the OppenheimerFunds
Age: 37 complex.
Vice President, Director of Research in Product Design and Risk Management of the Manager. Prior
RUDI W. SCHADT, to joining the Manager in February 2002, a Director and Senior Quantitative Analyst (2000-2001) at
Vice President and Portfolio UBS Asset Management prior to which he was an Associate Director of Research (since June 1999) and
Manager (since 2005) Senior Researcher and Portfolio Manager (from June 1997) at State Street Global Advisors. An
Age: 50 officer of 14 portfolios in the OppenheimerFunds complex.
DR. JERRY WEBMAN, Chief Economist of the Manager (since 2006); Senior Vice President (since February 1996) and
Vice President and Portfolio Senior Investment Officer and Director (since 1997) of the Manager's Fixed Income Investments;
Manager (since 2005) Senior Vice President (since May 1999) of HarbourView Asset Management Corporation. An officer of
Age: 58 11 portfolios in the OppenheimerFunds complex.
48 | CONSERVATIVE INVESTOR FUND
KURT WOLFGRUBER, President (since March 2007) and Chief Investment Officer and Director (since July 2003) of the
Vice President and Portfolio Manager; Executive Vice President of the Manager (March 2003-March 2007); Director of HarbourView
Manager (since 2005) Asset Management Corporation and of OFI Institutional Asset Management, Inc. (since June 2003) and
Age: 57 of Tremont Capital Management, Inc. (since October 2001). An officer of 11 portfolios in the
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 OppenheimerFunds Distributor, Inc., Centennial Asset Management and
Compliance Officer Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor,
(since 2005) Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983);
Age: 57 Former Vice President and Director of Internal Audit of the Manager (1997-February 2004). An
officer of 105 portfolios in the OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the following:
Treasurer and Principal HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder
Financial & Accounting Services, Inc., Oppenheimer Real Asset Management, Inc. and Oppenheimer Partnership Holdings, Inc.
Officer (since 2005) (since March 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds
Age: 48 International Ltd. and 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 105 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 2005) 1998-July 2002). An officer of 105 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 105 portfolios in the OppenheimerFunds
Age: 38 complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the
Vice President and Secretary Manager; General Counsel and Director of the Distributor (since December 2001); General Counsel of
(since 2005) Centennial Asset Management Corporation (since December 2001); Senior Vice President and General
Age: 59 Counsel of HarbourView Asset Management Corporation (since December 2001); Secretary and General
Counsel of OAC (since November 2001); Assistant Secretary (since September 1997) and Director
(since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice
President and Director of Oppenheimer Partnership Holdings, Inc. (since December 2002); Director
of Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice President, General
Counsel and Director of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since
December 2001); Senior Vice President, General Counsel and Director of OFI Private Investments,
Inc. and OFI Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy
Program (since June 2003); Senior Vice President and General Counsel of OFI Institutional Asset
Management, Inc.
49 | CONSERVATIVE INVESTOR FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
ROBERT G. ZACK, (since November 2001); Director of OppenheimerFunds (Asia) Limited (since December 2003); Senior
Continued Vice President (May 1985-December 2003). An officer of 105 portfolios in the OppenheimerFunds
complex.
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First Vice President (April
Assistant Secretary 2001-April 2004), Associate General Counsel (December 2000-April 2004) of UBS Financial Services,
(since 2005) Inc. An officer of 105 portfolios in the OppenheimerFunds complex.
Age: 40
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since September 2004); First Vice
Assistant Secretary President (2000-September 2004), Director (2000-September 2004) and Vice President (1998-2000) of
(since 2005) Merrill Lynch Investment Management. An officer of 105 portfolios in the OppenheimerFunds complex.
Age: 44
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 the
(since 2005) Distributor; Assistant Secretary of Centennial Asset Management Corporation (since October 2003);
Age: 42 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 105
portfolios in the OppenheimerFunds complex.
THE PORTFOLIO'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL
INFORMATION ABOUT THE PORTFOLIO'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT
CHARGE UPON REQUEST, BY CALLING 1.800.525.7048.
50 | CONSERVATIVE INVESTOR FUND
JANUARY 31, 2008
- --------------------------------------------------------------------------------
Moderate Management
Investor Fund Commentaries
A Series of Oppenheimer Portfolio Series and
Annual Report
- --------------------------------------------------------------------------------
MANAGEMENT COMMENTARIES
Market Recap and Outlook
Listing of Top Holdings
ANNUAL REPORT [GRAPHIC]
Portfolio Performance Discussion
Listing of Investments
Financial Statements
"WE ATTRIBUTE THE PORTFOLIO'S OUTPERFORMANCE OF ITS EQUITY BENCHMARK TO
ITS DIVERSIFIED STRUCTURE, PARTICULARLY THE STRONG CONTRIBUTIONS FROM THE
FIXED-INCOME COMPONENT AND THE ALLOCATION TO OPPENHEIMER COMMODITY
STRATEGY TOTAL RETURN FUND'S CLASS Y SHARES."
[LOGO] OPPENHEIMERFUNDS(R)
The Right Way to Invest
TOP HOLDINGS AND ALLOCATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSET CLASS ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Fixed Income Funds 46.9%
U.S. Equity Funds 33.8
Alternative Investment Funds 9.7
Global Equity Fund 9.5
Money Market Fund 0.1
Portfolio holdings and allocations are subject to change. Percentages are as of
January 31, 2008, and are based on the total market value of investments in
affiliated companies.
- --------------------------------------------------------------------------------
9 | MODERATE INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
HOW HAS THE PORTFOLIO PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS,
INC., OF THE PORTFOLIO'S PERFORMANCE DURING ITS FISCAL YEAR ENDED JANUARY 31,
2008, FOLLOWED BY A GRAPHICAL COMPARISON OF THE PORTFOLIO'S PERFORMANCE TO AN
APPROPRIATE BROAD-BASED MARKET INDEX.
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE. For its fiscal year ending
January 31, 2008, Moderate Investor Fund's Class A shares, without sales charge,
returned 1.01% and outperformed its equity benchmark, the S&P 500 Index, which
returned -2.31% but underperformed its fixed income benchmark, the Lehman
Aggregate Bond Index, which returned 8.81%. We attribute the Portfolio's
outperformance of its equity benchmark to its diversified structure particularly
the contributions from the fixed income component and the allocation to
Oppenheimer Commodity Strategy Total Return Fund's Class Y shares. In contrast,
the Portfolio's equity component hampered results.
On the alternative investments side, the Portfolio's allocation to
Oppenheimer Real Estate Fund's Class Y shares detracted from returns. The
Portfolio's position in Oppenheimer Commodity Strategy Total Return Fund's Class
Y shares, which posted a return of 33.95%, was a boon to the Portfolio's
performance. Oppenheimer Commodity Strategy Total Return Fund's success can be
attributed to the strength in commodity prices, especially in the price of oil,
which continued to rise due to strong global demand.
Although most of the Portfolio's underlying fixed income funds posted
positive absolute results, relative returns were weak. However, given that the
fixed income markets generally fared much better than equity markets during the
volatile period, the Portfolio's fixed income component ultimately helped
performance. A top contributor to performance was Oppenheimer International Bond
Fund, which continued to benefit from an emphasis on investments from emerging
markets. Although Oppenheimer Core Bond Fund and Oppenheimer Limited-Term
Government Fund posted weak relative performance for the period, each Fund
posted positive absolute returns, which contributed to the Portfolio's results.
The Portfolio's allocation to equity funds hampered returns. We attribute
the overall weakness in the Portfolio's equity component to the intense
volatility that gripped the capital markets over the last half of the period. A
top detractor was Oppenheimer Global Fund. Although almost all of the
Portfolio's underlying equity funds posted negative performance, Oppenheimer
Capital Appreciation Fund delivered positive absolute returns and successfully
outperformed the broader equity market, as represented by the S&P 500 Index for
the period. In addition to strong stock selection, Oppenheimer Capital
Appreciation Fund also gained value due to the positive performance generated by
large cap growth stocks in general. When economic growth slows, earnings growth
becomes more difficult to achieve. As a result of this cyclical event, investors
become risk adverse and seek out
10 | MODERATE INVESTOR FUND
larger, well-established companies, a situation that unfolded over the period
and aided Oppenheimer Capital Appreciation Fund's performance.
Lastly, the Portfolio's allocation to Oppenheimer Real Estate Fund's Class
Y shares detracted from performance. The Fund's weak performance is attributed
to the combined effects of a deteriorating housing market, higher energy prices
and concerns in the credit markets.
COMPARING THE PORTFOLIO'S PERFORMANCE TO THE MARKET. The graphs that follow show
the performance of a hypothetical $10,000 investment in each class of shares of
the Portfolio held until January 31, 2008. Performance is measured from the
inception of Classes A, B, C, N and Y on April 5, 2005. The Portfolio's
performance reflects the deduction of the maximum initial sales charge on Class
A shares, the applicable contingent deferred sales charge on Class B, Class C
and Class N shares, and reinvestments of all dividends and capital gains
distributions. Past performance cannot guarantee future results.
The Portfolio's performance is compared to the performance of the S&P 500
Index and the Lehman Aggregate Bond Index. The S&P 500 Index is a broad-based
measure of domestic stock performance that includes the reinvestment of
dividends. The Lehman Aggregate Bond Index is an index of U.S. Government and
corporate bonds that includes reinvestment of dividends. Index performance
reflects the reinvestment of income but does not consider the effect of
transaction costs, and none of the data in the graphs shows the effect of taxes.
The Portfolio's performance reflects the effects of the Portfolio's business and
operating expenses. While index comparisons may be useful to provide a benchmark
for the Portfolio's performance, it must be noted that the Portfolio's
investments are not limited to the investments in the index.
11 | MODERATE INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Moderate Investor Fund (Class A)
Lehman Aggregate Bond Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio
Series: Moderate Lehman Aggregate
Investor Fund (Class A) Bond Index S&P 500 Index
04/05/2005 $ 9,425 $10,000 $10,000
04/30/2005 $ 9,331 $10,135 $ 9,810
07/31/2005 $ 9,821 $10,207 $10,514
10/31/2005 $ 9,774 $10,150 $10,327
01/31/2006 $10,328 $10,293 $11,005
04/30/2006 $10,491 $10,207 $11,322
07/31/2006 $10,357 $10,356 $11,079
10/31/2006 $10,836 $10,677 $12,013
01/31/2007 $11,230 $10,734 $12,600
04/30/2007 $11,584 $10,959 $13,046
07/31/2007 $11,466 $10,934 $12,865
10/31/2007 $12,154 $11,252 $13,761
01/31/2008 $11,343 $11,679 $12,309
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/08
1-Year -4.80% Since Inception (4/5/05) 4.57%
12 | MODERATE INVESTOR FUND
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Moderate Investor Fund (Class B)
Lehman Aggregate Bond Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio
Series: Moderate Lehman Aggregate
Investor Fund (Class B) Bond Index S&P 500 Index
04/05/2005 $10,000 $10,000 $10,000
04/30/2005 $ 9,900 $10,135 $ 9,810
07/31/2005 $10,390 $10,207 $10,514
10/31/2005 $10,330 $10,150 $10,327
01/31/2006 $10,890 $10,293 $11,005
04/30/2006 $11,042 $10,207 $11,322
07/31/2006 $10,869 $10,356 $11,079
10/31/2006 $11,346 $10,677 $12,013
01/31/2007 $11,738 $10,734 $12,600
04/30/2007 $12,080 $10,959 $13,046
07/31/2007 $11,945 $10,934 $12,865
10/31/2007 $12,629 $11,252 $13,761
01/31/2008 $11,460 $11,679 $12,309
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/08
1-Year -4.63% Since Inception (4/5/05) 4.95%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 3% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 17 FOR FURTHER
INFORMATION.
13 | MODERATE INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Moderate Investor Fund (Class C)
Lehman Aggregate Bond Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio
Series: Moderate Lehman Aggregate
Investor Fund (Class C) Bond Index S&P 500 Index
04/05/2005 $10,000 $10,000 $10,000
04/30/2005 $ 9,890 $10,135 $ 9,810
07/31/2005 $10,380 $10,207 $10,514
10/31/2005 $10,320 $10,150 $10,327
01/31/2006 $10,882 $10,293 $11,005
04/30/2006 $11,035 $10,207 $11,322
07/31/2006 $10,872 $10,356 $11,079
10/31/2006 $11,349 $10,677 $12,013
01/31/2007 $11,736 $10,734 $12,600
04/30/2007 $12,088 $10,959 $13,046
07/31/2007 $11,943 $10,934 $12,865
10/31/2007 $12,627 $11,252 $13,761
01/31/2008 $11,765 $11,679 $12,309
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/08
1-Year -0.72% Since Inception (4/5/05) 5.93%
14 | MODERATE INVESTOR FUND
CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Moderate Investor Fund (Class N)
Lehman Aggregate Bond Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio
Series: Moderate Lehman Aggregate
Investor Fund (Class N) Bond Index S&P 500 Index
04/05/2005 $10,000 $10,000 $10,000
04/30/2005 $ 9,900 $10,135 $ 9,810
07/31/2005 $10,410 $10,207 $10,514
10/31/2005 $10,360 $10,150 $10,327
01/31/2006 $10,935 $10,293 $11,005
04/30/2006 $11,108 $10,207 $11,322
07/31/2006 $10,955 $10,356 $11,079
10/31/2006 $11,443 $10,677 $12,013
01/31/2007 $11,861 $10,734 $12,600
04/30/2007 $12,226 $10,959 $13,046
07/31/2007 $12,091 $10,934 $12,865
10/31/2007 $12,810 $11,252 $13,761
01/31/2008 $11,947 $11,679 $12,309
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/08
1-Year -0.24% Since Inception (4/5/05) 6.51%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 3% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 17 FOR FURTHER
INFORMATION.
15 | MODERATE INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS Y SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Moderate Investor Fund (Class Y)
Lehman Aggregate Bond Index
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio
Series: Moderate Lehman Aggregate
Investor Fund (Class Y) Bond Index S&P 500 Index
04/05/2005 $10,000 $10,000 $10,000
04/30/2005 $ 9,900 $10,135 $ 9,810
07/31/2005 $10,420 $10,207 $10,514
10/31/2005 $10,390 $10,150 $10,327
01/31/2006 $10,979 $10,293 $11,005
04/30/2006 $11,173 $10,207 $11,322
07/31/2006 $11,030 $10,356 $11,079
10/31/2006 $11,559 $10,677 $12,013
01/31/2007 $11,987 $10,734 $12,600
04/30/2007 $12,375 $10,959 $13,046
07/31/2007 $12,270 $10,934 $12,865
10/31/2007 $13,013 $11,252 $13,761
01/31/2008 $12,154 $11,679 $12,309
AVERAGE ANNUAL TOTAL RETURNS OF CLASS Y SHARES OF THE PORTFOLIO AT 1/31/08
1-Year 1.39% Since Inception (4/5/05) 7.16%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 3% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 17 FOR FURTHER
INFORMATION.
16 | MODERATE INVESTOR FUND
NOTES
- --------------------------------------------------------------------------------
Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. The Portfolio's total returns
shown do not reflect the deduction of income taxes on an individual's
investment. Taxes may reduce your actual investment returns on income or gains
paid by the Portfolio or any gains you may realize if you sell your shares.
INVESTORS SHOULD CONSIDER THE PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, AND
OTHER CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PORTFOLIO'S
PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT THE PORTFOLIO, AND MAY BE
OBTAINED BY ASKING YOUR FINANCIAL ADVISOR, CALLING US AT 1.800.525.7048 OR
VISITING OUR WEBSITE AT WWW.OPPENHEIMERFUNDS.COM. READ THE PROSPECTUS CAREFULLY
BEFORE INVESTING.
The Portfolio's investment strategy and focus can change over time. The mention
of specific fund holdings does not constitute a recommendation by
OppenheimerFunds, Inc.
CLASS A shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class A returns include the maximum initial sales charge of
5.75%.
CLASS B shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 3% (since inception). Class B shares are subject
to an annual 0.75% asset-based sales charge.
CLASS C shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
CLASS N shares of the Portfolio were first publicly offered on 4/5/05. Class N
shares are offered only through retirement plans. Unless otherwise noted, Class
N returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
CLASS Y shares of the Portfolio were first publicly offered on 4/5/05. Class Y
shares are offered only to certain institutional investors under special
agreements with the Distributor.
An explanation of the calculation of performance is in the Portfolio's Statement
of Additional Information.
17 | MODERATE INVESTOR FUND
PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
PORTFOLIO EXPENSES. As a shareholder of the Portfolio, you incur two types of
costs: (1) transaction costs, which may include sales charges (loads) on
purchase payments, contingent deferred sales charges on redemptions; and
redemption fees (if applicable); and (2) ongoing costs, including management
fees; distribution and service fees; and other Portfolio expenses. These
examples are intended to help you understand your ongoing costs (in dollars) of
investing in the Portfolio and to compare these costs with the ongoing costs of
investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended January 31, 2008.
ACTUAL EXPENSES. The first section of the table provides information about
actual account values and actual expenses. You may use the information in this
section 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 first section
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 second section of the table
provides information about hypothetical account values and hypothetical expenses
based on the Portfolio's actual expense ratio for each class of shares, and an
assumed rate of return of 5% per year for each class before expenses, which is
not the actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Portfolio and other funds. To do so, compare this 5% hypothetical example
for the class of shares you hold with the 5% hypothetical examples that appear
in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front-end
or contingent deferred sales charges (loads), or a $12.00 fee imposed annually
on accounts valued at less than $500.00 (subject to exceptions described in
18 | MODERATE INVESTOR FUND
the Statement of Additional Information). Therefore, the "hypothetical" section
of the table is 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
ACTUAL AUGUST 1, 2007 JANUARY 31, 2008 JANUARY 31, 2008
- -----------------------------------------------------------------------------------
Class A $ 1,000.00 $ 989.30 $ 1.86
- -----------------------------------------------------------------------------------
Class B 1,000.00 984.50 5.87
- -----------------------------------------------------------------------------------
Class C 1,000.00 985.00 5.67
- -----------------------------------------------------------------------------------
Class N 1,000.00 988.10 3.26
- -----------------------------------------------------------------------------------
Class Y 1,000.00 990.50 0.05
HYPOTHETICAL
(5% return before expenses)
- -----------------------------------------------------------------------------------
Class A 1,000.00 1,023.34 1.89
- -----------------------------------------------------------------------------------
Class B 1,000.00 1,019.31 5.97
- -----------------------------------------------------------------------------------
Class C 1,000.00 1,019.51 5.77
- -----------------------------------------------------------------------------------
Class N 1,000.00 1,021.93 3.32
- -----------------------------------------------------------------------------------
Class Y 1,000.00 1,025.16 0.05
Expenses are equal to the Portfolio's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios,
excluding all underlying fund expenses, on the 6-month period ended January 31,
2008 are as follows:
CLASS EXPENSE RATIOS
- ------------------------
Class A 0.37%
- ------------------------
Class B 1.17
- ------------------------
Class C 1.13
- ------------------------
Class N 0.65
- ------------------------
Class Y 0.01
The expense ratios reflect reduction to custodian expenses and voluntary waivers
or reimbursements of expenses by the Portfolio's Manager that can be terminated
at any time, without advance notice. The "Financial Highlights" tables in the
Portfolio's financial statements, included in this report, also show the gross
expense ratios, without such waivers or reimbursements and reduction to
custodian expenses, if applicable.
- --------------------------------------------------------------------------------
19 | MODERATE INVESTOR FUND
STATEMENT OF INVESTMENTS January 31, 2008
- --------------------------------------------------------------------------------
SHARES VALUE
- ----------------------------------------------------------------------------------------
INVESTMENT COMPANIES--99.9% 1
- ----------------------------------------------------------------------------------------
ALTERNATIVE INVESTMENT FUNDS--9.7%
Oppenheimer Commodity Strategy Total Return Fund, Cl. Y 6,896,989 $ 51,934,321
- ----------------------------------------------------------------------------------------
Oppenheimer Real Estate Fund, Cl. Y 2,112,124 40,595,036
-------------
92,529,357
- ----------------------------------------------------------------------------------------
FIXED INCOME FUNDS--46.8%
Oppenheimer Champion Income Fund, Cl. Y 10,823,248 92,538,773
- ----------------------------------------------------------------------------------------
Oppenheimer Core Bond Fund, Cl. Y 19,762,236 200,389,074
- ----------------------------------------------------------------------------------------
Oppenheimer International Bond Fund, Cl. Y 8,350,987 54,782,475
- ----------------------------------------------------------------------------------------
Oppenheimer Limited-Term Government Fund, Cl. Y 10,121,883 101,117,620
-------------
448,827,942
- ----------------------------------------------------------------------------------------
GLOBAL EQUITY FUND--9.5%
Oppenheimer Global Fund, Cl. Y 1,368,498 91,319,888
- ----------------------------------------------------------------------------------------
MONEY MARKET FUND--0.1%
Oppenheimer Institutional Money Market Fund, Cl. E, 4.54% 2 1,346,117 1,346,117
- ----------------------------------------------------------------------------------------
U.S. EQUITY FUNDS--33.8%
Oppenheimer Capital Appreciation Fund, Cl. Y 1,971,338 95,117,104
- ----------------------------------------------------------------------------------------
Oppenheimer Main Street Fund, Cl. Y 2,683,355 92,468,405
- ----------------------------------------------------------------------------------------
Oppenheimer Main Street Opportunity Fund, Cl. Y 3,514,973 45,835,244
- ----------------------------------------------------------------------------------------
Oppenheimer Value Fund, Cl. Y 3,731,119 90,628,874
-------------
324,049,627
- ----------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $993,233,920) 99.9% 958,072,931
- ----------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.1 1,269,429
--------------------------
NET ASSETS 100.0% $959,342,360
==========================
INDUSTRY CLASSIFICATIONS ARE UNAUDITED.
20 | MODERATE INVESTOR FUND
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended January 31, 2008, by virtue of the Portfolio owning
at least 5% of the voting securities of the issuer or as a result of the
Portfolio and the issuer having the same investment adviser. Transactions during
the period in which the issuer was an affiliate are as follows:
SHARES SHARES
JANUARY 31, GROSS GROSS JANUARY 31,
2007 ADDITIONS REDUCTIONS 2008
- ----------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation Fund, Cl.Y 1,239,117 751,566 19,345 1,971,338
Oppenheimer Champion Income Fund, Cl. Y 6,341,189 4,590,502 108,443 10,823,248
Oppenheimer Commodity Strategy Total Return Fund, Cl. Y 3,864,044 3,886,000 853,055 6,896,989
Oppenheimer Core Bond Fund, Cl. Y 11,639,178 8,321,736 198,678 19,762,236
Oppenheimer Global Fund, Cl. Y 831,381 571,523 34,406 1,368,498
Oppenheimer Institutional Money Market Fund, Cl. E 1,897,564 128,352,465 128,903,912 1,346,117
Oppenheimer International Bond Fund, Cl. Y 4,986,529 3,468,051 103,593 8,350,987
Oppenheimer Limited-Term Government Fund, Cl. Y 5,914,588 4,308,975 101,680 10,121,883
Oppenheimer Main Street Fund, Cl. Y 1,499,294 1,230,504 46,443 2,683,355
Oppenheimer Main Street Opportunity Fund, Cl. Y 2,033,988 1,542,278 61,293 3,514,973
Oppenheimer Real Estate Fund, Cl. Y 1,351,142 920,576 159,594 2,112,124
Oppenheimer Value Fund, Cl. Y 2,348,542 1,576,655 194,078 3,731,119
DIVIDEND REALIZED
VALUE INCOME GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation Fund, Cl. Y $ 95,117,104 $ -- $ (32,243)
Oppenheimer Champion Income Fund, Cl. Y 92,538,773 5,759,506 (41,710)
Oppenheimer Commodity Strategy Total Return Fund, Cl. Y 51,934,321 6,036,429 (334,762)
Oppenheimer Core Bond Fund, Cl. Y 200,389,074 6,747,763 (30,266)
Oppenheimer Global Fund, Cl. Y 91,319,888 1,749,580 (76,362)
Oppenheimer Institutional Money Market Fund, Cl. E 1,346,117 67,523 --
Oppenheimer International Bond Fund, Cl. Y 54,782,475 3,277,276 (5,106)
Oppenheimer Limited-Term Government Fund, Cl. Y 101,117,620 3,935,665 (13,494)
Oppenheimer Main Street Fund, Cl. Y 92,468,405 5,247,966 (83,046)
Oppenheimer Main Street Opportunity Fund, Cl. Y 45,835,244 2,658,011 (33,596)
Oppenheimer Real Estate Fund, Cl. Y 40,595,036 1,662,650 (50,896)
Oppenheimer Value Fund, Cl. Y 90,628,874 3,111,920 4,560
-----------------------------------------
$958,072,931 $40,254,289 $ (696,921)
=========================================
2. Rate shown is the 7-day yield as of January 31, 2008.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21 | MODERATE INVESTOR FUND
STATEMENT OF ASSETS AND LIABILITIES January 31, 2008
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments--
affiliated companies (cost $993,233,920) $ 958,072,931
- -------------------------------------------------------------------------------------
Cash 262,293
- -------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 4,353,253
Dividends 2,125,629
Other 13,655
--------------
Total assets 964,827,761
- -------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 3,735,922
Shares of beneficial interest redeemed 1,392,635
Distribution and service plan fees 195,686
Transfer and shareholder servicing agent fees 79,995
Trustees' compensation 36,133
Shareholder communications 6,226
Other 38,804
--------------
Total liabilities 5,485,401
- -------------------------------------------------------------------------------------
NET ASSETS $ 959,342,360
==============
- -------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 87,480
- -------------------------------------------------------------------------------------
Additional paid-in capital 975,184,790
- -------------------------------------------------------------------------------------
Accumulated net investment income 300,753
- -------------------------------------------------------------------------------------
Accumulated net realized gain on investments 18,930,326
- -------------------------------------------------------------------------------------
Net unrealized depreciation on investments (35,160,989)
--------------
NET ASSETS $ 959,342,360
==============
22 | MODERATE INVESTOR FUND
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- -----------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$497,376,867and 45,178,641 shares of beneficial interest outstanding) $ 11.01
Maximum offering price per share (net asset value plus sales charge of 5.75%
of offering price) $ 11.68
- -----------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $132,233,000 and
12,104,095 shares of beneficial interest outstanding) $ 10.92
- -----------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $231,792,628 and
21,261,997 shares of beneficial interest outstanding) $ 10.90
- -----------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $96,079,832 and
8,767,177 shares of beneficial interest outstanding) $ 10.96
- -----------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $1,860,033 and 168,289 shares of beneficial interest outstanding) $ 11.05
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23 | MODERATE INVESTOR FUND
STATEMENT OF OPERATIONS For the Year Ended January 31, 2008
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
INVESTMENT INCOME
- -------------------------------------------------------------------------------------
Dividends from affiliated companies $ 40,254,289
- -------------------------------------------------------------------------------------
Interest 49,683
- -------------------------------------------------------------------------------------
Other income 5,778
--------------
Total investment income 40,309,750
- -------------------------------------------------------------------------------------
EXPENSES
- -------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 1,047,439
Class B 1,214,680
Class C 1,933,106
Class N 368,050
- -------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 431,056
Class B 174,806
Class C 227,121
Class N 96,677
Class Y 6
- -------------------------------------------------------------------------------------
Shareholder communications:
Class A 48,346
Class B 25,620
Class C 22,025
Class N 2,903
Class Y 4
- -------------------------------------------------------------------------------------
Trustees' compensation 24,377
- -------------------------------------------------------------------------------------
Custodian fees and expenses 4,561
- -------------------------------------------------------------------------------------
Other 56,295
--------------
Total expenses 5,677,072
Less reduction to custodian expenses (108)
Less waivers and reimbursements of expenses (1,314)
--------------
Net expenses 5,675,650
- -------------------------------------------------------------------------------------
NET INVESTMENT INCOME 34,634,100
- -------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- -------------------------------------------------------------------------------------
Net realized gain (loss) on investments:
Affiliated companies (696,921)
Distributions received from affiliated companies 22,301,479
--------------
Net realized gain 21,604,558
- -------------------------------------------------------------------------------------
Net change in unrealized depreciation on investments (60,182,411)
- -------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (3,943,753)
==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | MODERATE INVESTOR FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED JANUARY 31, 2008 2007
- -----------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income $ 34,634,100 $ 12,927,432
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gain 21,604,558 6,721,332
- -----------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (60,182,411) 20,367,168
------------------------------------
Net increase (decrease) in net assets resulting from operations (3,943,753) 40,015,932
- -----------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (18,904,451) (6,838,205)
Class B (4,112,456) (1,753,095)
Class C (7,591,061) (2,462,961)
Class N (3,249,986) (1,056,853)
Class Y (57,724) (23,344)
------------------------------------
(33,915,678) (12,134,458)
- -----------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (3,981,106) (694,225)
Class B (1,073,876) (231,731)
Class C (1,892,622) (318,700)
Class N (722,066) (111,013)
Class Y (11,276) (2,136)
------------------------------------
(7,680,946) (1,357,805)
- -----------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest transactions:
Class A 207,816,823 191,855,068
Class B 35,877,108 60,241,093
Class C 101,146,789 88,079,456
Class N 48,924,312 37,858,714
Class Y 734,860 845,510
------------------------------------
394,499,892 378,879,841
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------
Total increase 348,959,515 405,403,510
- -----------------------------------------------------------------------------------------------------------------------------
Beginning of period 610,382,845 204,979,335
------------------------------------
End of period (including accumulated net investment income of $300,753
and $999,526, respectively) $ 959,342,360 $ 610,382,845
====================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | MODERATE INVESTOR FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED JANUARY 31, 2008 2007 2006 1
- --------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.42 $ 10.78 $ 10.00
- --------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .54 .39 .38
Net realized and unrealized gain (loss) (.41) .55 .57
----------------------------------------
Total from investment operations .13 .94 .95
- --------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.45) (.27) (.17)
Distributions from net realized gain (.09) (.03) --
----------------------------------------
Total dividends and/or distributions to shareholders (.54) (.30) (.17)
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.01 $ 11.42 $ 10.78
========================================
- --------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 1.01% 8.73% 9.58%
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 497,377 $ 313,311 $ 107,686
- --------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 423,981 $ 206,672 $ 43,984
- --------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 4.59% 3.57% 4.39%
Total expenses 5 0.37% 0.40% 0.47%
Expenses after payments, waivers and/or
reimbursements and reduction to custodian expenses 0.37% 0.40% 0.46%
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate 3% 4% 0%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods less than one full year.
5. Total expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2008 0.95%
Year Ended January 31, 2007 1.01%
Period Ended January 31, 2006 1.15%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | MODERATE INVESTOR FUND
CLASS B YEAR ENDED JANUARY 31, 2008 2007 2006 1
- --------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.34 $ 10.74 $ 10.00
- --------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .42 .30 .31
Net realized and unrealized gain (loss) (.39) .54 .58
----------------------------------------
Total from investment operations .03 .84 .89
- --------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.36) (.21) (.15)
Distributions from net realized gain (.09) (.03) --
----------------------------------------
Total dividends and/or distributions to shareholders (.45) (.24) (.15)
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.92 $ 11.34 $ 10.74
========================================
- --------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 0.18% 7.80% 8.90%
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 132,233 $ 101,929 $ 36,956
- -------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 121,584 $ 70,066 $ 15,521
- --------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 3.61% 2.73% 3.56%
Total expenses 5 1.18% 1.21% 1.31%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 1.18% 1.21% 1.29%
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate 3% 4% 0%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods less than one full year.
5. Total expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2008 1.76%
Year Ended January 31, 2007 1.82%
Period Ended January 31, 2006 1.99%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | MODERATE INVESTOR FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS C YEAR ENDED JANUARY 31, 2008 2007 2006 1
- --------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.33 $ 10.73 $ 10.00
- --------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .45 .30 .31
Net realized and unrealized gain (loss) (.41) .54 .57
----------------------------------------
Total from investment operations .04 .84 .88
- --------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.38) (.21) (.15)
Distributions from net realized gain (.09) (.03) --
----------------------------------------
Total dividends and/or distributions to shareholders (.47) (.24) (.15)
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.90 $ 11.33 $ 10.73
========================================
- --------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 0.24% 7.85% 8.82%
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 231,792 $ 142,351 $ 47,904
- --------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 193,641 $ 95,773 $ 19,527
- --------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 3.88% 2.78% 3.64%
Total expenses 5 1.14% 1.16% 1.23%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 1.14% 1.16% 1.22%
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate 3% 4% 0%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods less than one full year.
5. Total expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2008 1.72%
Year Ended January 31, 2007 1.77%
Period Ended January 31, 2006 1.91%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | MODERATE INVESTOR FUND
CLASS N YEAR ENDED JANUARY 31, 2008 2007 2006 1
- --------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.38 $ 10.76 $ 10.00
- --------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .51 .40 .40
Net realized and unrealized gain (loss) (.41) .51 .53
----------------------------------------
Total from investment operations .10 .91 .93
- --------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.43) (.26) (.17)
Distributions from net realized gain (.09) (.03) --
----------------------------------------
Total dividends and/or distributions
to shareholders (.52) (.29) (.17)
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.96 $ 11.38 $ 10.76
========================================
- --------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 0.72% 8.47% 9.35%
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 96,080 $ 51,620 $ 12,117
- --------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 73,754 $ 27,110 $ 4,158
- --------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 4.36% 3.58% 4.56%
Total expenses 5 0.64% 0.65% 0.68%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 0.64% 0.65% 0.67%
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate 3% 4% 0%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods less than one full year.
5. Total expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2008 1.22%
Year Ended January 31, 2007 1.26%
Period Ended January 31, 2006 1.36%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | MODERATE INVESTOR FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS Y YEAR ENDED JANUARY 31, 2008 2007 2006 1
- --------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.45 $ 10.79 $ 10.00
- --------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .55 .56 .36
Net realized and unrealized gain (loss) (.38) .43 .61
----------------------------------------
Total from investment operations .17 .99 .97
- --------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.48) (.30) (.18)
Distributions from net realized gain (.09) (.03) --
----------------------------------------
Total dividends and/or distributions to shareholders (.57) (.33) (.18)
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.05 $ 11.45 $ 10.79
========================================
- --------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 1.39% 9.18% 9.79%
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 1,860 $ 1,172 $ 316
- --------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 1,315 $ 335 $ 216
- --------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 4.67% 5.06% 4.20%
Total expenses 5 0.02% 0.00% 0.28%
Expenses after payments, waivers and/or
reimbursements and reduction to custodian expenses 0.02% 0.00% 0.12%
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate 3% 4% 0%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods less than one full year.
5. Total expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2008 0.60%
Year Ended January 31, 2007 0.61%
Period Ended January 31, 2006 0.96%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30 | MODERATE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Portfolio Series (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
Moderate Investor Fund (the "Portfolio") is a series of the Fund whose
investment objective is to seek long term growth of capital and current income.
The Portfolio is a special type of mutual fund known as a "fund of funds"
because it invests in other mutual funds. The Portfolio normally invests in a
diversified portfolio of Oppenheimer mututal funds (individually, an "Underlying
Fund" and collectively, the "Underlying Funds"). The Portfolio's investment
adviser is OppenheimerFunds, Inc. (the "Manager").
The Portfolio offers Class A, Class B, Class C, Class N and Class Y
shares. Class A shares are sold at their offering price, which is normally net
asset value plus a front-end sales charge. Class B, Class C and Class N shares
are sold without a front-end sales charge but may be subject to a contingent
deferred sales charge ("CDSC"). Class N shares are sold only through retirement
plans. Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC, however, the institutional investor
may impose charges on those accounts. All classes of shares have identical
rights and voting privileges with respect to the Portfolio in general and
exclusive voting rights on matters that affect that class alone. Earnings, net
assets and net asset value per share may differ due to each class having its own
expenses, such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares 72
months after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Portfolio.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Portfolio calculates the net asset value of each class
of its shares based upon the net asset value of the applicable Underlying Fund.
For each Underlying Fund, the net asset value per share for a class of shares is
determined as of the close of the New York Stock Exchange (the "Exchange"),
normally 4:00 P. M. Eastern time, on each day the Exchange is open for trading
by dividing the value of the Underlying Fund's net assets attributable to that
class by the number of outstanding shares of that class on that day. To
determine net asset values, the Underlying Fund's assets are valued primarily on
the basis of current market quotations. Securities for which market quotations
are not readily available are valued at their fair value. Securities whose
values have been materially affected by what the Manager identifies as a
significant event occurring before the Underlying 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 Underlying Fund's Board of Trustees. "Money market-type" debt
instruments with remaining maturities of sixty days or less are valued at cost
adjusted by the amortization of discount or premium to maturity (amortized
cost), which approximates market value.
31 | MODERATE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
RISKS OF INVESTING IN THE UNDERLYING FUNDS. Each of the Underlying Funds in
which the Portfolio invests has its own investment risks, and those risks can
affect the value of the Portfolio's investments and therefore the value of the
Portfolio's shares. To the extent that the Portfolio invests more of its assets
in one Underlying Fund than in another, the Portfolio will have greater exposure
to the risks of that Underlying Fund.
- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Portfolio is
permitted to invest daily available cash balances in an affiliated money market
fund. The Portfolio may invest the available cash in Class E shares of
Oppenheimer Institutional Money Market Fund ("IMMF") to seek current income
while preserving liquidity. 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 adviser of IMMF. The
Portfolio's investment in IMMF is included in the Statement of Investments. As a
shareholder, the Portfolio is subject to its proportional share of IMMF's Class
E expenses, including its management fee. The Manager will waive fees and/or
reimburse Portfolio expenses in an amount equal to the indirect management fees
incurred through the Portfolio's investment in IMMF.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Portfolio intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders. Therefore, no federal income or excise tax provision is
required. The Portfolio files income tax returns in U.S. federal and applicable
state jurisdictions. The statute of limitations on the Portfolio's tax return
filings generally remain open for the three preceding fiscal reporting period
ends.
The tax components of capital shown in the table below represent distribution
requirements the Portfolio must satisfy under the income tax regulations, losses
the Portfolio may be able to offset against income and gains realized in future
years and unrealized appreciation or depreciation of securities and other
investments for federal income tax purposes.
NET UNREALIZED
DEPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD TAX PURPOSES
---------------------------------------------------------------
$ 335,610 $19,401,891 $-- $35,632,554
32 | MODERATE INVESTOR FUND
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Portfolio.
Accordingly, the following amounts have been reclassified for January 31, 2008.
Net assets of the Portfolio were unaffected by the reclassifications.
REDUCTION TO REDUCTION TO
ACCUMULATED NET ACCUMULATED NET
INCREASE INVESTMENT REALIZED GAIN
TO PAID-IN CAPITAL INCOME ON INVESTMENTS 1
--------------------------------------------------------------
$2,444,094 $1,417,195 $1,026,899
1. $2,444,094, all of which was long-term capital gain, was distributed in
connection with Portfolio share redemptions.
The tax character of distributions paid during the years ended January 31, 2008
and January 31, 2007 was as follows:
YEAR ENDED YEAR ENDED
JANUARY 31, 2008 JANUARY 31, 2007
--------------------------------------------------------------
Distributions paid from:
Ordinary income $ 35,404,134 $ 12,134,458
Long-term capital gain 6,192,490 1,357,805
-----------------------------------
Total $ 41,596,624 $ 13,492,263
===================================
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of January 31, 2008 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 $ 993,705,485
==============
Gross unrealized appreciation $ 10,453,910
Gross unrealized depreciation (46,086,464)
--------------
Net unrealized depreciation $ ( 35,632,554)
==============
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Portfolio has adopted an unfunded retirement plan
(the "Plan") for the Portfolio's independent trustees. Benefits are based on
years of service and fees paid to each trustee during their period of service.
The Plan was frozen with respect to adding new participants effective December
31, 2006 (the "Freeze Date") and existing Plan Participants as of the Freeze
Date will continue to receive accrued benefits under the Plan. Active
independent trustees as of the Freeze Date have each elected a distribution
method with respect to their benefits under the Plan. During the year ended
January 31,
33 | MODERATE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
2008, the Portfolio's projected benefit obligations, payments to retired
trustees and accumulated liability were as follows:
Projected Benefit Obligations Increased $ 10,260
Payments Made to Retired Trustees 11,531
Accumulated Liability as of January 31, 2008 25,128
The Board of Trustees has adopted a compensation deferral plan for independent
trustees that enables trustees to elect to defer receipt of all or a portion of
the annual compensation they are entitled to receive from the Portfolio. For
purposes of determining the amount owed to the Trustee under the plan, deferred
amounts are treated as though equal dollar amounts had been invested in shares
of the Portfolio or in other Oppenheimer funds selected by the Trustee. The
Portfolio purchases shares of the funds selected for deferral by the Trustee in
amounts equal to his or her deemed investment, resulting in a Portfolio asset
equal to the deferred compensation liability. Such assets are included as a
component of "Other" within the asset section of the Statement of Assets and
Liabilities. Deferral of trustees' fees under the plan will not affect the net
assets of the Portfolio, and will not materially affect the Portfolio's assets,
liabilities or net investment income per share. Amounts will be deferred until
distributed in accordance to the compensation deferral plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations and
may differ from U.S. generally accepted accounting principles, are recorded on
the ex-dividend date. Income and capital gain distributions, if any, are
declared and paid annually or at other times as deemed necessary by the Manager.
- --------------------------------------------------------------------------------
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 is recognized on an accrual basis. Market discount and
premium, which are included in interest income on the Statement of Operations,
are amortized or accreted daily.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Portfolio on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Portfolio pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Portfolio, at a rate equal to
the Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line
item, if applicable, represents earnings on cash balances maintained by the
Portfolio during the period. Such interest expense and other custodian fees may
be paid with these earnings.
34 | MODERATE INVESTOR FUND
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Portfolio's organizational documents provide current and
former trustees and officers with a limited indemnification against liabilities
arising in connection with the performance of their duties to the Portfolio. In
the normal course of business, the Portfolio may also enter into contracts that
provide general indemnifications. The Portfolio's maximum exposure under these
arrangements is unknown as this would be dependent on future claims that may be
made against the Portfolio. The risk of material loss from such claims is
considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Portfolio has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED JANUARY 31, 2008 YEAR ENDED JANUARY 31, 2007
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
CLASS A
Sold 23,670,312 $ 277,504,057 20,288,978 $ 223,056,909
Dividends and/or
distributions reinvested 1,911,665 21,792,987 639,909 7,205,339
Redeemed (7,842,283) (91,480,221) (3,480,234) (38,407,180)
-----------------------------------------------------------
Net increase 17,739,694 $ 207,816,823 17,448,653 $ 191,855,068
===========================================================
- ------------------------------------------------------------------------------------------------------
CLASS B
Sold 5,367,940 $ 62,105,890 6,606,757 $ 71,847,371
Dividends and/or
distributions reinvested 445,664 5,044,923 169,423 1,897,534
Redeemed (2,696,518) (31,273,705) (1,231,276) (13,503,812)
-----------------------------------------------------------
Net increase 3,117,086 $ 35,877,108 5,544,904 $ 60,241,093
===========================================================
- ------------------------------------------------------------------------------------------------------
CLASS C
Sold 11,349,465 $ 131,882,421 9,578,836 $ 104,254,518
Dividends and/or
distributions reinvested 782,773 8,845,325 232,677 2,603,646
Redeemed (3,432,256) (39,580,957) (1,715,538) (18,778,708)
-----------------------------------------------------------
Net increase 8,699,982 $ 101,146,789 8,095,975 $ 88,079,456
===========================================================
35 | MODERATE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST Continued
YEAR ENDED JANUARY 31, 2008 YEAR ENDED JANUARY 31, 2007
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
CLASS N
Sold 6,083,743 $ 70,781,442 4,596,537 $ 50,879,391
Dividends and/or
distributions reinvested 327,476 3,720,127 94,107 1,056,826
Redeemed (2,181,216) (25,577,257) (1,279,558) (14,077,503)
-----------------------------------------------------------
Net increase 4,230,003 $ 48,924,312 3,411,086 $ 37,858,714
===========================================================
- ------------------------------------------------------------------------------------------------------
CLASS Y
Sold 84,671 $ 956,883 102,771 $ 1,171,814
Dividends and/or
distributions reinvested 6,021 68,943 2,252 25,447
Redeemed (24,775) (290,966) (31,969) (351,751)
-----------------------------------------------------------
Net increase 65,917 $ 734,860 73,054 $ 845,510
===========================================================
- --------------------------------------------------------------------------------
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 January
31, 2008, were as follows:
PURCHASES SALES
- --------------------------------------------------------------------------------
Investment securities $439,537,141 $27,906,290
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the investment advisory agreement, the Manager does not
charge a management fee, but rather collects indirect management fees from
investments in the Underlying Funds. The weighted indirect management fees
collected from the Underlying Funds, as a percent of average daily net assets of
the Portfolio for the year ended January 31, 2008 was 0.55%.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services ("OFS"), a division of the
Manager, acts as the transfer and shareholder servicing agent for the Portfolio.
The Portfolio pays OFS a per account fee. For the year ended January 31, 2008,
the Portfolio paid $905,645 to OFS for services to the Portfolio.
Additionally, Class Y shares are subject to minimum fees of $10,000
annually 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 Portfolio, OppenheimerFunds Distributor, Inc. (the
"Distributor") acts as the Portfolio's principal underwriter in the continuous
public offering of the Portfolio's classes of shares.
36 | MODERATE INVESTOR FUND
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Portfolio has adopted a Service Plan (the
"Plan") for Class A shares under Rule 12b-1 of the Investment Company Act of
1940. Under the Plan, the Portfolio reimburses the Distributor for a portion of
its costs incurred for services provided to accounts that hold Class A shares.
Reimbursement is made periodically at an annual rate of up to 0.25% of the
average annual net assets of Class A shares of the Portfolio. The Distributor
currently uses all of those fees to pay dealers, brokers, banks and other
financial institutions periodically for providing personal service and
maintenance of accounts of their customers that hold Class A shares. Any
unreimbursed expenses the Distributor incurs with respect to Class A shares in
any fiscal year cannot be recovered in subsequent periods. Fees incurred by the
Portfolio under the Plan are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The
Portfolio has adopted Distribution and Service Plans (the "Plans") for Class B,
Class C and Class N shares under Rule 12b-1 of the Investment Company Act of
1940 to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the Plans, the
Portfolio pays the Distributor an annual asset-based sales charge of 0.75% on
Class B and Class C shares and 0.25% on Class N shares. The Distributor also
receives a service fee of 0.25% per year under each plan. If either the Class B,
Class C or Class N plan is terminated by the Portfolio or by the shareholders of
a class, the Board of Trustees and its independent trustees must determine
whether the Distributor shall be entitled to payment from the Portfolio of all
or a portion of the service fee and/or asset-based sales charge in respect to
shares sold prior to the effective date of such termination. The Distributor's
aggregate uncompensated expenses under the Plans at December 31, 2007 for Class
B, Class C and Class N shares were $2,082,400, $1,701,074 and $845,521,
respectively. Fees incurred by the Portfolio under the Plans are detailed in the
Statement of Operations.
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
("CDSC") do not represent expenses of the Portfolio. They are deducted from the
proceeds of sales of Portfolio shares prior to investment or from redemption
proceeds prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the following table for the period
indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- --------------------------------------------------------------------------------------------------
January 31, 2008 $1,489,970 $13,816 $210,014 $40,484 $5,211
37 | MODERATE INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
WAIVERS AND REIMBURSEMENTS OF EXPENSES. The Manager has voluntarily agreed to a
total expense limitation on the aggregate amount of combined direct
(fund-of-funds level) and indirect expense so that "Total expenses" as a
percentage of average daily net assets will not exceed the following annual
rates: 1.30%, 2.05%, 2.05%, 1.55% and 1.05%, for Class A, Class B, Class C,
Class N and Class Y, respectively. The Manager may modify or terminate this
undertaking at any time without notice to shareholders. These expense
limitations do not include extraordinary expenses and other expenses not
incurred in the ordinary course of the Portfolio's business. Notwithstanding the
foregoing limits, the Manager is not required to waive or reimburse Portfolio
expenses in excess of indirect management fees earned from investments in
Underlying Funds to assure that expenses do not exceed those limits.
OFS has voluntarily agreed to limit transfer and shareholder servicing
agent fees for all classes to 0.35% of average annual net assets per class. This
undertaking may be amended or withdrawn at any time.
The Manager will waive fees and/or reimburse Portfolio expenses in an
amount equal to the indirect management fees incurred through the Portfolio's
investment in IMMF. During the year ended January 31, 2008, the Manager waived
$1,314 for IMMF management fees.
- --------------------------------------------------------------------------------
5. RECENT ACCOUNTING PRONOUNCEMENT
In September 2006, Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 157, FAIR VALUE
MEASUREMENTS. This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and expands
disclosures about fair value measurements. SFAS No. 157 applies to fair value
measurements already required or permitted by existing standards. SFAS No. 157
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. As of January
31, 2008, 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.
38 | MODERATE INVESTOR FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER PORTFOLIO SERIES:
We have audited the accompanying statement of assets and liabilities of Moderate
Investor Fund (one of the portfolios constituting the Oppenheimer Portfolio
Series), including the statement of investments, as of January 31, 2008, 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 two-year period then
ended and for the period April 5, 2005 (commencement of operations) to January
31, 2006. These financial statements and financial highlights are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of January 31, 2008, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Moderate Investor Fund as of January 31, 2008, 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 two-year period then ended and for the period April 5, 2005 (commencement
of operations) to January 31, 2006, in conformity with U.S. generally accepted
accounting principles.
/s/ KPMG LLP
Denver, Colorado
March 13, 2008
39 | MODERATE INVESTOR FUND
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2008, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Portfolio during
calendar year 2007. Regulations of the U.S. Treasury Department require the
Portfolio to report this information to the Internal Revenue Service.
Capital gain distributions of $0.0763 per share were paid to Class A,
Class B, Class C, Class N and Class Y shareholders, respectively, on December
31, 2007. Whether received in stock or in cash, the capital gain distribution
should be treated by shareholders as a gain from the sale of the capital assets
held for more than one year (long-term capital gains).
Dividends, if any, paid by the Portfolio during the fiscal year ended
January 31, 2008 which are not designated as capital gain distributions should
be multiplied by 13.87% to arrive at the amount eligible for the corporate
dividend-received deduction.
A portion, if any, of the dividends paid by the Portfolio during the
fiscal year ended January 31, 2008 which are not designated as capital gain
distributions are eligible for lower individual income tax rates to the extent
that the Portfolio has received qualified dividend income as stipulated by
recent tax legislation. $5,998,155 of the Portfolio's fiscal year taxable income
may be eligible for the lower individual income tax rates. In early 2008,
shareholders of record received information regarding the percentage of
distributions that are eligible for lower individual income tax rates.
Recent tax legislation allows a regulated investment company to designate
distributions not designated as capital gain distributions, as either interest
related dividends or short-term capital gain dividends, both of which are exempt
from the U.S. withholding tax applicable to non U.S. taxpayers. For the fiscal
year ended January 31, 2008, $42,698 or 0.13% of the ordinary distributions paid
by the Portfolio qualifies as an interest related dividend and $71,261 or 4.79%
of the short-term capital gain distribution paid and to be paid by the Portfolio
qualifies as a short-term capital gain dividend.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Portfolio to the Internal Revenue Service.
Because of the complexity of the federal regulations which may affect your
individual tax return and the many variations in state and local tax
regulations, we recommend that you consult your tax advisor for specific
guidance.
40 | MODERATE INVESTOR FUND
BOARD APPROVAL OF THE PORTFOLIO'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew Moderate
Investor Fund's (the "Fund" or the "Fund's) investment advisory agreement (the
"Agreement"). The Investment Company Act of 1940, as amended, requires that the
Board request and evaluate, and that the Manager provide, such information as
may be reasonably necessary to evaluate the terms of the Agreement. The Board
employs an independent consultant to prepare a report that provides information,
including comparative information, that the Board requests for that purpose. In
addition, the Board receives information throughout the year regarding Fund
services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services by the Manager and its affiliates,
(v) the extent to which economies of scale are realized as the Fund grows and
whether fee levels reflect these economies of scale for Fund investors and (vi)
other benefits to the Manager from its relationship with the Fund. The Board was
aware that there are alternatives to retaining the Manager.
NATURE AND EXTENT OF SERVICES. The Board considered information about the
nature and extent of the services provided to the Fund and information regarding
the Manager's key personnel who provide such services. The Manager's duties
include providing the Fund with the services of the portfolio managers and the
Manager's asset allocation team, who provide research, analysis and other
advisory services in regard to the Fund's investments; 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
41 | MODERATE INVESTOR FUND
BOARD APPROVAL OF THE PORTFOLIO'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 Rudi W. Schadt, Jerry Webman, Kurt Wolfgruber
and Christopher Leavy, the portfolio managers of the Fund, and the experience of
the portfolio managers and the investment performance of the investment
companies in which the Fund may invest (the "Underlying Funds"). 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 regular quarterly 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 mixed-asset target allocation moderate funds of funds
advised by other investment advisers. The Board noted that the Fund's since
inception performance was better than its peer group median. However, its
one-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
noted that the Fund does not pay a direct management fee but that the Fund
indirectly bears its share of the management fees of the Underlying Funds. 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
moderate funds of funds and other funds of funds with comparable asset levels
and distribution features. The Board noted that the Manager has agreed to
42 | MODERATE INVESTOR FUND
voluntarily limit the aggregate amount of combined direct (fund-of-funds level)
and indirect expense so that as a percentage of average daily net assets they
will not exceed the following annual rates: 1.30% for Class A, 2.05% for Class
B, 2.05% for Class C, 1.55% for Class N and 1.05% for Class Y. The Manager may
modify or terminate this undertaking at any time without notice to shareholders.
The Board noted that the Fund does not pay a management fee and that the Fund's
total expenses are lower than its peer group median.
ECONOMIES OF SCALE. The Board considered the extent to which the Manager
may realize economies of scale in managing and supporting the Fund and the
Underlying Funds, and the extent to which those economies of scale would benefit
the Fund's 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 and its affiliates for
services provided to the Fund and to the Underlying Funds.
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.
43 | MODERATE INVESTOR FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in 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.
44 | MODERATE INVESTOR FUND
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD; NUMBER
FUND, LENGTH OF SERVICE, AGE OF PORTFOLIOS IN THE FUND COMPLEX CURRENTLY OVERSEEN
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, COLORADO
TRUSTEES 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION,
RETIREMENT, DEATH OR REMOVAL.
BRIAN F. WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since September 1995-December 2007);
Chairman of the Board Director of Special Value Opportunities Fund, LLC (registered investment company) (affiliate of
of Trustees (since 2007) the Manager's parent company) (since September 2004); Member of Zurich Financial Investment
and Trustee (since 2005) Management Advisory Council (insurance) (since October 2004); Chairman (since August 2007) and
Age: 64 Trustee (since August 1991) of the Board of Trustees of the Jackson Laboratory (non-profit);
Treasurer and 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). Oversees 66 portfolios in the OppenheimerFunds
complex.
DAVID K. DOWNES, President, Chief Executive Officer and Board Member of CRAFund Advisors, Inc. (investment
Trustee (since 2007) management company) (since January 2004); President of The Community Reinvestment Act Qualified
Age: 68 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 66 portfolios in the
OppenheimerFunds complex.
MATTHEW P. FINK, Trustee of the Committee for Economic Development (policy research foundation) (since 2005);
Trustee (since 2005) Director of ICI Education Foundation (education foundation) (October 1991-August 2006);
Age: 67 President of the Investment Company Institute (trade association) (October 1991-June 2004);
Director of ICI Mutual Insurance Company (insurance company) (October 1991-June 2004). Oversees
56 portfolios in the OppenheimerFunds complex.
45 | MODERATE INVESTOR FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
ROBERT G. GALLI, A director or trustee of other Oppenheimer funds. Oversees 66 portfolios in the OppenheimerFunds
Trustee (since 2005) complex.
Age: 74
PHILLIP A. GRIFFITHS, Distinguished Presidential Fellow for International Affairs (since 2002) and Member (since 1979)
Trustee (since 2005) of the National Academy of Sciences; Council on Foreign Relations (since 2002); Director of GSI
Age: 69 Lumonics Inc. (precision medical equipment supplier) (since 2001); Senior Advisor of The
Andrew W. Mellon Foundation (since 2001); Chair of Science Initiative Group (since 1999); Member
of the American Philosophical Society (since 1996); Trustee of Woodward Academy (since 1983);
Foreign Associate of Third World Academy of Sciences; Director of the Institute for Advanced
Study (1991-2004); Director of Bankers Trust New York Corporation (1994-1999); Provost at Duke
University (1983-1991). Oversees 56 portfolios in the OppenheimerFunds complex.
MARY F. MILLER, Trustee of the American Symphony Orchestra (not-for-profit) (since October 1998); and Senior
Trustee (since 2005) Vice President and General Auditor of American Express Company (financial services company)
Age: 65 (July 1998-February 2003). Oversees 56 portfolios in the OppenheimerFunds complex.
JOEL W. MOTLEY, Managing Director of Public Capital Advisors, LLC (privately-held financial advisor) (since
Trustee (since 2005) January 2006); Director of Columbia Equity Financial Corp. (privately-held financial advisor)
Age: 55 (since 2002); Managing Director of Carmona Motley, Inc. (privately-held financial advisor)
(since January 2002); Managing Director of Carmona Motley Hoffman Inc. (privately-held financial
advisor) (January 1998-December 2001); Member of the Finance and Budget Committee of the Council
on Foreign Relations, Member of the Investment Committee of the Episcopal Church of America,
Member of the Investment Committee and Board of Human Rights Watch and the Investment Committee
of Historic Hudson Valley. Oversees 56 portfolios in the OppenheimerFunds complex.
RUSSELL S. REYNOLDS, JR., Chairman of RSR Partners (formerly "The Directorship Search Group, Inc.") (corporate governance
Trustee (since 2005) consulting and executive recruiting) (since 1993); Life Trustee of International House
Age: 76 (non-profit educational organization); Former Trustee of The Historical Society of the Town of
Greenwich; Former Director of Greenwich Hospital Association. Oversees 56 portfolios in the
OppenheimerFunds complex.
JOSEPH M. WIKLER, Director of the following medical device companies: Medintec (since 1992) and Cathco (since
Trustee (since 2005) 1996); Director of Lakes Environmental Association (environmental protection organization)
Age: 67 (since 1996); Member of the Investment Committee of the Associated Jewish Charities of Baltimore
(since 1994); Director of Fortis/Hartford mutual funds (1994-December 2001); Director of C-TASC
(a privately held bio-statistics company) (since May 2007). Oversees 56 portfolios in the
OppenheimerFunds complex.
PETER I. WOLD, President of Wold Oil Properties, Inc. (oil and gas exploration and production company) (since
Trustee (since 2005) 1994); Vice President of American Talc Company, Inc. (talc mining and milling) (since 1999);
Age: 60 Managing Member of Hole-in-the-Wall Ranch (cattle ranching) (since 1979); Vice President,
Secretary and Treasurer of Wold Trona Company, Inc. (soda ash processing and production)
(1996-2006); Director and Chairman of the Denver Branch of the Federal Reserve Bank of Kansas
City (1993-1999); and Director of PacifiCorp. (electric utility) (1995-1999). Oversees 56
portfolios in the OppenheimerFunds complex.
46 | MODERATE INVESTOR FUND
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW
AND OFFICER YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS
RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS
RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS
POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director of the Manager (since June 2001); President of
President and Principal the Manager (September 2000-March 2007); President and director or trustee of other Oppenheimer
Executive Officer and Trustee funds; President and Director of Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent
(since 2005) holding company) and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of
Age: 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 105 portfolios in the OppenheimerFunds complex.
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. LEAVY, SCHADT,
THE PORTFOLIO WEBMAN, WOLFGRUBER, ZACK, GILLESPIE AND MS. BLOOMBERG, TWO WORLD FINANCIAL CENTER, 225 LIBERTY
STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY, WIXTED, PETERSEN, SZILAGYI AND MS.
IVES, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE
TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
CHRISTOPHER LEAVY, Director of Equities of the Manager (since January 2007); Senior Vice President of the Manager
Vice President and (since September 2000). Portfolio manager of Morgan Stanley Dean Witter Investment Management
Portfolio Manager (1997-September 2000). A portfolio manager and officer of 15 portfolios in the OppenheimerFunds
(since 2007) complex.
Age: 37
RUDI W. SCHADT, Vice President, Director of Research in Product Design and Risk Management of the Manager. Prior
Vice President and to joining the Manager in February 2002, a Director and Senior Quantitative Analyst (2000-2001)
Portfolio Manager at UBS Asset Management prior to which he was an Associate Director of Research (since June
(since 2005) 1999) and Senior Researcher and Portfolio Manager (from June 1997) at State Street Global
Age: 50 Advisors. An officer of 14 portfolios in the OppenheimerFunds complex.
DR. JERRY WEBMAN, Chief Economist of the Manager (since 2006); Senior Vice President (since February 1996) and
Vice President and Senior Investment Officer and Director (since 1997) of the Manager's Fixed Income Investments;
Portfolio Manager Senior Vice President (since May 1999) of HarbourView Asset Management Corporation. An officer
(since 2005) of 11 portfolios in the OppenheimerFunds complex.
Age: 58
47 | MODERATE INVESTOR FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
KURT WOLFGRUBER, President (since March 2007) and Chief Investment Officer and Director (since July 2003) of the
Vice President and Manager; Executive Vice President of the Manager (March 2003-March 2007); Director of
Portfolio Manager HarbourView Asset Management Corporation and of OFI Institutional Asset Management, Inc. (since
(since 2005) June 2003) and of Tremont Capital Management, Inc. (since October 2001). An officer of 11
Age: 57 portfolios in the OppenheimerFunds complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief
Vice President and Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and
Chief Compliance Officer Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor,
(since 2005) Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983);
Age: 57 Former Vice President and Director of Internal Audit of the Manager (1997-February 2004). An
officer of 105 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 2005) Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since March 2000),
Age: 48 OppenheimerFunds International Ltd. and 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 105 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 2005) 1998-July 2002). An officer of 105 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 105 portfolios in the OppenheimerFunds
Age: 38 complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the
Vice President and Secretary Manager; General Counsel and Director of the Distributor (since December 2001); General Counsel
(since 2005) of Centennial Asset Management Corporation (since December 2001); Senior Vice President and
Age: 59 General Counsel of HarbourView Asset Management Corporation (since December 2001); Secretary and
General Counsel of OAC (since November 2001); Assistant Secretary (since September 1997) and
Director (since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc;
Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since December 2002);
Director of Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice
President, General Counsel and Director of Shareholder Financial Services, Inc. and Shareholder
Services, Inc. (since December 2001); Senior Vice President, General Counsel and Director of OFI
Private Investments, Inc. and OFI Trust Company (since November 2001); Vice President of
OppenheimerFunds Legacy Program (since June 2003); Senior Vice President and General Counsel of
OFI Institutional Asset Management, Inc. (since November 2001); Director of OppenheimerFunds
(Asia) Limited (since December 2003); Senior Vice President (May 1985-December 2003). An officer
of 105 portfolios in the OppenheimerFunds complex.
48 | MODERATE INVESTOR FUND
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) of UBS Financial
(since 2005) Services, Inc. An officer of 105 portfolios in the OppenheimerFunds complex.
Age: 40
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 2005) (1998-2000) of Merrill Lynch Investment Management. An officer of 105 portfolios in the
Age: 44 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 the
(since 2005) 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 105 portfolios in the OppenheimerFunds complex.
THE PORTFOLIO'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL
INFORMATION ABOUT THE PORTFOLIO'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT
CHARGE UPON REQUEST, BY CALLING 1.800.525.7048.
49 | MODERATE INVESTOR FUND
JANUARY 31, 2008
- --------------------------------------------------------------------------------
Active Management
Allocation Fund Commentaries
and
A Series of Oppenheimer Portfolio Series Annual Report
- --------------------------------------------------------------------------------
MANAGEMENT COMMENTARIES
Market Recap and Outlook
Listing of Top Holdings
ANNUAL REPORT [GRAPHIC]
Portfolio Performance Discussion
Listing of Investments
Financial Statements
[LOGO] OPPENHEIMERFUNDS(R)
The Right Way to Invest
TOP HOLDINGS AND ALLOCATIONS
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
- --------------------------------------------------------------------------------
ASSET CLASS ALLOCATION
U.S. Equity Funds 51.1%
Fixed Income Funds 25.3
Global Equity Funds 18.0
Alternative Investment Fund 4.8
Money Market Fund 0.8
Portfolio holdings and allocations are subject to change. Percentages are as of
January 31, 2008, and are based on the total market value of investments in
affiliated companies.
- --------------------------------------------------------------------------------
9 | ACTIVE ALLOCATION FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
HOW HAS THE PORTFOLIO PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS,
INC., OF THE PORTFOLIO'S PERFORMANCE DURING ITS FISCAL YEAR ENDED JANUARY 31,
2008, FOLLOWED BY A GRAPHICAL COMPARISON OF THE PORTFOLIO'S PERFORMANCE TO AN
APPROPRIATE BROAD-BASED MARKET INDEX.
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE. For its fiscal year ending
January 31, 2008, the Portfolio outperformed its equity index, the S&P 500
Index, which returned -2.31%. As an additional point of reference, the Lehman
Aggregate Bond Index returned 8.81% during the reporting period. We attribute
the Portfolio's outperformance of the S&P 500 Index to the gains achieved by the
Portfolio's approximate 20% tactical (active) component. Within the tactical
component, the Portfolio benefited from its allocations to international funds
in addition to a successful derivative overlay strategy.
In contrast, performance was hurt by the weak results posted by many of
the Portfolio's underlying domestic equity funds in addition to the Portfolio's
allocation to Oppenheimer Real Estate Fund's Class Y shares.
Over the period, international equity markets continued to outperform U.S.
equity markets. The Portfolio enjoyed the advances made in the international
markets primarily through its tactical component. Contributors to performance
included Oppenheimer Developing Markets Fund, Oppenheimer International Growth
Fund, Oppenheimer International Small Company Fund and Oppenheimer International
Bond Fund.
Oppenheimer Developing Markets Fund advanced on a variety of economic
factors benefiting the emerging markets, which included robust economic growth,
low interest rates and high commodity prices. The Portfolio's allocations to
Oppenheimer International Growth Fund's Class Y shares and Oppenheimer
International Small Company Fund's Class Y shares also added to the Portfolio's
performance. Oppenheimer International Bond Fund's Class Y shares returned
19.40% for the reporting period, and continued to benefit from an emphasis on
investments from emerging markets.
The Portfolio's tactical component also advanced on the success achieved
through a derivative overlay strategy. The strategy enabled the management team
to effectively respond to changing market conditions in both the emerging
markets and U.S. markets by implementing sizable positions quickly and
efficiently.
Within the strategic component of the Portfolio, the allocation to
Oppenheimer Real Estate Fund's Class Y shares detracted from performance. The
Fund's weak performance is attributed to the combined effects of a deteriorating
housing market, higher energy prices and concerns in the credit markets. It is
important to mention that the negative effects that Oppenheimer Real Estate Fund
had on the Portfolio were reduced due to an annual rebalance that occurred at
the start of the period. The rebalance brought the
10 | ACTIVE ALLOCATION FUND
Portfolio's allocation to Oppenheimer Real Estate Fund's Class Y shares to
slightly under its target level of 5%, which prevented any additional exposure
to the weakened fund.
The Portfolio's allocation to domestic equity funds also hampered returns.
We attribute the overall weakness in the Portfolio's domestic equity component
to the intense volatility that gripped the capital markets over the last half of
the period. Although almost all of the Portfolio's acquired equity funds posted
negative performance, Oppenheimer Capital Appreciation Fund's Class Y shares
delivered positive absolute returns. In addition to strong stock selection,
Oppenheimer Capital Appreciation Fund gained value due to the generally positive
performance generated by large cap growth stocks.
The Portfolio's fixed income component also added to results. Most of the
Portfolio's underlying fixed income funds posted positive absolute results, but
relative returns were weak. However, given that fixed income markets generally
fared better than equity markets during the volatile period, the Portfolio's
fixed income component ultimately helped performance.
On a final note, we eliminated Oppenheimer Strategic Income Fund from the
strategic component of the Portfolio and reinvested the proceeds into Class Y
shares of Oppenheimer U.S. Government Trust, Oppenheimer Champion Income Fund
and Oppenheimer International Bond Fund.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow
show the performance of a hypothetical $10,000 investment in each class of
shares of the Portfolio held until January 31, 2008. Performance is measured
from the inception of Classes A, B, C, N and Y on April 5, 2005. The Portfolio's
performance reflects the deduction of the maximum initial sales charge on Class
A shares, the applicable contingent deferred sales charge on Class B, Class C
and Class N shares, and reinvestments of all dividends and capital gains
distributions. Past performance cannot guarantee future results.
The Portfolio's performance is compared to the performance of the S&P 500
Index and the Lehman Aggregate Bond Index. The S&P 500 Index is an unmanaged
index of equity securities. The Lehman Aggregate Bond Index is an index of U.S.
Government and corporate bonds that includes reinvestment of dividends. Index
performance reflects the reinvestment of income but does not consider the effect
of transaction costs, and none of the data in the graphs shows the effect of
taxes. The Portfolio's performance reflects the effects of the Portfolio's
business and operating expenses. While index comparisons may be useful to
provide a benchmark for the Portfolio's performance, it must be noted that the
Portfolio's investments are not limited to the investments in the index.
11 | ACTIVE ALLOCATION FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Active Allocation Fund (Class A)
S&P 500 Index
Lehman Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio
Series: Active Allocation Lehman Aggregate
Fund (Class A) S&P 500 Index Bond Index
04/05/2005 $ 9,425 $10,000 $10,000
04/30/2005 $ 9,227 $ 9,810 $10,135
07/31/2005 $ 9,868 $10,514 $10,207
10/31/2005 $ 9,830 $10,327 $10,150
01/31/2006 $10,679 $11,005 $10,293
04/30/2006 $10,948 $11,322 $10,207
07/31/2006 $10,573 $11,079 $10,356
10/31/2006 $11,314 $12,013 $10,677
01/31/2007 $11,868 $12,600 $10,734
04/30/2007 $12,312 $13,046 $10,959
07/31/2007 $12,203 $12,865 $10,934
10/31/2007 $13,021 $13,761 $11,252
01/31/2008 $11,669 $12,309 $11,679
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/08
1-Year -7.34% Since Inception (4/5/05) 5.62%
12 | ACTIVE ALLOCATION FUND
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Active Allocation Fund (Class B)
S&P 500 Index
Lehman Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio
Series: Active Allocation Lehman Aggregate
Fund (Class B) S&P 500 Index Bond Index
04/05/2005 $10,000 $10,000 $10,000
04/30/2005 $ 9,790 $ 9,810 $10,135
07/31/2005 $10,450 $10,514 $10,207
10/31/2005 $10,390 $10,327 $10,150
01/31/2006 $11,272 $11,005 $10,293
04/30/2006 $11,527 $11,322 $10,207
07/31/2006 $11,109 $11,079 $10,356
10/31/2006 $11,863 $12,013 $10,677
01/31/2007 $12,416 $12,600 $10,734
04/30/2007 $12,862 $13,046 $10,959
07/31/2007 $12,717 $12,865 $10,934
10/31/2007 $13,547 $13,761 $11,252
01/31/2008 $11,818 $12,309 $11,679
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/08
1-Year -7.08% Since Inception (4/5/05) 6.10%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 3% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 17 FOR FURTHER
INFORMATION.
13 | ACTIVE ALLOCATION FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Active Allocation Fund (Class C)
S&P 500 Index
Lehman Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio
Series: Active Allocation Lehman Aggregate
Fund (Class C) S&P 500 Index Bond Index
04/05/2005 $10,000 $10,000 $10,000
04/30/2005 $ 9,780 $ 9,810 $10,135
07/31/2005 $10,440 $10,514 $10,207
10/31/2005 $10,380 $10,327 $10,150
01/31/2006 $11,266 $11,005 $10,293
04/30/2006 $11,520 $11,322 $10,207
07/31/2006 $11,103 $11,079 $10,356
10/31/2006 $11,856 $12,013 $10,677
01/31/2007 $12,416 $12,600 $10,734
04/30/2007 $12,862 $13,046 $10,959
07/31/2007 $12,717 $12,865 $10,934
10/31/2007 $13,548 $13,761 $11,252
01/31/2008 $12,116 $12,309 $11,679
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/08
1-Year -3.35% Since Inception (4/5/05) 7.04%
14 | ACTIVE ALLOCATION FUND
CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Active Allocation Fund (Class N)
S&P 500 Index
Lehman Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio
Series: Active Allocation Lehman Aggregate
Fund (Class N) S&P 500 Index Bond Index
04/05/2005 $10,000 $10,000 $10,000
04/30/2005 $ 9,790 $ 9,810 $10,135
07/31/2005 $10,460 $10,514 $10,207
10/31/2005 $10,410 $10,327 $10,150
01/31/2006 $11,318 $11,005 $10,293
04/30/2006 $11,593 $11,322 $10,207
07/31/2006 $11,185 $11,079 $10,356
10/31/2006 $11,961 $12,013 $10,677
01/31/2007 $12,549 $12,600 $10,734
04/30/2007 $13,008 $13,046 $10,959
07/31/2007 $12,883 $12,865 $10,934
10/31/2007 $13,739 $13,761 $11,252
01/31/2008 $12,304 $12,309 $11,679
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/08
1-Year -2.89% Since Inception (4/5/05) 7.62%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 3% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 17 FOR FURTHER
INFORMATION.
15 | ACTIVE ALLOCATION FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS Y SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Active Allocation Fund (Class Y)
S&P 500 Index
Lehman Aggregate Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio
Series: Active Allocation Lehman Aggregate
Fund (Class Y) S&P 500 Index Bond Index
04/05/2005 $10,000 $10,000 $10,000
04/30/2005 $ 9,790 $ 9,810 $10,135
07/31/2005 $10,490 $10,514 $10,207
10/31/2005 $10,450 $10,327 $10,150
01/31/2006 $11,372 $11,005 $10,293
04/30/2006 $11,668 $11,322 $10,207
07/31/2006 $11,280 $11,079 $10,356
10/31/2006 $12,077 $12,013 $10,677
01/31/2007 $12,687 $12,600 $10,734
04/30/2007 $13,169 $13,046 $10,959
07/31/2007 $13,064 $12,865 $10,934
10/31/2007 $13,956 $13,761 $11,252
01/31/2008 $12,512 $12,309 $11,679
AVERAGE ANNUAL TOTAL RETURNS OF CLASS Y SHARES OF THE PORTFOLIO AT 1/31/08
1-Year -1.38% Since Inception (4/5/05) 8.26%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 3% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 17 FOR FURTHER
INFORMATION.
16 | ACTIVE ALLOCATION FUND
NOTES
- --------------------------------------------------------------------------------
Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. The Portfolio's total returns
shown do not reflect the deduction of income taxes on an individual's
investment. Taxes may reduce your actual investment returns on income or gains
paid by the Portfolio or any gains you may realize if you sell your shares.
INVESTORS SHOULD CONSIDER THE PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, AND
OTHER CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PORTFOLIO'S
PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT THE PORTFOLIO, AND MAY BE
OBTAINED BY ASKING YOUR FINANCIAL ADVISOR, CALLING US AT 1.800.525.7048 OR
VISITING OUR WEBSITE AT WWW.OPPENHEIMERFUNDS.COM. READ THE PROSPECTUS CAREFULLY
BEFORE INVESTING.
The Portfolio's investment strategy and focus can change over time. The mention
of specific fund holdings does not constitute a recommendation by
OppenheimerFunds, Inc.
CLASS A shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class A returns include the maximum initial sales charge of
5.75%.
CLASS B shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 3% (since inception). Class B shares are subject
to an annual 0.75% asset-based sales charge.
CLASS C shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
CLASS N shares of the Portfolio were first publicly offered on 4/5/05. Class N
shares are offered only through retirement plans. Unless otherwise noted, Class
N returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
CLASS Y shares of the Portfolio were first publicly offered on 4/5/05. Class Y
shares are offered only to certain institutional investors under special
agreements with the Distributor.
An explanation of the calculation of performance is in the Portfolio's Statement
of Additional Information.
17 | ACTIVE ALLOCATION FUND
PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
PORTFOLIO EXPENSES. As a shareholder of the Portfolio, you incur two types of
costs: (1) transaction costs, which may include sales charges (loads) on
purchase payments, contingent deferred sales charges on redemptions; and
redemption fees (if applicable); and (2) ongoing costs, including management
fees; distribution and service fees; and other Portfolio expenses. These
examples are intended to help you understand your ongoing costs (in dollars) of
investing in the Portfolio and to compare these costs with the ongoing costs of
investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended January 31, 2008.
ACTUAL EXPENSES. The first section of the table provides information about
actual account values and actual expenses. You may use the information in this
section 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 first section
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 second section of the table
provides information about hypothetical account values and hypothetical expenses
based on the Portfolio's actual expense ratio for each class of shares, and an
assumed rate of return of 5% per year for each class before expenses, which is
not the actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Portfolio and other funds. To do so, compare this 5% hypothetical example
for the class of shares you hold with the 5% hypothetical examples that appear
in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front-end
or contingent deferred sales charges (loads), or a $12.00 fee imposed annually
on accounts valued at less than $500.00 (subject to exceptions described in the
Statement of Additional Information). Therefore, the
18 | ACTIVE ALLOCATION FUND
"hypothetical" section of the table is 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
ACTUAL AUGUST 1, 2007 JANUARY 31, 2008 JANUARY 31, 2008
- -----------------------------------------------------------------------------------------
Class A $1,000.00 $ 956.20 $2.37
- -----------------------------------------------------------------------------------------
Class B 1,000.00 952.90 6.27
- -----------------------------------------------------------------------------------------
Class C 1,000.00 952.80 6.12
- -----------------------------------------------------------------------------------------
Class N 1,000.00 955.00 3.46
- -----------------------------------------------------------------------------------------
Class Y 1,000.00 957.70 0.64
HYPOTHETICAL
(5% return before expenses)
- -----------------------------------------------------------------------------------------
Class A 1,000.00 1,022.79 2.45
- -----------------------------------------------------------------------------------------
Class B 1,000.00 1,018.80 6.48
- -----------------------------------------------------------------------------------------
Class C 1,000.00 1,018.95 6.33
- -----------------------------------------------------------------------------------------
Class N 1,000.00 1,021.68 3.57
- -----------------------------------------------------------------------------------------
Class Y 1,000.00 1,024.55 0.66
Expenses are equal to the Portfolio's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios,
excluding all underlying funds expenses, on the 6-month period ended January 31,
2008 are as follows:
CLASS EXPENSE RATIOS
- -------------------------------
Class A 0.48%
- -------------------------------
Class B 1.27
- -------------------------------
Class C 1.24
- -------------------------------
Class N 0.70
- -------------------------------
Class Y 0.13
The expense ratios reflect reduction to custodian expenses and voluntary waivers
or reimbursements of expenses by the Portfolio's Manager that can be terminated
at any time, without advance notice. The "Financial Highlights" tables in the
Portfolio's financial statements, included in this report, also show the gross
expense ratios, without such waivers or reimbursements and reduction to
custodian expenses, if applicable.
- --------------------------------------------------------------------------------
19 | ACTIVE ALLOCATION FUND
STATEMENT OF INVESTMENTS January 31, 2008
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES--99.7% 1
- --------------------------------------------------------------------------------------------------
ALTERNATIVE INVESTMENT FUND--4.8%
Oppenheimer Real Estate Fund, Cl. Y 6,562,660 $ 126,134,324
- --------------------------------------------------------------------------------------------------
FIXED INCOME FUNDS--25.2%
Oppenheimer Champion Income Fund, Cl. Y 16,515,149 141,204,522
- --------------------------------------------------------------------------------------------------
Oppenheimer Core Bond Fund, Cl. Y 29,099,763 295,071,595
- --------------------------------------------------------------------------------------------------
Oppenheimer International Bond Fund, Cl. Y 18,223,098 119,543,525
- --------------------------------------------------------------------------------------------------
Oppenheimer U.S. Government Trust, Cl. Y 11,382,541 110,752,122
---------------
666,571,764
- --------------------------------------------------------------------------------------------------
GLOBAL EQUITY FUNDS--17.9%
Oppenheimer Developing Markets Fund, Cl. Y 2 457,641 20,213,981
- --------------------------------------------------------------------------------------------------
Oppenheimer Global Fund, Cl. Y 3,691,578 246,339,005
- --------------------------------------------------------------------------------------------------
Oppenheimer Global Opportunities Fund, Cl. Y 4,621,178 142,794,408
- --------------------------------------------------------------------------------------------------
Oppenheimer International Growth Fund, Cl. Y 753,125 21,433,928
- --------------------------------------------------------------------------------------------------
Oppenheimer International Small Company Fund, Cl. Y 890,431 20,551,141
- --------------------------------------------------------------------------------------------------
Oppenheimer Quest International Value Fund, Inc., Cl. A 1,105,423 20,925,657
---------------
472,258,120
- --------------------------------------------------------------------------------------------------
MONEY MARKET FUND--0.8%
Oppenheimer Institutional Money Market Fund, Cl. E, 4.54% 3 22,664,856 22,664,856
- --------------------------------------------------------------------------------------------------
U.S. EQUITY FUNDS--51.0%
Oppenheimer Capital Appreciation Fund, Cl. Y 7,395,404 356,828,230
- --------------------------------------------------------------------------------------------------
Oppenheimer Main Street Fund, Cl. Y 7,233,544 249,267,917
- --------------------------------------------------------------------------------------------------
Oppenheimer Main Street Opportunity Fund, Cl. Y 11,047,198 144,055,459
- --------------------------------------------------------------------------------------------------
Oppenheimer Main Street Small Cap Fund, Cl. Y 6,936,180 132,966,571
- --------------------------------------------------------------------------------------------------
Oppenheimer MidCap Fund, Cl. Y 4 2,069,622 39,219,433
- --------------------------------------------------------------------------------------------------
Oppenheimer Small- & Mid- Cap Value Fund, Cl. Y 1,165,687 40,146,249
- --------------------------------------------------------------------------------------------------
Oppenheimer Value Fund, Cl. Y 15,820,161 384,271,704
---------------
1,346,755,563
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $2,793,189,035) 99.7% 2,634,384,627
- --------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.3 7,824,617
----------------------------
NET ASSETS 100.0% $2,642,209,244
============================
INDUSTRY CLASSIFICATIONS ARE UNAUDITED.
20 | ACTIVE ALLOCATION FUND
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended January 31, 2008, by virtue of the Portfolio owning
at least 5% of the voting securities of the issuer or as a result of the
Portfolio and the issuer having the same investment adviser. Transactions during
the period in which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
JAN. 31, 2007 ADDITIONS REDUCTIONS JAN. 31, 2008
- -------------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation Fund, Cl. Y 5,035,770 2,547,905 188,271 7,395,404
Oppenheimer Champion Income Fund, Cl. Y 3,973,401 12,729,804 188,056 16,515,149
Oppenheimer Core Bond Fund, Cl. Y 17,144,429 12,257,702 302,368 29,099,763
Oppenheimer Developing Markets Fund, Cl. Y 366,377 207,793 116,529 457,641
Oppenheimer Global Fund, Cl. Y 2,405,097 1,396,864 110,383 3,691,578
Oppenheimer Global Opportunities Fund, Cl. Y 2,450,325 2,203,357 32,504 4,621,178
Oppenheimer Institutional Money Market Fund, Cl. E 6,349,533 328,192,508 311,877,185 22,664,856
Oppenheimer International Bond Fund, Cl. Y 2,779,230 16,394,686 950,818 18,223,098
Oppenheimer International Growth Fund, Cl. Y 1,566,542 685,847 1,499,264 753,125
Oppenheimer International Small Company Fund, Cl. Y 558,527 423,682 91,778 890,431
Oppenheimer Main Street Fund, Cl. Y 4,361,432 3,049,991 177,879 7,233,544
Oppenheimer Main Street Opportunity Fund, Cl. Y 6,480,652 4,645,725 79,179 11,047,198
Oppenheimer Main Street Small Cap Fund, Cl. Y 4,007,613 2,981,173 52,606 6,936,180
Oppenheimer MidCap Fund, Cl. Y -- 2,070,603 981 2,069,622
Oppenheimer Quest International Value Fund, Inc.,
Cl. A 1,270,789 677,316 842,682 1,105,423
Oppenheimer Real Estate Fund, Cl. Y 4,290,964 2,880,480 608,784 6,562,660
Oppenheimer Small- & Mid- Cap Value Fund, Cl. Y 762,924 469,821 67,058 1,165,687
Oppenheimer Strategic Income Fund, Cl. Y 41,051,737 18,510,102 59,561,839 --
Oppenheimer U.S. Government Trust, Cl. Y 3,000,034 11,669,663 3,287,156 11,382,541
Oppenheimer Value Fund, Cl. Y 9,865,588 6,649,507 694,934 15,820,161
DIVIDEND REALIZED
VALUE INCOME GAIN (LOSS)
- -------------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation Fund, Cl. Y $ 356,828,230 $ -- $ (587,629)
Oppenheimer Champion Income Fund, Cl. Y 141,204,522 5,348,062 (53,156)
Oppenheimer Core Bond Fund, Cl. Y 295,071,595 9,626,200 (17,251)
Oppenheimer Developing Markets Fund, Cl. Y 20,213,981 790,270 (620,733)
Oppenheimer Global Fund, Cl. Y 246,339,005 4,874,668 (282,012)
Oppenheimer Global Opportunities Fund, Cl. Y 142,794,408 8,840,759 (226,544)
Oppenheimer Institutional Money Market Fund, Cl. E 22,664,856 710,694 --
Oppenheimer International Bond Fund, Cl. Y 119,543,525 5,428,831 75,384
Oppenheimer International Growth Fund, Cl. Y 21,433,928 860,094 719,738
Oppenheimer International Small Company Fund, Cl. Y 20,551,141 1,528,481 138,626
Oppenheimer Main Street Fund, Cl. Y 249,267,917 14,549,996 (310,556)
Oppenheimer Main Street Opportunity Fund, Cl. Y 144,055,459 8,586,802 (127,626)
Oppenheimer Main Street Small Cap Fund, Cl. Y 132,966,571 2,652,406 (176,127)
Oppenheimer MidCap Fund, Cl. Y 39,219,433 -- (23)
Oppenheimer Quest International Value Fund, Inc., Cl. A 20,925,657 1,293,303 (3,182,248)
Oppenheimer Real Estate Fund, Cl. Y 126,134,324 5,337,524 544,293
Oppenheimer Small- & Mid- Cap Value Fund, Cl. Y 40,146,249 1,386,245 (19,190)
Oppenheimer Strategic Income Fund, Cl. Y -- 9,080,285 9,901,275
Oppenheimer U.S. Government Trust, Cl. Y 110,752,122 3,192,077 664,476
Oppenheimer Value Fund, Cl. Y 384,271,704 12,670,427 (177,268)
---------------------------------------------
$2,634,384,627 $96,757,124 $ 6,263,429
=============================================
2. A sufficient amount of securities has been designated to cover outstanding
foreign currency contracts. See Note 5 of accompanying Notes.
3. Rate shown is the 7-day yield as of January 31, 2008.
4. Non-income producing security.
21 | ACTIVE ALLOCATION FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FOREIGN CURRENCY EXCHANGE CONTRACTS AS OF JANUARY 31, 2008 ARE AS FOLLOWS:
- --------------------------------------------------------------------------------
CONTRACT
BUY/ AMOUNT EXPIRATION UNREALIZED UNREALIZED
CONTRACT DESCRIPTION SELL (000S) DATE VALUE APPRECIATION DEPRECIATION
- ----------------------------------------------------------------------------------------------------------------
British Pound Sterling (GBP) Sell 700GBP 4/7/08 $1,386,196 $ 15,204 $ --
Euro (EUR) Sell 4,400EUR 4/7/08 6,528,098 -- 55,961
Hong Kong Dollar (HKD) Buy 23,000HKD 2/11/08 2,950,501 -- 752
Hungarian Forint (HUF) Buy 323,000HUF 4/7/08 1,845,792 -- 20,613
Japanese Yen (JPY) Sell 550,000JPY 4/7/08 5,195,037 -- 231,138
Mexican Nuevo Peso (MXN) Buy 25,000MXN 2/7/08 2,307,202 18,349 --
New Turkish Lira (TRY) Buy 2,000TRY 4/7/08 1,669,816 6,338 --
Polish Zloty (PLZ) Buy 4,100PLZ 2/7/08 1,692,084 17,931 --
Singapore Dollar (SGD) Buy 3,800SGD 2/11/08 2,682,729 46,586 --
---------------------------
Total unrealized appreciation
(depreciation) $ 104,408 $ 308,464
===========================
- --------------------------------------------------------------------------------
FUTURE CONTRACTS AS OF JANUARY 31, 2008 ARE AS FOLLOWS:
- --------------------------------------------------------------------------------
UNREALIZED
BUY/ NUMBER OF EXPIRATION APPRECIATION
CONTRACT DESCRIPTION SELL CONTRACTS DATE VALUE (DEPRECIATION)
- -------------------------------------------------------------------------------------------------
Japan (Government of)
Mini Bonds, 10 yr. Sell 45 3/10/08 $ 5,828,906 $ (59,361)
Standard & Poor's
500 E-Mini Buy 407 3/20/08 28,074,860 1,924,377
U.S. Long Bonds Sell 74 3/19/08 8,829,125 66,972
United Kingdom Long Gilt Sell 38 3/27/08 8,355,194 (29,798)
-------------
$ 1,902,190
=============
22 | ACTIVE ALLOCATION FUND
- --------------------------------------------------------------------------------
TOTAL RETURN SWAP CONTRACTS AS OF JANUARY 31, 2008 ARE AS FOLLOWS:
- --------------------------------------------------------------------------------
SWAP NOTIONAL PAID BY RECEIVED BY TERMINATION
COUNTERPARTY AMOUNT THE PORTFOLIO THE PORTFOLIO DATE VALUE
- ------------------------------------------------------------------------------------------------------
Three-Month
USD BBA LIBOR
and if negative, If positive, the
the absolute value Total Return of
of the MSCI Daily the MSCI Daily
Total Return Net Total Return Net
Goldman Sachs Emerging Market Emerging Market
International $ 28,736,542 USD Index. USD Index 12/8/08 $ (3,833,168)
- ------------------------------------------------------------------------------------------------------
UBS AG:
One-Month USD
BBA LIBOR minus
60 basis points
and if negative,
the absolute value
If positive, the of the Total
Total Return of the Return of the
S&P Small Cap S&P Small Cap
26,990,582 600 Index 600 Index 11/6/08 992,826
One-Month USD
BBA LIBOR minus
60 basis points
and if negative,
If positive, the the absolute value
Total Return of the of the Total Return
S&P Small Cap of the S&P Small
2,455,032 600 Index Cap 600 Index 11/6/08 99,693
-------------
$ (2,740,649)
=============
Index abbreviations are as follows:
BBA LIBOR British Bankers' Association London-Interbank Offered Rate
MSCI Morgan Stanley Capital International
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23 | ACTIVE ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES January 31, 2008
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments--affiliated
companies (cost $2,793,189,035) $ 2,634,384,627
- ----------------------------------------------------------------------------------------------------
Cash 98,708
- ----------------------------------------------------------------------------------------------------
Cash used for collateral on futures 7,858,062
- ----------------------------------------------------------------------------------------------------
Unrealized appreciation on foreign currency exchange contracts 104,408
- ----------------------------------------------------------------------------------------------------
Swaps, at value 1,092,519
- ----------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 8,032,601
Dividends 3,358,573
Futures margins 462,907
Other 37,361
----------------
Total assets 2,655,429,766
- ----------------------------------------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------------------------------------
Unrealized depreciation on foreign currency exchange contracts 308,464
- ----------------------------------------------------------------------------------------------------
Swaps, at value 3,833,168
- ----------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 4,472,212
Shares of beneficial interest redeemed 3,540,913
Distribution and service plan fees 552,379
Transfer and shareholder servicing agent fees 251,501
Trustees' compensation 106,280
Shareholder communications 83,131
Other 72,474
----------------
Total liabilities 13,220,522
- ----------------------------------------------------------------------------------------------------
NET ASSETS $ 2,642,209,244
================
- ----------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ----------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 235,129
- ----------------------------------------------------------------------------------------------------
Additional paid-in capital 2,717,016,027
- ----------------------------------------------------------------------------------------------------
Accumulated net investment income 2,894,627
- ----------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 81,910,384
- ----------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments and translation of assets and
liabilities denominated in foreign currencies (159,846,923)
----------------
NET ASSETS $ 2,642,209,244
================
24 | ACTIVE ALLOCATION FUND
- -----------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- -----------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$1,396,770,123 and 123,858,241 shares of beneficial interest outstanding) $ 11.28
Maximum offering price per share (net asset value plus sales charge of 5.75%
of offering price) $ 11.97
- -----------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of
$449,130,035 and 40,116,344 shares of beneficial interest outstanding) $ 11.20
- -----------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of
$630,989,900 and 56,451,929 shares of beneficial interest outstanding) $ 11.18
- -----------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of
$161,530,252 and 14,368,450 shares of beneficial interest outstanding) $ 11.24
- -----------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $3,788,934 and 334,402 shares of beneficial interest outstanding) $ 11.33
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | ACTIVE ALLOCATION FUND
STATEMENT OF OPERATIONS For the Year Ended January 31, 2008
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
INVESTMENT INCOME
- -------------------------------------------------------------------------------------
Dividends from affiliated companies $ 96,757,124
- -------------------------------------------------------------------------------------
Interest 231,365
- -------------------------------------------------------------------------------------
Other income 13,766
---------------
Total investment income 97,002,255
- -------------------------------------------------------------------------------------
EXPENSES
- -------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 3,159,834
Class B 4,328,148
Class C 5,766,301
Class N 729,020
- -------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 1,431,491
Class B 608,601
Class C 702,644
Class N 123,290
Class Y 414
- -------------------------------------------------------------------------------------
Shareholder communications:
Class A 179,785
Class B 96,882
Class C 80,463
Class N 7,163
Class Y 56
- -------------------------------------------------------------------------------------
Asset allocation fees 2,424,896
- -------------------------------------------------------------------------------------
Trustees' compensation 74,589
- -------------------------------------------------------------------------------------
Custodian fees and expenses 13,879
- -------------------------------------------------------------------------------------
Other 105,583
---------------
Total expenses 19,833,039
Less reduction to custodian expenses (638)
Less waivers and reimbursements of expenses (71,299)
---------------
Net expenses 19,761,102
- -------------------------------------------------------------------------------------
NET INVESTMENT INCOME 77,241,153
26 | ACTIVE ALLOCATION FUND
- ---------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ---------------------------------------------------------------------------------------------
Net realized gain on investments:
Affiliated companies $ 6,263,429
Distributions received from affiliated companies 97,610,535
Closing and expiration of futures contracts 1,447,907
Foreign currency transactions 618,614
Swap contracts 9,288,315
-----------------
Net realized gain 115,228,800
- ---------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (275,074,510)
Translation of assets and liabilities denominated in foreign currencies (204,055)
Futures contracts 802,781
Swap contracts (2,660,196)
-----------------
Net change in unrealized depreciation (277,135,980)
- ---------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (84,666,027)
=================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | ACTIVE ALLOCATION FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED JANUARY 31, 2008 2007
- ---------------------------------------------------------------------------------------------------------
OPERATIONS
- ---------------------------------------------------------------------------------------------------------
Net investment income $ 77,241,153 $ 32,270,527
- ---------------------------------------------------------------------------------------------------------
Net realized gain 115,228,800 26,702,188
- ---------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (277,135,980) 94,186,438
-------------------------------------
Net increase (decrease) in net assets resulting from operations (84,666,027) 153,159,153
- ---------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (49,762,444) (17,134,058)
Class B (13,063,856) (4,713,190)
Class C (18,702,863) (5,972,851)
Class N (5,468,177) (1,888,584)
Class Y (158,040) (50,117)
-------------------------------------
(87,155,380) (29,758,800)
- ---------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (19,567,662) (3,316,909)
Class B (6,468,393) (1,236,698)
Class C (9,012,023) (1,515,292)
Class N (2,267,194) (381,215)
Class Y (57,016) (8,618)
-------------------------------------
(37,372,288) (6,458,732)
- ---------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ---------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest
transactions:
Class A 551,288,066 602,241,849
Class B 134,492,010 210,888,833
Class C 248,464,306 280,476,657
Class N 65,148,152 74,350,364
Class Y 1,324,654 2,130,523
-------------------------------------
1,000,717,188 1,170,088,226
- ---------------------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------------------
Total increase 791,523,493 1,287,029,847
- ---------------------------------------------------------------------------------------------------------
Beginning of period 1,850,685,751 563,655,904
-------------------------------------
End of period (including accumulated net investment income of
$2,894,627 and $2,861,582, respectively) $ 2,642,209,244 $ 1,850,685,751
=====================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | ACTIVE ALLOCATION FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED JANUARY 31, 2008 2007 2006 1
- -----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.05 $ 11.10 $ 10.00
- -----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .44 .35 .43
Net realized and unrealized gain (loss) (.61) .89 .89
----------------------------------------------
Total from investment operations (.17) 1.24 1.32
- -----------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.43) (.24) (.20)
Distributions from net realized gain (.17) (.05) (.02)
----------------------------------------------
Total dividends and/or distributions to shareholders (.60) (.29) (.22)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.28 $ 12.05 $ 11.10
==============================================
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 (1.69)% 11.14% 13.31%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 1,396,770 $ 956,520 $ 293,578
- -----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 1,267,499 $ 605,517 $ 112,224
- -----------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 3.54% 3.10% 4.94%
Total expenses 5 0.48% 0.51% 0.56%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 0.48% 0.50% 0.55%
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 18% 40% 90%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods less than one full year.
5. Total expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2008 1.11%
Year Ended January 31, 2007 1.16%
Period Ended January 31, 2006 1.28%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | ACTIVE ALLOCATION FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS B YEAR ENDED JANUARY 31, 2008 2007 2006 1
- -----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.97 $ 11.07 $ 10.00
- -----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .33 .26 .36
Net realized and unrealized gain (loss) (.59) .86 .91
----------------------------------------------
Total from investment operations (.26) 1.12 1.27
- -----------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.34) (.17) (.18)
Distributions from net realized gain (.17) (.05) (.02)
----------------------------------------------
Total dividends and/or distributions to shareholders (.51) (.22) (.20)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.20 $ 11.97 $ 11.07
==============================================
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 (2.40)% 10.15% 12.72%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 449,130 $ 349,024 $ 115,629
- -----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 433,217 $ 229,365 $ 46,284
- -----------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.64% 2.26% 4.06%
Total expenses 5 1.27% 1.29% 1.37%
Expenses after payments, waivers and/or
reimbursements and reduction to custodian expenses 1.27% 1.29% 1.34%
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 18% 40% 90%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods less than one full year.
5. Total expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2008 1.90%
Year Ended January 31, 2007 1.94%
Period Ended January 31, 2006 2.09%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30 | ACTIVE ALLOCATION FUND
CLASS C YEAR ENDED JANUARY 31, 2008 2007 2006 1
- -----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.96 $ 11.06 $ 10.00
- -----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .34 .27 .37
Net realized and unrealized gain (loss) (.60) .86 .89
----------------------------------------------
Total from investment operations (.26) 1.13 1.26
- -----------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.35) (.18) (.18)
Distributions from net realized gain (.17) (.05) (.02)
----------------------------------------------
Total dividends and/or distributions to shareholders (.52) (.23) (.20)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.18 $ 11.96 $ 11.06
==============================================
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 (2.41)% 10.21% 12.66%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 630,990 $ 433,213 $ 125,622
- -----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 577,347 $ 272,038 $ 45,647
- -----------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.77% 2.34% 4.18%
Total expenses 5 1.24% 1.27% 1.33%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 1.24% 1.26% 1.31%
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 18% 40% 90%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods less than one full year.
5. Total expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2008 1.87%
Year Ended January 31, 2007 1.92%
Period Ended January 31, 2006 2.05%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31 | ACTIVE ALLOCATION FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS N YEAR ENDED JANUARY 31, 2008 2007 2006 1
- -----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.02 $ 11.09 $ 10.00
- -----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .41 .35 .46
Net realized and unrealized gain (loss) (.61) .86 .85
----------------------------------------------
Total from investment operations (.20) 1.21 1.31
- -----------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.41) (.23) (.20)
Distributions from net realized gain (.17) (.05) (.02)
----------------------------------------------
Total dividends and/or distributions to shareholders (.58) (.28) (.22)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.24 $ 12.02 $ 11.09
==============================================
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 (1.95)% 10.88% 13.18%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 161,530 $ 109,146 $ 28,345
- -----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 145,988 $ 62,929 $ 9,156
- -----------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 3.31% 3.07% 5.28%
Total expenses 5 0.70% 0.70% 0.73%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 0.69% 0.70% 0.72%
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 18% 40% 90%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods less than one full year.
5. Total expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2008 1.33%
Year Ended January 31, 2007 1.35%
Period Ended January 31, 2006 1.45%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32 | ACTIVE ALLOCATION FUND
CLASS Y YEAR ENDED JANUARY 31, 2008 2007 2006 1
- -----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.10 $ 11.13 $ 10.00
- -----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .50 .44 .39
Net realized and unrealized gain (loss) (.63) .85 .97
----------------------------------------------
Total from investment operations (.13) 1.29 1.36
- -----------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.47) (.27) (.21)
Distributions from net realized gain (.17) (.05) (.02)
----------------------------------------------
Total dividends and/or distributions to
shareholders (.64) (.32) (.23)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.33 $ 12.10 $ 11.13
==============================================
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 (1.38)% 11.56% 13.72%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 3,789 $ 2,783 $ 482
- -----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 3,663 $ 1,317 $ 196
- -----------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 3.98% 3.79% 4.44%
Total expenses 5 0.13% 0.11% 0.33%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 0.13% 0.11% 0.21%
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 18% 40% 90%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods less than one full year.
5. Total expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2008 0.76%
Year Ended January 31, 2007 0.76%
Period Ended January 31, 2006 1.05%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33 | ACTIVE ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Portfolio Series (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
Active Allocation Fund (the "Portfolio") is a series of the Fund whose
investment objective is to seek long term growth of capital with a secondary
objective of current income. The Portfolio is a special type of mutual fund
known as a "fund of funds" because it invests in other mutual funds. The
Portfolio normally invests in a diversified portfolio of Oppenheimer mutual
funds (individually, an "Underlying Fund" and collectively, the "Underlying
Funds"). The Portfolio's investment adviser is OppenheimerFunds, Inc. (the
"Manager").
The Portfolio offers Class A, Class B, Class C, Class N and Class Y shares.
Class A shares are sold at their offering price, which is normally net asset
value plus a front-end sales charge. Class B, Class C and Class N shares are
sold without a front-end sales charge but may be subject to a contingent
deferred sales charge ("CDSC"). Class N shares are sold only through retirement
plans. Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC, however, the institutional investor
may impose charges on those accounts. All classes of shares have identical
rights and voting privileges with respect to the Portfolio in general and
exclusive voting rights on matters that affect that class alone. Earnings, net
assets and net asset value per share may differ due to each class having its own
expenses, such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares 72
months after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Portfolio.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Portfolio calculates the net asset value of each class
of its shares based upon the net asset value of the applicable Underlying Fund.
For each Underlying Fund, the net asset value per share for a class of shares is
determined as of the close of the New York Stock Exchange (the "Exchange"),
normally 4:00 P. M. Eastern time, on each day the Exchange is open for trading
by dividing the value of the Underlying Fund's net assets attributable to that
class by the number of outstanding shares of that class on that day. To
determine net asset values, the Underlying Fund's assets are valued primarily on
the basis of current market quotations. Securities for which market quotations
are not readily available are valued at their fair value. Securities whose
values have been materially affected by what the Manager identifies as a
significant event occurring before the Underlying 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 Underlying Fund's Board of Trustees. "Money market-type" debt
instruments with remaining maturities of sixty days or less are valued at cost
adjusted by the amortization of discount or premium to maturity (amortized
cost), which approximates market value.
34 | ACTIVE ALLOCATION FUND
- --------------------------------------------------------------------------------
RISKS OF INVESTING IN THE UNDERLYING FUNDS. Each of the Underlying Funds in
which the Portfolio invests has its own investment risks, and those risks can
affect the value of the Portfolio's investments and therefore the value of the
Portfolio's shares. To the extent that the Portfolio invests more of its assets
in one Underlying Fund than in another, the Portfolio will have greater exposure
to the risks of that Underlying Fund.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Portfolio'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
Exchange, normally 4:00 P.M. Eastern time, on each day the Exchange is open for
trading. Foreign exchange rates may be valued primarily using a reliable bank,
dealer or service authorized by the Board of Trustees.
Reported net realized gains and losses from foreign currency transactions
arise from sales of portfolio securities, sales and maturities of short-term
securities, sales of foreign currencies, exchange rate fluctuations 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 Portfolio's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized appreciation and depreciation on the
translation of assets and liabilities denominated in foreign currencies 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 Portfolio's Statement of Operations.
- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Portfolio is
permitted to invest daily available cash balances in an affiliated money market
fund. The Portfolio may invest the available cash in Class E shares of
Oppenheimer Institutional Money Market Fund ("IMMF") to seek current income
while preserving liquidity. 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 adviser of IMMF. The
Portfolio's investment in IMMF is included in the Statement of Investments. As a
shareholder, the Portfolio is subject to its proportional share of IMMF's Class
E expenses, including its management fee. The Manager will waive fees and/or
reimburse Portfolio expenses in an amount equal to the indirect management fees
incurred through the Portfolio's investment in IMMF.
- --------------------------------------------------------------------------------
INVESTMENTS WITH OFF-BALANCE SHEET RISK. The Portfolio enters into financial
instrument transactions (such as swaps, futures, options and other derivatives)
that may have off-balance sheet market risk. Off-balance sheet market risk
exists when the maximum potential loss on a particular financial instrument is
greater than the value of such financial instrument, as reflected in the
Portfolio's Statement of Assets and Liabilities.
35 | ACTIVE ALLOCATION 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 Portfolio intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders. Therefore, no federal income or excise tax provision is
required. The Portfolio files income tax returns in U.S. federal and applicable
state jurisdictions. The statute of limitations on the Portfolio's tax return
filings generally remain open for the three preceding fiscal reporting period
ends.
The tax components of capital shown in the table below represent distribution
requirements the Portfolio must satisfy under the income tax regulations, losses
the Portfolio may be able to offset against income and gains realized in future
years and unrealized appreciation or depreciation of securities and other
investments for federal income tax purposes.
NET UNREALIZED
DEPRECIATION
BASED ON COST OF
SECURITIES AND OTHER
UNDISTRIBUTED NET UNDISTRIBUTED ACCUMULATED LOSS INVESTMENTS FOR FEDERAL
INVESTMENT INCOME LONG-TERM GAIN CARRYFORWARD 1 INCOME TAX PURPOSES
- --------------------------------------------------------------------------------
$-- $ 88,314,014 $ 276,537 $ 162,977,140
1. The Portfolio had $276,537 of post-October foreign currency losses which were
deferred.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Portfolio.
Accordingly, the following amounts have been reclassified for January 31, 2008.
Net assets of the Portfolio were unaffected by the reclassifications.
REDUCTION TO
REDUCTION TO ACCUMULATED
ACCUMULATED NET NET REALIZED
INCREASE INVESTMENT GAIN ON
TO PAID-IN CAPITAL LOSS INVESTMENTS 2
-------------------------------------------------------
$ 8,412,363 $ 9,947,272 $ 18,359,635
2. $8,412,363, all of which was long-term capital gain, was distributed in
connection with Portfolio share redemptions.
36 | ACTIVE ALLOCATION FUND
The tax character of distributions paid during the years ended January 31, 2008
and January 31, 2007 was as follows:
YEAR ENDED YEAR ENDED
JANUARY 31, 2008 JANUARY 31, 2007
---------------------------------------------------------------
Distributions paid from:
Ordinary income $ 92,720,357 $ 30,212,092
Long-term capital gain 31,807,311 6,005,440
------------------------------------
Total $ 124,527,668 $ 36,217,532
====================================
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of January 31, 2008 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 $ 2,797,324,778
Federal tax cost of other investments 2,396,769
-----------------
Total federal tax cost $ 2,799,721,547
=================
Gross unrealized appreciation $ 29,664,885
Gross unrealized depreciation (192,642,025)
-----------------
Net unrealized depreciation $ (162,977,140)
=================
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Portfolio has adopted an unfunded retirement plan
(the "Plan") for the Portfolio's independent trustees. Benefits are based on
years of service and fees paid to each trustee during their period of service.
The Plan was frozen with respect to adding new participants effective December
31, 2006 (the "Freeze Date") and existing Plan Participants as of the Freeze
Date will continue to receive accrued benefits under the Plan. Active
independent trustees as of the Freeze Date have each elected a distribution
method with respect to their benefits under the Plan. During the year ended
January 31, 2008, the Portfolio's projected benefit obligations, payments to
retired trustees and accumulated liability were as follows:
Projected Benefit Obligations Increased $ 32,419
Payments Made to Retired Trustees 33,726
Accumulated Liability as of January 31, 2008 74,195
The Board of Trustees has adopted a compensation deferral plan for independent
trustees that enables trustees to elect to defer receipt of all or a portion of
the annual compensation they are entitled to receive from the Portfolio. For
purposes of determining the amount owed to the Trustee under the plan, deferred
amounts are treated as though equal dollar amounts had been invested in shares
of the Portfolio or in other Oppenheimer funds selected by the Trustee. The
Portfolio purchases shares of the funds selected for deferral by the Trustee in
amounts equal to his or her deemed investment,
37 | ACTIVE ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
resulting in a Portfolio asset equal to the deferred compensation liability.
Such assets are included as a component of "Other" within the asset section of
the Statement of Assets and Liabilities. Deferral of trustees' fees under the
plan will not affect the net assets of the Portfolio, and will not materially
affect the Portfolio's assets, liabilities or net investment income per share.
Amounts will be deferred until distributed in accordance to the compensation
deferral plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations and
may differ from U.S. generally accepted accounting principles, are recorded on
the ex-dividend date. Income and capital gain distributions, if any, are
declared and paid annually or at other times as deemed necessary by the Manager.
- --------------------------------------------------------------------------------
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 is recognized on an accrual basis. Market discount and
premium, which are included in interest income on the Statement of Operations,
are amortized or accreted daily.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Portfolio on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Portfolio pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Portfolio, at a rate equal to
the Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line
item, if applicable, represents earnings on cash balances maintained by the
Portfolio during the period. Such interest expense and other custodian fees may
be paid with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Portfolio's organizational documents provide current and
former trustees and officers with a limited indemnification against liabilities
arising in connection with the performance of their duties to the Portfolio. In
the normal course of business, the Portfolio may also enter into contracts that
provide general indemnifications. The Portfolio's maximum exposure under these
arrangements is unknown as this would be dependent on future claims that may be
made against the Portfolio. The risk of material loss from such claims is
considered remote.
38 | ACTIVE ALLOCATION FUND
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
- --------------------------------------------------------------------------------
2.SHARES OF BENEFICIAL INTEREST
The Portfolio has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED JANUARY 31, 2008 YEAR ENDED JANUARY 31, 2007
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------
CLASS A
Sold 55,772,313 $ 692,918,762 57,596,220 $ 654,562,965
Dividends and/or
distributions reinvested 5,622,995 66,806,258 1,662,202 19,663,799
Redeemed (16,930,276) (208,436,954) (6,303,806) (71,984,915)
---------------------------------------------------------------------
Net increase 44,465,032 $ 551,288,066 52,954,616 $ 602,241,849
=====================================================================
- --------------------------------------------------------------------------------------------------
CLASS B
Sold 16,273,470 $ 200,111,397 21,225,979 $ 239,218,008
Dividends and/or
distributions reinvested 1,608,626 18,997,933 490,803 5,771,900
Redeemed (6,916,902) (84,617,320) (3,014,115) (34,101,075)
---------------------------------------------------------------------
Net increase 10,965,194 $ 134,492,010 18,702,667 $ 210,888,833
=====================================================================
- --------------------------------------------------------------------------------------------------
CLASS C
Sold 25,614,816 $ 314,499,898 27,543,050 $ 310,509,299
Dividends and/or
distributions reinvested 2,206,578 26,014,894 600,867 7,060,230
Redeemed (7,591,141) (92,050,486) (3,282,836) (37,092,872)
---------------------------------------------------------------------
Net increase 20,230,253 $ 248,464,306 24,861,081 $ 280,476,657
=====================================================================
- --------------------------------------------------------------------------------------------------
CLASS N
Sold 6,924,608 $ 85,551,101 7,119,593 $ 81,030,208
Dividends and/or
distributions reinvested 609,598 7,223,732 176,954 2,088,058
Redeemed (2,248,973) (27,626,681) (769,703) (8,767,902)
---------------------------------------------------------------------
Net increase 5,285,233 $ 65,148,152 6,526,844 $ 74,350,364
=====================================================================
- --------------------------------------------------------------------------------------------------
CLASS Y
Sold 212,825 $ 2,659,299 197,518 $ 2,248,494
Dividends and/or
distributions reinvested 17,705 211,401 4,945 58,703
Redeemed (126,203) (1,546,046) (15,653) (176,674)
---------------------------------------------------------------------
Net increase 104,327 $ 1,324,654 186,810 $ 2,130,523
=====================================================================
39 | ACTIVE ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 January
31, 2008, were as follows:
PURCHASES SALES
- --------------------------------------------------------------------------------
Investment securities $1,488,802,006 $438,826,308
- --------------------------------------------------------------------------------
4.FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the investment advisory agreement, the Manager does not
charge a management fee, but rather collects indirect management fees from
investments in the Underlying Funds. The weighted indirect management fees
collected from the Underlying Funds, as a percent of average daily net assets of
the Portfolio for the year ended January 31, 2008 was 0.57%.
The Portfolio pays the Manager an asset allocation fee equal to an annual
rate of 0.10% of the average daily net assets of the Portfolio.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services ("OFS"), a division of the
Manager, acts as the transfer and shareholder servicing agent for the Portfolio.
The Portfolio pays OFS a per account fee. For the year ended January 31, 2008,
the Portfolio paid $2,790,074 to OFS for services to the Portfolio.
Additionally, Class Y shares are subject to minimum fees of $10,000
annually 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 Portfolio, OppenheimerFunds Distributor, Inc. (the
"Distributor") acts as the Portfolio's principal underwriter in the continuous
public offering of the Portfolio's classes of shares.
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Portfolio has adopted a Service Plan (the
"Plan") for Class A shares under Rule 12b-1 of the Investment Company Act of
1940. Under the Plan, the Portfolio reimburses the Distributor for a portion of
its costs incurred for services provided to accounts that hold Class A shares.
Reimbursement is made periodically at an annual rate of up to 0.25% of the
average annual net assets of Class A shares of the Portfolio. The Distributor
currently uses all of those fees to pay dealers, brokers, banks and other
financial institutions periodically for providing personal service and
maintenance of accounts of their customers that hold Class A shares. Any
unreimbursed expenses the Distributor incurs with respect to Class A shares in
any fiscal year cannot be recovered in subsequent periods. Fees incurred by the
Portfolio under the Plan are detailed in the Statement of Operations.
40 | ACTIVE ALLOCATION FUND
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The
Portfolio has adopted Distribution and Service Plans (the "Plans") for Class B,
Class C and Class N shares under Rule 12b-1 of the Investment Company Act of
1940 to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the Plans, the
Portfolio pays the Distributor an annual asset-based sales charge of 0.75% on
Class B and Class C shares and 0.25% on Class N shares. The Distributor also
receives a service fee of 0.25% per year under each plan. If either the Class B,
Class C or Class N plan is terminated by the Portfolio or by the shareholders of
a class, the Board of Trustees and its independent trustees must determine
whether the Distributor shall be entitled to payment from the Portfolio of all
or a portion of the service fee and/or asset-based sales charge in respect to
shares sold prior to the effective date of such termination. The Distributor's
aggregate uncompensated expenses under the Plans at December 31, 2007 for Class
B, Class C and Class N shares were $7,395,309, $4,696,709 and $1,387,178,
respectively. Fees incurred by the Portfolio under the Plans are detailed in the
Statement of Operations.
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
("CDSC") do not represent expenses of the Portfolio. They are deducted from the
proceeds of sales of Portfolio shares prior to investment or from redemption
proceeds prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the following table for the period
indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- ------------------------------------------------------------------------------------------------------
January 31, 2008 $ 4,199,482 $ 20,189 $ 672,104 $ 125,696 $ 17,578
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. The Manager has voluntarily agreed to a
total expense limitation on the aggregate amount of combined direct
(fund-of-funds level) and indirect expense so that "Total expenses" as a
percentage of average daily net assets will not exceed the following annual
rates: 1.45%, 2.20%, 2.20%, 1.70% and 1.20%, for Class A, Class B, Class C,
Class N and Class Y, respectively. During the year ended January 31, 2008, the
Manager reimbursed the Portfolio $29,917, $10,384, $13,627, $3,446 and $86 for
Class A, Class B, Class C, Class N and Class Y shares, respectively. The Manager
may modify or terminate this undertaking at any time without notice to
shareholders. These expense limitations do not include extraordinary expenses
and other expenses not incurred in the ordinary course of the Portfolio's
business. Notwithstanding the foregoing limits, the Manager is not required to
waive or reimburse Portfolio expenses in excess of indirect management fees
earned from investments in Underlying Funds to assure that expenses do not
exceed those limits.
41 | ACTIVE ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
The Manager will waive fees and/or reimburse Portfolio expenses in an
amount equal to the indirect management fees incurred through the Portfolio's
investment in IMMF. During the year ended January 31, 2008, the Manager waived
$13,839 for IMMF management fees.
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY EXCHANGE CONTRACTS
The Portfolio may enter into foreign currency exchange contracts ("forward
contracts") for the purchase or sale of a foreign currency at a negotiated rate
at a future date.
Foreign currency exchange contracts are reported on a schedule following
the Statement of Investments. Forward contracts will be valued daily based upon
the closing prices of the forward currency rates determined at the close of the
Exchange as provided by a bank, dealer or pricing service. The resulting
unrealized appreciation (depreciation) is reported in the Statement of Assets
and Liabilities as a receivable or payable and in the Statement of Operations
within the change in unrealized appreciation (depreciation). At contract close,
the difference between the original cost of the contract and the value at the
close date is recorded as a realized gain (loss) in the Statement of Operations.
Risks to the Portfolio include both market and credit risk. Market risk is
the risk that the value of the forward contract will depreciate due to
unfavorable changes in the exchange rates. Credit risk arises from the
possibility that the counterparty will default. If the counterparty defaults,
the Portfolio's loss will consist of the net amount of contractual payments that
the Portfolio has not yet received.
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
financial instrument at a negotiated price on a stipulated future date. The
Portfolio may buy and sell futures contracts that relate to broadly based
securities indices (financial futures), debt securities (interest rate futures)
and various commodities (commodity index futures). The Portfolio may also buy or
write put or call options on these futures contracts.
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 Portfolio's assets are valued.
Upon entering into a futures contract, the Portfolio is required to
deposit either cash or securities (initial margin) in an amount equal to a
certain percentage of the contract value. Subsequent payments (variation margin)
are made or received by the Portfolio each day. The variation margin payments
are equal to the daily changes in the contract value and are recorded as
unrealized gains and losses.
42 | ACTIVE ALLOCATION FUND
Futures contracts are reported on a schedule following the Statement of
Investments. Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. Cash held by the broker to cover initial margin requirements on
open futures contracts and the receivable and/or payable for the daily mark to
market for the variation margin are noted in the Statement of Assets and
Liabilities. The net change in unrealized appreciation and depreciation is
reported in the Statement of Operations. Realized gains (losses) are reported in
the Statement of Operations at the closing or expiration of futures contracts.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market where the Portfolio is unable
to liquidate the contract or enter into an offsetting position and, if used for
hedging purposes, the risk that the price of the contract will correlate
imperfectly with the prices of the Portfolio's securities.
- --------------------------------------------------------------------------------
7. SWAP CONTRACTS
The Portfolio may enter into swap contract agreements with a counterparty to
exchange a series of cash flows based on either specified reference rates, or
the occurrence of a credit event, over a specified period. Such contracts may
include interest rate, equity, debt, index, total return, credit and currency
swaps.
Swaps are marked to market daily using primarily quotations from pricing
services, counterparties and brokers. Swap contracts are reported on a schedule
following the Statement of Investments. 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 Portfolio at termination or settlement. The net change in this amount
during the period is included on the Statement of Operations. The Portfolio also
records any periodic payments received from (paid to) the counterparty,
including at termination, under such contracts as realized gain (loss) on the
Statement of Operations.
Risks of entering into swap contracts include credit, market and liquidity
risk. Credit risk arises from the possibility that the counterparty will
default. If the counterparty defaults, the Portfolio's loss will consist of the
net amount of contractual payments that the Portfolio has not yet received.
Market risk is the risk that the value of the contract will depreciate due to
unfavorable changes in the reference asset. If there is an illiquid market for
the agreement, the Portfolio may be unable to close the contract prior to
contract termination.
- --------------------------------------------------------------------------------
TOTAL RETURN SWAP CONTRACTS. A total return swap is an agreement between
counterparties to exchange a set of future cash flows on the notional amount of
the contract. One cash flow is typically based on a reference interest rate or
index and the other on the total return of a reference asset such as a security,
a basket of securities, or an index. The total return includes appreciation or
depreciation on the reference asset, plus any interest or dividend payments.
43 | ACTIVE ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. RECENT ACCOUNTING PRONOUNCEMENT
In September 2006, Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 157, FAIR VALUE
MEASUREMENTS. This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and expands
disclosures about fair value measurements. SFAS No. 157 applies to fair value
measurements already required or permitted by existing standards. SFAS No. 157
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. As of January
31, 2008, 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.
44 | ACTIVE ALLOCATION FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER PORTFOLIO SERIES:
We have audited the accompanying statement of assets and liabilities of Active
Allocation Fund (one of the portfolios constituting the Oppenheimer Portfolio
Series), including the statement of investments, as of January 31, 2008, 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 two-year period then
ended and for the period April 5, 2005 (commencement of operations) to January
31, 2006. These financial statements and financial highlights are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of January 31, 2008, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Active Allocation Fund as of January 31, 2008, 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 two-year period then ended and for the period April 5, 2005 (commencement
of operations) to January 31, 2006, in conformity with U.S. generally accepted
accounting principles.
KPMG LLP
Denver, Colorado
March 13, 2008
45 | ACTIVE ALLOCATION FUND
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2008, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Portfolio during
calendar year 2007. Regulations of the U.S. Treasury Department require the
Portfolio to report this information to the Internal Revenue Service.
Capital gain distributions of $0.1434 per share were paid to Class A,
Class B, Class C, Class N and Class Y shareholders, respectively, on December
31, 2007. Whether received in stock or in cash, the capital gain distribution
should be treated by shareholders as a gain from the sale of the capital assets
held for more than one year (long-term capital gains).
Dividends, if any, paid by the Portfolio during the fiscal year ended
January 31, 2008 which are not designated as capital gain distributions should
be multiplied by 19.38% to arrive at the amount eligible for the corporate
dividend-received deduction
A portion, if any, of the dividends paid by the Portfolio during the
fiscal year ended January 31, 2008 which are not designated as capital gain
distributions are eligible for lower individual income tax rates to the extent
that the Portfolio has received qualified dividend income as stipulated by
recent tax legislation. $24,765,819 of the Portfolio's fiscal year taxable
income may be eligible for the lower individual income tax rates. In early 2008,
shareholders of record received information regarding the percentage of
distributions that are eligible for lower individual income tax rates.
Recent tax legislation allows a regulated investment company to designate
distributions not designated as capital gain distributions, as either interest
related dividends or short-term capital gain dividends, both of which are exempt
from the U.S. withholding tax applicable to non U.S. taxpayers. For the fiscal
year ended January 31, 2008, $187,579 or 0.22% of the ordinary distributions
paid by the Portfolio qualifies as an interest related dividend and $3,413,559
or 61.34% of the short-term capital gain distribution paid and to be paid by the
Portfolio qualifies as a short-term capital gain dividend.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Portfolio to the Internal Revenue Service.
Because of the complexity of the federal regulations which may affect your
individual tax return and the many variations in state and local tax
regulations, we recommend that you consult your tax advisor for specific
guidance.
46 | ACTIVE ALLOCATION FUND
BOARD APPROVAL OF THE PORTFOLIO'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew Active
Allocation Fund's (the "Fund" or the "Fund's") investment advisory agreement
(the "Agreement"). The Investment Company Act of 1940, as amended, requires that
the Board request and evaluate, and that the Manager provide, such information
as may be reasonably necessary to evaluate the terms of the Agreement. The Board
employs an independent consultant to prepare a report that provides information,
including comparative information, that the Board requests for that purpose. In
addition, the Board receives information throughout the year regarding Fund
services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services by the Manager and its affiliates,
(v) the extent to which economies of scale are realized as the Fund grows and
whether fee levels reflect these economies of scale for Fund investors and (vi)
other benefits to the Manager from its relationship with the Fund. The Board was
aware that there are alternatives to retaining the Manager.
NATURE AND EXTENT OF SERVICES. The Board considered information about the
nature and extent of the services provided to the Fund and information regarding
the Manager's key personnel who provide such services. The Manager's duties
include providing the Fund with the services of the portfolio managers and the
Manager's asset allocation team, who provide research, analysis and other
advisory services in regard to the Fund's investments; 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
47 | ACTIVE ALLOCATION FUND
BOARD APPROVAL OF THE PORTFOLIO'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
took account of the fact that the Manager has had over forty years of experience
as an investment adviser and that its assets under management rank it among the
top mutual fund managers in the United States. The Board evaluated the Manager's
administrative, accounting, legal and compliance services, and information the
Board has received regarding the experience and professional qualifications of
the Manager's personnel and the size and functions of its staff. In its
evaluation of the quality of the portfolio management services provided, the
Board considered the experience of Rudi W. Schadt, Jerry Webman, Kurt
Wolfgruber, Christopher Leavy and Caleb Wong, the portfolio managers of the
Fund, and the experience of the portfolio managers and the investment
performance of the investment companies in which the Fund may invest (the
"Underlying Funds"). 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 regular quarterly 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 mixed-asset target allocation growth funds of funds
advised by other investment advisers. The Board noted that the Fund's one-year
and since inception performance were higher than its peer group median.
MANAGEMENT FEES AND EXPENSES. The Board reviewed the fees paid to the
Manager and its affiliates and the other expenses borne by the Fund. The Board
noted that the Fund does not pay a direct management fee but that the Fund
indirectly bears its share of the management fees of the Underlying Funds. 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 of funds and other funds of funds with comparable asset levels and
distribution features. The Board noted that the Manager has agreed to
voluntarily limit the aggregate amount of combined direct (fund-of-funds
48 | ACTIVE ALLOCATION FUND
level) and indirect expense so that as a percentage of average daily net assets
they will not exceed the following annual rates: 1.45% for Class A, 2.20% for
Class B, 2.20% for Class C, 1.70% for Class N and 1.20% for Class Y. The Manager
may modify or terminate this undertaking at any time without notice to
shareholders. In addition, the Portfolio pays the manager an asset allocation
fee equal to an annual rate of 0.10% of average daily net assets of the
Portfolio. The Board noted that the Fund does not pay a management fee and that
the Fund's total expenses are lower than its peer group median.
ECONOMIES OF SCALE. The Board considered the extent to which the Manager
may realize economies of scale in managing and supporting the Fund and the
Underlying Funds, and the extent to which those economies of scale would benefit
the Fund's 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 and its affiliates for
services provided to the Fund and to the Underlying Funds.
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and the independent Trustees. Fund counsel is independent of the
Manager within the meaning and intent of the Securities and Exchange Commission
Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
concluded that the nature, extent and quality of the services provided to the
Fund by the Manager are a benefit to the Fund and in the best interest of the
Fund's shareholders and that the amount and structure of the compensation
received by the Manager and its affiliates are reasonable in relation to the
services provided. Accordingly, the Board elected to continue the Agreement for
another year. In arriving at this decision, the Board did not single out any
factor or factors as being more important than others, but considered all of the
factors together. The Board judged the terms and conditions of the Agreement,
including the management fee, in light of all of the surrounding circumstances.
49 | ACTIVE ALLOCATION FUND
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 | ACTIVE ALLOCATION FUND
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD; NUMBER OF
FUND, LENGTH OF SERVICE, AGE PORTFOLIOS IN THE FUND COMPLEX CURRENTLY OVERSEEN
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, COLORADO
TRUSTEES 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION,
RETIREMENT, DEATH OR REMOVAL.
BRIAN F. WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since September 1995-December 2007);
Chairman of the Board Director of Special Value Opportunities Fund, LLC (registered investment company) (affiliate of
of Trustees (since 2007) the Manager's parent company) (since September 2004); Member of Zurich Financial Investment
and Trustee (since 2005) Management Advisory Council (insurance) (since October 2004); Chairman (since August 2007) and
Age: 64 Trustee (since August 1991) of the Board of Trustees of the Jackson Laboratory (non-profit);
Treasurer and 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). Oversees 66 portfolios in the OppenheimerFunds complex.
DAVID K. DOWNES, President, Chief Executive Officer and Board Member of CRAFund Advisors, Inc. (investment
Trustee (since 2007) management company) (since January 2004); President of The Community Reinvestment Act Qualified
Age: 68 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 66 portfolios
in the OppenheimerFunds complex.
MATTHEW P. FINK, Trustee of the Committee for Economic Development (policy research foundation) (since 2005);
Trustee (since 2005) Director of ICI Education Foundation (education foundation) (October 1991-August 2006); President
Age: 67 of the Investment Company Institute (trade association) (October 1991-June 2004); Director of ICI
Mutual Insurance Company (insurance company) (October 1991-June 2004). Oversees 56 portfolios in
the OppenheimerFunds complex.
ROBERT G. GALLI, A director or trustee of other Oppenheimer funds. Oversees 66 portfolios in the OppenheimerFunds
Trustee (since 2005) complex.
Age: 74
51 | ACTIVE ALLOCATION FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
PHILLIP A. GRIFFITHS, Distinguished Presidential Fellow for International Affairs (since 2002) and Member (since 1979)
Trustee (since 2005) of the National Academy of Sciences; Council on Foreign Relations (since 2002); Director of GSI
Age: 69 Lumonics Inc. (precision medical equipment supplier) (since 2001); Senior Advisor of The Andrew
W. Mellon Foundation (since 2001); Chair of Science Initiative Group (since 1999); Member of the
American Philosophical Society (since 1996); Trustee of Woodward Academy (since 1983); Foreign
Associate of Third World Academy of Sciences; Director of the Institute for Advanced Study
(1991-2004); Director of Bankers Trust New York Corporation (1994-1999); Provost at Duke
University (1983-1991). Oversees 56 portfolios in the OppenheimerFunds complex.
MARY F. MILLER, Trustee of the American Symphony Orchestra (not-for-profit) (since October 1998); and Senior Vice
Trustee (since 2005) President and General Auditor of American Express Company (financial services company) (July
Age: 65 1998-February 2003). Oversees 56 portfolios in the OppenheimerFunds complex.
JOEL W. MOTLEY, Managing Director of Public Capital Advisors, LLC (privately-held financial advisor) (since
Trustee (since 2005) January 2006); Director of Columbia Equity Financial Corp. (privately-held financial advisor)
Age: 55 (since 2002); Managing Director of Carmona Motley, Inc. (privately-held financial advisor)
(since January 2002); Managing Director of Carmona Motley Hoffman Inc. (privately-held financial
advisor) (January 1998-December 2001); Member of the Finance and Budget Committee of the Council
on Foreign Relations, Member of the Investment Committee of the Episcopal Church of America,
Member of the Investment Committee and Board of Human Rights Watch and the Investment Committee of
Historic Hudson Valley. Oversees 56 portfolios in the OppenheimerFunds complex.
RUSSELL S. REYNOLDS, JR., Chairman of RSR Partners (formerly "The Directorship Search Group, Inc.") (corporate governance
Trustee (since 2005) consulting and executive recruiting) (since 1993); Life Trustee of International House (non-profit
Age: 76 educational organization); Former Trustee of The Historical Society of the Town of Greenwich;
Former Director of Greenwich Hospital Association. Oversees 56 portfolios in the OppenheimerFunds
complex.
JOSEPH M. WIKLER, Director of the following medical device companies: Medintec (since 1992) and Cathco (since 1996);
Trustee (since 2005) Director of Lakes Environmental Association (environmental protection organization) (since 1996);
Age: 67 Member of the Investment Committee of the Associated Jewish Charities of Baltimore (since 1994);
Director of Fortis/Hartford mutual funds (1994-December 2001); Director of C-TASC (a privately
held bio-statistics company) (since May 2007). Oversees 56 portfolios in the OppenheimerFunds
complex.
PETER I. WOLD, President of Wold Oil Properties, Inc. (oil and gas exploration and production company) (since
Trustee (since 2005) 1994); Vice President of American Talc Company, Inc. (talc mining and milling) (since 1999);
Age: 60 Managing Member of Hole-in-the-Wall Ranch (cattle ranching) (since 1979); Vice President,
Secretary and Treasurer of Wold Trona Company, Inc. (soda ash processing and production)
(1996-2006); Director and Chairman of the Denver Branch of the Federal Reserve Bank of Kansas City
(1993-1999); and Director of PacifiCorp. (electric utility) (1995-1999). Oversees 56 portfolios in
the OppenheimerFunds complex.
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW YORK,
AND OFFICER NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS
RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS
RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS
POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
52 | ACTIVE ALLOCATION FUND
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director of the Manager (since June 2001); President of the
President and Principal Manager (September 2000-March 2007); President and director or trustee of other Oppenheimer funds;
Executive Officer and Trustee President and Director of Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent holding
(since 2005) company) and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the Manager)
Age: 58 (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
105 portfolios in the OppenheimerFunds complex.
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. LEAVY, SCHADT,
THE PORTFOLIO WEBMAN, WOLFGRUBER, WONG, ZACK 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.
CHRISTOPHER LEAVY, Director of Equities of the Manager (since January 2007); Senior Vice President of the Manager
Vice President and Portfolio (since September 2000). Portfolio manager of Morgan Stanley Dean Witter Investment Management
Manager (since 2007) (1997-September 2000). A portfolio manager and officer of 15 portfolios in the OppenheimerFunds
Age: 37 complex.
RUDI W. SCHADT, Vice President, Director of Research in Product Design and Risk Management of the Manager. Prior
Vice President and Portfolio to joining the Manager in February 2002, a Director and Senior Quantitative Analyst (2000-2001) at
Manager (since 2005) UBS Asset Management prior to which he was an Associate Director of Research (since June 1999) and
Age: 50 Senior Researcher and Portfolio Manager (from June 1997) at State Street Global Advisors. An
officer of 14 portfolios in the OppenheimerFunds complex.
DR. JERRY WEBMAN, Senior Vice President (since February 1996) and Senior Investment Officer and Director (since
Vice President and Portfolio 1997) of the Manager's Fixed Income Investments; Senior Vice President (since May 1999) of
Manager (since 2005) HarbourView Asset Management Corporation. An officer of 11 portfolios in the OppenheimerFunds
Age: 58 complex.
KURT WOLFGRUBER, President (since March 2007) and Chief Investment Officer and Director (since July 2003) of
Vice President and Portfolio the Manager; Executive Vice President of the Manager (March 2003-March 2007); Director of
Manager (since 2005) HarbourView Asset Management Corporation and of OFI Institutional Asset Management, Inc.
Age: 57 (since June 2003) and of Tremont Capital Management, Inc. (since October 2001). An officer of
11 portfolios in the OppenheimerFunds complex.
53 | ACTIVE ALLOCATION FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
CALEB WONG, Vice President of the Manager (since June 1999); worked in fixed-income quantitative research and
Vice President and Portfolio risk management for the Manager (since July 1996); formerly Assistant Vice President of the
Manager (since 2005) Manager (January 1997-June 1999); before joining the Manager in July 1996 Mr. Wong was enrolled in
Age: 42 the Ph.D. program for Economics at the University of Chicago. An officer of 2 portfolios in the
OppenheimerFunds complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief
Vice President and Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and
Chief Compliance Officer Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor,
(since 2005) Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983);
Age: 57 Former Vice President and Director of Internal Audit of the Manager (1997-February 2004). An
officer of 105 portfolios in the OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the following:
Treasurer and Principal HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder
Financial & Accounting Services, Inc., Oppenheimer Real Asset Management, Inc. and Oppenheimer Partnership Holdings, Inc.
Officer (since 2005) (since March 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds
Age: 48 International Ltd. and 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 105 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 2005) 1998-July 2002). An officer of 105 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 105 portfolios in the OppenheimerFunds
Age: 38 complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the
Vice President and Secretary Manager; General Counsel and Director of the Distributor (since December 2001); General Counsel of
(since 2005) Centennial Asset Management Corporation (since December 2001); Senior Vice President and General
Age: 59 Counsel of HarbourView Asset Management Corporation (since December 2001); Secretary and General
Counsel of OAC (since November 2001); Assistant Secretary (since September 1997) and Director
(since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice
President and Director of Oppenheimer Partnership Holdings, Inc. (since December 2002); Director
of Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice President, General
Counsel and Director of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since
December 2001); Senior Vice President, General Counsel and Director of OFI Private Investments,
Inc. and OFI Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy
Program (since June 2003); Senior Vice President and General Counsel of OFI Institutional Asset
Management, Inc. (since November 2001); Director of OppenheimerFunds (Asia) Limited (since
December 2003); Senior Vice President (May 1985-December 2003). An officer of 105 portfolios in
the OppenheimerFunds complex.
54 | ACTIVE ALLOCATION FUND
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First Vice President (April
Assistant Secretary 2001-April 2004), Associate General Counsel (December 2000-April 2004) of UBS Financial Services,
(since 2005) Inc. An officer of 105 portfolios in the OppenheimerFunds complex.
Age: 40
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 2005) (1998-2000) of Merrill Lynch Investment Management. An officer of 105 portfolios in the
Age: 44 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 the
(since 2005) Distributor; Assistant Secretary of Centennial Asset Management Corporation (since October 2003);
Age: 42 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 105
portfolios in the OppenheimerFunds complex.
THE PORTFOLIO'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL
INFORMATION ABOUT THE PORTFOLIO'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT
CHARGE UPON REQUEST, BY CALLING 1.800.525.7048.
55 | ACTIVE ALLOCATION FUND
JANUARY 31, 2008
- --------------------------------------------------------------------------------
Management
Equity Commentaries
Investor Fund and
A Series of Oppenheimer Portfolio Series Annual Report
- --------------------------------------------------------------------------------
MANAGEMENT COMMENTARIES
Market Recap and Outlook
Listing of Top Holdings
ANNUAL REPORT [GRAPHIC]
Portfolio Performance Discussion
Listing of Investments
Financial Statements
[LOGO] OPPENHEIMERFUNDS(R)
The Right Way to Invest
TOP HOLDINGS AND ALLOCATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSET CLASS ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
U.S. Equity Funds 69.4%
Global Equity Funds 30.6
Portfolio holdings and allocations are subject to change. Percentages are as of
January 31, 2008, and are based on the total market value of investments in
affiliated companies.
- --------------------------------------------------------------------------------
8 | EQUITY INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
HOW HAS THE PORTFOLIO PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS,
INC., OF THE PORTFOLIO'S PERFORMANCE DURING ITS FISCAL YEAR ENDED JANUARY 31,
2008, FOLLOWED BY A GRAPHICAL COMPARISON OF THE PORTFOLIO'S PERFORMANCE TO AN
APPROPRIATE BROAD-BASED MARKET INDEX.
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE. Equity Investor Fund's Class A
shares, without sales charge, returned -2.45% for the 12-month period ending
January 31, 2008 and performed inline with its benchmark, the S&P 500 Index,
which returned -2.31% for the same period. As an additional point of comparison,
the MSCI World Index returned -0.47%. We attribute the Portfolio's
underperformance to significantly volatile global equity markets. Additionally,
disappointing stock selection along with the underperformance of small-cap
stocks as an asset class, negatively impacted some of the Portfolio's acquired
funds, and ultimately hurt the Portfolio's overall results.
Despite the Portfolio's relative underperformance, its diversified equity
weighting, which enabled the Portfolio to own sectors not included in its index,
helped cushion the Portfolio against the intense volatility seen in the global
equity markets over the period. Contributors to performance included Oppenheimer
Developing Markets Fund, Oppenheimer Capital Appreciation Fund and Oppenheimer
Value Fund.
Over the period, Oppenheimer Developing Markets Fund's Class Y shares
produced a total return of 23.01%. The Fund's performance was positively
influenced by a variety of economic factors benefiting the emerging markets,
which included robust economic growth, low interest rates and high commodity
prices. Also contributing to performance were the Portfolio's allocations to
Oppenheimer Capital Appreciation Fund and Oppenheimer Value Fund. Taken as a
group, the Portfolio's underlying domestic equity funds slightly hampered
overall results, despite the fact that all of them outperformed their respective
benchmarks, i.e. exhibited good stock selection thoughout the reporting period.
The positive performance of Oppenheimer Capital Appreciation Fund helped to
mitigate the extent of the losses, while Oppenheimer Value Fund had strong stock
selection in a period where the value style of investing was out of favor. While
both Funds benefited from successful stock selection, Oppenheimer Capital
Appreciation Fund also gained value due to the positive performance generated by
large cap growth stocks in general. When economic growth slows, earnings growth
becomes more difficult to achieve. As a result of this cyclical event, investors
become risk adverse and seek out larger, well-established companies, a situation
that unfolded over the period and aided Oppenheimer Capital Appreciation Fund's
performance.
In addition to the general negative impact from volatile equity markets,
top performance detractors included Oppenheimer Main Street Small Cap Fund,
Oppenheimer Global Fund and Oppenheimer Global Opportunities Fund. The weak
performance posted by Oppenheimer Main Street Small Cap Fund is attributed to
the underperformance of
9 | EQUITY INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
small-cap stocks as an asset class. In fact, for the year ending January 31,
2008, the Russell 2000 Index, an unmanaged index of small-capitalization stocks,
posted a negative total return.
For approximately six years, small-cap stocks generally led U.S. equity
market performance, outperforming most other asset classes. However, during the
reporting period economic growth began to slow and market volatility increased.
As a result investors began to reassess their attitudes toward risk and shifted
away from small-cap stocks toward larger, well-established multinational
corporations with a track record of consistent earnings.
International markets were also choppy during the reporting period, as
represented by the MSCI World Index, which as we mentioned returned -0.47%.
However, both Oppenheimer Global Fund and Oppenheimer Global Opportunities Fund
underperformed the MSCI World Index. Both Funds suffered due to a variety of
issues, which included weak stock selection.
COMPARING THE PORTFOLIO'S PERFORMANCE TO THE MARKET. The graphs that
follow show the performance of a hypothetical $10,000 investment in each class
of shares of the Portfolio held from inception until January 31, 2008.
Performance is measured from the inception of Classes A, B, C, N and Y on April
5, 2005. The Portfolio's performance reflects the deduction of the maximum
initial sales charge on Class A shares, the applicable contingent deferred sales
charge on Class B, Class C and Class N shares, and reinvestments of all
dividends and capital gains distributions. Past performance cannot guarantee
future results.
The Portfolio's performance is compared to the performance of the S&P 500
Index and the MSCI World Index(SM). The S&P 500 Index is an unmanaged index of
equity securities. The Morgan Stanley Capital International, Inc. (MSCI) World
Index is an unmanaged index of issuers listed on the stock exchanges of foreign
countries and the U.S. Index performance reflects the reinvestment of income but
does not consider the effect of transaction costs, and none of the data in the
graphs shows the effect of taxes. The Portfolio's performance reflects the
effects of the Portfolio's business and operating expenses. While index
comparisons may be useful to provide a benchmark for the Portfolio's
performance, it must be noted that the Portfolio's investments are not limited
to the investments in the index.
10 | EQUITY INVESTOR FUND
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Equity Investor Fund (Class A)
S&P 500 Index
MSCI World Index(SM)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Equity Investor Fund (Class A) S&P 500 Index MSCI World Index(SM)
04/05/2005 $ 9,425 $ 10,000 $ 10,000
04/30/2005 $ 9,199 $ 9,810 $ 9,789
07/31/2005 $ 9,991 $ 10,514 $ 10,415
10/31/2005 $ 9,972 $ 10,327 $ 10,515
01/31/2006 $ 11,071 $ 11,005 $ 11,613
04/30/2006 $ 11,433 $ 11,322 $ 12,227
07/31/2006 $ 10,746 $ 11,079 $ 11,898
10/31/2006 $ 11,624 $ 12,013 $ 12,819
01/31/2007 $ 12,272 $ 12,600 $ 13,571
04/30/2007 $ 12,816 $ 13,046 $ 14,374
07/31/2007 $ 12,894 $ 12,865 $ 14,360
10/31/2007 $ 13,846 $ 13,761 $ 15,507
01/31/2008 $ 11,971 $ 12,309 $ 13,573
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/08
1-Year -8.06% Since Inception (4/5/05) 6.58%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 3% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 16 FOR FURTHER
INFORMATION.
11 | EQUITY INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Equity Investor Fund (Class B)
S&P 500 Index
MSCI World Index(SM)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Equity Investor Fund (Class B) S&P 500 Index MSCI World Index(SM)
04/05/2005 $ 10,000 $ 10,000 $ 10,000
04/30/2005 $ 9,750 $ 9,810 $ 9,789
07/31/2005 $ 10,580 $ 10,514 $ 10,415
10/31/2005 $ 10,540 $ 10,327 $ 10,515
01/31/2006 $ 11,670 $ 11,005 $ 11,613
04/30/2006 $ 12,023 $ 11,322 $ 12,227
07/31/2006 $ 11,276 $ 11,079 $ 11,898
10/31/2006 $ 12,185 $ 12,013 $ 12,819
01/31/2007 $ 12,833 $ 12,600 $ 13,571
04/30/2007 $ 13,375 $ 13,046 $ 14,374
07/31/2007 $ 13,426 $ 12,865 $ 14,360
10/31/2007 $ 14,398 $ 13,761 $ 15,507
01/31/2008 $ 12,118 $ 12,309 $ 13,573
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/08
1-Year -7.90% Since Inception (4/5/05) 7.05%
12 | EQUITY INVESTOR FUND
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Equity Investor Fund (Class C)
S&P 500 Index
MSCI World Index(SM)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Equity Investor Fund (Class C) S&P 500 Index MSCI World Index(SM)
04/05/2005 $ 10,000 $ 10,000 $ 10,000
04/30/2005 $ 9,750 $ 9,810 $ 9,789
07/31/2005 $ 10,570 $ 10,514 $ 10,415
10/31/2005 $ 10,530 $ 10,327 $ 10,515
01/31/2006 $ 11,664 $ 11,005 $ 11,613
04/30/2006 $ 12,028 $ 11,322 $ 12,227
07/31/2006 $ 11,280 $ 11,079 $ 11,898
10/31/2006 $ 12,180 $ 12,013 $ 12,819
01/31/2007 $ 12,831 $ 12,600 $ 13,571
04/30/2007 $ 13,384 $ 13,046 $ 14,374
07/31/2007 $ 13,435 $ 12,865 $ 14,360
10/31/2007 $ 14,397 $ 13,761 $ 15,507
01/31/2008 $ 12,427 $ 12,309 $ 13,573
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/08
1-Year -4.08% Since Inception (4/5/05) 8.00%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 3% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 16 FOR FURTHER
INFORMATION.
13 | EQUITY INVESTOR FUND
PORTFOLIO PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Equity Investor Fund (Class N)
S&P 500 Index
MSCI World Index(SM)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Equity Investor Fund (Class N) S&P 500 Index MSCI World Index(SM)
04/05/2005 $ 10,000 $ 10,000 $ 10,000
04/30/2005 $ 9,750 $ 9,810 $ 9,789
07/31/2005 $ 10,600 $ 10,514 $ 10,415
10/31/2005 $ 10,580 $ 10,327 $ 10,515
01/31/2006 $ 11,734 $ 11,005 $ 11,613
04/30/2006 $ 12,109 $ 11,322 $ 12,227
07/31/2006 $ 11,380 $ 11,079 $ 11,898
10/31/2006 $ 12,301 $ 12,013 $ 12,819
01/31/2007 $ 12,986 $ 12,600 $ 13,571
04/30/2007 $ 13,553 $ 13,046 $ 14,374
07/31/2007 $ 13,625 $ 12,865 $ 14,360
10/31/2007 $ 14,625 $ 13,761 $ 15,507
01/31/2008 $ 12,645 $ 12,309 $ 13,573
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE
PORTFOLIO AT 1/31/08
1-Year -3.57% Since Inception (4/5/05) 8.67%
14 | EQUITY INVESTOR FUND
CLASS Y SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Portfolio Series: Equity Investor Fund (Class Y)
S&P 500 Index
MSCI World Index(SM)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series:
Equity Investor Fund (Class Y) S&P 500 Index MSCI World Index(SM)
04/05/2005 $ 10,000 $ 10,000 $ 10,000
04/30/2005 $ 9,760 $ 9,810 $ 9,789
07/31/2005 $ 10,600 $ 10,514 $ 10,415
10/31/2005 $ 10,600 $ 10,327 $ 10,515
01/31/2006 $ 11,769 $ 11,005 $ 11,613
04/30/2006 $ 12,164 $ 11,322 $ 12,227
07/31/2006 $ 11,444 $ 11,079 $ 11,898
10/31/2006 $ 12,407 $ 12,013 $ 12,819
01/31/2007 $ 13,113 $ 12,600 $ 13,571
04/30/2007 $ 13,703 $ 13,046 $ 14,374
07/31/2007 $ 13,806 $ 12,865 $ 14,360
10/31/2007 $ 14,841 $ 13,761 $ 15,507
01/31/2008 $ 12,850 $ 12,309 $ 13,573
AVERAGE ANNUAL TOTAL RETURNS OF CLASS Y SHARES OF THE PORTFOLIO AT 1/31/08
1-Year -2.00% Since Inception (4/5/05) 9.29%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 3% (SINCE INCEPTION); AND
FOR CLASS C AND N SHARES, THE 1% CONTINGENT DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 16 FOR FURTHER
INFORMATION.
15 | EQUITY INVESTOR FUND
NOTES
- --------------------------------------------------------------------------------
Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. The Portfolio's total returns
shown do not reflect the deduction of income taxes on an individual's
investment. Taxes may reduce your actual investment returns on income or gains
paid by the Portfolio or any gains you may realize if you sell your shares.
INVESTORS SHOULD CONSIDER THE PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, AND
OTHER CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PORTFOLIO'S
PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT THE PORTFOLIO, AND MAY BE
OBTAINED BY ASKING YOUR FINANCIAL ADVISOR, CALLING US AT 1.800.525.7048 OR
VISITING OUR WEBSITE AT WWW.OPPENHEIMERFUNDS.COM. READ THE PROSPECTUS CAREFULLY
BEFORE INVESTING.
The Portfolio's investment strategy and focus can change over time. The mention
of specific fund holdings does not constitute a recommendation by
OppenheimerFunds, Inc.
CLASS A shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class A returns include the maximum initial sales charge of
5.75%.
CLASS B shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 3% (since inception). Class B shares are subject
to an annual 0.75% asset-based sales charge.
CLASS C shares of the Portfolio were first publicly offered on 4/5/05. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
CLASS N shares of the Portfolio were first publicly offered on 4/5/05. Class N
shares are offered only through retirement plans. Unless otherwise noted, Class
N returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
CLASS Y shares of the Portfolio were first publicly offered on 4/5/05. Class Y
shares are offered only to certain institutional investors under special
agreements with the Distributor.
An explanation of the calculation of performance is in the Portfolio's Statement
of Additional Information.
16 | EQUITY INVESTOR FUND
PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
PORTFOLIO EXPENSES. As a shareholder of the Portfolio, you incur two types of
costs: (1) transaction costs, which may include sales charges (loads) on
purchase payments, contingent deferred sales charges on redemptions; and
redemption fees (if applicable); and (2) ongoing costs, including management
fees; distribution and service fees; and other Portfolio expenses. These
examples are intended to help you understand your ongoing costs (in dollars) of
investing in the Portfolio and to compare these costs with the ongoing costs of
investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended January 31, 2008.
ACTUAL EXPENSES. The first section of the table provides information about
actual account values and actual expenses. You may use the information in this
section 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 first section
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 second section of the table
provides information about hypothetical account values and hypothetical expenses
based on the Portfolio's actual expense ratio for each class of shares, and an
assumed rate of return of 5% per year for each class before expenses, which is
not the actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Portfolio and other funds. To do so, compare this 5% hypothetical example
for the class of shares you hold with the 5% hypothetical examples that appear
in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front-end
or contingent deferred sales charges (loads), or a $12.00 fee imposed annually
on accounts valued at less than $500.00 (subject to exceptions described in the
Statement of Additional Information). Therefore, the "hypothetical" section of
the table is useful in comparing
17 | EQUITY INVESTOR FUND
PORTFOLIO EXPENSES Continued
- --------------------------------------------------------------------------------
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
ACTUAL AUGUST 1, 2007 JANUARY 31, 2008 JANUARY 31, 2008
- --------------------------------------------------------------------------------
Class A $ 1,000.00 $ 928.40 $ 2.19
- --------------------------------------------------------------------------------
Class B 1,000.00 925.00 6.04
- --------------------------------------------------------------------------------
Class C 1,000.00 925.00 5.99
- --------------------------------------------------------------------------------
Class N 1,000.00 928.00 3.31
- --------------------------------------------------------------------------------
Class Y 1,000.00 930.70 0.05
HYPOTHETICAL
(5% return before expenses)
- --------------------------------------------------------------------------------
Class A 1,000.00 1,022.94 2.30
- --------------------------------------------------------------------------------
Class B 1,000.00 1,018.95 6.33
- --------------------------------------------------------------------------------
Class C 1,000.00 1,019.00 6.28
- --------------------------------------------------------------------------------
Class N 1,000.00 1,021.78 3.47
- --------------------------------------------------------------------------------
Class Y 1,000.00 1,025.16 0.05
Expenses are equal to the Portfolio's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios,
excluding all underlying fund expenses, on the 6-month period ended January 31,
2008 are as follows:
CLASS EXPENSE RATIOS
- -----------------------------
Class A 0.45%
- -----------------------------
Class B 1.24
- -----------------------------
Class C 1.23
- -----------------------------
Class N 0.68
- -----------------------------
Class Y 0.01
The expense ratios reflect reduction to custodian expenses and voluntary waivers
or reimbursements of expenses by the Portfolio's Manager that can be terminated
at any time, without advance notice. The "Financial Highlights" tables in the
Portfolio's financial statements, included in this report, also show the gross
expense ratios, without such waivers or reimbursements and reduction to
custodian expenses, if applicable.
- --------------------------------------------------------------------------------
18 | EQUITY INVESTOR FUND
STATEMENT OF INVESTMENTS January 31, 2008
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
INVESTMENT COMPANIES--99.9% 1
- --------------------------------------------------------------------------------
GLOBAL EQUITY FUNDS--30.6%
Oppenheimer Developing Markets Fund, Cl. Y 681,054 $ 30,082,159
- --------------------------------------------------------------------------------
Oppenheimer Global Fund, Cl. Y 1,505,084 100,434,248
- --------------------------------------------------------------------------------
Oppenheimer Global Opportunities Fund, Cl. Y 807,432 24,949,652
----------------
155,466,059
- --------------------------------------------------------------------------------
MONEY MARKET FUND--0.0%
Oppenheimer Institutional Money Market Fund,
Cl. E, 4.54% 2 144,934 144,934
- --------------------------------------------------------------------------------
U.S. EQUITY FUNDS--69.3%
Oppenheimer Capital Appreciation Fund, Cl. Y 2,170,054 104,705,142
- --------------------------------------------------------------------------------
Oppenheimer Main Street Fund, Cl. Y 2,212,683 76,249,059
- --------------------------------------------------------------------------------
Oppenheimer Main Street Opportunity Fund, Cl. Y 3,863,720 50,382,900
- --------------------------------------------------------------------------------
Oppenheimer Main Street Small Cap Fund, Cl. Y 2,432,908 46,638,851
- --------------------------------------------------------------------------------
Oppenheimer Value Fund, Cl. Y 3,075,162 74,695,701
----------------
352,671,653
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $550,793,965) 99.9% 508,282,646
- --------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.1 360,913
-----------------------------
NET ASSETS 100.0% $ 508,643,559
=============================
INDUSTRY CLASSIFICATIONS ARE UNAUDITED.
19 | EQUITY INVESTOR FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended January 31, 2008, by virtue of the Portfolio owning
at least 5% of the voting securities of the issuer or as a result of the
Portfolio and the issuer having the same investment adviser. Transactions during
the period in which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
JAN. 31, 2007 ADDITIONS REDUCTIONS JAN. 31, 2008
- ------------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation Fund, Cl. Y 1,364,861 829,295 24,102 2,170,054
Oppenheimer Developing Markets Fund, Cl. Y 425,351 285,922 30,219 681,054
Oppenheimer Global Fund, Cl. Y 915,262 608,692 18,870 1,505,084
Oppenheimer Global Opportunities Fund, Cl. Y 430,055 385,986 8,609 807,432
Oppenheimer Institutional Money Market Fund, Cl. E 812,798 64,963,693 65,631,557 144,934
Oppenheimer Main Street Fund, Cl. Y 1,239,380 996,597 23,294 2,212,683
Oppenheimer Main Street Opportunity Fund, Cl. Y 2,241,434 1,664,045 41,759 3,863,720
Oppenheimer Main Street Small Cap Fund, Cl. Y 1,423,589 1,039,542 30,223 2,432,908
Oppenheimer Value Fund, Cl. Y 1,940,570 1,257,762 123,170 3,075,162
DIVIDEND REALIZED
VALUE INCOME LOSS
- ------------------------------------------------------------------------------------------------------------------
Oppenheimer Capital Appreciation Fund, Cl. Y $ 104,705,142 $ -- $ 108,021
Oppenheimer Developing Markets Fund, Cl. Y 30,082,159 1,001,271 51,965
Oppenheimer Global Fund, Cl. Y 100,434,248 1,949,622 155,137
Oppenheimer Global Opportunities Fund, Cl. Y 24,949,652 1,522,212 68,584
Oppenheimer Institutional Money Market Fund, Cl. E 144,934 36,090 --
Oppenheimer Main Street Fund, Cl. Y 76,249,059 4,386,189 138,416
Oppenheimer Main Street Opportunity Fund, Cl. Y 50,382,900 2,963,923 82,879
Oppenheimer Main Street Small Cap Fund, Cl. Y 46,638,851 917,191 113,710
Oppenheimer Value Fund, Cl. Y 74,695,701 2,592,679 94,623
---------------------------------------------
$ 508,282,646 $ 15,369,177 $ 813,335
=============================================
2. Rate shown is the 7-day yield as of January 31, 2008.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20 | EQUITY INVESTOR FUND
STATEMENT OF ASSETS AND LIABILITIES January 31, 2008
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments--
affiliated companies (cost $550,793,965) $ 508,282,646
- -----------------------------------------------------------------------------------------------------------
Cash 107,057
- -----------------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 1,292,516
Dividends 685
Other 8,619
--------------
Total assets 509,691,523
- -----------------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 527,509
Investments purchased 283,301
Distribution and service plan fees 104,505
Transfer and shareholder servicing agent fees 73,375
Trustees' compensation 19,400
Shareholder communications 9,019
Other 30,855
--------------
Total liabilities 1,047,964
- -----------------------------------------------------------------------------------------------------------
NET ASSETS $ 508,643,559
==============
- -----------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 43,147
- -----------------------------------------------------------------------------------------------------------
Additional paid-in capital 526,296,332
- -----------------------------------------------------------------------------------------------------------
Accumulated net investment loss (18,644)
- -----------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments 24,834,043
- -----------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments (42,511,319)
--------------
NET ASSETS $ 508,643,559
==============
21 | EQUITY INVESTOR FUND
STATEMENT OF ASSETS AND LIABILITIES Continued
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- -----------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$262,208,371 and 22,161,001 shares of beneficial interest outstanding) $ 11.83
Maximum offering price per share (net asset value plus sales charge of 5.75% of
offering price) $ 12.55
- -----------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $79,187,112 and
6,748,078 shares of beneficial interest outstanding) $ 11.73
- -----------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $110,382,580 and
9,418,874 shares of beneficial interest outstanding) $ 11.72
- -----------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $54,335,666 and
4,605,772 shares of beneficial interest outstanding) $ 11.80
- -----------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $2,529,830 and 212,994 shares of beneficial interest outstanding) $ 11.88
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 | EQUITY INVESTOR FUND
STATEMENT OF OPERATIONS For the Year Ended January 31, 2008
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- -----------------------------------------------------------------------------------------------------------
Dividends from affiliated companies $ 15,369,177
- -----------------------------------------------------------------------------------------------------------
Interest 25,115
- -----------------------------------------------------------------------------------------------------------
Other income 5,556
--------------
Total investment income 15,399,848
- -----------------------------------------------------------------------------------------------------------
EXPENSES
- -----------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 587,895
Class B 751,135
Class C 979,598
Class N 243,374
- -----------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 415,299
Class B 153,560
Class C 194,981
Class N 75,544
Class Y 20
- -----------------------------------------------------------------------------------------------------------
Shareholder communications:
Class A 50,022
Class B 24,104
Class C 18,232
Class N 2,626
Class Y 16
- -----------------------------------------------------------------------------------------------------------
Trustees' compensation 14,098
- -----------------------------------------------------------------------------------------------------------
Custodian fees and expenses 2,618
- -----------------------------------------------------------------------------------------------------------
Other 46,755
--------------
Total expenses 3,559,877
Less reduction to custodian expenses (88)
Less waivers and reimbursements of expenses (696)
--------------
Net expenses 3,559,093
- -----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 11,840,755
- -----------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- -----------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments:
Affiliated companies (813,335)
Distributions received from affiliated companies 28,489,001
--------------
Net realized gain 27,675,666
- -----------------------------------------------------------------------------------------------------------
Net change in unrealized depreciation on investments (62,666,904)
- -----------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (23,150,483)
==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23 | EQUITY INVESTOR FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED JANUARY 31, 2008 2007
- ------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------------------------------
Net investment income $ 11,840,755 $ 3,773,289
- ------------------------------------------------------------------------------------------------------------------
Net realized gain 27,675,666 9,113,640
- ------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (62,666,904) 14,991,693
-------------------------------
Net increase (decrease) in net assets resulting from operations (23,150,483) 27,878,622
- ------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (6,834,536) (2,293,120)
Class B (1,518,294) (510,255)
Class C (2,199,214) (615,967)
Class N (1,303,777) (486,103)
Class Y (78,107) (30,630)
-------------------------------
(11,933,928) (3,936,075)
- ------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (4,212,810) (522,857)
Class B (1,300,283) (182,273)
Class C (1,796,530) (214,177)
Class N (866,546) (112,075)
Class Y (41,914) (5,808)
-------------------------------
(8,218,083) (1,037,190)
- ------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial
interest transactions:
Class A 111,010,914 113,644,714
Class B 26,272,715 36,285,425
Class C 49,412,256 45,942,782
Class N 23,207,023 27,802,175
Class Y 733,708 1,165,948
-------------------------------
210,636,616 224,841,044
- ------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
Total increase 167,334,122 247,746,401
- ------------------------------------------------------------------------------------------------------------------
Beginning of period 341,309,437 93,563,036
-------------------------------
End of period (including accumulated net investment loss of $18,644
and $16,141, respectively) $ 508,643,559 $ 341,309,437
===============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | EQUITY INVESTOR FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED JANUARY 31, 2008 2007 2006 1
- -----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.63 $ 11.60 $ 10.00
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .38 .25 .22
Net realized and unrealized gain (loss) (.65) 1.00 1.52
-------------------------------------------
Total from investment operations (.27) 1.25 1.74
- -----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.33) (.18) (.12)
Distributions from net realized gain (.20) (.04) (.02)
-------------------------------------------
Total dividends and distributions to shareholders (.53) (.22) (.14)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.83 $ 12.63 $ 11.60
===========================================
- -----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 (2.45)% 10.85% 17.46%
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 262,208 $ 173,539 $ 48,132
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 239,348 $ 109,318 $ 17,321
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.87% 2.07% 2.47%
Total expenses 5 0.45% 0.50% 0.70%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 0.45% 0.50% 0.68%
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 2% 2% 7%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods less than one full year.
5. Total expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2008 1.08%
Year Ended January 31, 2007 1.15%
Period Ended January 31, 2006 1.39%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | EQUITY INVESTOR FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS B YEAR ENDED JANUARY 31, 2008 2007 2006 1
- -----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.54 $ 11.55 $ 10.00
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .26 .14 .16
Net realized and unrealized gain (loss) (.63) 1.01 1.50
-------------------------------------------
Total from investment operations (.37) 1.15 1.66
- -----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.24) (.12) (.09)
Distributions from net realized gain (.20) (.04) (.02)
-------------------------------------------
Total dividends and distributions to shareholders (.44) (.16) (.11)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.73 $ 12.54 $ 11.55
===========================================
- -----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 (3.23)% 9.97% 16.70%
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 79,187 $ 59,406 $ 19,078
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 75,204 $ 38,569 $ 7,050
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 1.98% 1.19% 1.83%
Total expenses 5 1.25% 1.31% 1.53%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 1.25% 1.31% 1.50%
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 2% 2% 7%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods less than one full year.
5. Total expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2008 1.88%
Year Ended January 31, 2007 1.96%
Period Ended January 31, 2006 2.22%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | EQUITY INVESTOR FUND
CLASS C YEAR ENDED JANUARY 31, 2008 2007 2006 1
- -----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.53 $ 11.54 $ 10.00
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .28 .14 .15
Net realized and unrealized gain (loss) (.64) 1.01 1.51
-------------------------------------------
Total from investment operations (.36) 1.15 1.66
- -----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.25) (.12) (.10)
Distributions from net realized gain (.20) (.04) (.02)
-------------------------------------------
Total dividends and distributions to shareholders (.45) (.16) (.12)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.72 $ 12.53 $ 11.54
===========================================
- -----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 (3.15)% 10.00% 16.64%
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 110,383 $ 70,691 $ 20,034
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 98,098 $ 45,312 $ 6,131
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.15% 1.23% 1.71%
Total expenses 5 1.23% 1.29% 1.48%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 1.23% 1.29% 1.45%
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 2% 2% 7%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods less than one full year.
5. Total expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2008 1.86%
Year Ended January 31, 2007 1.94%
Period Ended January 31, 2006 2.17%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | EQUITY INVESTOR FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS N YEAR ENDED JANUARY 31, 2008 2007 2006 1
- -----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.60 $ 11.59 $ 10.00
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .35 .29 .24
Net realized and unrealized gain (loss) (.65) .94 1.49
-------------------------------------------
Total from investment operations (.30) 1.23 1.73
- -----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.30) (.18) (.12)
Distributions from net realized gain (.20) (.04) (.02)
-------------------------------------------
Total dividends and distributions to shareholders (.50) (.22) (.14)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.80 $ 12.60 $ 11.59
===========================================
- -----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 (2.63)% 10.67% 17.34%
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 54,336 $ 35,652 $ 5,608
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 48,745 $ 18,874 $ 1,717
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.67% 2.47% 2.62%
Total expenses 5 0.68% 0.69% 0.79%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 0.68% 0.69% 0.78%
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 2% 2% 7%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods less than one full year.
5. Total expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2008 1.31%
Year Ended January 31, 2007 1.34%
Period Ended January 31, 2006 1.48%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | EQUITY INVESTOR FUND
CLASS Y YEAR ENDED JANUARY 31, 2008 2007 2006 1
- -----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.67 $ 11.61 $ 10.00
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .43 .29 .24
Net realized and unrealized gain (loss) (.64) 1.03 1.52
-------------------------------------------
Total from investment operations (.21) 1.32 1.76
- -----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.38) (.22) (.13)
Distributions from net realized gain (.20) (.04) (.02)
-------------------------------------------
Total dividends and distributions to shareholders (.58) (.26) (.15)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.88 $ 12.67 $ 11.61
===========================================
- -----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 (2.00)% 11.42% 17.69%
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 2,530 $ 2,021 $ 711
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 2,508 $ 1,267 $ 331
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 3.25% 2.46% 2.67%
Total expenses 5 0.02% 0.03% 0.30%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 0.02% 0.03% 0.27%
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 2% 2% 7%
1. For the period from April 5, 2005 (commencement of operations) to January 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on portfolio distributions or the redemption of portfolio shares.
4. Annualized for periods less than one full year.
5. Total expenses including all underlying fund expenses were as follows:
Year Ended January 31, 2008 0.65%
Year Ended January 31, 2007 0.68%
Period Ended January 31, 2006 0.99%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | EQUITY INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Portfolio Series (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
Equity Investor Fund (the "Portfolio") is a series of the Fund whose investment
objective is to seek long term growth of capital. The Portfolio is a special
type of mutual fund known as a "fund of funds" because it invests in other
mutual funds. The Portfolio normally invests in a diversified portfolio of
Oppenheimer mutual funds (individually, an "Underlying Fund" and collectively,
the "Underlying Funds"). The Portfolio's investment adviser is OppenheimerFunds,
Inc. (the "Manager").
The Portfolio offers Class A, Class B, Class C, Class N and Class Y
shares. Class A shares are sold at their offering price, which is normally net
asset value plus a front-end sales charge. Class B, Class C and Class N shares
are sold without a front-end sales charge but may be subject to a contingent
deferred sales charge ("CDSC"). Class N shares are sold only through retirement
plans. Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC, however, the institutional investor
may impose charges on those accounts. All classes of shares have identical
rights and voting privileges with respect to the Portfolio in general and
exclusive voting rights on matters that affect that class alone. Earnings, net
assets and net asset value per share may differ due to each class having its own
expenses, such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares 72
months after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Portfolio.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Portfolio calculates the net asset value of each class
of its shares based upon the net asset value of the applicable Underlying Fund.
For each Underlying Fund, the net asset value per share for a class of shares is
determined as of the close of the New York Stock Exchange (the "Exchange"),
normally 4:00 P. M. Eastern time, on each day the Exchange is open for trading
by dividing the value of the Underlying Fund's net assets attributable to that
class by the number of outstanding shares of that class on that day. To
determine net asset values, the Underlying Fund's assets are valued primarily on
the basis of current market quotations. Securities for which market quotations
are not readily available are valued at their fair value. Securities whose
values have been materially affected by what the Manager identifies as a
significant event occurring before the Underlying 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 Underlying Fund's Board of Trustees. "Money market-type" debt
instruments with remaining maturities of sixty days or less are valued at cost
adjusted by the amortization of discount or premium to maturity (amortized
cost), which approximates market value.
30 | EQUITY INVESTOR FUND
- --------------------------------------------------------------------------------
RISKS OF INVESTING IN THE UNDERLYING FUNDS. Each of the Underlying Funds in
which the Portfolio invests has its own investment risks, and those risks can
affect the value of the Portfolio's investments and therefore the value of the
Portfolio's shares. To the extent that the Portfolio invests more of its assets
in one Underlying Fund than in another, the Portfolio will have greater exposure
to the risks of that Underlying Fund.
- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Portfolio is
permitted to invest daily available cash balances in an affiliated money market
fund. The Portfolio may invest the available cash in Class E shares of
Oppenheimer Institutional Money Market Fund ("IMMF") to seek current income
while preserving liquidity. 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 adviser of IMMF. The
Portfolio's investment in IMMF is included in the Statement of Investments. As a
shareholder, the Portfolio is subject to its proportional share of IMMF's Class
E expenses, including its management fee. The Manager will waive fees and/or
reimburse Portfolio expenses in an amount equal to the indirect management fees
incurred through the Portfolio's investment in IMMF.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Portfolio intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders. Therefore, no federal income or excise tax provision is
required. The Portfolio files income tax returns in U.S. federal and applicable
state jurisdictions. The statute of limitations on the Portfolio's tax return
filings generally remain open for the three preceding fiscal reporting period
ends.
The tax components of capital shown in the table below represent distribution
requirements the Portfolio must satisfy under the income tax regulations, losses
the Portfolio may be able to offset against income and gains realized in future
years and unrealized appreciation or depreciation of securities and other
investments for federal income tax purposes.
NET UNREALIZED
DEPRECIATION
BASED ON COST OF
SECURITIES AND OTHER
UNDISTRIBUTED NET UNDISTRIBUTED ACCUMULATED LOSS INVESTMENTS FOR FEDERAL
INVESTMENT INCOME LONG-TERM GAIN CARRYFORWARD INCOME TAX PURPOSES
- --------------------------------------------------------------------------------
$188,710 $25,212,771 $-- $43,078,757
31 | EQUITY INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Portfolio.
Accordingly, the following amounts have been reclassified for January 31, 2008.
Net assets of the Portfolio were unaffected by the reclassifications.
REDUCTION TO
REDUCTION TO ACCUMULATED NET
INCREASE ACCUMULATED NET REALIZED GAIN ON
TO PAID-IN CAPITAL INVESTMENT LOSS INVESTMENTS 1
----------------------------------------------------------------
$2,643,509 $ 90,670 $ 2,734,179
1. $2,643,509, including $2,623,870 of long-term capital gain, was distributed
in connection with Portfolio share redemptions.
The tax character of distributions paid during the years ended January 31, 2008
and January 31, 2007 was as follows:
YEAR ENDED YEAR ENDED
JANUARY 31, 2008 JANUARY 31, 2007
--------------------------------------------------------------
Distributions paid from:
Ordinary income $ 11,933,928 $ 3,936,056
Long-term capital gain 8,218,083 1,037,209
-------------------------------
Total $ 20,152,011 $ 4,973,265
===============================
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of January 31, 2008 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 $ 551,361,403
=============
Gross unrealized appreciation $ 3,556,305
Gross unrealized depreciation (46,635,062)
-------------
Net unrealized depreciation $ (43,078,757)
=============
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Portfolio has adopted an unfunded retirement plan
(the "Plan") for the Portfolio's independent trustees. Benefits are based on
years of service and fees paid to each trustee during their period of service.
The Plan was frozen with respect to adding new participants effective December
31, 2006 (the "Freeze Date") and existing Plan Participants as of the Freeze
Date will continue to receive accrued benefits under the Plan. Active
independent trustees as of the Freeze Date have each elected a distribution
method with respect to their benefits under the Plan. During the year ended
January 31,
32 | EQUITY INVESTOR FUND
2008, the Portfolio's projected benefit obligations, payments to retired
trustees and accumulated liability were as follows:
Projected Benefit Obligations Increased $ 6,241
Payments Made to Retired Trustees 6,110
Accumulated Liability as of January 31, 2008 13,552
The Board of Trustees has adopted a compensation deferral plan for independent
trustees that enables trustees to elect to defer receipt of all or a portion of
the annual compensation they are entitled to receive from the Portfolio. For
purposes of determining the amount owed to the Trustee under the plan, deferred
amounts are treated as though equal dollar amounts had been invested in shares
of the Portfolio or in other Oppenheimer funds selected by the Trustee. The
Portfolio purchases shares of the funds selected for deferral by the Trustee in
amounts equal to his or her deemed investment, resulting in a Portfolio asset
equal to the deferred compensation liability. Such assets are included as a
component of "Other" within the asset section of the Statement of Assets and
Liabilities. Deferral of trustees' fees under the plan will not affect the net
assets of the Portfolio, and will not materially affect the Portfolio's assets,
liabilities or net investment income per share. Amounts will be deferred until
distributed in accordance to the compensation deferral plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations and
may differ from U.S. generally accepted accounting principles, are recorded on
the ex-dividend date. Income and capital gain distributions, if any, are
declared and paid annually or at other times as deemed necessary by the Manager.
- --------------------------------------------------------------------------------
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 is recognized on an accrual basis. Market discount and
premium, which are included in interest income on the Statement of Operations,
are amortized or accreted daily.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Portfolio on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Portfolio pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Portfolio, at a rate equal to
the Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line
item, if applicable, represents earnings on cash balances maintained by the
Portfolio during the period. Such interest expense and other custodian fees may
be paid with these earnings.
33 | EQUITY INVESTOR 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 Portfolio's organizational documents provide current and
former trustees and officers with a limited indemnification against liabilities
arising in connection with the performance of their duties to the Portfolio. In
the normal course of business, the Portfolio may also enter into contracts that
provide general indemnifications. The Portfolio's maximum exposure under these
arrangements is unknown as this would be dependent on future claims that may be
made against the Portfolio. The risk of material loss from such claims is
considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Portfolio has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED JANUARY 31, 2008 YEAR ENDED JANUARY 31, 2007
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------
CLASS A
Sold 10,914,889 $ 143,741,742 10,788,987 $ 127,694,890
Dividends and/or
distributions reinvested 830,164 10,636,288 217,939 2,704,630
Redeemed (3,324,723) (43,367,116) (1,417,148) (16,754,806)
------------------------------------------------------------
Net increase 8,420,330 $ 111,010,914 9,589,778 $ 113,644,714
============================================================
- -----------------------------------------------------------------------------------------------
CLASS B
Sold 2,909,331 $ 37,978,741 3,586,753 $ 42,131,412
Dividends and/or
distributions reinvested 215,120 2,734,266 54,487 671,822
Redeemed (1,113,188) (14,440,292) (556,353) (6,517,809)
------------------------------------------------------------
Net increase 2,011,263 $ 26,272,715 3,084,887 $ 36,285,425
============================================================
- -----------------------------------------------------------------------------------------------
CLASS C
Sold 5,030,455 $ 65,585,341 4,655,073 $ 54,733,344
Dividends and/or
distributions reinvested 304,091 3,858,873 65,253 803,921
Redeemed (1,555,496) (20,031,958) (816,245) (9,594,483)
------------------------------------------------------------
Net increase 3,779,050 $ 49,412,256 3,904,081 $ 45,942,782
============================================================
34 | EQUITY INVESTOR FUND
YEAR ENDED JANUARY 31, 2008 YEAR ENDED JANUARY 31, 2007
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------
CLASS N
Sold 2,431,824 $ 31,836,415 2,837,844 $ 33,657,788
Dividends and/or
distributions reinvested 150,827 1,926,056 41,434 512,955
Redeemed (806,573) (10,555,448) (533,502) (6,368,568)
------------------------------------------------------------
Net increase 1,776,078 $ 23,207,023 2,345,776 $ 27,802,175
============================================================
- -----------------------------------------------------------------------------------------------
CLASS Y
Sold 117,125 $ 1,549,814 121,765 $ 1,440,825
Dividends and/or
distributions reinvested 9,336 119,962 2,927 36,412
Redeemed (73,009) (936,068) (26,372) (311,289)
------------------------------------------------------------
Net increase 53,452 $ 733,708 98,320 $ 1,165,948
============================================================
- --------------------------------------------------------------------------------
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 January
31, 2008, were as follows:
PURCHASES SALES
--------------------------------------------------------------
Investment securities $ 242,397,692 $ 9,876,400
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the investment advisory agreement, the Manager does not
charge a management fee, but rather collects indirect management fees from
investments in the Underlying Funds. The weighted indirect management fees
collected from the Underlying Funds, as a percent of average daily net assets of
the Portfolio for the year ended January 31, 2008 was 0.58%.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services ("OFS"), a division of the
Manager, acts as the transfer and shareholder servicing agent for the Portfolio.
The Portfolio pays OFS a per account fee. For the year ended January 31, 2008,
the Portfolio paid $817,127 to OFS for services to the Portfolio.
Additionally, Class Y shares are subject to minimum fees of $10,000
annually 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 Portfolio, OppenheimerFunds Distributor, Inc. (the
"Distributor") acts as the Portfolio's principal underwriter in the continuous
public offering of the Portfolio's classes of shares.
35 | EQUITY INVESTOR FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
SERVICE PLAN FOR CLASS A SHARES. The Portfolio has adopted a Service Plan (the
"Plan") for Class A shares under Rule 12b-1 of the Investment Company Act of
1940. Under the Plan, the Portfolio reimburses the Distributor for a portion of
its costs incurred for services provided to accounts that hold Class A shares.
Reimbursement is made periodically at an annual rate of up to 0.25% of the
average annual net assets of Class A shares of the Portfolio. The Distributor
currently uses all of those fees to pay dealers, brokers, banks and other
financial institutions periodically for providing personal service and
maintenance of accounts of their customers that hold Class A shares. Any
unreimbursed expenses the Distributor incurs with respect to Class A shares in
any fiscal year cannot be recovered in subsequent periods. Fees incurred by the
Portfolio under the Plan are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The
Portfolio has adopted Distribution and Service Plans (the "Plans") for Class B,
Class C and Class N shares under Rule 12b-1 of the Investment Company Act of
1940 to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the Plans, the
Portfolio pays the Distributor an annual asset-based sales charge of 0.75% on
Class B and Class C shares and 0.25% on Class N shares. The Distributor also
receives a service fee of 0.25% per year under each plan. If either the Class B,
Class C or Class N plan is terminated by the Portfolio or by the shareholders of
a class, the Board of Trustees and its independent trustees must determine
whether the Distributor shall be entitled to payment from the Portfolio of all
or a portion of the service fee and/or asset-based sales charge in respect to
shares sold prior to the effective date of such termination. The Distributor's
aggregate uncompensated expenses under the Plans at December 31, 2007 for Class
B, Class C and Class N shares were $1,446,152, $866,487 and $432,746,
respectively. Fees incurred by the Portfolio under the Plans are detailed in the
Statement of Operations.
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
("CDSC") do not represent expenses of the Portfolio. They are deducted from the
proceeds of sales of Portfolio shares prior to investment or from redemption
proceeds prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the following table for the period
indicated.
CLASS A CLASS B CLASS C CLASS N
CONTINGENT CONTINGENT CONTINGENT CONTINGENT
CLASS A DEFERRED SALES DEFERRED SALES DEFERRED SALES DEFERRED SALES
FRONT-END SALES CHARGES CHARGES CHARGES CHARGES
CHARGES RETAINED RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED BY DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- -------------------------------------------------------------------------------------------------------
January 31, 2008 $ 1,017,940 $ 5,868 $ 132,245 $ 17,722 $ 1,948
36 | EQUITY INVESTOR FUND
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. The Manager has voluntarily agreed to a
total expense limitation on the aggregate amount of combined direct
(fund-of-funds level) and indirect expense so that "Total expenses" as a
percentage of average daily net assets will not exceed the following annual
rates: 1.45%, 2.20%, 2.20%, 1.70% and 1.20%, for Class A, Class B, Class C,
Class N and Class Y, respectively. The Manager may modify or terminate this
undertaking at any time without notice to shareholders. These expense
limitations do not include extraordinary expenses and other expenses not
incurred in the ordinary course of the Portfolio's business. Notwithstanding the
foregoing limits, the Manager is not required to waive or reimburse Portfolio
expenses in excess of indirect management fees earned from investments in
Underlying Funds to assure that expenses do not exceed those limits.
OFS has voluntarily agreed to limit transfer and shareholder servicing
agent fees for all classes to 0.35% of average annual net assets per class. This
undertaking may be amended or withdrawn at any time.
The Manager will waive fees and/or reimburse Portfolio expenses in an
amount equal to the indirect management fees incurred through the Portfolio's
investment in IMMF. During the year ended January 31, 2008, the Manager waived
$696 for IMMF management fees.
- --------------------------------------------------------------------------------
5. RECENT ACCOUNTING PRONOUNCEMENT
In September 2006, Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 157, FAIR VALUE
MEASUREMENTS. This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and expands
disclosures about fair value measurements. SFAS No. 157 applies to fair value
measurements already required or permitted by existing standards. SFAS No. 157
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. As of January
31, 2008, 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.
37 | EQUITY INVESTOR FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER PORTFOLIO SERIES:
We have audited the accompanying statement of assets and liabilities of Equity
Investor Fund (one of the portfolios constituting the Oppenheimer Portfolio
Series), including the statement of investments, as of January 31, 2008, 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 two-year period then
ended and for the period April 5, 2005 (commencement of operations) to January
31, 2006. These financial statements and financial highlights are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of January 31, 2008, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Equity Investor Fund as of January 31, 2008, 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 two-year period then ended and for the period April 5, 2005 (commencement
of operations) to January 31, 2006, in conformity with U.S. generally accepted
accounting principles.
KPMG LLP
Denver, Colorado
March 13, 2008
38 | EQUITY INVESTOR FUND
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2008, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Portfolio during
calendar year 2007. Regulations of the U.S. Treasury Department require the
Portfolio to report this information to the Internal Revenue Service.
Capital gain distributions of $0.2025 per share were paid to Class A,
Class B, Class C, Class N and Class Y shareholders, respectively, on December
31, 2007. Whether received in stock or in cash, the capital gain distribution
should be treated by shareholders as a gain from the sale of the capital assets
held for more than one year (long-term capital gains).
Dividends, if any, paid by the Portfolio during the fiscal year ended
January 31, 2008 which are not designated as capital gain distributions should
be multiplied by 40.42% to arrive at the amount eligible for the corporate
dividend-received deduction.
A portion, if any, of the dividends paid by the Portfolio during the
fiscal year ended January 31, 2008 which are not designated as capital gain
distributions are eligible for lower individual income tax rates to the extent
that the Portfolio has received qualified dividend income as stipulated by
recent tax legislation. $6,927,867 of the Portfolio's fiscal year taxable income
may be eligible for the lower individual income tax rates. In early 2008,
shareholders of record received information regarding the percentage of
distributions that are eligible for lower individual income tax rates.
Recent tax legislation allows a regulated investment company to designate
distributions not designated as capital gain distributions, as either interest
related dividends or short-term capital gain dividends, both of which are exempt
from the U.S. withholding tax applicable to non U.S. taxpayers. For the fiscal
year ended January 31, 2008, $19,322 or 0.16% of the ordinary distributions paid
by the Portfolio qualifies as an interest related dividend.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Portfolio to the Internal Revenue Service.
Because of the complexity of the federal regulations which may affect your
individual tax return and the many variations in state and local tax
regulations, we recommend that you consult your tax advisor for specific
guidance.
39 | EQUITY INVESTOR 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 Equity Investor
Fund's (the "Fund" or the "Funds") investment advisory agreement (the
"Agreement"). The Investment Company Act of 1940, as amended, requires that the
Board request and evaluate, and that the Manager provide, such information as
may be reasonably necessary to evaluate the terms of the Agreement. The Board
employs an independent consultant to prepare a report that provides information,
including comparative information, that the Board requests for that purpose. In
addition, the Board receives information throughout the year regarding Fund
services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services by the Manager and its affiliates,
(v) the extent to which economies of scale are realized as the Fund grows and
whether fee levels reflect these economies of scale for Fund investors and (vi)
other benefits to the Manager from its relationship with the Fund. The Board was
aware that there are alternatives to retaining the Manager.
NATURE AND EXTENT OF SERVICES. The Board considered information about the
nature and extent of the services provided to the Fund and information regarding
the Manager's key personnel who provide such services. The Manager's duties
include providing the Fund with the services of the portfolio managers and the
Manager's asset allocation team, who provide research, analysis and other
advisory services in regard to the Fund's investments; 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.
40 | EQUITY INVESTOR FUND
QUALITY OF SERVICES. The Board also considered the quality of the services
provided and the quality of the Manager's resources that are available to the
Fund. The Board took account of the fact that the Manager has had over forty
years of experience as an investment adviser and that its assets under
management rank it among the top mutual fund managers in the United States. The
Board evaluated the Manager's administrative, accounting, legal and compliance
services, and information the Board has received regarding the experience and
professional qualifications of the Manager's personnel and the size and
functions of its staff. In its evaluation of the quality of the portfolio
management services provided, the Board considered the experience of Rudi W.
Schadt, Jerry Webman, Kurt Wolfgruber and Christopher Leavy, the portfolio
managers of the Fund, and the experience of the portfolio managers and the
investment performance of the investment companies in which the Fund may invest
(the "Underlying Funds"). 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 regular quarterly 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 global multi-cap core funds of funds advised by other
investment advisers. The Board noted that the Fund's one-year and since
inception performance were below its peer group median.
MANAGEMENT FEES AND EXPENSES. The Board reviewed the fees paid to the
Manager and its affiliates and the other expenses borne by the Fund. The Board
noted that the Fund does not pay a direct management fee but that the Fund
indirectly bears its share of the management fees of the Underlying Funds. 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 global multi-cap core funds,
global small/mid-cap core fund, global multi-cap growth fund
41 | EQUITY INVESTOR FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
and international multi-cap core funds of funds and other funds of funds with
comparable asset levels and distribution features. The Board noted that the
Manager has agreed to voluntarily limit the aggregate amount of combined direct
(fund-of-funds level) and indirect expense so that as a percentage of average
daily net assets they will not exceed the following annual rates: 1.45% for
Class A, 2.20% for Class B, 2.20% for Class C, 1.70% for Class N and 1.20% for
Class Y. The Manager may modify or terminate this undertaking at any time
without notice to shareholders. The Board noted that the Fund does not pay a
management fee and that the Fund's total expenses are lower than its peer group
median.
ECONOMIES OF SCALE. The Board considered the extent to which the Manager
may realize economies of scale in managing and supporting the Fund and the
Underlying Funds, and the extent to which those economies of scale would benefit
the Fund's 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 and its affiliates for
services provided to the Fund and to the Underlying Funds.
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and the independent Trustees. Fund counsel is independent of the
Manager within the meaning and intent of the Securities and Exchange Commission
Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
concluded that the nature, extent and quality of the services provided to the
Fund by the Manager are a benefit to the Fund and in the best interest of the
Fund's shareholders and that the amount and structure of the compensation
received by the Manager and its affiliates are reasonable in relation to the
services provided. Accordingly, the Board elected to continue the Agreement for
another year. In arriving at this decision, the Board did not single out any
factor or factors as being more important than others, but considered all of the
factors together. The Board judged the terms and conditions of the Agreement,
including the management fee, in light of all of the surrounding circumstances.
42 | EQUITY INVESTOR FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's web-site at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
43 | EQUITY INVESTOR FUND
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS
FUND, LENGTH OF SERVICE, AGE HELD; NUMBER OF PORTFOLIOS IN THE FUND COMPLEX CURRENTLY OVERSEEN
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, COLORADO
TRUSTEES 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION,
RETIREMENT, DEATH OR REMOVAL.
BRIAN F. WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since September 1995-December 2007);
Chairman of the Board of Director of Special Value Opportunities Fund, LLC (registered investment company) (affiliate of
Trustees (since 2007) and the Manager's parent company) (since September 2004); Member of Zurich Financial Investment
Trustee (since 2005) Management Advisory Council (insurance) (since October 2004); Chairman (since August 2007) and
Age: 64 Trustee (since August 1991) of the Board of Trustees of the Jackson Laboratory (non-profit);
Treasurer and 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). Oversees 66 portfolios in the OppenheimerFunds
complex.
DAVID K. DOWNES, President, Chief Executive Officer and Board Member of CRAFund Advisors, Inc. (investment
Trustee (since 2007) management company) (since January 2004); President of The Community Reinvestment Act Qualified
Age: 68 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 66 portfolios in the OppenheimerFunds complex.
MATTHEW P. FINK, Trustee of the Committee for Economic Development (policy research foundation) (since 2005);
Trustee (since 2005) Director of ICI Education Foundation (education foundation) (October 1991-August 2006);
Age: 67 President of the Investment Company Institute (trade association) (October 1991-June 2004);
Director of ICI Mutual Insurance Company (insurance company) (October 1991-June 2004). Oversees
56 portfolios in the OppenheimerFunds complex.
ROBERT G. GALLI, A director or trustee of other Oppenheimer funds. Oversees 66 portfolios in the OppenheimerFunds
Trustee (since 2005) complex.
Age: 74
44 | EQUITY INVESTOR FUND
PHILLIP A. GRIFFITHS, Distinguished Presidential Fellow for International Affairs (since 2002) and Member (since 1979)
Trustee (since 2005) of the National Academy of Sciences; Council on Foreign Relations (since 2002); Director of GSI
Age: 69 Lumonics Inc. (precision medical equipment supplier) (since 2001); Senior Advisor of The Andrew
W. Mellon Foundation (since 2001); Chair of Science Initiative Group (since 1999); Member of the
American Philosophical Society (since 1996); Trustee of Woodward Academy (since 1983); Foreign
Associate of Third World Academy of Sciences; Director of the Institute for Advanced Study
(1991-2004); Director of Bankers Trust New York Corporation (1994-1999); Provost at Duke
University (1983-1991). Oversees 56 portfolios in the OppenheimerFunds complex.
MARY F. MILLER, Trustee of the American Symphony Orchestra (not-for-profit) (since October 1998); and Senior Vice
Trustee (since 2005) President and General Auditor of American Express Company (financial services company) (July
Age: 65 1998-February 2003). Oversees 56 portfolios in the OppenheimerFunds complex.
JOEL W. MOTLEY, Managing Director of Public Capital Advisors, LLC (privately-held financial advisor) (since
Trustee (since 2005) January 2006); Director of Columbia Equity Financial Corp. (privately-held financial advisor)
Age: 55 (since 2002); Managing Director of Carmona Motley, Inc. (privately-held financial advisor) (since
January 2002); Managing Director of Carmona Motley Hoffman Inc. (privately-held financial advisor)
(January 1998-December 2001); Member of the Finance and Budget Committee of the Council on Foreign
Relations, Member of the Investment Committee of the Episcopal Church of America, Member of the
Investment Committee and Board of Human Rights Watch and the Investment Committee of Historic
Hudson Valley. Oversees 56 portfolios in the OppenheimerFunds complex.
RUSSELL S. REYNOLDS, JR., Chairman of RSR Partners (formerly "The Directorship Search Group, Inc.") (corporate
Trustee (since 2005) governance consulting and executive recruiting) (since 1993); Life Trustee of International
Age: 76 House (non-profit educational organization); Former Trustee of The Historical Society of the
Town of Greenwich; Former Director of Greenwich Hospital Association. Oversees 56 portfolios in
the OppenheimerFunds complex.
JOSEPH M. WIKLER, Director of the following medical device companies: Medintec (since 1992) and Cathco (since 1996);
Trustee (since 2005) Director of Lakes Environmental Association (environmental protection organization) (since 1996);
Age: 67 Member of the Investment Committee of the Associated Jewish Charities of Baltimore (since 1994);
Director of Fortis/Hartford mutual funds (1994-December 2001); Director of C-TASC (a privately
held bio-statistics company) (since May 2007). Oversees 56 portfolios in the OppenheimerFunds
complex.
PETER I. WOLD, President of Wold Oil Properties, Inc. (oil and gas exploration and production company) (since
Trustee (since 2005) 1994); Vice President of American Talc Company, Inc. (talc mining and milling) (since 1999);
Age: 60 Managing Member of Hole-in-the-Wall Ranch (cattle ranching) (since 1979); Vice President,
Secretary and Treasurer of Wold Trona Company, Inc. (soda ash processing and production)
(1996-2006); Director and Chairman of the Denver Branch of the Federal Reserve Bank of Kansas
City (1993-1999); and Director of PacifiCorp. (electric utility) (1995-1999). Oversees 56
portfolios in the OppenheimerFunds complex.
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INTERESTED TRUSTEE AND THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW
OFFICER YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS
RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS
RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS
POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
45 | EQUITY INVESTOR FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director of the Manager (since June 2001); President of
President and Principal the Manager (September 2000-March 2007); President and director or trustee of other Oppenheimer
Executive Officer and funds; President and Director of Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent
Trustee (since 2005) 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
105 portfolios in the OppenheimerFunds complex.
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OTHER OFFICERS OF THE THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. LEAVY, SCHADT,
PORTFOLIO WEBMAN, WOLFGRUBER, ZACK, GILLESPIE AND MS. BLOOMBERG, TWO WORLD FINANCIAL CENTER, 225 LIBERTY
STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY, WIXTED, PETERSEN, SZILAGYI AND MS.
IVES, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE
TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
CHRISTOPHER LEAVY, Director of Equities of the Manager (since January 2007); Senior Vice President of the Manager
Vice President and Portfolio (since September 2000). Portfolio manager of Morgan Stanley Dean Witter Investment Management
Manager (since 2007) (1997-September 2000). A portfolio manager and officer of 15 portfolios in the OppenheimerFunds
Age: 37 complex.
RUDI W. SCHADT, Vice President, Director of Research in Product Design and Risk Management of the Manager. Prior
Vice President and Portfolio to joining the Manager in February 2002; a Director and Senior Quantitative Analyst (2000-2001)
Manager (since 2005) at UBS Asset Management prior to which he was an Associate Director of Research (since June 1999)
Age: 50 and Senior Researcher and Portfolio Manager (from June 1997) at State Street Global Advisors. An
officer of 14 portfolios in the OppenheimerFunds complex.
DR. JERRY WEBMAN, Chief Economist of the Manager (since 2006); Senior Vice President (since February 1996) and
Vice President and Portfolio Senior Investment Officer and Director (since 1997) of the Manager's Fixed Income Investments;
Manager (since 2005) Senior Vice President (since May 1999) of HarbourView Asset Management Corporation. An officer of
Age: 58 11 portfolios in the OppenheimerFunds complex.
KURT WOLFGRUBER, President (since March 2007) and Chief Investment Officer and Director (since July 2003) of the
Vice President and Portfolio Manager; Executive Vice President of the Manager (March 2003-March 2007); Director of HarbourView
Manager (since 2005) Asset Management Corporation and of OFI Institutional Asset Management, Inc. (since June 2003)
Age: 57 and of Tremont Capital Management, Inc. (since October 2001). An officer of 11 portfolios in the
OppenheimerFunds complex.
46 | EQUITY INVESTOR FUND
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief
Vice President and Chief Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and
Compliance Officer Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor,
(since 2005) Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983);
Age: 57 Former Vice President and Director of Internal Audit of the Manager (1997-February 2004). An
officer of 105 portfolios in the OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the following:
Treasurer and Principal HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder
Financial & Accounting Services, Inc., Oppenheimer Real Asset Management, Inc. and Oppenheimer Partnership Holdings,
Officer (since 2005) Inc. (since March 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds
Age: 48 International Ltd. and 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 105 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 2005) 1998-July 2002). An officer of 105 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 105 portfolios in the OppenheimerFunds
Age: 38 complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the
Vice President and Secretary Manager; General Counsel and Director of the Distributor (since December 2001); General Counsel
(since 2005) of Centennial Asset Management Corporation (since December 2001); Senior Vice President and
Age: 59 General Counsel of HarbourView Asset Management Corporation (since December 2001); Secretary and
General Counsel of OAC (since November 2001); Assistant Secretary (since September 1997) and
Director (since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc;
Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since December 2002);
Director of Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice
President, General Counsel and Director of Shareholder Financial Services, Inc. and Shareholder
Services, Inc. (since December 2001); Senior Vice President, General Counsel and Director of OFI
Private Investments, Inc. and OFI Trust Company (since November 2001); Vice President of
OppenheimerFunds Legacy Program (since June 2003); Senior Vice President and General Counsel of
OFI Institutional Asset Management, Inc. (since November 2001); Director of OppenheimerFunds
(Asia) Limited (since December 2003); Senior Vice President (May 1985-December 2003). An officer
of 105 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) of UBS Financial
(since 2005) Services, Inc. An officer of 105 portfolios in the OppenheimerFunds complex.
Age: 40
47 | EQUITY INVESTOR FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
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 2005) (1998-2000) of Merrill Lynch Investment Management. An officer of 105 portfolios in the
Age: 44 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 the
(since 2005) 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 105 portfolios in the OppenheimerFunds complex.
THE PORTFOLIO'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL
INFORMATION ABOUT THE PORTFOLIO'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT
CHARGE, UPON REQUEST, BY CALLING 1.800.525.7048.
48 | EQUITY INVESTOR 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 $78,300 in fiscal 2008 and $68,500 in fiscal 2007.
(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 for fiscal 2008 and $225,954 for fiscal 2007 the
registrant's investment adviser or any entity controlling, controlled by, or
under common control with the adviser that provides ongoing services to the
registrant.
Such services include: internal control reviews and professional services
relating to FAS 123R.
(c) Tax Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees to the registrant during the last two fiscal
years.
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees 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 2008 and $225,954 in fiscal 2007 to
the registrant and the registrant's investment adviser or any entity
controlling, controlled by, or under common control with the adviser that
provides ongoing services to the registrant related to non-audit fees.
Those billings did not include any prohibited non-audit services as defined
by the Securities Exchange Act of 1934.
(h) No such services were rendered.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
THE FUND'S GOVERNANCE COMMITTEE PROVISIONS WITH RESPECT TO NOMINATIONS OF
DIRECTORS/TRUSTEES TO THE RESPECTIVE BOARDS
1. The Fund's Governance Committee (the "Committee") will evaluate potential
Board candidates to assess their qualifications. The Committee shall have
the authority, upon approval of the Board, to retain an executive search
firm to assist in this effort. The Committee may consider recommendations
by business and personal contacts of current Board members and by executive
search firms which the Committee may engage from time to time and may also
consider shareholder recommendations. The Committee may consider the advice
and recommendation of the Funds' investment manager and its affiliates in
making the selection.
2. The Committee shall screen candidates for Board membership. The Committee
has not established specific qualifications that it believes must be met by
a trustee nominee. In evaluating trustee nominees, the Committee considers,
among other things, an individual's background, skills, and experience;
whether the individual is an "interested person" as defined in the
Investment Company Act of 1940; and whether the individual would be deemed
an "audit committee financial expert" within the meaning of applicable SEC
rules. The Committee also considers whether the individual's background,
skills, and experience will complement the background, skills, and
experience of other nominees and will contribute to the Board. There are no
differences in the manner in which the Committee evaluates nominees for
trustees based on whether the nominee is recommended by a shareholder.
3. The Committee may consider nominations from shareholders for the Board at
such times as the Committee meets to consider new nominees for the Board.
The Committee shall have the sole discretion to determine the candidates to
present to the Board and, in such cases where required, to shareholders.
Recommendations for trustee nominees should, at a minimum, be accompanied
by the following:
o the name, address, and business, educational, and/or other pertinent
background of the person being recommended;
o a statement concerning whether the person is an "interested person" as
defined in the Investment Company Act of 1940;
o any other information that the Funds would be required to include in a
proxy statement concerning the person if he or she was nominated; and
o the name and address of the person submitting the recommendation and,
if that person is a shareholder, the period for which that person held
Fund shares.
The recommendation also can include any additional information which the
person submitting it believes would assist the Committee in evaluating the
recommendation.
4. Shareholders should note that a person who owns securities issued by
Massachusetts Mutual Life Insurance Company (the parent company of the
Funds' investment adviser) would be deemed an "interested person" under the
Investment Company Act of 1940. In addition, certain other relationships
with Massachusetts Mutual Life Insurance Company or its subsidiaries, with
registered broker-dealers, or with the Funds' outside legal counsel may
cause a person to be deemed an "interested person."
5. Before the Committee decides to nominate an individual as a trustee,
Committee members and other directors customarily interview the individual
in person. In addition, the individual customarily is asked to complete a
detailed questionnaire which is designed to elicit information which must
be disclosed under SEC and stock exchange rules and to determine whether
the individual is subject to any statutory disqualification from serving as
a trustee of a registered investment company.
ITEM 11. CONTROLS AND PROCEDURES.
Based on their evaluation of the registrant's disclosure controls and procedures
(as defined in rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR
270.30a-3(c)) as of 01/31/2008, the registrant's principal executive officer and
principal financial officer found the registrant's disclosure controls and
procedures to provide reasonable assurances that information required to be
disclosed by the registrant in the reports that it files under the Securities
Exchange Act of 1934 (a) is accumulated and communicated to registrant's
management, including its principal executive officer and principal financial
officer, to allow timely decisions regarding required disclosure, and (b) is
recorded, processed, summarized and reported, within the time periods specified
in the rules and forms adopted by the U.S. Securities and Exchange Commission.
There have been no changes in the registrant's internal controls over financial
reporting that occurred during the registrant's second fiscal quarter of the
period covered by this report that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a) (1) Exhibit attached hereto.
(2) Exhibits attached hereto.
(3) Not applicable.
(b) Exhibit attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Oppenheimer Portfolio Series
By: /s/ John V. Murphy
---------------------------
John V. Murphy
Principal Executive Officer
Date: 03/11/2008
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: 03/11/2008
By: /s/ Brian W. Wixted
---------------------------
Brian W. Wixted
Principal Financial Officer
Date: 03/11/2008