-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Hy5tk6oZElTFmnUkQN5gskoNsTti6u4wSKC4sCFR9Ce7idDcgRobKfnQ5n2bh+wC FFzm70WD2SIZ9nMQxM4aYQ== 0000935069-06-001043.txt : 20060403 0000935069-06-001043.hdr.sgml : 20060403 20060403134215 ACCESSION NUMBER: 0000935069-06-001043 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20060131 FILED AS OF DATE: 20060403 DATE AS OF CHANGE: 20060403 EFFECTIVENESS DATE: 20060403 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Oppenheimer Portfolio Series CENTRAL INDEX KEY: 0001307792 IRS NUMBER: 000000000 STATE OF INCORPORATION: MA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-21686 FILM NUMBER: 06732492 BUSINESS ADDRESS: STREET 1: 6803 SOUTH TUCSON WAY CITY: CENTENNIAL STATE: CO ZIP: 80112-3924 BUSINESS PHONE: 303-768-3200 MAIL ADDRESS: STREET 1: 6803 SOUTH TUCSON WAY CITY: CENTENNIAL STATE: CO ZIP: 80112-3924 0001307792 S000007511 Active Allocation Fund C000020527 A C000020528 B C000020529 C C000020530 N C000020531 Y 0001307792 S000007512 Aggressive Investor Fund C000020532 A C000020533 B C000020534 C C000020535 N C000020536 Y 0001307792 S000007513 Conservative Investor Fund C000020537 A C000020538 B C000020539 C C000020540 N C000020541 Y 0001307792 S000007514 Moderate Investor Fund C000020542 A C000020543 B C000020544 C C000020545 N C000020546 Y N-CSR 1 ra550_31494ncsr.txt RA550_31494NCSR UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-21686 OPPENHEIMER PORTFOLIO SERIES, CONSISTING OF: ACTIVE ALLOCATION FUND, AGGRESSIVE INVESTOR FUND, CONSERVATIVE INVESTOR FUND, AND MODERATE INVESTOR FUND (Exact name of registrant as specified in charter) 6803 SOUTH TUCSON WAY, CENTENNIAL, COLORADO 80112-3924 (Address of principal executive offices) (Zip code) ROBERT G. ZACK, ESQ. OPPENHEIMERFUNDS, INC. TWO WORLD FINANCIAL CENTER, NEW YORK, NEW YORK 10281-1008 (Name and address of agent for service) Registrant's telephone number, including area code: (303) 768-3200 Date of fiscal year end: JANUARY 31 Date of reporting period: JANUARY 31, 2006 ITEM 1. REPORTS TO STOCKHOLDERS. ACTIVE ALLOCATION FUND TOP HOLDINGS AND ALLOCATIONS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ASSET CLASS ALLOCATION [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Global Equity 26.6% U.S. Equity 39.7 Fixed Income 23.7 Alternative Investments 10.0 Portfolio holdings and allocations are subject to change. Percentages are as of January 31, 2006, and are based on the total market value of investments in affiliated companies. - -------------------------------------------------------------------------------- 10 | ACTIVE ALLOCATION FUND PORTFOLIO PERFORMANCE DISCUSSION - -------------------------------------------------------------------------------- HOW HAS THE PORTFOLIO PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS, INC., OF THE PORTFOLIO'S PERFORMANCE DURING THE REPORTING PERIOD OF APRIL 5, 2005 TO JANUARY 31, 2006, FOLLOWED BY A GRAPHICAL COMPARISON OF THE PORTFOLIO'S PERFORMANCE TO AN APPROPRIATE BROAD-BASED MARKET INDEX. MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE. Since its inception on April 5, 2005 to the end of the period on January 31, 2006, the Portfolio outperformed its benchmark, the S&P 500 Index. We attribute the Portfolio's outperformance of its benchmark to its diversified equity weighting that enabled it to own sectors that outperformed the S&P 500 Index. During the period, the Portfolio significantly benefited from its large equity exposure, which accounted for approximately 70% of the Portfolio at the end of the period. When the Portfolio was launched in early April 2005, U.S. equities had hit year lows and since then the stock indices have rallied. For example, the S&P 500 Index rose 9.96% since the Portfolio's inception, despite returning only -0.81% for the first six months of 2005. In addition, the Portfolio's exposure to foreign markets was also a boon to performance. Over the period the MSCI All Country World Index returned 17.56%, far outpacing the S&P 500 Index. Since the Portfolio has exposure to foreign markets through the underlying international funds it holds, it reaped the benefits as these markets expanded. Within the equity allocation of the Portfolio, many sectors produced strong results over the period. The Portfolio benefited from the continued outperformance of small-cap stocks versus large-cap stocks through its allocation to Oppenheimer Main Street Small Cap Fund, which posted a return of 23.02% for the reporting period. Through its allocations to Oppenheimer Global Fund, Oppenheimer Global Opportunity Fund and Oppenheimer Developing Markets Fund the Portfolio enjoyed the strong results posted by international markets, especially the emerging markets. The Portfolio's exposure to the high performing real estate sector through its 5% position in Oppenheimer Real Estate Fund, which posted a return of 34.44%, helped bolster the Portfolio's returns. Oppenheimer Real Estate Fund's success can be attributed to its profitable investments in the apartment, office and industrial sectors. Within the tactical allocation component of the Portfolio, having positions in both Oppenheimer International Small Company Fund and Oppenheimer Developing Markets Fund boosted returns as these Funds beat their respective benchmarks and posted returns of 41.89% and 50.9%, respectively, over the reporting period. The Portfolio's exposure to commodities through Oppenheimer Real Asset Fund both contributed to and detracted from results. Most of the rally in commodities occurred prior to the inception of the Portfolio. The Oppenheimer Real Asset Fund did not post a positive return between the inception date of the Active Allocation Fund and the end of the reporting period. Rather, commodities rallied during this period, but later corrected as energy prices traded off from their market highs in late September. 11 | ACTIVE ALLOCATION FUND PORTFOLIO PERFORMANCE DISCUSSION - -------------------------------------------------------------------------------- On the negative side, the Portfolio's exposure to the fixed income markets hampered performance as fixed income, as an asset class, underperformed equities over the same period. For the reporting period, the Lehman Brothers Aggregate Bond Index returned 2.78%, underperforming the S&P 500 Index's 9.96% return. 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, 2006. Performance is measured from the inception of Classes A, B, C, N and Y on April 5, 2005. The Portfolio's performance reflects the deduction of the maximum initial sales charge on Class A shares, the applicable contingent deferred sales charge on Class B, Class C, and Class N shares, and reinvestments of all dividends and capital gains distributions. Past performance cannot guarantee future results. The Portfolio's performance is compared to the performance of the S&P 500 Index. The S&P 500 Index is an unmanaged index of equity securities. Index performance reflects the reinvestment of income but does not consider the effect of transaction costs, and none of the data in the graphs shows the effect of taxes. The Portfolio's performance reflects the effects of the Portfolio's business and operating expenses. While index comparisons may be useful to provide a benchmark for the Portfolio's performance, it must be noted that the Portfolio's investments are not limited to the investments in the index. 12 | ACTIVE ALLOCATION FUND CLASS A SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Portfolio Series: Active Allocation Fund (Class A) S&P 500 Index Lehman Brothers Aggregate Bond Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Portfolio Series: Active Allocation Fund S&P 500 Lehman Brothers (Class A) Index Aggregate Bond Index - ---------- ----------------------------- ------------------ -------------------- 04/05/2005 9,425 10,000 10,000 04/30/2005 9,227 9,810 10,135 07/31/2005 9,868 10,514 10,207 10/31/2005 9,830 10,327 10,150 01/31/2006 10,679 11,005 10,293
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE PORTFOLIO AT 1/31/06 Since Inception (4/5/05) 6.79% 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 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 18 FOR FURTHER INFORMATION. 13 | ACTIVE ALLOCATION FUND PORTFOLIO PERFORMANCE DISCUSSION - -------------------------------------------------------------------------------- CLASS B SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Portfolio Series: Active Allocation Fund (Class B) S&P 500 Index Lehman Brothers Aggregate Bond Index
Oppenheimer Portfolio Series: Active Allocation Fund S&P 500 Lehman Brothers (Class B) Index Aggregate Bond Index - ---------- ----------------------------- ------------------ -------------------- 04/05/2005 10,000 10,000 10,000 04/30/2005 9,790 9,810 10,135 07/31/2005 10,450 10,514 10,207 10/31/2005 10,390 10,327 10,150 01/31/2006 10,772 11,005 10,293
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE PORTFOLIO AT 1/31/06 Since Inception (4/5/05) 7.72% 14 | ACTIVE ALLOCATION FUND CLASS C SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Portfolio Series: Active Allocation Fund (Class C) S&P 500 Index Lehman Brothers Aggregate Bond Index
Oppenheimer Portfolio Series: Active Allocation Fund S&P 500 Lehman Brothers (Class C) Index Aggregate Bond Index - ---------- ----------------------------- ------------------ -------------------- 04/05/2005 10,000 10,000 10,000 04/30/2005 9,780 9,810 10,135 07/31/2005 10,440 10,514 10,207 10/31/2005 10,380 10,327 10,150 01/31/2006 11,166 11,005 10,293
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE PORTFOLIO AT 1/31/06 Since Inception (4/5/05) 11.66% THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM, OR CALL US AT 1.800.525.7048. PORTFOLIO RETURNS INCLUDE CHANGES IN SHARE PRICE, REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES, THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR); AND 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 18 FOR FURTHER INFORMATION. 15 | ACTIVE ALLOCATION FUND PORTFOLIO PERFORMANCE DISCUSSION - -------------------------------------------------------------------------------- CLASS N SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Portfolio Series: Active Allocation Fund (Class N) S&P 500 Index Lehman Brothers Aggregate Bond Index
Oppenheimer Portfolio Series: Active Allocation Fund S&P 500 Lehman Brothers (Class N) Index Aggregate Bond Index - ---------- ----------------------------- ------------------ -------------------- 04/05/2005 10,000 10,000 10,000 04/30/2005 9,790 9,810 10,135 07/31/2005 10,460 10,514 10,207 10/31/2005 10,410 10,327 10,150 01/31/2006 11,218 11,005 10,293
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE PORTFOLIO AT 1/31/06 Since Inception (4/5/05) 12.18% 16 | ACTIVE ALLOCATION FUND CLASS Y SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Portfolio Series: Active Allocation Fund (Class Y) S&P 500 Index Lehman Brothers Aggregate Bond Index
Oppenheimer Portfolio Series: Active Allocation Fund S&P 500 Lehman Brothers (Class Y) Index Aggregate Bond Index - ---------- ----------------------------- ------------------ -------------------- 04/05/2005 10,000 10,000 10,000 04/30/2005 9,790 9,810 10,135 07/31/2005 10,490 10,514 10,207 10/31/2005 10,450 10,327 10,150 01/31/2006 11,372 11,005 10,293
AVERAGE ANNUAL TOTAL RETURNS OF CLASS Y SHARES OF THE PORTFOLIO AT 1/31/06 Since Inception (4/5/05) 13.72% 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 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 18 FOR FURTHER INFORMATION. 17 | 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). 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. 18 | ACTIVE ALLOCATION FUND CLASS Y shares of the Portfolio were first publicly offered on 4/5/05. Class Y shares are offered only to certain institutional investors under special agreements with the Distributor. An explanation of the calculation of performance is in the Portfolio's Statement of Additional Information. 19 | ACTIVE ALLOCATION FUND PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- PORTFOLIO EXPENSES. As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and service fees; and other Portfolio expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended January 31, 2006. ACTUAL EXPENSES. The "actual" lines of the table provide information about actual account values and actual expenses. You may use the information on this line for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the "actual" line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio for each class of shares, and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as front-end or contingent deferred sales charges (loads), or a $12.00 fee imposed annually on accounts valued at less than $500.00 (subject to exceptions described in 20 | ACTIVE ALLOCATION FUND the Statement of Additional Information). Therefore, the "hypothetical" lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING VALUE VALUE 6 MONTHS ENDED (8/1/05) (1/31/06) JANUARY 31, 2006 - -------------------------------------------------------------------------------- Class A Actual $1,000.00 $1,082.20 $2.73 - -------------------------------------------------------------------------------- Class A Hypothetical 1,000.00 1,022.58 2.65 - -------------------------------------------------------------------------------- Class B Actual 1,000.00 1,078.70 6.94 - -------------------------------------------------------------------------------- Class B Hypothetical 1,000.00 1,018.55 6.74 - -------------------------------------------------------------------------------- Class C Actual 1,000.00 1,079.10 6.78 - -------------------------------------------------------------------------------- Class C Hypothetical 1,000.00 1,018.70 6.58 - -------------------------------------------------------------------------------- Class N Actual 1,000.00 1,082.00 3.68 - -------------------------------------------------------------------------------- Class N Hypothetical 1,000.00 1,021.68 3.57 - -------------------------------------------------------------------------------- Class Y Actual 1,000.00 1,084.10 1.00 - -------------------------------------------------------------------------------- Class Y Hypothetical 1,000.00 1,024.25 0.97 Hypothetical assumes 5% annual return before expenses. Expenses are equal to the Portfolio's annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Those annualized expense ratios, excluding all underlying fund expenses, based on the 6-month period ended January 31, 2006 are as follows: CLASS EXPENSE RATIOS - --------------------------- Class A 0.52% - --------------------------- Class B 1.32 - --------------------------- Class C 1.29 - --------------------------- Class N 0.70 - --------------------------- Class Y 0.19 The expense ratios reflect voluntary waivers or reimbursements of expenses by the Portfolio's Manager and Transfer Agent that can be terminated at any time, without advance notice. The "Financial Highlights" tables in the Portfolio's financial statements, included in this report, also show the gross expense ratios, without such waivers or reimbursements. - -------------------------------------------------------------------------------- 21 | ACTIVE ALLOCATION FUND STATEMENT OF INVESTMENTS January 31, 2006 - --------------------------------------------------------------------------------
VALUE SHARES SEE NOTE 1 - ---------------------------------------------------------------------------------------------------- INVESTMENTS IN AFFILIATED COMPANIES--98.5% 1 - ---------------------------------------------------------------------------------------------------- GLOBAL EQUITY--26.2% Oppenheimer Developing Markets Fund, Cl. Y 735,369 $ 29,120,616 - ---------------------------------------------------------------------------------------------------- Oppenheimer Global Fund, Cl. Y 817,108 57,777,755 - ---------------------------------------------------------------------------------------------------- Oppenheimer Global Opportunities Fund, Cl. Y 771,757 31,233,008 - ---------------------------------------------------------------------------------------------------- Oppenheimer International Small Company Fund, Cl. Y 1,296,021 29,432,632 -------------- 147,564,011 - ---------------------------------------------------------------------------------------------------- U.S. EQUITY--39.1% Oppenheimer Capital Appreciation Fund, Cl. Y 1,206,388 55,059,534 - ---------------------------------------------------------------------------------------------------- Oppenheimer Main Street Fund, Cl. Y 1,422,021 54,619,844 - ---------------------------------------------------------------------------------------------------- Oppenheimer Main Street Opportunity Fund, Cl. Y 1,943,920 27,564,794 - ---------------------------------------------------------------------------------------------------- Oppenheimer Main Street Small Cap Fund, Cl. Y 1,258,510 29,084,171 - ---------------------------------------------------------------------------------------------------- Oppenheimer Value Fund, Cl. Y 2,210,413 54,133,002 -------------- 220,461,345 - ---------------------------------------------------------------------------------------------------- FIXED INCOME--23.3% Oppenheimer Core Bond Fund, Cl. Y 5,106,446 52,085,753 - ---------------------------------------------------------------------------------------------------- Oppenheimer Strategic Income Fund, Cl. Y 12,557,766 52,993,772 - ---------------------------------------------------------------------------------------------------- Oppenheimer U.S. Government Trust, Cl. Y 2,764,889 26,238,793 -------------- 131,318,318 - ---------------------------------------------------------------------------------------------------- ALTERNATIVE INVESTMENTS--9.9% Oppenheimer Real Asset Fund, Cl. Y 3,273,185 26,872,855 - ---------------------------------------------------------------------------------------------------- Oppenheimer Real Estate Fund, Cl. Y 1,403,079 28,777,166 -------------- 55,650,021 -------------- Total Investments in Affiliated Companies (Cost $531,891,076) 554,993,695
PRINCIPAL AMOUNT - ---------------------------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS--0.5% - ---------------------------------------------------------------------------------------------------- Undivided interest of 0.36% in joint repurchase agreement (Principal Amount/ Value $781,426,000, with a maturity value of $781,521,291) with UBS Warburg LLC, 4.39%, dated 1/31/06, to be repurchased at $2,826,345 on 2/1/06, collateralized by Federal Home Loan Mortgage Corp., 5%, 12/1/35, with a value of $799,056,396 (Cost $2,826,000) $2,826,000 2,826,000 - ---------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $534,717,076) 99.0% 557,819,695 - ---------------------------------------------------------------------------------------------------- OTHER ASSETS NET OF LIABILITIES 1.0 5,836,209 ---------------------------- NET ASSETS 100.0% $ 563,655,904 ============================
22 | ACTIVE ALLOCATION FUND FOOTNOTE TO STATEMENT OF INVESTMENTS 1. Affiliated companies. Represents ownership of an affiliated fund, at or during the period ended January 31, 2006. Transactions during the period in which the issuer was an affiliate are as follows:
SHARES SHARES APRIL 5, GROSS GROSS JANUARY 31, 2005 ADDITIONS REDUCTIONS 2006 - --------------------------------------------------------------------------------------------------------------------- Oppenheimer Capital Appreciation Fund, Cl. Y -- 1,206,388 -- 1,206,388 Oppenheimer Core Bond Fund, Cl. Y* -- 5,106,446 -- 5,106,446 Oppenheimer Developing Markets Fund, Cl. A -- 749,173 749,173 -- Oppenheimer Developing Markets Fund, Cl. Y -- 1,158,340 422,971 735,369 Oppenheimer Global Fund, Cl. Y -- 817,108 -- 817,108 Oppenheimer Global Opportunities Fund, Cl. Y -- 771,757 -- 771,757 Oppenheimer International Small Company Fund, Cl. A -- 949,884 949,884 -- Oppenheimer International Small Company Fund, Cl. Y -- 1,986,571 690,550 1,296,021 Oppenheimer Main Street Fund, Cl. Y -- 1,422,021 -- 1,422,021 Oppenheimer Main Street Opportunity Fund, Cl. Y -- 1,943,920 -- 1,943,920 Oppenheimer Main Street Small Cap Fund, Cl. Y -- 1,258,510 -- 1,258,510 Oppenheimer Money Market Fund, Inc., Cl. Y -- 27,144,844 27,144,844 -- Oppenheimer Real Asset Fund, Cl. Y -- 5,641,708 2,368,523 3,273,185 Oppenheimer Real Estate Fund, Cl. Y* -- 1,403,079 -- 1,403,079 Oppenheimer Strategic Income Fund, Cl. Y -- 12,557,766 -- 12,557,766 Oppenheimer U.S. Government Trust, Cl. Y -- 6,692,138 3,927,249 2,764,889 Oppenheimer Value Fund, Cl. Y -- 3,670,221 1,459,808 2,210,413
VALUE DIVIDEND REALIZED SEE NOTE 1 INCOME GAIN (LOSS) - --------------------------------------------------------------------------------------------------------------------- Oppenheimer Capital Appreciation Fund, Cl. Y $ 55,059,534 $ 363,057 $ -- Oppenheimer Core Bond Fund, Cl. Y* 52,085,753 826,934 -- Oppenheimer Developing Markets Fund, Cl. A -- -- (142,284) Oppenheimer Developing Markets Fund, Cl. Y 29,120,616 489,530 338,377 Oppenheimer Global Fund, Cl. Y 57,777,755 393,261 -- Oppenheimer Global Opportunities Fund, Cl. Y 31,233,008 453,977 -- Oppenheimer International Small Company Fund, Cl. A -- -- (121,768) Oppenheimer International Small Company Fund, Cl. Y 29,432,632 921,459 48,338 Oppenheimer Main Street Fund, Cl. Y 54,619,844 543,445 -- Oppenheimer Main Street Opportunity Fund, Cl. Y 27,564,794 422,027 -- Oppenheimer Main Street Small Cap Fund, Cl. Y 29,084,171 235,180 -- Oppenheimer Money Market Fund, Inc., Cl. Y -- 63,814 -- Oppenheimer Real Asset Fund, Cl. Y 26,872,855 811,115 (1,263,564) Oppenheimer Real Estate Fund, Cl. Y* 28,777,166 681,898 -- Oppenheimer Strategic Income Fund, Cl. Y 52,993,772 1,859,978 -- Oppenheimer U.S. Government Trust, Cl. Y 26,238,793 208,978 (38,191) Oppenheimer Value Fund, Cl. Y 54,133,002 1,357,676 (931,242) --------------------------------------------- $554,993,695 $ 9,632,329 $ (2,110,334) =============================================
* Represents at least 5% of the voting securities of the issuer, and is or was an affiliate, as defined in the Investment Company Act of 1940. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 23 | ACTIVE ALLOCATION FUND STATEMENT OF ASSETS AND LIABILITIES - -------------------------------------------------------------------------------- January 31, 2006 - ----------------------------------------------------------------------------------- ASSETS - ----------------------------------------------------------------------------------- Investments, at value--see accompanying statement of investments: Unaffiliated companies (cost $2,826,000) $ 2,826,000 Affiliated companies (cost $531,891,076) 554,993,695 ------------- 557,819,695 - ----------------------------------------------------------------------------------- Cash 3,106 - ----------------------------------------------------------------------------------- Receivables and other assets: Shares of beneficial interest sold 10,543,096 Interest and dividends 318,146 Other 3,028 ------------- Total assets 568,687,071 - ----------------------------------------------------------------------------------- LIABILITIES - ----------------------------------------------------------------------------------- Payables and other liabilities: Investments purchased 4,352,220 Shares of beneficial interest redeemed 406,224 Distribution and service plan fees 106,439 Transfer and shareholder servicing agent fees 50,046 Shareholder communications 29,205 Trustees' compensation 654 Other 86,379 ------------- Total liabilities 5,031,167 - ----------------------------------------------------------------------------------- NET ASSETS $563,655,904 ============= - ----------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS - ----------------------------------------------------------------------------------- Par value of shares of beneficial interest $ 50,847 - ----------------------------------------------------------------------------------- Additional paid-in capital 536,276,269 - ----------------------------------------------------------------------------------- Accumulated net investment income 53,764 - ----------------------------------------------------------------------------------- Accumulated net realized gain on investments 4,172,405 - ----------------------------------------------------------------------------------- Net unrealized appreciation on investments 23,102,619 ------------- NET ASSETS $563,655,904 =============
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 $293,577,731 and 26,438,593 shares of beneficial interest outstanding) $11.10 Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $11.78 - ---------------------------------------------------------------------------------------------------------- Class B Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $115,629,346 and 10,448,483 shares of beneficial interest outstanding) $11.07 - ---------------------------------------------------------------------------------------------------------- Class C Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $125,622,130 and 11,360,595 shares of beneficial interest outstanding) $11.06 - ---------------------------------------------------------------------------------------------------------- Class N Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $28,345,099 and 2,556,373 shares of beneficial interest outstanding) $11.09 - ---------------------------------------------------------------------------------------------------------- Class Y Shares: Net asset value, redemption price and offering price per share (based on net assets of $481,598 and 43,265 shares of beneficial interest outstanding) $11.13
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 25 | ACTIVE ALLOCATION FUND STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- For the Period Ended January 31, 2006 1 - ----------------------------------------------------------------------------------- INVESTMENT INCOME - ----------------------------------------------------------------------------------- Dividends from affiliated companies $ 9,632,329 - ----------------------------------------------------------------------------------- Interest 66,500 ------------- Total investment income 9,698,829 - ----------------------------------------------------------------------------------- EXPENSES - ----------------------------------------------------------------------------------- Distribution and service plan fees: Class A 228,321 Class B 379,747 Class C 374,213 Class N 37,490 - ----------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees: Class A 116,305 Class B 64,011 Class C 52,664 Class N 5,016 Class Y 183 - ----------------------------------------------------------------------------------- Shareholder communications: Class A 33,310 Class B 20,373 Class C 14,559 Class N 1,045 Class Y 100 - ----------------------------------------------------------------------------------- Asset allocation fees 175,127 - ----------------------------------------------------------------------------------- Legal, auditing and other professional fees 31,413 - ----------------------------------------------------------------------------------- Trustees' compensation 9,002 - ----------------------------------------------------------------------------------- Custodian fees and expenses 2,218 - ----------------------------------------------------------------------------------- Other 65,678 ------------- Total expenses 1,610,775 Less reduction to custodian expenses (161) Less waivers and reimbursements of expenses (38,809) ------------- Net expenses 1,571,805 - ----------------------------------------------------------------------------------- NET INVESTMENT INCOME 8,127,024 - ----------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) - ----------------------------------------------------------------------------------- Net realized gain (loss) on: Distributions received from affiliated companies 7,504,012 Affiliated companies (2,110,334) ------------- Net realized gain 5,393,678 - ----------------------------------------------------------------------------------- Net change in unrealized appreciation on investments 23,102,619 - ----------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 36,623,321 =============
1. For the period from April 5, 2005 (commencement of operations) to January 31, 2006. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 26 | ACTIVE ALLOCATION FUND STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
PERIOD ENDED JANUARY 31, 2006 1 - ------------------------------------------------------------------------------------------------- OPERATIONS - ------------------------------------------------------------------------------------------------- Net investment income $ 8,127,024 - ------------------------------------------------------------------------------------------------- Net realized gain 5,393,678 - ------------------------------------------------------------------------------------------------- Net change in unrealized appreciation 23,102,619 --------------- Net increase in net assets resulting from operations 36,623,321 - ------------------------------------------------------------------------------------------------- DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS - ------------------------------------------------------------------------------------------------- Dividends from net investment income: Class A (4,500,051) Class B (1,549,890) Class C (1,619,117) Class N (414,437) Class Y (6,386) - ------------------------------------------------------------------------------------------------- Distributions from net realized gain: Class A (376,546) Class B (149,661) Class C (153,460) Class N (35,176) Class Y (507) - ------------------------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS - ------------------------------------------------------------------------------------------------- Net increase in net assets resulting from beneficial interest transactions: Class A 278,869,967 Class B 109,728,240 Class C 119,590,827 Class N 27,088,823 Class Y 455,957 - ------------------------------------------------------------------------------------------------- NET ASSETS - ------------------------------------------------------------------------------------------------- Total increase 563,551,904 - ------------------------------------------------------------------------------------------------- Beginning of period 104,000 2 --------------- End of period (including accumulated net investment income of $53,764 for the period ended January 31, 2006) $ 563,655,904 ===============
1. For the period from April 5, 2005 (commencement of operations) to January 31, 2006. 2. Reflects the value of the Manager's initial seed money investment on March 15, 2005. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 27 | ACTIVE ALLOCATION FUND FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C PERIOD ENDED JANUARY 31, 2006 1 2006 1 2006 1 - --------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA - --------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 - --------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 2 .43 .36 .37 Net realized and unrealized gain .89 .91 .89 --------------------------------------- Total from investment operations 1.32 1.27 1.26 - --------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.20) (.18) (.18) Distributions from net realized gain (.02) (.02) (.02) --------------------------------------- Total dividends and/or distributions to shareholders (.22) (.20) (.20) - --------------------------------------------------------------------------------------------- Net asset value, end of period $ 11.10 $ 11.07 $ 11.06 ======================================= - --------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 3 13.31% 12.72% 12.66% - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $293,578 $115,629 $125,622 - --------------------------------------------------------------------------------------------- Average net assets (in thousands) $112,224 $ 46,284 $ 45,647 - --------------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 4.94% 4.06% 4.18% Total expenses 0.56% 5 1.37% 6 1.33% 7 Expenses after waivers and reimbursements and reduction to custodian expenses 0.55% 1.34% 1.31% - --------------------------------------------------------------------------------------------- Portfolio turnover rate 90% 90% 90%
1. For the period from April 5, 2005 (commencement of operations) to January 31, 2006. 2. Per share amounts calculated based on the average shares outstanding during the period. 3. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. 4. Annualized for periods of less than one full year. 5. Expenses including all underlying fund expenses were 1.28% for January 31, 2006. 6. Expenses including all underlying fund expenses were 2.09% for January 31, 2006. 7. Expenses including all underlying fund expenses were 2.05% for January 31, 2006. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 28 | ACTIVE ALLOCATION FUND CLASS N CLASS Y PERIOD ENDED JANUARY 31, 2006 1 2006 1 - -------------------------------------------------------------------------------- PER SHARE OPERATING DATA - -------------------------------------------------------------------------------- Net asset value, beginning of period $ 10.00 $ 10.00 - -------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 2 .46 .39 Net realized and unrealized gain .85 .97 --------------------------- Total from investment operations 1.31 1.36 - -------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.20) (.21) Distributions from net realized gain (.02) (.02) --------------------------- Total dividends and/or distributions to shareholders (.22) (.23) - -------------------------------------------------------------------------------- Net asset value, end of period $ 11.09 $ 11.13 =========================== - -------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 3 13.18% 13.72% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 28,345 $ 482 - -------------------------------------------------------------------------------- Average net assets (in thousands) $ 9,156 $ 196 - -------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 5.28% 4.44% Total expenses 0.73% 5 0.33% 6 Expenses after waivers and reimbursements and reduction to custodian expenses 0.72% 0.21% - -------------------------------------------------------------------------------- Portfolio turnover rate 90% 90% 1. For the period from April 5, 2005 (commencement of operations) to January 31, 2006. 2. Per share amounts calculated based on the average shares outstanding during the period. 3. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. 4. Annualized for periods of less than one full year. 5. Expenses including all underlying fund expenses were 1.45% for January 31, 2006. 6. Expenses including all underlying fund expenses were 1.05% for January 31, 2006. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 29 | ACTIVE ALLOCATION FUND NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Oppenheimer Portfolio Series (the "Fund") is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. Active Allocation Fund (the "Portfolio") is a series of the Fund whose investment objective is to seek long term growth of capital with a secondary objective of current income. The Portfolio is a special type of mutual fund known as a "fund of funds" because it invests in other mutual funds. The Portfolio normally invests in a portfolio consisting of a target-weighted allocation in Class A or Class Y shares of other Oppenheimer funds. The Fund's investment advisor is OppenheimerFunds Inc. (the "Manager"). The Portfolio offers Class A, Class B, Class C, Class N and Class Y shares. Class A shares are sold at their offering price, which is normally net asset value plus a front-end sales charge. Class B, Class C and Class N shares are sold without a front-end sales charge but may be subject to a contingent deferred sales charge (CDSC). Class N shares are sold only through retirement plans. Retirement plans that offer Class N shares may impose charges on those accounts. Class Y shares are sold to certain institutional investors without either a front-end sales charge or a CDSC, however, the institutional investor may impose charges on those accounts. All classes of shares have identical rights and voting privileges with respect to the Portfolio in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class. Class A, B, C and N have separate distribution and/or service plans. No such plan has been adopted for Class Y shares. Class B shares will automatically convert to Class A shares six years after the date of purchase. Under normal market conditions, the Manager will invest the Portfolio's assets in shares of Oppenheimer Core Bond Fund, Oppenheimer Capital Appreciation Fund, Oppenheimer Global Fund, Oppenheimer Global Opportunities Fund, Oppenheimer Main Street Fund(R), Oppenheimer Main Street Opportunity Fund(R), Oppenheimer Main Street Small Cap Fund(R), Oppenheimer Real Estate Fund, Oppenheimer Strategic Income Fund and Oppenheimer Value Fund (individually, an "Underlying Fund" and collectively, the "Underlying Funds"). Oppenheimer Funds: Oppenheimer Core Bond Fund Oppenheimer Capital Appreciation Fund Oppenheimer Developing Markets Fund Oppenheimer Discovery Fund Oppenheimer Gold & Special Minerals Fund Oppenheimer Growth Fund Oppenheimer High Yield Fund Oppenheimer International Bond Fund Oppenheimer International Growth Fund Oppenheimer International Small Company Fund Oppenheimer Limited-Term Government Fund 30 | ACTIVE ALLOCATION FUND Oppenheimer MidCap Fund Oppenheimer Money Market Fund, Inc. Oppenheimer Quest International Value Fund, Inc. Oppenheimer Real Asset Fund Oppenheimer Small- & Mid-Cap Value Fund Oppenheimer U.S. Government Trust Oppenheimer Value Fund In addition, up to 20% of the Portfolio's net assets may be invested according to a tactical allocation among up to four Oppenheimer funds or money market securities based on recommendations made by the Manager. The following is a summary of significant accounting policies consistently followed by the Portfolio. - -------------------------------------------------------------------------------- SECURITIES VALUATION. The Portfolio calculates the net asset value of each class of shares based upon the net asset value of the applicable Underlying Funds' as of the close of The New York Stock Exchange (the "Exchange"), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading. For each Underlying Fund, the net asset value per share for a class of shares on a "regular business day" is determined by dividing the value of the Underlying Fund's net assets attributable to that class by the number of shares of that class outstanding on that day. To determine net asset values, the Underlying Fund assets are valued primarily on the basis of current market quotations. If market quotations are not readily available or do not accurately reflect fair value for a security (in the Manager's judgment) or if a security's value has been materially affected by events occurring after the close of the exchange or market on which the security is principally traded, that security may be valued by another method that the Underlying Fund's Board of Trustees/Directors believes accurately reflects the fair value. Because some foreign securities trade in markets and on exchanges that operate on weekends and U.S. holidays, the values of some of the Underlying Fund's foreign investments may change on days when investors cannot buy or redeem Underlying Fund shares. Short-term "money market type" debt securities with remaining maturities of sixty days or less are valued at amortized cost (which approximates market value). - -------------------------------------------------------------------------------- RISKS OF INVESTING IN THE UNDERLYING FUNDS. Each of the Underlying Funds in which the Portfolio invests has its own investment risks, and those risks can affect the value of the Portfolio's investments and therefore the value of the Portfolio's shares. To the extent that the Portfolio invests more of its assets in one Underlying Fund than in another, the Portfolio will have greater exposure to the risks of that Underlying Fund. 31 | ACTIVE ALLOCATION FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Portfolio, along with other affiliated funds advised by the Manager, may transfer uninvested cash balances into joint trading accounts on a daily basis. These balances are invested in one or more repurchase agreements. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. In the event of default by the other party to the agreement, retention of the collateral may be subject to legal proceedings. - -------------------------------------------------------------------------------- ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class. - -------------------------------------------------------------------------------- FEDERAL TAXES. The Portfolio intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders, therefore, no federal income or excise tax provision is required. The tax components of capital shown in the table below represent distribution requirements the Portfolio must satisfy under the income tax regulations, losses the Portfolio may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes. NET UNREALIZED APPRECIATION BASED ON COST OF SECURITIES AND UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME INCOME GAIN CARRYFORWARD 1 TAX PURPOSES ---------------------------------------------------------------------------- $54,033 $5,975,584 $-- $21,299,440 1. During the period ended January 31, 2006, the Portfolio did not have any capital loss carryforward. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Portfolio. Accordingly, the following amounts have been reclassified for January 31, 2006. Net assets of the Portfolio were unaffected by the reclassifications. 32 | ACTIVE ALLOCATION FUND REDUCTION INCREASE TO ACCUMULATED NET INCREASE TO ACCUMULATED NET REALIZED GAIN TO PAID-IN CAPITAL INVESTMENT INCOME ON INVESTMENTS 2 -------------------------------------------------------------------------- $489,302 $16,621 $505,923 2. $506,265, all of which was long-term capital gain, was distributed in connection with Portfolio share redemptions. The tax character of distributions paid during the period ended January 31, 2006 was as follows: PERIOD ENDED JANUARY 31, 2006 -------------------------------------------------------------------------- Distributions paid from: Ordinary income $8,805,231 The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of January 31, 2006 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 $ 536,520,255 ============== Gross unrealized appreciation $ 22,353,457 Gross unrealized depreciation (1,054,017) -------------- Net unrealized appreciation $ 21,299,440 ============== - -------------------------------------------------------------------------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. Income and capital gain distributions, if any, are declared and paid annually. - -------------------------------------------------------------------------------- INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, which includes accretion of discount and amortization of premium, is accrued as earned. - -------------------------------------------------------------------------------- CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may include interest expense incurred by the Portfolio on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Portfolio pays interest to its custodian on such cash overdrafts to the extent they are not offset by positive cash balances maintained by the Portfolio at a rate equal to the Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item, if applicable, represents earnings on cash balances maintained by the Portfolio during the period. At January 31, 2006, the Portfolio had $39 of such earnings on cash balances available to offset future custodian fees or interest expenses incurred during the next fiscal year. 33 | ACTIVE ALLOCATION 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 U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. - -------------------------------------------------------------------------------- 2. SHARES OF BENEFICIAL INTEREST The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows: PERIOD ENDED JANUARY 31, 2006 1,2 SHARES AMOUNT - ----------------------------------------------------------------------- CLASS A Sold 27,068,123 $ 285,660,045 Dividends and/or distributions reinvested 438,928 4,665,805 Redeemed (1,078,458) (11,455,883) --------------------------------- Net increase 26,428,593 $ 278,869,967 ================================= - ----------------------------------------------------------------------- CLASS B Sold 10,764,936 $ 113,091,487 Dividends and/or distributions reinvested 154,655 1,639,339 Redeemed (471,208) (5,002,586) --------------------------------- Net increase 10,448,383 $ 109,728,240 ================================= - ----------------------------------------------------------------------- CLASS C Sold 11,696,791 $ 123,196,995 Dividends and/or distributions reinvested 155,748 1,649,374 Redeemed (492,044) (5,255,542) --------------------------------- Net increase 11,360,495 $ 119,590,827 ================================= 34 | ACTIVE ALLOCATION FUND PERIOD ENDED JANUARY 31, 2006 1,2 SHARES AMOUNT - ----------------------------------------------------------------------- CLASS N Sold 2,664,849 $ 28,261,231 Dividends and/or distributions reinvested 42,051 446,165 Redeemed (150,627) (1,618,573) --------------------------------- Net increase 2,556,273 $ 27,088,823 ================================= - ----------------------------------------------------------------------- CLASS Y Sold 54,640 $ 577,537 Dividends and/or distributions reinvested 645 6,870 Redeemed (12,120) (128,450) --------------------------------- Net increase 43,165 $ 455,957 ================================= 1. For the period from April 5, 2005 (commencement of operations) to January 31, 2006. 2. The Portfolio sold 10,000 shares of Class A at a value of $100,000 and 100 shares of Class B, Class C, Class N and Class Y at a value of $1,000, respectively, to the Manager upon seeding of the Portfolio on March 15, 2005. - -------------------------------------------------------------------------------- 3. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the period ended January 31, 2006, were as follows: PURCHASES SALES -------------------------------------------------------------- Investment securities $725,196,533 $191,277,223 - -------------------------------------------------------------------------------- 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES MANAGEMENT FEES. Under the investment advisory agreement, the Manager does not charge a management fee, but rather collects indirect management fees from investments in the Underlying Funds. The weighted indirect management fees collected from the Underlying Funds, as a percent of average daily net assets of the Portfolio for the period ended January 31, 2006 was 0.60%. The Portfolio pays the Manager an asset allocation fee equal to an annual rate of 0.10% of the average daily net assets of the Portfolio. - -------------------------------------------------------------------------------- TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Portfolio. The Portfolio pays OFS a per account fee. For the period ended January 31, 2006, the Portfolio paid $187,555 to OFS for services to the Portfolio. Additionally, Class Y shares are subject to minimum fees of $10,000 per annum for assets of $10 million or more. The Class Y shares are subject to the minimum fees in the event that the per account fee does not equal or exceed the applicable minimum fees. OFS may voluntarily waive the minimum fees. - -------------------------------------------------------------------------------- INITIAL OFFERING AND ORGANIZATIONAL COSTS. The Manager assumed all initial offering and organizational costs associated with the registration and seeding of the Portfolio. 35 | ACTIVE ALLOCATION 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 for Class A shares. It reimburses the Distributor for a portion of its costs incurred for services provided to accounts that hold Class A shares. Reimbursement is made periodically at an annual rate of up to 0.25% of the average annual net assets of Class A shares of the Portfolio. The Distributor currently uses all of those fees to pay dealers, brokers, banks and other financial institutions periodically for providing personal services and maintenance of accounts of their customers that hold Class A shares. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent years. Fees incurred by the Portfolio under the Plan are detailed in the Statement of Operations. - -------------------------------------------------------------------------------- DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Portfolio has adopted Distribution and Service Plans for Class B, Class C and Class N shares to compensate the Distributor for its services and costs in connection with the distribution of those shares and servicing accounts. Under the plans, the Portfolio pays the Distributor an annual asset-based sales charge of 0.75% on Class B and Class C shares and 0.25% on Class N shares. The Distributor also receives a service fee of 0.25% per year under each plan. If either the Class B, Class C or Class N plan is terminated by the Portfolio or by the shareholders of a class, the Board of Trustees and its independent trustees must determine whether the Distributor shall be entitled to payment from the Portfolio of all or a portion of the service fee and/or asset-based sales charge in respect to shares sold prior to the effective date of such termination. The Distributor's aggregate uncompensated expenses under the plan at January 31, 2006 for Class B, Class C and Class N shares were $1,607,656, $932,769 and $317,511, respectively. Fees incurred by the Portfolio under the plans are detailed in the Statement of Operations. - -------------------------------------------------------------------------------- SALES CHARGES. Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Portfolio. They are deducted from the proceeds of sales of Portfolio shares prior to investment or from redemption proceeds prior to remittance, as applicable. The sales charges retained by the Distributor from the sale of shares and the CDSC retained by the Distributor on the redemption of shares is shown in the table below for the period indicated.
CLASS A CLASS B CLASS C CLASS N CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY PERIOD ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR - ------------------------------------------------------------------------------------------------- January 31, 2006 $1,474,177 $-- $44,078 $16,412 $4,555
36 | ACTIVE ALLOCATION FUND - -------------------------------------------------------------------------------- WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees paid directly by the Portfolio to 0.35% of average annual net assets for each class. During the period ended January 31, 2006, OFS waived $365, $186, $15 and $12 for Class B, Class C, Class N and Class Y shares, respectively. This undertaking may be amended or withdrawn at any time. The Manager has voluntarily agreed to a total expense limitation on the aggregate amount of combined direct (fund-of-funds level) and indirect expense so that Combined Total Annual and Underlying Fund Operating Expenses as a percentage of average daily net assets will not exceed the following annual rates: 1.45%, 2.20%, 2.20%, 1.70% and 1.20%, for Class A, Class B, Class C, Class N and Class Y, respectively. During the period ended January 31, 2006, the Manager reimbursed the Portfolio $18,930, $10,748, $7,600, $763 and $190, for the Class A, Class B, Class C, Class N and Class Y shares, respectively. The Manager may modify or terminate this undertaking at any time without notice to shareholders. These expense limitations do not include Extraordinary Expenses and other expenses not incurred in the ordinary course of the Portfolio's business. Notwithstanding the foregoing limits, the Manager is not required to waive or reimburse Portfolio expenses in excess of indirect management fees earned from investments in Underlying Funds to assure that expenses do not exceed those limits. - -------------------------------------------------------------------------------- 5. LITIGATION A complaint was filed as a putative class action against the Manager and OFS (and other defendants) in the U.S. District Court for the Southern District of New York on January 10, 2005 and was amended on March 4, 2005. Seven of the eight counts in the complaint, including claims against certain of the Oppenheimer funds excluding the Portfolio, as nominal defendants, and against certain present and former Directors, Trustees and officers of the funds, and the Distributor, as defendants, were dismissed with prejudice, under a court order dated March 10, 2006, in response to a motion to dismiss the suit that had been filed by the defendants. The remaining count against the Adviser Defendants alleges, among other things, that the defendants charged excessive fees in violation of section 36(b) of the Investment Company Act of 1940. The plaintiffs seek unspecified damages, an accounting of all fees paid, and an award of attorneys' fees and litigation expenses. The Adviser Defendants believe that the claims asserted in the remaining count under this lawsuit are without merit, and intend to defend the suit vigorously and contest any claimed liability. They believe that it is premature to render any opinion as to the likelihood of an outcome unfavorable to them and that no estimate can yet be made with any degree of certainty as to the amount or range of any potential loss. - -------------------------------------------------------------------------------- 6. CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM At a meeting held on December 14, 2005, the Board of Trustees of the Fund appointed KPMG LLP as the independent registered public accounting firm to the Fund to replace the firm of Ernst & Young LLP, who were dismissed as the independent registered public 37 | ACTIVE ALLOCATION FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 6. CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Continued accounting firm to the Fund. This change in the Fund's auditors was approved by the Fund's audit committee and ratified by the Fund's independent Trustees. The report of Ernst & Young LLP on the Fund's statements of assets and liabilities as of March 15, 2005 contained no adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles. The Fund commenced operations on April 5, 2005. During the period from March 15, 2005 through December 14, 2005, there were no disagreements with Ernst & Young LLP on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures which, if not resolved to the satisfaction of Ernst & Young LLP, would have caused Ernst & Young LLP to make reference to the matter in their report. 38 | ACTIVE ALLOCATION FUND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TO 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, 2006, and the related statement of operations, the statement of changes in net assets and the financial highlights 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 audit. We conducted our audit 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, 2006, 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 audit provides 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, 2006, the results of its operations, the changes in its net assets and the financial highlights for the period April 5, 2005 (commencement of operations) to January 31, 2006, in conformity with U.S. generally accepted accounting principles. KPMG LLP Denver, Colorado March 15, 2006 39 | ACTIVE ALLOCATION FUND FEDERAL INCOME TAX INFORMATION Unaudited - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- In early 2006, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Portfolio during calendar year 2005. Regulations of the U.S. Treasury Department require the Portfolio to report this information to the Internal Revenue Service. Dividends, if any, paid by the Portfolio during the fiscal year ended January 31, 2006 which are not designated as capital gain distributions should be multiplied by 26.42% 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, 2006 which are not designated as capital gain distributions are eligible for lower individual income tax rates to the extent that the Portfolio has received qualified dividend income as stipulated by recent tax legislation. $3,110,591 of the Portfolio's fiscal year taxable income may be eligible for the lower individual income tax rates. In early 2006, shareholders of record received information regarding the percentage of distributions that are eligible for lower individual income tax rates. 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 | ACTIVE ALLOCATION FUND REPORT OF SHAREHOLDER MEETING Unaudited - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- On September 26, 2005, a shareholder meeting of the Oppenheimer Portfolio Series on behalf of Active Allocation Fund was held at which the eleven Trustees identified below were elected. The following is a report of the votes cast: - -------------------------------------------------------------------------------- NOMINEE FOR WITHHELD TOTAL - -------------------------------------------------------------------------------- TRUSTEES Matthew P. Fink 6,000,869.900 134,980.874 6,135,850.774 Robert G. Galli 6,000,869.900 134,980.874 6,135,850.774 Phillip A. Griffiths 6,000,869.900 134,980.874 6,135,850.774 Mary F. Miller 5,994,733.624 141,117.150 6,135,850.774 Joel W. Motley 6,000,869.900 134,980.874 6,135,850.774 John V. Murphy 5,996,947.708 138,903.066 6,135,850.774 Kenneth A. Randall 5,986,566.528 149,284.246 6,135,850.774 Russell S. Reynolds, Jr. 6,000,869.900 134,980.874 6,135,850.774 Joseph M. Wikler 5,996,035.348 139,815.426 6,135,850.774 Peter I. Wold 5,999,659.969 136,190.805 6,135,850.774 Clayton K. Yeutter 5,986,265.672 149,585.102 6,135,850.774 41 | 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. 42 | ACTIVE ALLOCATION FUND TRUSTEES AND OFFICERS Unaudited - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------- NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER FUND, LENGTH OF SERVICE, AGE TRUSTEESHIPS/DIRECTORSHIPS HELD; NUMBER OF PORTFOLIOS IN THE FUND COMPLEX CURRENTLY OVERSEEN INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON TRUSTEES WAY, CENTENNIAL, COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL. CLAYTON K. YEUTTER, Director of American Commercial Lines (barge company) (since January Chairman of the Board 2005); Attorney at Hogan & Hartson (law firm) (since June 1993); of Trustees (since 2003), Director of Danielson Holding Corp. (waste-to-energy company) (since Trustee (since 2005) 2002); Director of Weyerhaeuser Corp. (1999-April 2004); Director of Age: 74 Caterpillar, Inc. (1993-December 2002); Director of ConAgra Foods (1993-2001); Director of Texas Instruments (1993-2001); Director of FMC Corporation (1993-2001). Oversees 38 portfolios in the OppenheimerFunds complex. MATTHEW P. FINK, Trustee of the Committee for Economic Development (policy research Trustee (since 2005) foundation) (since 2005); Director of ICI Education Foundation Age: 64 (education foundation) (since October 1991); President of the Investment Company Institute (trade association) (1991-2004); Director of ICI Mutual Insurance Company (insurance company) (1991-2004). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT G. GALLI, A trustee or director of other Oppenheimer funds. Oversees 48 Trustee (since 2005) portfolios in the OppenheimerFunds complex. Age: 72 PHILLIP A. GRIFFITHS, Director of GSI Lumonics Inc. (precision medical equipment supplier) Trustee (since 2005) (since 2001); Trustee of Woodward Academy (since 1983); Senior Age: 67 Advisor of The Andrew W. Mellon Foundation (since 2001); Member of the National Academy of Sciences (since 1979); Member of the American Philosophical Society (since 1996); Council on Foreign Relations (since 2002); Director of the Institute for Advanced Study (1991-2004); Director of Bankers Trust New York Corporation (1994-1999). Oversees 38 portfolios in the OppenheimerFunds complex. MARY F. MILLER, Trustee of the American Symphony Orchestra (not-for-profit) (since Trustee (since 2005) October 1998); and Senior Vice President and General Auditor of Age: 63 American Express Company (financial services company) (July 1998-February 2003). Oversees 38 portfolios in the OppenheimerFunds complex. JOEL W. MOTLEY, Director of Columbia Equity Financial Corp. (privately-held Trustee (since 2005) financial adviser) (since 2002); Managing Director of Carmona Age: 53 Motley, Inc. (privately-held financial adviser) (since January 2002); Managing Director of Carmona Motley Hoffman Inc. (privately-held financial adviser) (January 1998-December 2001). Oversees 38 portfolios in the OppenheimerFunds complex. KENNETH A. RANDALL, Director of Dominion Resources, Inc. (electric utility holding Trustee (since 2005) company) (since February 1972); Former Director of Prime Retail, Age: 78 Inc. (real estate investment trust), Dominion Energy Inc. (electric power and oil & gas producer), Lumbermens Mutual Casualty Company, American Motorists Insurance Company and American Manufacturers Mutual Insurance Company; Former President and Chief Executive Officer of The Conference Board, Inc. (international economic and business research). Oversees 38 portfolios in the OppenheimerFunds complex.
43 | ACTIVE ALLOCATION FUND TRUSTEES AND OFFICERS Unaudited / Continued - -------------------------------------------------------------------------------- RUSSELL S. REYNOLDS, JR., Chairman of The Directorship Search Group, Inc. (corporate Trustee (since 2005) governance consulting and executive recruiting) (since 1993); Life Age: 73 Trustee of International House (non-profit educational organization); Former Trustee of The Historical Society of the Town of Greenwich. Oversees 38 portfolios in the OppenheimerFunds complex. JOSEPH M. WIKLER, Director of the following medical device companies: Medintec (since Trustee (since 2005) 1992) and Cathco (since 1996); Director of Lakes Environmental Age: 64 Association (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). Oversees 39 portfolios in the OppenheimerFunds complex. PETER I. WOLD, President of Wold Oil Properties, Inc. (oil and gas exploration and Trustee (since 2005) production company) (since 1994); Vice President, Secretary and Age: 57 Treasurer of Wold Trona Company, Inc. (soda ash processing and production) (since 1996); Vice President of Wold Talc Company, Inc. (talc mining) (since 1999); Managing Member of Hole-in-the-Wall Ranch (cattle ranching) (since 1979); Director and Chairman of the Denver Branch of the Federal Reserve Bank of Kansas City (1993-1999); and Director of PacifiCorp. (electric utility) (1995-1999). Oversees 39 portfolios in the OppenheimerFunds complex. BRIAN F. WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since Trustee (since 2005) September 1995); Director of Special Value Opportunities Fund, LLC Age: 62 (registered investment company) (since September 2004); Member, Zurich Financial Investment Advisory Board (affiliate of the Manager's parent company) (since October 2004); Board of Governing Trustees of The Jackson Laboratory (non-profit) (since August 1990); Trustee of the Institute for Advanced Study (non-profit educational institute) (since May 1992); Special Limited Partner of Odyssey Investment Partners, LLC (private equity investment) (January 1999-September 2004); Trustee of Research Foundation of AIMR (2000-2002) (investment research, non-profit); Governor, Jerome Levy Economics Institute of Bard College (August 1990-September 2001) (economics research); Director of Ray & Berendtson, Inc. (May 2000-April 2002) (executive search firm); President and Chief Executive Officer of the Delaware Group of Mutual Funds (1992-1995); Chairman, President and Chief Executive Officer of Equitable Capital Management Corporation (1985-1992); Executive Vice President and Chief Investment Officer at The Equitable Life Assurance Society of the U.S. (1979-1992); Vice President and Co-manager at Smith Barney, Harris Upham and Company (1970-1979); Engineer, Sperry Gyroscope Company (1966-1970); former governor of the Association for Investment Management and Research; former chairman of the Institute of Chartered Financial Analysts; Chartered Financial Analyst. Oversees 48 portfolios in the OppenheimerFunds complex.
44 | ACTIVE ALLOCATION FUND - ---------------------------------------------------------------------------------------------------------- INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 AND OFFICER LIBERTY STREET, 11TH FLOOR, NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES. JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) Trustee, President and and President (since September 2000) of the Manager; President and Principal Executive Officer Director or Trustee of other Oppenheimer funds; President and (since 2005) Director of Oppenheimer Acquisition Corp. ("OAC") (the Manager's Age: 56 parent holding company) and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since November 2001); Chairman and Director of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager) (since July 2001); President and Director of OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since July 2001); Director of the following investment advisory subsidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment Management Corporation and Tremont Capital Management, Inc. (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 1, 2001) and Director (since July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President of 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); Member of the Investment Company Institute's Board of Governors (since October 3, 2003); Chief Operating Officer of the Manager (September 2000-June 2001); President and Trustee of MML Series Investment Fund and MassMutual Select Funds (open-end investment companies) (November 1999-November 2001); Director of C.M. Life Insurance Company (September 1999-August 2000); President, Chief Executive Officer and Director of MML Bay State Life Insurance Company (September 1999-August 2000); Director of Emerald Isle Bancorp and Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June 1998). Oversees 87 portfolios in the OppenheimerFunds complex. - ---------------------------------------------------------------------------------------------------------- OTHER OFFICERS THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: OF THE PORTFOLIO FOR MESSRS. SCHADT, WEBMAN, WILBY, WOLFGRUBER, WONG AND ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY AND WIXTED, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT DEATH OR REMOVAL. RUDI W. SCHADT, Vice President, Director of Research in Product Design and Risk Vice President and Portfolio Management of the Manager. Prior to joining the Manager in Manager (since 2005) February 2002 he was a Director and Senior Quantitative Analyst Age: 48 (2000-2001) at UBS Asset Management prior to which he was an Associate Director of Research (since June 1999) and Senior Researcher and Portfolio Manager (from June 1997) at State Street Global Advisors. An officer of 7 portfolios in the OppenheimerFunds complex. JERRY WEBMAN, Senior Vice President (since February 1996) and Senior Investment Vice President and Portfolio Officer and Director (since 1997) of the Manager's Fixed Income Manager (since 2005) Investments; Senior Vice President (since May 1999) of HarbourView Age: 56 Asset Management Corporation. An officer of 4 portfolios in the OppenheimerFunds complex.
45 | ACTIVE ALLOCATION FUND TRUSTEES AND OFFICERS Unaudited / Continued - -------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------- WILLIAM L. WILBY, Senior Vice President (since July 1994) and Senior Investment Vice President and Portfolio Officer, Director of Equities (since July 2004) of the Manager. Manager (since 2005) Formerly, Senior Investment Officer, Director of International Age: 61 Equities of the Manager (May 2000-July 2004) and Senior Vice President of HarbourView Asset Management Corporation (May 1999- November 2001). An officer of 6 portfolios in the OppenheimerFunds complex. KURT WOLFGRUBER, Executive Vice President (since March 2003) and Chief Investment Vice President and Portfolio Officer and Director (since July 2003) of the Manager; Director of Manager (since 2005) HarbourView Asset Management Corporation and of OFI Institutional Age: 55 Asset Management, Inc. (since June 2003) and of Tremont Capital Management, Inc. (since October 2001). An officer of 4 portfolios in the OppenheimerFunds complex. CALEB WONG, Vice President of the Manager since June 1999; worked in Vice President and Portfolio fixed-income quantitative research and risk management for the Manager (since 2005) Manager (since July 1996); an officer of 2 portfolios in the Age: 40 OppenheimerFunds complex. Formerly Assistant Vice President of the Manager (January 1997-June 1999); before joining the Manager in July 1996 Mr. Wong was enrolled in the Ph.D. program for Economics at the University of Chicago. MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager Vice President and Chief (since March 2004); Vice President of OppenheimerFunds Distributor, Compliance Officer Inc., Centennial Asset Management Corporation and Shareholder (since 2005) Services, Inc. (since June 1983). Former Vice President and Director Age: 55 of Internal Audit of the Manager (1997-February 2004). An officer of 87 portfolios in the OppenheimerFunds complex. BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March Treasurer and Principal 1999); Treasurer of the following: HarbourView Asset Management Financial and Accounting Corporation, Shareholder Financial Services, Inc., Shareholder Officer (since 2005) Services, Inc., Oppenheimer Real Asset Management Corporation, and Age: 46 Oppenheimer Partnership Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd. (since May 2000), OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since March 1999),Centennial Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March 1995-March 1999). An officer of 87 portfolios in the OppenheimerFunds complex. ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel Secretary (since 2005) (since March 2002) of the Manager; General Counsel and Director of Age: 57 the Distributor (since December 2001); General Counsel of Centennial Asset Management Corporation (since December 2001); Senior Vice President and General Counsel of HarbourView Asset Management Corporation (since December 2001); Secretary and General Counsel of OAC (since November 2001); Assistant Secretary (since September 1997) and Director (since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since December 2002); Director of Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice President, General Counsel and Director of
46 | ACTIVE ALLOCATION FUND ROBERT G. ZACK, Shareholder Financial Services, Inc. and Shareholder Services, Inc. Continued (since December 2001); Senior Vice President, General Counsel and Director of OFI Private Investments, Inc. and OFI Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since November 2001); Director of OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President (May 1985-December 2003), Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of the following: Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001), and OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of 87 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. 47 | ACTIVE ALLOCATION FUND AGGRESSIVE INVESTOR FUND TOP HOLDINGS AND ALLOCATIONS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ASSET CLASS ALLOCATION [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Global Equity 31.5% U.S. Equity 68.5 Portfolio holdings and allocations are subject to change. Percentages are as of January 31, 2006, and are based on the total market value of investments in affiliated companies. - -------------------------------------------------------------------------------- 8 | AGGRESSIVE INVESTOR FUND PORTFOLIO PERFORMANCE DISCUSSION - -------------------------------------------------------------------------------- HOW HAS THE PORTFOLIO PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS, INC., OF THE PORTFOLIO'S PERFORMANCE DURING THE REPORTING PERIOD OF APRIL 5, 2005 TO JANUARY 31, 2006, FOLLOWED BY A GRAPHICAL COMPARISON OF THE PORTFOLIO'S PERFORMANCE TO AN APPROPRIATE BROAD-BASED MARKET INDEX. MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE Since its inception on April 5, 2005 to the end of the period on January 31, 2006, the Portfolio outperformed its benchmark, the S&P 500 Index. We attribute the Portfolio's outperformance of its benchmark to its diversified equity weighting that enabled it to own sectors not included in the S&P 500 Index, especially those of international markets, which posted strong results over the reporting period. Over the reporting period the MSCI All Country World Index, an unmanaged index that is designed to measure equity market performance in the global developed and emerging markets, returned 17.56%, far outpacing the S&P 500 Index. Since the Portfolio had an approximately 30% allocation to foreign markets through the underlying international funds it holds, it reaped the benefits as these markets expanded. Major contributors to performance included Oppenheimer Global Fund, Oppenheimer Global Opportunities Fund and Oppenheimer Developing Markets Fund. The Portfolio's allocations to Oppenheimer Global Fund and Oppenheimer Global Opportunities Fund benefited performance as the Funds produced strong returns of 24.72% and 38.63%, respectively. The strong performance of both Funds can be attributed to a successful stock selection process as well as the beneficial effects of a strengthening global economy. The Portfolio's exposure to Oppenheimer Developing Markets Fund also significantly contributed to performance, as it produced a total return of 50.9% over the period. The Portfolio benefited from a strong individual stock selection process as well as its exposure to the emerging markets. Although the other equity funds that the Portfolio owned produced solid returns, they did not match the returns of the international funds and slightly hampered performance. We attribute the underperformance of our domestic equity funds relative to the performance of our international funds to the simple fact that the domestic funds are focused on the U.S. equity market, which generally underperformed international markets over the period. 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, 2006. 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 9 | AGGRESSIVE INVESTOR FUND PORTFOLIO PERFORMANCE DISCUSSION - -------------------------------------------------------------------------------- deferred sales charge on Class B, Class C, and Class N shares, and reinvestments of all dividends and capital gains distributions. Past performance cannot guarantee future results. The Portfolio's performance is compared to the performance of the S&P 500 Index. The S&P 500 Index is an unmanaged index of equity securities. Index performance reflects the reinvestment of income but does not consider the effect of transaction costs, and none of the data in the graphs shows the effect of taxes. The Portfolio's performance reflects the effects of the Portfolio's business and operating expenses. While index comparisons may be useful to provide a benchmark for the Portfolio's performance, it must be noted that the Portfolio's investments are not limited to the investments in the index. 10 | AGGRESSIVE INVESTOR FUND CLASS A SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Portfolio Series: Aggressive Investor Fund (Class A) S&P 500 Index MSCI World Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.] Oppenheimer Portfolio Series: Aggressive Investor Fund S & P 500 MSCI (Class A) Index World Index 04/05/2005 9,425 10,000 10,000 04/30/2005 9,199 9,810 9,788 07/31/2005 9,991 10,514 10,414 10/31/2005 9,972 10,327 10,514 01/31/2006 11,071 11,005 11,612 AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE PORTFOLIO AT 1/31/06 Since Inception (4/5/05) 10.71% 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 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 | AGGRESSIVE INVESTOR FUND PORTFOLIO PERFORMANCE DISCUSSION - -------------------------------------------------------------------------------- CLASS B SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Portfolio Series: Aggressive Investor Fund (Class B) S&P 500 Index MSCI World Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.] Oppenheimer Portfolio Series: Aggressive Investor Fund S & P 500 MSCI (Class B) Index World Index 04/05/2005 10,000 10,000 10,000 04/30/2005 9,750 9,810 9,788 07/31/2005 10,580 10,514 10,414 10/31/2005 10,540 10,327 10,514 01/31/2006 11,170 11,005 11,612 AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE PORTFOLIO AT 1/31/06 Since Inception (4/5/05) 11.70% 12 | AGGRESSIVE INVESTOR FUND CLASS C SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Portfolio Series: Aggressive Investor Fund (Class C) S&P 500 Index MSCI World Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.] Oppenheimer Portfolio Series: Aggressive Investor Fund S & P 500 MSCI (Class C) Index World Index 04/05/2005 10,000 10,000 10,000 04/30/2005 9,750 9,810 9,788 07/31/2005 10,570 10,514 10,414 10/31/2005 10,530 10,327 10,514 01/31/2006 11,564 11,005 11,612 AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE PORTFOLIO AT 1/31/06 Since Inception (4/5/05) 15.64% 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 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 | AGGRESSIVE INVESTOR FUND PORTFOLIO PERFORMANCE DISCUSSION - -------------------------------------------------------------------------------- CLASS N SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Portfolio Series: Aggressive Investor Fund (Class N) S&P 500 Index MSCI World Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.] Oppenheimer Portfolio Series: Aggressive Investor Fund S & P 500 MSCI (Class N) Index World Index 04/05/2005 10,000 10,000 10,000 04/30/2005 9,750 9,810 9,788 07/31/2005 10,600 10,514 10,414 10/31/2005 10,580 10,327 10,514 01/31/2006 11,634 11,005 11,612 AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE PORTFOLIO AT 1/31/06 Since Inception (4/5/05) 16.34% 14 | AGGRESSIVE INVESTOR FUND CLASS Y SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Portfolio Series: Aggressive Investor Fund (Class Y) S&P 500 Index MSCI World Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.] Oppenheimer Portfolio Series: Aggressive Investor Fund S & P 500 MSCI (Class Y) Index World Index 04/05/2005 10,000 10,000 10,000 04/30/2005 9,760 9,810 9,788 07/31/2005 10,600 10,514 10,414 10/31/2005 10,600 10,327 10,514 01/31/2006 11,769 11,005 11,612 AVERAGE ANNUAL TOTAL RETURNS OF CLASS Y SHARES OF THE PORTFOLIO AT 1/31/06 Since Inception (4/5/05) 17.69% 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 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 | AGGRESSIVE 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). 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 | AGGRESSIVE INVESTOR FUND PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- PORTFOLIO EXPENSES. As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and service fees; and other Portfolio expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended January 31, 2006. ACTUAL EXPENSES. The "actual" lines of the table provide information about actual account values and actual expenses. You may use the information on this line for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the "actual" line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio for each class of shares, and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as front-end or contingent deferred sales charges (loads), or a $12.00 fee imposed annually on accounts valued at less than $500.00 (subject to exceptions described in 17 | AGGRESSIVE INVESTOR FUND PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- the Statement of Additional Information). Therefore, the "hypothetical" lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING VALUE VALUE 6 MONTHS ENDED (8/1/05) (1/31/06) JANUARY 31, 2006 - -------------------------------------------------------------------------------- Class A Actual $1,000.00 $1,108.10 $3.62 - -------------------------------------------------------------------------------- Class A Hypothetical 1,000.00 1,021.78 3.47 - -------------------------------------------------------------------------------- Class B Actual 1,000.00 1,103.00 7.98 - -------------------------------------------------------------------------------- Class B Hypothetical 1,000.00 1,017.64 7.66 - -------------------------------------------------------------------------------- Class C Actual 1,000.00 1,103.50 7.71 - -------------------------------------------------------------------------------- Class C Hypothetical 1,000.00 1,017.90 7.40 - -------------------------------------------------------------------------------- Class N Actual 1,000.00 1,107.00 4.10 - -------------------------------------------------------------------------------- Class N Hypothetical 1,000.00 1,021.32 3.93 - -------------------------------------------------------------------------------- Class Y Actual 1,000.00 1,110.20 1.33 - -------------------------------------------------------------------------------- Class Y Hypothetical 1,000.00 1,023.95 1.28 Hypothetical assumes 5% annual return before expenses. Expenses are equal to the Portfolio's annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Those annualized expense ratios, excluding all underlying fund expenses, based on the 6-month period ended January 31, 2006 are as follows: CLASS EXPENSE RATIOS - ----------------------------------- Class A 0.68% - ----------------------------------- Class B 1.50 - ----------------------------------- Class C 1.45 - ----------------------------------- Class N 0.77 - ----------------------------------- Class Y 0.25 The expense ratios reflect voluntary waivers or reimbursements of expenses by the Portfolio's Manager and Transfer Agent that can be terminated at any time, without advance notice. The "Financial Highlights" tables in the Portfolio's financial statements, included in this report, also show the gross expense ratios, without such waivers or reimbursements. - -------------------------------------------------------------------------------- 18 | AGGRESSIVE INVESTOR FUND STATEMENT OF INVESTMENTS January 31, 2006 - --------------------------------------------------------------------------------
VALUE SHARES SEE NOTE 1 - ----------------------------------------------------------------------------------------------------------- INVESTMENTS IN AFFILIATED COMPANIES--98.4% 1 GLOBAL EQUITY--31.0% Oppenheimer Developing Markets Fund, Cl. Y 131,194 $ 5,195,257 - ----------------------------------------------------------------------------------------------------------- Oppenheimer Global Fund, Cl. Y 265,671 18,785,577 - ----------------------------------------------------------------------------------------------------------- Oppenheimer Global Opportunities Fund, Cl. Y 124,676 5,045,603 ----------- 29,026,437 - ----------------------------------------------------------------------------------------------------------- U. S. EQUITY--67.4% Oppenheimer Capital Appreciation Fund, Cl. Y 393,164 17,943,986 - ----------------------------------------------------------------------------------------------------------- Oppenheimer Main Street Fund, Cl. Y 347,889 13,362,423 - ----------------------------------------------------------------------------------------------------------- Oppenheimer Main Street Opportunity Fund, Cl. Y 633,885 8,988,492 - ----------------------------------------------------------------------------------------------------------- Oppenheimer Main Street Small Cap Fund, Cl. Y 409,733 9,468,940 - ----------------------------------------------------------------------------------------------------------- Oppenheimer Value Fund, Cl. Y 541,824 13,269,265 ------------ 63,033,106 ----------- Total Investments in Affiliated Companies (Cost $86,895,651) 92,059,543 PRINCIPAL AMOUNT - ----------------------------------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS--0.6% Undivided interest of 0.07% in joint repurchase agreement (Principal Amount/Value $781,426,000, with a maturity value of $781,521,291) with UBS Warburg LLC, 4.39%, dated 1/31/06, to be repurchased at $535,065 on 2/1/06, collateralized by Federal Home Loan Mortgage Corp., 5%, 12/1/35, with a value of $799,056,396 (Cost $535,000) $535,000 535,000 - ----------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $87,430,651) 99.0% 92,594,543 - ----------------------------------------------------------------------------------------------------------- OTHER ASSETS NET OF LIABILITIES 1.0 968,493 --------------------------- NET ASSETS 100.0% $93,563,036 ===========================
FOOTNOTE TO STATEMENT OF INVESTMENTS 1. Affiliated companies. Represents ownership of an affiliated fund, at or during the period ended January 31, 2006. Transactions during the period in which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES APRIL 5, 2005 ADDITIONS REDUCTIONS JAN. 31, 2006 - ----------------------------------------------------------------------------------------------------------------- Oppenheimer Capital Appreciation Fund, Cl. Y -- 393,164 -- 393,164 Oppenheimer Developing Markets Fund, Cl. A -- 69,254 69,254 -- Oppenheimer Developing Markets Fund, Cl. Y -- 131,194 -- 131,194 Oppenheimer Global Fund, Cl. Y -- 265,671 -- 265,671 Oppenheimer Global Opportunities Fund, Cl. Y -- 124,676 -- 124,676 Oppenheimer Main Street Fund, Cl. Y -- 347,889 -- 347,889 Oppenheimer Main Street Opportunity Fund, Cl. Y -- 633,885 -- 633,885 Oppenheimer Main Street Small Cap Fund, Cl. Y -- 409,733 -- 409,733 Oppenheimer Value Fund, Cl. Y -- 541,824 -- 541,824
19 | AGGRESSIVE INVESTOR FUND STATEMENT OF INVESTMENTS Continued - --------------------------------------------------------------------------------
VALUE DIVIDEND REALIZED SEE NOTE 1 INCOME GAIN - ----------------------------------------------------------------------------------------------- Oppenheimer Capital Appreciation Fund, Cl. Y $17,943,986 $ 102,086 $ -- Oppenheimer Developing Markets Fund, Cl. A -- -- 136,715 Oppenheimer Developing Markets Fund, Cl. Y 5,195,257 80,177 -- Oppenheimer Global Fund, Cl. Y 18,785,577 111,604 -- Oppenheimer Global Opportunities Fund, Cl. Y 5,045,603 63,790 -- Oppenheimer Main Street Fund, Cl. Y 13,362,423 113,520 -- Oppenheimer Main Street Opportunity Fund, Cl. Y 8,988,492 120,815 -- Oppenheimer Main Street Small Cap Fund, Cl. Y 9,468,940 67,423 -- Oppenheimer Value Fund, Cl. Y 13,269,265 191,917 -- ------------------------------------------- $92,059,543 $ 851,332 $ 136,715 ===========================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 20 | AGGRESSIVE INVESTOR FUND STATEMENT OF ASSETS AND LIABILITIES January 31, 2006 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ASSETS - -------------------------------------------------------------------------------- Investments, at value--see accompanying statement of investments: Unaffiliated companies (cost $535,000) $ 535,000 Affiliated companies (cost $86,895,651) 92,059,543 ------------ 92,594,543 - -------------------------------------------------------------------------------- Cash 5,412 - -------------------------------------------------------------------------------- Receivables and other assets: Shares of beneficial interest sold 1,785,905 Interest and dividends 65 Other 2,109 ------------ Total assets 94,388,034 - -------------------------------------------------------------------------------- LIABILITIES - -------------------------------------------------------------------------------- Payables and other liabilities: Investments purchased 737,769 Shares of beneficial interest redeemed 17,527 Distribution and service plan fees 16,971 Shareholder communications 12,704 Transfer and shareholder servicing agent fees 11,625 Trustees' compensation 97 Other 28,305 ------------ Total liabilities 824,998 - -------------------------------------------------------------------------------- NET ASSETS $93,563,036 ============ - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS - -------------------------------------------------------------------------------- Par value of shares of beneficial interest $ 8,084 - -------------------------------------------------------------------------------- Additional paid-in capital 87,414,797 - -------------------------------------------------------------------------------- Accumulated net investment loss (41) - -------------------------------------------------------------------------------- Accumulated net realized gain on investments 976,304 - -------------------------------------------------------------------------------- Net unrealized appreciation on investments 5,163,892 - -------------------------------------------------------------------------------- NET ASSETS $93,563,036 ============ 21 | AGGRESSIVE 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 $48,132,412 and 4,150,893 shares of beneficial interest outstanding) $11.60 Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $12.31 - ----------------------------------------------------------------------------------------------------------- Class B Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $19,077,611 and 1,651,928 shares of beneficial interest outstanding) $11.55 - ----------------------------------------------------------------------------------------------------------- Class C Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $20,033,822 and 1,735,743 shares of beneficial interest outstanding) $11.54 - ----------------------------------------------------------------------------------------------------------- Class N Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $5,608,345 and 483,918 shares of beneficial interest outstanding) $11.59 - ----------------------------------------------------------------------------------------------------------- Class Y Shares: Net asset value, redemption price and offering price per share (based on net assets of $710,846 and 61,222 shares of beneficial interest outstanding) $11.61
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 22 | AGGRESSIVE INVESTOR FUND STATEMENT OF OPERATIONS For the Period Ended January 31, 2006 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INVESTMENT INCOME - -------------------------------------------------------------------------------- Dividends from affiliated companies $ 851,332 - -------------------------------------------------------------------------------- Interest 11,236 ----------- Total investment income 862,568 - -------------------------------------------------------------------------------- EXPENSES - -------------------------------------------------------------------------------- Distribution and service plan fees: Class A 34,064 Class B 57,776 Class C 50,173 Class N 7,028 - -------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees: Class A 28,007 Class B 14,158 Class C 10,884 Class N 1,431 Class Y 320 - -------------------------------------------------------------------------------- Shareholder communications: Class A 13,623 Class B 7,721 Class C 5,373 Class N 481 Class Y 11 - -------------------------------------------------------------------------------- Legal, auditing and other professional fees 25,582 - -------------------------------------------------------------------------------- Trustees' compensation 7,695 - -------------------------------------------------------------------------------- Custodian fees and expenses 105 - -------------------------------------------------------------------------------- Other 12,370 ----------- Total expenses 276,802 Less reduction to custodian expenses (2) Less waivers and reimbursements of expenses (5,919) ----------- Net expenses 270,881 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME 591,687 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN - -------------------------------------------------------------------------------- Net realized gain on: Distributions received from affiliated companies 1,146,959 Affiliated companies 136,715 ----------- Net realized gain 1,283,674 - -------------------------------------------------------------------------------- Net change in unrealized appreciation on investments 5,163,892 - -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $7,039,253 =========== 1. For the period from April 5, 2005 (commencement of operations) to January 31, 2006. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 23 | AGGRESSIVE INVESTOR FUND STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
PERIOD ENDED JANUARY 31, 2006 1 - ------------------------------------------------------------------------------------------------- OPERATIONS - ------------------------------------------------------------------------------------------------- Net investment income $ 591,687 - ------------------------------------------------------------------------------------------------- Net realized gain 1,283,674 - ------------------------------------------------------------------------------------------------- Net change in unrealized appreciation 5,163,892 ------------- Net increase in net assets resulting from operations 7,039,253 - ------------------------------------------------------------------------------------------------- DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS - ------------------------------------------------------------------------------------------------- Dividends from net investment income: Class A (380,503) Class B (127,617) Class C (120,802) Class N (41,332) Class Y (6,678) - ------------------------------------------------------------------------------------------------- Distributions from net realized gain: Class A (67,178) Class B (28,621) Class C (25,903) Class N (7,402) Class Y (1,071) - ------------------------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS - ------------------------------------------------------------------------------------------------- Net increase in net assets resulting from beneficial interest transactions: Class A 44,717,597 Class B 17,711,412 Class C 18,857,875 Class N 5,289,149 Class Y 650,857 - ------------------------------------------------------------------------------------------------- NET ASSETS - ------------------------------------------------------------------------------------------------- Total increase 93,459,036 - ------------------------------------------------------------------------------------------------- Beginning of period 104,000 2 ------------- End of period (including accumulated net investment loss of $41 for the period ended January 31, 2006) $93,563,036 =============
1. For the period from April 5, 2005 (commencement of operations) to January 31, 2006. 2. Reflects the value of the Manager's initial seed money investment on March 15, 2005. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 24 | AGGRESSIVE INVESTOR FUND FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C PERIOD ENDED JANUARY 31, 2006 1 2006 1 2006 1 - ------------------------------------------------------------------------------------------------ PER SHARE OPERATING DATA - ------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 - ------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income 2 .22 .16 .15 Net realized and unrealized gain 1.52 1.50 1.51 -------------------------------------------- Total from investment operations 1.74 1.66 1.66 - ------------------------------------------------------------------------------------------------ Dividends and/or distributions to shareholders: Dividends from net investment income (.12) (.09) (.10) Distributions from net realized gain (.02) (.02) (.02) -------------------------------------------- Total dividends and distributions to shareholders (.14) (.11) (.12) - ------------------------------------------------------------------------------------------------ Net asset value, end of period $ 11.60 $ 11.55 $ 11.54 ============================================ - ------------------------------------------------------------------------------------------------ TOTAL RETURN, AT NET ASSET VALUE 3 17.46% 16.70% 16.64% - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $48,132 $19,078 $20,034 - ------------------------------------------------------------------------------------------------ Average net assets (in thousands) $17,321 $ 7,050 $ 6,131 - ------------------------------------------------------------------------------------------------ Ratios to average net assets: 4 Net investment income 2.47% 1.83% 1.71% Total expenses 0.70% 5 1.53% 6 1.48% 7 Expenses after waivers and reimbursements and reduction to custodian expenses 0.68% 1.50% 1.45% - ------------------------------------------------------------------------------------------------ Portfolio turnover rate 7% 7% 7%
1. For the period from April 5, 2005 (commencement of operations) to January 31, 2006. 2. Per share amounts calculated based on the average shares outstanding during the period. 3. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. 4. Annualized for periods of less than one full year. 5. Expenses including all underlying fund expenses were 1.39% for January 31, 2006. 6. Expenses including all underlying fund expenses were 2.22% for January 31, 2006. 7. Expenses including all underlying fund expenses were 2.17% for January 31, 2006. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 25 | AGGRESSIVE INVESTOR FUND FINANCIAL HIGHLIGHTS Continued - --------------------------------------------------------------------------------
CLASS N CLASS Y PERIOD ENDED JANUARY 31, 2006 1 2006 1 - -------------------------------------------------------------------------------- PER SHARE OPERATING DATA - -------------------------------------------------------------------------------- Net asset value, beginning of period $10.00 $10.00 - -------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 2 .24 .24 Net realized and unrealized gain 1.49 1.52 -------------------------- Total from investment operations 1.73 1.76 - -------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.12) (.13) Distributions from net realized gain (.02) (.02) -------------------------- Total dividends and distributions to shareholders (.14) (.15) - -------------------------------------------------------------------------------- Net asset value, end of period $11.59 $11.61 ========================== - -------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 3 17.34% 17.69% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Net assets, end of period (in thousands) $5,608 $ 711 - -------------------------------------------------------------------------------- Average net assets (in thousands) $1,717 $ 331 - -------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 2.62% 2.67% Total expenses 0.79% 5 0.30% 6 Expenses after waivers and reimbursements and reduction to custodian expenses 0.78% 0.27% - -------------------------------------------------------------------------------- Portfolio turnover rate 7% 7%
1. For the period from April 5, 2005 (commencement of operations) to January 31, 2006. 2. Per share amounts calculated based on the average shares outstanding during the period. 3. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. 4. Annualized for periods of less than one full year. 5. Expenses including all underlying fund expenses were 1.48% for January 31, 2006. 6. Expenses including all underlying fund expenses were 0.99% for January 31, 2006. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 26 | AGGRESSIVE 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. Aggressive Investor Fund (the "Portfolio") is a series of the Fund whose investment objective is to seek long term growth of capital. The Portfolio is a special type of mutual fund known as a "fund of funds" because it invests in other mutual funds. The Portfolio normally invests in a portfolio consisting of a target-weighted allocation in Class A or Class Y shares of other Oppenheimer funds. The Fund's investment advisor is OppenheimerFunds Inc. (the "Manager"). The Portfolio offers Class A, Class B, Class C, Class N and Class Y shares. Class A shares are sold at their offering price, which is normally net asset value plus a front-end sales charge. Class B, Class C and Class N shares are sold without a front-end sales charge but may be subject to a contingent deferred sales charge (CDSC). Class N shares are sold only through retirement plans. Retirement plans that offer Class N shares may impose charges on those accounts. Class Y shares are sold to certain institutional investors without either a front-end sales charge or a CDSC, however, the institutional investor may impose charges on those accounts. All classes of shares have identical rights and voting privileges with respect to the Portfolio in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class. Class A, B, C and N have separate distribution and/or service plans. No such plan has been adopted for Class Y shares. Class B shares will automatically convert to Class A shares six years after the date of purchase. Under normal market conditions, the Manager will invest the Portfolio's assets in shares of Oppenheimer Capital Appreciation Fund, Oppenheimer Developing Markets Fund, Oppenheimer Global Fund, Oppenheimer Global Opportunities Fund, Oppenheimer Main Street Fund(R), Oppenheimer Main Street Opportunity Fund(R), Oppenheimer Main Street Small Cap Fund(R) and Oppenheimer Value Fund (individually, an "Underlying Fund" and collectively, the "Underlying Funds"). The following is a summary of significant accounting policies consistently followed by the Portfolio. - -------------------------------------------------------------------------------- SECURITIES VALUATION. The Portfolio calculates the net asset value of each class of shares based upon the net asset value of the applicable Underlying Funds' as of the close of The New York Stock Exchange (the "Exchange"), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading. For each Underlying Fund, the net asset value per share for a class of shares on a "regular business day" is determined by dividing the value of the Underlying Fund's net assets attributable to that class by the number of shares of that class outstanding on that day. To determine net asset values, the Underlying Fund assets are valued primarily on the basis of current market quotations. If market quotations are not readily available or do 27 | AGGRESSIVE INVESTOR FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued not accurately reflect fair value for a security (in the Manager's judgment) or if a security's value has been materially affected by events occurring after the close of the exchange or market on which the security is principally traded, that security may be valued by another method that the Underlying Fund's Board of Trustees/Directors believes accurately reflects the fair value. Because some foreign securities trade in markets and on exchanges that operate on weekends and U.S. holidays, the values of some of the Underlying Fund's foreign investments may change on days when investors cannot buy or redeem Underlying Fund shares. Short-term "money market type" debt securities with remaining maturities of sixty days or less are valued at amortized cost (which approximates market value). - -------------------------------------------------------------------------------- RISKS OF INVESTING IN THE UNDERLYING FUNDS. Each of the Underlying Funds in which the Portfolio invests has its own investment risks, and those risks can affect the value of the Portfolio's investments and therefore the value of the Portfolio's shares. To the extent that the Portfolio invests more of its assets in one Underlying Fund than in another, the Portfolio will have greater exposure to the risks of that Underlying Fund. - -------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Portfolio, along with other affiliated funds advised by the Manager, may transfer uninvested cash balances into joint trading accounts on a daily basis. These balances are invested in one or more repurchase agreements. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. In the event of default by the other party to the agreement, retention of the collateral may be subject to legal proceedings. - -------------------------------------------------------------------------------- ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class. - -------------------------------------------------------------------------------- FEDERAL TAXES. The Portfolio intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders, therefore, no federal income or excise tax provision is required. 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. 28 | AGGRESSIVE INVESTOR FUND NET UNREALIZED APPRECIATION BASED ON COST OF SECURITIES AND UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME INCOME GAIN CARRYFORWARD 1 TAX PURPOSES -------------------------------------------------------------------------- $-- $977,747 $-- $5,162,449 1. During the period ended January 31, 2006, the Portfolio did not have any capital loss carryforward. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Portfolio. Accordingly, the following amounts have been reclassified for January 31, 2006. Net assets of the Portfolio were unaffected by the reclassifications. REDUCTION REDUCTION TO ACCUMULATED NET INCREASE TO ACCUMULATED REALIZED GAIN TO PAID-IN CAPITAL INVESTMENT LOSS ON INVESTMENTS 2 -------------------------------------------------------------------------- $91,991 $85,204 $177,195 2. $95,557, all of which was long-term capital gain, was distributed in connection with Portfolio share redemptions. The tax character of distributions paid during the period ended January 31, 2006 was as follows: PERIOD ENDED JANUARY 31, 2006 -------------------------------------------------------------------------- Distributions paid from: Ordinary income $807,107 The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of January 31, 2006 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 $87,432,094 =========== Gross unrealized appreciation $ 5,162,449 Gross unrealized depreciation -- ----------- Net unrealized appreciation $ 5,162,449 =========== - -------------------------------------------------------------------------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded 29 | AGGRESSIVE INVESTOR FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued on the ex-dividend date. Income and capital gain distributions, if any, are declared and paid annually. - -------------------------------------------------------------------------------- INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, which includes accretion of discount and amortization of premium, is accrued as earned. - -------------------------------------------------------------------------------- CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may include interest expense incurred by the Portfolio on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Portfolio pays interest to its custodian on such cash overdrafts to the extent they are not offset by positive cash balances maintained by the Portfolio at a rate equal to the Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item, if applicable, represents earnings on cash balances maintained by the Portfolio during the period. At January 31, 2006, the Portfolio had $39 of such earnings on cash balances available to offset future custodian fees or interest expenses incurred during the next fiscal year. - -------------------------------------------------------------------------------- SECURITY TRANSACTIONS. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost. - -------------------------------------------------------------------------------- INDEMNIFICATIONS. The Portfolio's organizational documents provide current and former trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Portfolio. In the normal course of business, the Portfolio may also enter into contracts that provide general indemnifications. The Portfolio's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Portfolio. The risk of material loss from such claims is considered remote. - -------------------------------------------------------------------------------- OTHER. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. - -------------------------------------------------------------------------------- 2. SHARES OF BENEFICIAL INTEREST The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows: 30 | AGGRESSIVE INVESTOR FUND PERIOD ENDED JANUARY 31, 2006 1,2 SHARES AMOUNT - ----------------------------------------------------------------- CLASS A Sold 4,307,796 $46,498,407 Dividends and/or distributions reinvested 38,611 427,037 Redeemed (205,514) (2,207,847) ----------------------------- Net increase 4,140,893 $44,717,597 ============================= - ----------------------------------------------------------------- CLASS B Sold 1,712,718 $18,374,371 Dividends and/or distributions reinvested 13,238 145,879 Redeemed (74,128) (808,838) ----------------------------- Net increase 1,651,828 $17,711,412 ============================= - ----------------------------------------------------------------- CLASS C Sold 1,784,313 $19,370,332 Dividends and/or distributions reinvested 12,844 141,411 Redeemed (61,514) (653,868) ----------------------------- Net increase 1,735,643 $18,857,875 ============================= - ----------------------------------------------------------------- CLASS N Sold 536,355 $ 5,884,519 Dividends and/or distributions reinvested 3,629 40,096 Redeemed (56,166) (635,466) ----------------------------- Net increase 483,818 $ 5,289,149 ============================= - ----------------------------------------------------------------- CLASS Y Sold 69,936 $ 744,994 Dividends and/or distributions reinvested 699 7,734 Redeemed (9,513) (101,871) ----------------------------- Net increase 61,122 $ 650,857 ============================= 1. For the period from April 5, 2005 (commencement of operations) to January 31, 2006. 2. The Portfolio sold 10,000 shares of Class A at a value of $100,000 and 100 shares of Class B, Class C, Class N and Class Y at a value of $1,000, respectively, to the Manager upon seeding of the Portfolio on March 15, 2005. - -------------------------------------------------------------------------------- 3. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the period ended January 31, 2006, were as follows: PURCHASES SALES -------------------------------------------------------------------------- Investment Securities $89,015,063 $2,256,128 31 | AGGRESSIVE INVESTOR FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES MANAGEMENT FEES. Under the investment advisory agreement, the Manager does not charge a management fee, but rather collects indirect management fees from investments in the Underlying Funds. The weighted indirect management fees collected from the Underlying Funds, as a percent of average daily net assets of the Portfolio for the period ended January 31, 2006 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 period ended January 31, 2006, the Portfolio paid $43,055 to OFS for services to the Portfolio. Additionally, Class Y shares are subject to minimum fees of $10,000 per annum for assets of $10 million or more. The Class Y shares are subject to the minimum fees in the event that the per account fee does not equal or exceed the applicable minimum fees. OFS may voluntarily waive the minimum fees. - -------------------------------------------------------------------------------- INITIAL OFFERING AND ORGANIZATIONAL COSTS. The Manager assumed all initial offering and organizational costs associated with the registration and seeding of the Portfolio. - -------------------------------------------------------------------------------- DISTRIBUTION AND SERVICE PLAN (12B-1) FEES. Under its General Distributor's Agreement with the Portfolio, OppenheimerFunds Distributor, Inc. (the Distributor) acts as the Portfolio's principal underwriter in the continuous public offering of the Portfolio's classes of shares. - -------------------------------------------------------------------------------- SERVICE PLAN FOR CLASS A SHARES. The Portfolio has adopted a Service Plan for Class A shares. It reimburses the Distributor for a portion of its costs incurred for services provided to accounts that hold Class A shares. Reimbursement is made periodically at an annual rate of up to 0.25% of the average annual net assets of Class A shares of the Portfolio. The Distributor currently uses all of those fees to pay dealers, brokers, banks and other financial institutions periodically for providing personal services and maintenance of accounts of their customers that hold Class A shares. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent years. Fees incurred by the Portfolio under the Plan are detailed in the Statement of Operations. - -------------------------------------------------------------------------------- DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Portfolio has adopted Distribution and Service Plans for Class B, Class C and Class N shares to compensate the Distributor for its services and costs in connection with the distribution of those shares and servicing accounts. Under the plans, the Portfolio pays the Distributor an annual asset-based sales charge of 0.75% on Class B and Class C shares and 0.25% on Class N shares. The Distributor also receives a service fee of 0.25% per year under each plan. If either the Class B, Class C or Class N plan is terminated by the Portfolio or by the shareholders of a class, the Board of Trustees and its independent 32 | AGGRESSIVE INVESTOR FUND trustees must determine whether the Distributor shall be entitled to payment from the Portfolio of all or a portion of the service fee and/or asset-based sales charge in respect to shares sold prior to the effective date of such termination. The Distributor's aggregate uncompensated expenses under the plan at January 31, 2006 for Class B, Class C and Class N shares were $262,957, $142,362 and $36,299, respectively. Fees incurred by the Portfolio under the plans are detailed in the Statement of Operations. - -------------------------------------------------------------------------------- SALES CHARGES. Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Portfolio. They are deducted from the proceeds of sales of Portfolio shares prior to investment or from redemption proceeds prior to remittance, as applicable. The sales charges retained by the Distributor from the sale of shares and the CDSC retained by the Distributor on the redemption of shares is shown in the table below for the period indicated.
CLASS A CLASS B CLASS C CLASS N 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 PERIOD ENDED BY DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR - ----------------------------------------------------------------------------------------------------------------- January 31, 2006 $265,087 $-- $5,572 $2,126 $5,679 - -----------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees paid directly by the Portfolio to 0.35% of average annual net assets for each class. During the period ended January 31, 2006, OFS waived $113, $3 and $4 for Class B, Class N and Class Y shares, respectively. This undertaking may be amended or withdrawn at any time. The Manager has voluntarily agreed to a total expense limitation on the aggregate amount of combined direct (fund-of-funds level) and indirect expense so that Combined Total Annual and Underlying Fund Operating Expenses as a percentage of average daily net assets will not exceed the following annual rates: 1.45%, 2.20%, 2.20%, 1.70% and 1.20%, for Class A, Class B, Class C, Class N and Class Y, respectively. During the period ended January 31, 2006, the Manager reimbursed the Portfolio $2,512, $1,811, $1,334, $99 and $43, for the Class A, Class B, Class C, Class N and Class Y shares, respectively. The Manager may modify or terminate this undertaking at any time without notice to shareholders. These expense limitations do not include Extraordinary Expenses and other expenses not incurred in the ordinary course of the Portfolio's business. Notwithstanding the foregoing limits, the Manager is not required to waive or reimburse Portfolio expenses in excess of indirect management fees earned from investments in Underlying Funds to assure that expenses do not exceed those limits. 33 | AGGRESSIVE INVESTOR FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 5. LITIGATION A complaint was filed as a putative class action against the Manager and OFS (and other defendants) in the U.S. District Court for the Southern District of New York on January 10, 2005 and was amended on March 4, 2005. Seven of the eight counts in the complaint, including claims against certain of the Oppenheimer funds excluding the Portfolio, as nominal defendants, and against certain present and former Directors, Trustees and officers of the funds, and the Distributor, as defendants, were dismissed with prejudice, under a court order dated March 10, 2006, in response to a motion to dismiss the suit that had been filed by the defendants. The remaining count against the Adviser Defendants alleges, among other things, that the defendants charged excessive fees in violation of section 36(b) of the Investment Company Act of 1940. The plaintiffs seek unspecified damages, an accounting of all fees paid, and an award of attorneys' fees and litigation expenses. The Adviser Defendants believe that the claims asserted in the remaining count under this lawsuit are without merit, and intend to defend the suit vigorously and contest any claimed liability. They believe that it is premature to render any opinion as to the likelihood of an outcome unfavorable to them and that no estimate can yet be made with any degree of certainty as to the amount or range of any potential loss. - -------------------------------------------------------------------------------- 6. CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM At a meeting held on December 14, 2005, the Board of Trustees of the Fund appointed KPMG LLP as the independent registered public accounting firm to the Fund to replace the firm of Ernst & Young LLP, who were dismissed as the independent registered public accounting firm to the Fund. This change in the Fund's auditors was approved by the Fund's audit committee and ratified by the Fund's independent Trustees. The report of Ernst & Young LLP on the Fund's statements of assets and liabilities as of March 15, 2005 contained no adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles. The Fund commenced operations on April 5, 2005. During the period from March 15, 2005 through December 14, 2005, there were no disagreements with Ernst & Young LLP on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures which, if not resolved to the satisfaction of Ernst & Young LLP, would have caused Ernst & Young LLP to make reference to the matter in their report. 34 | AGGRESSIVE 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 Aggressive Investor Fund (one of the portfolios constituting the Oppenheimer Portfolio Series), including the statement of investments, as of January 31, 2006, and the related statement of operations, the statement of changes in net assets and the financial highlights 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 audit. We conducted our audit 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, 2006, 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 audit provides 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 Aggressive Investor Fund as of January 31, 2006, the results of its operations, the changes in its net assets and the financial highlights for the period April 5, 2005 (commencement of operations) to January 31, 2006, in conformity with U.S. generally accepted accounting principles. KPMG LLP Denver, Colorado March 15, 2006 35 | AGGRESSIVE INVESTOR FUND FEDERAL INCOME TAX INFORMATION Unaudited - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- In early 2006, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Portfolio during calendar year 2005. Regulations of the U.S. Treasury Department require the Portfolio to report this information to the Internal Revenue Service. Dividends, if any, paid by the Portfolio during the fiscal year ended January 31, 2006 which are not designated as capital gain distributions should be multiplied by 71.34% 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, 2006 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. $642,286 of the Portfolio's fiscal year taxable income may be eligible for the lower individual income tax rates. In early 2006, shareholders of record received information regarding the percentage of distributions that are eligible for lower individual income tax rates. 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. 36 | AGGRESSIVE INVESTOR FUND REPORT OF SHAREHOLDER MEETING Unaudited - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- On September 26, 2005, a shareholder meeting of the Oppenheimer Portfolio Series on behalf of Aggressive Investor Fund was held at which the eleven Trustees identified below were elected. The following is a report of the votes cast: - -------------------------------------------------------------------------------- NOMINEE FOR WITHHELD TOTAL - -------------------------------------------------------------------------------- TRUSTEES Matthew P. Fink 1,101,509.865 4,475.714 1,105,985.579 Robert G. Galli 1,101,509.865 4,475.714 1,105,985.579 Phillip A. Griffiths 1,101,509.865 4,475.714 1,105,985.579 Mary F. Miller 1,101,108.324 4,877.255 1,105,985.579 Joel W. Motley 1,101,509.865 4,475.714 1,105,985.579 John V. Murphy 1,101,509.865 4,475.714 1,105,985.579 Kenneth A. Randall 1,101,509.865 4,475.714 1,105,985.579 Russell S. Reynolds, Jr. 1,101,509.865 4,475.714 1,105,985.579 Joseph M. Wikler 1,101,509.865 4,475.714 1,105,985.579 Peter I. Wold 1,101,509.865 4,475.714 1,105,985.579 Clayton K. Yeutter 1,101,509.865 4,475.714 1,105,985.579 37 | AGGRESSIVE INVESTOR FUND PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities ("portfolio proxies") held by the Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and (iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund's voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at www.sec.gov. The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund's Form N-Q filings are available on the SEC's website at http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 38 | AGGRESSIVE 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 TRUSTEES THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL. CLAYTON K. YEUTTER, Director of American Commercial Lines (barge company) (since January 2005); Chairman of the Board Attorney at Hogan & Hartson (law firm) (since June 1993); Director of Danielson of Trustees (since 2003), Holding Corp. (waste-to-energy company) (since 2002); Director of Trustee (since 2005) Weyerhaeuser Corp. (1999-April 2004); Director of Caterpillar, Inc. (1993- Age: 74 December 2002); Director of ConAgra Foods (1993-2001); Director of Texas Instruments (1993-2001); Director of FMC Corporation (1993-2001). Oversees 38 portfolios in the OppenheimerFunds complex. MATTHEW P. FINK, Trustee of the Committee for Economic Development (policy research foundation) Trustee (since 2005) (since 2005); Director of ICI Education Foundation (education foundation) Age: 64 (since October 1991); President of the Investment Company Institute (trade association) (1991-2004); Director of ICI Mutual Insurance Company (insurance company) (1991-2004). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT G. GALLI, A trustee or director of other Oppenheimer funds. Oversees 48 portfolios in the Trustee (since 2005) OppenheimerFunds complex. Age: 72 PHILLIP A. GRIFFITHS, Director of GSI Lumonics Inc. (precision medical equipment supplier) (since Trustee (since 2005) 2001); Trustee of Woodward Academy (since 1983); Senior Advisor of The Age: 67 Andrew W. Mellon Foundation (since 2001); Member of the National Academy of Sciences (since 1979); Member of the American Philosophical Society (since 1996); Council on Foreign Relations (since 2002); Director of the Institute for Advanced Study (1991-2004); Director of Bankers Trust New York Corporation (1994-1999). Oversees 38 portfolios in the OppenheimerFunds complex. MARY F. MILLER, Trustee of the American Symphony Orchestra (not-for-profit) (since October Trustee (since 2005) 1998); and Senior Vice President and General Auditor of American Express Age: 63 Company (financial services company) (July 1998-February 2003). Oversees 38 portfolios in the OppenheimerFunds complex. JOEL W. MOTLEY, Director of Columbia Equity Financial Corp. (privately-held financial adviser) Trustee (since 2005) (since 2002); Managing Director of Carmona Motley, Inc. (privately-held financial Age: 53 adviser) (since January 2002); Managing Director of Carmona Motley Hoffman Inc. (privately-held financial adviser) (January 1998-December 2001). Oversees 38 portfolios in the OppenheimerFunds complex. KENNETH A. RANDALL, Director of Dominion Resources, Inc. (electric utility holding company) (since Trustee (since 2005) February 1972); Former Director of Prime Retail, Inc. (real estate investment Age: 78 trust), Dominion Energy Inc. (electric power and oil & gas producer), Lumbermens Mutual Casualty Company, American Motorists Insurance Company and American Manufacturers Mutual Insurance Company; Former President and Chief Executive Officer of The Conference Board, Inc. (international economic and business research). Oversees 38 portfolios in the OppenheimerFunds complex.
39 | AGGRESSIVE INVESTOR FUND TRUSTEES AND OFFICERS Unaudited / Continued - -------------------------------------------------------------------------------- RUSSELL S. REYNOLDS, JR., Chairman of The Directorship Search Group, Inc. (corporate governance consulting Trustee (since 2005) and executive recruiting) (since 1993); Life Trustee of International House Age: 73 (non-profit educational organization); Former Trustee of The Historical Society of the Town of Greenwich. Oversees 38 portfolios in the OppenheimerFunds complex. JOSEPH M. WIKLER, Director of the following medical device companies: Medintec (since 1992) and Trustee (since 2005) Cathco (since 1996); Director of Lakes Environmental Association (since 1996); Age: 64 Member of the Investment Committee of the Associated Jewish Charities of Baltimore (since 1994); Director of Fortis/Hartford mutual funds (1994- December 2001). Oversees 39 portfolios in the OppenheimerFunds complex. PETER I. WOLD, President of Wold Oil Properties, Inc. (oil and gas exploration and production Trustee (since 2005) company) (since 1994); Vice President, Secretary and Treasurer of Wold Trona Age: 57 Company, Inc. (soda ash processing and production) (since 1996); Vice President of Wold Talc Company, Inc. (talc mining) (since 1999); Managing Member of Hole-in-the-Wall Ranch (cattle ranching) (since 1979); Director and Chairman of the Denver Branch of the Federal Reserve Bank of Kansas City (1993-1999); and Director of PacifiCorp. (electric utility) (1995-1999). Oversees 39 portfolios in the OppenheimerFunds complex. BRIAN F. WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since September 1995); Trustee (since 2005) Director of Special Value Opportunities Fund, LLC (registered investment company) Age: 62 (since September 2004); Member, Zurich Financial Investment Advisory Board (affiliate of the Manager's parent company) (since October 2004); Board of Governing Trustees of The Jackson Laboratory (non-profit) (since August 1990); Trustee of the Institute for Advanced Study (non-profit educational institute) (since May 1992); Special Limited Partner of Odyssey Investment Partners, LLC (private equity investment) (January 1999-September 2004); Trustee of Research Foundation of AIMR (2000-2002) (investment research, non-profit); Governor, Jerome Levy Economics Institute of Bard College (August 1990- September 2001) (economics research); Director of Ray & Berendtson, Inc. (May 2000-April 2002) (executive search firm); President and Chief Executive Officer of the Delaware Group of Mutual Funds (1992-1995); Chairman, President and Chief Executive Officer of Equitable Capital Management Corporation (1985- 1992); Executive Vice President and Chief Investment Officer at The Equitable Life Assurance Society of the U.S. (1979-1992); Vice President and Co-manager at Smith Barney, Harris Upham and Company (1970-1979); Engineer, Sperry Gyroscope Company (1966-1970); former governor of the Association for Investment Management and Research; former chairman of the Institute of Chartered Financial Analysts; Chartered Financial Analyst. Oversees 48 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH AND OFFICER FLOOR, NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES. JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President Trustee, President and (since September 2000) of the Manager; President and Director or Trustee of Principal Executive Officer other Oppenheimer funds; President and Director of Oppenheimer Acquisition (since 2005) Corp. ("OAC") (the Manager's parent holding company) and of Oppenheimer Age: 56 Partnership Holdings, Inc. (holding company subsidiary of the Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the
40 | AGGRESSIVE INVESTOR FUND JOHN V. MURPHY, Manager) (since November 2001); Chairman and Director of Shareholder Continued Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager) (since July 2001); President and Director of OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since July 2001); Director of the following investment advisory subsidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment Management Corporation and Tremont Capital Management, Inc. (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 1, 2001) and Director (since July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President of Massachusetts Mutual Life Insurance Company (OAC's parent company) (since February 1997); Director of DLB Acquisition Corporation (holding company parent of Babson Capital Management LLC) (since June 1995); Member of the Investment Company Institute's Board of Governors (since October 3, 2003); Chief Operating Officer of the Manager (September 2000-June 2001); President and Trustee of MML Series Investment Fund and MassMutual Select Funds (open-end investment companies) (November 1999-November 2001); Director of C.M. Life Insurance Company (September 1999-August 2000); President, Chief Executive Officer and Director of MML Bay State Life Insurance Company (September 1999-August 2000); Director of Emerald Isle Bancorp and Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June 1998). Oversees 87 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------------------------------------------------ OTHER OFFICERS THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. SCHADT, OF THE PORTFOLIO WEBMAN, WILBY, WOLFGRUBER AND ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS.VANDEHEY AND WIXTED, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT DEATH OR REMOVAL. RUDI W. SCHADT, Vice President, Director of Research in Product Design and Risk Management of Vice President and Portfolio the Manager. Prior to joining the Manager in February 2002 he was a Director Manager (since 2005) and Senior Quantitative Analyst (2000-2001) at UBS Asset Management prior to Age: 48 which he was an Associate Director of Research (since June 1999) and Senior Researcher and Portfolio Manager (from June 1997) at State Street Global Advisors. An officer of 7 portfolios in the OppenheimerFunds complex. JERRY WEBMAN, Senior Vice President (since February 1996) and Senior Investment Officer and Vice President and Portfolio Director (since 1997) of the Manager's Fixed Income Investments; Senior Vice Manager (since 2005) President (since May 1999) of HarbourView Asset Management Corporation. An Age: 56 officer of 4 portfolios in the OppenheimerFunds complex. WILLIAM L. WILBY, Senior Vice President (since July 1994) and Senior Investment Officer, Director of Vice President and Portfolio Equities (since July 2004) of the Manager. Formerly, Senior Investment Officer, Manager (since 2005) Director of International Equities of the Manager (May 2000-July 2004) and Age: 61 Senior Vice President of HarbourView Asset Management Corporation (May 1999-November 2001). An officer of 6 portfolios in the OppenheimerFunds complex. KURT WOLFGRUBER, Executive Vice President (since March 2003) and Chief Investment Officer and Vice President and Portfolio Director (since July 2003) of the Manager; Director of HarbourView Asset Manager (since 2005) Management Corporation and of OFI Institutional Asset Management, Inc. Age: 55 (since June 2003) and of Tremont Capital Management, Inc. (since October 2001). An officer of 4 portfolios in the OppenheimerFunds complex.
41 | AGGRESSIVE INVESTOR FUND TRUSTEES AND OFFICERS Unaudited / Continued - -------------------------------------------------------------------------------- MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since Vice President and Chief March 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Compliance Officer Asset Management Corporation and Shareholder Services, Inc. (since June 1983). (since 2005) Former Vice President and Director of Internal Audit of the Manager (1997- Age: 55 February 2004). An officer of 87 portfolios in the OppenheimerFunds complex. BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer and Principal Treasurer of the following: HarbourView Asset Management Corporation, Financial and Accounting Shareholder Financial Services, Inc., Shareholder Services, Inc., Oppenheimer Real Officer (since 2005) Asset Management Corporation, and Oppenheimer Partnership Holdings, Inc. Age: 46 (since March 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd. (since May 2000), OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (charitable trust program estab- lished by the Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since March 1999),Centennial Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March 1995-March 1999). An officer of 87 portfolios in the OppenheimerFunds complex. ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March Secretary (since 2005) 2002) of the Manager; General Counsel and Director of the Distributor (since Age: 57 December 2001); General Counsel of Centennial Asset Management Corporation (since December 2001); Senior Vice President and General Counsel of HarbourView Asset Management Corporation (since December 2001); Secretary and General Counsel of OAC (since November 2001); Assistant Secretary (since September 1997) and Director (since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since December 2002); Director of Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice President, General Counsel and Director of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice President, General Counsel and Director of OFI Private Investments, Inc. and OFI Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since November 2001); Director of OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President (May 1985-December 2003), Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of the following: Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001), and OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of 87 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. 42 | AGGRESSIVE INVESTOR FUND CONSERVATIVE INVESTOR FUND TOP HOLDINGS AND ALLOCATIONS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ASSET CLASS ALLOCATION [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Global Equity 5.9% U.S. Equity 17.0 Fixed Income 65.8 Alternative Investments 11.3 Portfolio holdings and allocations are subject to change. Percentages are as of January 31, 2006, and are based on the total market value of investments in affiliated companies. - -------------------------------------------------------------------------------- 9 | CONSERVATIVE INVESTOR FUND PORTFOLIO PERFORMANCE DISCUSSION - -------------------------------------------------------------------------------- HOW HAS THE PORTFOLIO PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS, INC., OF THE PORTFOLIO'S PERFORMANCE DURING THE REPORTING PERIOD OF APRIL 5, 2005 TO JANUARY 31, 2006, FOLLOWED BY A GRAPHICAL COMPARISON OF THE PORTFOLIO'S PERFORMANCE TO AN APPROPRIATE BROAD-BASED MARKET INDEX. MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE. Since the Portfolio's inception on April 5, 2005 to the end of the reporting period on January 31, 2006, the Portfolio outperformed its fixed income benchmark, the Lehman Brothers Aggregate Bond Index. We attribute this outperformance to the Portfolio's diversified structure. During the reporting period, the Portfolio significantly benefited from its equity exposure, which accounted for approximately 23% of the Portfolio at the end of the period. When the Portfolio was launched in early April 2005, equities had hit year lows and since then the stock indices have rallied. For example, the S&P 500 Index rose 9.96% since the Portfolio's inception, despite returning only -0.81% for the first six months of 2005. Other major contributors to the Portfolio's performance included its positions in Oppenheimer Global Fund, Oppenheimer Real Estate Fund, Oppenheimer International Bond Fund and Oppenheimer High Yield Fund. On the equity side, the Portfolio's allocation to the Oppenheimer Global Fund Class Y Shares, which posted a return of 24.72% over the reporting period, aided its performance. The strong performance of Oppenheimer Global Fund is a reflection of a successful stock selection strategy. On the alternative investments side, the Portfolio's 5.7% position in Oppenheimer Real Estate Fund's Class Y Shares, which posted a return of 34.44% over the reporting period and ranked favorably within its own peer group, was a boon to the Portfolio's performance. Oppenheimer Real Estate Fund's success can be attributed to its profitable investments in the apartment, office and industrial sectors. On the fixed income side, the Portfolio benefited from its allocation to Oppenheimer International Bond Fund's Class Y Shares, as this Fund outperformed its Lipper peer group and peer benchmark primarily due to its successful investments in local currencies within the emerging markets. Additionally contributing to the Portfolio's performance was its allocation to Oppenheimer High Yield Fund. Over the reporting period, Oppenheimer High Yield Fund received positive contributions to performance from its relatively heavy investments in the telecommunications sector, which benefited from a surge in mergers-and-acquisitions activity. On the negative side, the Portfolio's 16% allocation to Oppenheimer's Limited-Term Government Fund's Class Y Shares hampered the Portfolio's performance. As the Fed continued to raise short-term interest rates over the period, funds that had a large exposure to the short end of the yield curve, such as Oppenheimer Limited-Term Government Fund, with its significant allocation to short-term treasury notes, were adversely affected since short-term treasuries underperformed long-term treasuries. 10 | CONSERVATIVE INVESTOR FUND PORTFOLIO PERFORMANCE DISCUSSION - -------------------------------------------------------------------------------- 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, 2006. Performance is measured from the inception of Classes A, B, C, N and Y on April 5, 2005. The Portfolio's performance reflects the deduction of the maximum initial sales charge on Class A shares, the applicable contingent deferred sales charge on Class B, Class C and Class N shares, and reinvestments of all dividends and capital gains distributions. Past performance cannot guarantee future results. The Portfolio's performance is compared to the performance of the S&P 500 Index and the Lehman Brothers Aggregate Bond Index. The S&P 500 Index is a broad-based measure of domestic stock performance that includes the reinvestment of dividends. The index is unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative purposes only and does not predict or depict the performance of the Portfolio. The Lehman Brothers Aggregate Bond Index is an index of U.S. Government and corporate bonds that includes reinvestment of dividends. Index performance reflects the reinvestment of income but does not consider the effect of transaction costs, and none of the data in the graphs shows the effect of taxes. The Portfolio's performance reflects the effects of the Portfolio's business and operating expenses. While index comparisons may be useful to provide a benchmark for the Portfolio's performance, it must be noted that the Portfolio's investments are not limited to the investments in the index. 11 | CONSERVATIVE INVESTOR FUND PORTFOLIO PERFORMANCE DISCUSSION - -------------------------------------------------------------------------------- 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 Brothers Aggregate Bond Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.] Oppenheimer Portfolio Series: Conservative Investor Fund S & P 500 Index Lehman Brothers (Class A) Aggregate 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 AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE PORTFOLIO AT 1/31/06 Since Inception (4/5/05) 0.99% 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 Brothers Aggregate Bond Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.] Oppenheimer Portfolio Series: Conservative Investor Fund S & P 500 Index Lehman Brothers (Class B) Aggregate 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 10,144 11,005 10,293 AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE PORTFOLIO AT 1/31/06 Since Inception (4/5/05) 1.44% 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 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 - -------------------------------------------------------------------------------- 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 Brothers Aggregate Bond Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.] Oppenheimer Portfolio Series: Conservative Investor Fund S & P 500 Index Lehman Brothers (Class C) Aggregate 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 10,537 11,005 10,293 AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE PORTFOLIO AT 1/31/06 Since Inception (4/5/05) 5.37% 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 Brothers Aggregate Bond Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.] Oppenheimer Portfolio Series: Conservative Investor Fund S & P 500 Index Lehman Brothers (Class N) Aggregate Bond Index 04/05/2005 10,000 10,000 10,000 04/30/2005 9,980 9,810 10,135 07/31/2005 10,340 10,514 10,207 10/31/2005 10,290 10,327 10,150 01/31/2006 10,598 11,005 10,293 AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE PORTFOLIO AT 1/31/06 Since Inception (4/5/05) 5.98% 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 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 - -------------------------------------------------------------------------------- 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 Brothers Aggregate Bond Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.] Oppenheimer Portfolio Series: Conservative Investor Fund S & P 500 Index Lehman Brothers (Class Y) Aggregate 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 AVERAGE ANNUAL TOTAL RETURNS OF CLASS Y SHARES OF THE PORTFOLIO AT 1/31/06 Since Inception (4/5/05) 7.34% 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 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 - -------------------------------------------------------------------------------- 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 current maximum initial sales charge of 5.75%. CLASS B shares of the Portfolio were first publicly offered on 4/5/05. Unless otherwise noted, Class B returns include the applicable contingent deferred sales charge of 5% (1-year). 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 - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- PORTFOLIO EXPENSES. As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and service fees; and other Portfolio expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended January 31, 2006. ACTUAL EXPENSES. The "actual" lines of the table provide information about actual account values and actual expenses. You may use the information on this line for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the "actual" line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio for each class of shares, and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as front-end or contingent deferred sales charges (loads), or a $12.00 fee imposed annually on accounts valued at less than $500.00 (subject to exceptions described in 19 | CONSERVATIVE INVESTOR FUND PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- the Statement of Additional Information). Therefore, the "hypothetical" lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING VALUE VALUE 6 MONTHS ENDED (8/1/05) (1/31/06) JANUARY 31, 2006 - -------------------------------------------------------------------------------- Class A Actual $1,000.00 $1,036.30 $2.52 - -------------------------------------------------------------------------------- Class A Hypothetical 1,000.00 1,022.74 2.50 - -------------------------------------------------------------------------------- Class B Actual 1,000.00 1,031.40 6.88 - -------------------------------------------------------------------------------- Class B Hypothetical 1,000.00 1,018.45 6.84 - -------------------------------------------------------------------------------- Class C Actual 1,000.00 1,031.70 6.83 - -------------------------------------------------------------------------------- Class C Hypothetical 1,000.00 1,018.50 6.79 - -------------------------------------------------------------------------------- Class N Actual 1,000.00 1,034.60 3.65 - -------------------------------------------------------------------------------- Class N Hypothetical 1,000.00 1,021.63 3.62 - -------------------------------------------------------------------------------- Class Y Actual 1,000.00 1,037.10 1.18 - -------------------------------------------------------------------------------- Class Y Hypothetical 1,000.00 1,024.05 1.17 Hypothetical assumes 5% annual return before expenses. Expenses are equal to the Portfolio's annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Those annualized expense ratios, excluding all underlying fund expenses, based on the 6-month period ended January 31, 2006 are as follows: CLASS EXPENSE RATIOS - ---------------------------------- Class A 0.49% - ---------------------------------- Class B 1.34 - ---------------------------------- Class C 1.33 - ---------------------------------- Class N 0.71 - ---------------------------------- Class Y 0.23 The expense ratios reflect voluntary waivers or reimbursements of expenses by the Portfolio's Manager and Transfer Agent that can be terminated at any time, without advance notice. The "Financial Highlights" tables in the Portfolio's financial statements, included in this report, also show the gross expense ratios, without such waivers or reimbursements. - -------------------------------------------------------------------------------- 20 | CONSERVATIVE INVESTOR FUND STATEMENT OF INVESTMENTS January 31, 2006 - --------------------------------------------------------------------------------
VALUE SHARES SEE NOTE 1 - ----------------------------------------------------------------------------------------------------------------- INVESTMENTS IN AFFILIATED COMPANIES--97.1% 1 - ----------------------------------------------------------------------------------------------------------------- GLOBAL EQUITY--5.7% Oppenheimer Global Fund, Cl. Y 66,908 $ 4,731,060 - ----------------------------------------------------------------------------------------------------------------- U.S. EQUITY--16.5% Oppenheimer Capital Appreciation Fund, Cl. Y 99,978 4,563,028 - ----------------------------------------------------------------------------------------------------------------- Oppenheimer Main Street Fund, Cl. Y 117,728 4,521,933 - ----------------------------------------------------------------------------------------------------------------- Oppenheimer Value Fund, Cl. Y 181,842 4,453,313 ----------- 13,538,274 - ----------------------------------------------------------------------------------------------------------------- FIXED INCOME FUNDS--63.9% Oppenheimer Core Bond Fund, Cl. Y 2,533,270 25,839,353 - ----------------------------------------------------------------------------------------------------------------- Oppenheimer High Yield Fund, Cl. Y 978,485 9,119,482 - ----------------------------------------------------------------------------------------------------------------- Oppenheimer International Bond Fund, Cl. Y 751,912 4,451,319 - ----------------------------------------------------------------------------------------------------------------- Oppenheimer Limited-Term Government Fund, Cl. Y 1,326,111 13,208,065 ----------- 52,618,219 - ----------------------------------------------------------------------------------------------------------------- ALTERNATIVE INVESTMENTS--11.0% Oppenheimer Real Asset Fund, Cl. Y 524,309 4,304,573 - ----------------------------------------------------------------------------------------------------------------- Oppenheimer Real Estate Fund, Cl. Y 230,456 4,726,661 ----------- 9,031,234 ----------- Total Investments in Affiliated Companies (Cost $78,851,358) 79,918,787 PRINCIPAL AMOUNT - ----------------------------------------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS--0.0% Undivided interest of 0.001% in joint repurchase agreement (Principal Amount/ Value $781,426,000, with a maturity value of $781,521,291) with UBS Warburg LLC, 4.39%, dated 1/31/06, to be repurchased at $5,001 on 2/1/06, collateralized by Federal Home Loan Mortgage Corp., 5%, 12/1/35, with a value of $799,056,396 (Cost $5,000) $5,000 5,000 - ----------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $78,856,358) 97.1% 79,923,787 - ----------------------------------------------------------------------------------------------------------------- OTHER ASSETS NET OF LIABILITIES 2.9 2,366,981 --------------------------- NET ASSETS 100.0% $82,290,768 ===========================
21 | CONSERVATIVE INVESTOR FUND STATEMENT OF INVESTMENTS Continued - -------------------------------------------------------------------------------- FOOTNOTES TO STATEMENT OF INVESTMENTS 1. Affiliated companies. Represents ownership of an affiliated fund, at or during the period ended January 31, 2006. Transactions during the period in which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES APRIL 5, 2005 ADDITIONS REDUCTIONS JAN. 31, 2006 - ---------------------------------------------------------------------------------------------------------------------------- Oppenheimer Capital Appreciation Fund, Cl. Y -- 102,934 2,956 99,978 Oppenheimer Core Bond Fund, Cl. Y -- 2,800,411 267,141 2,533,270 Oppenheimer Global Fund, Cl. Y -- 68,853 1,945 66,908 Oppenheimer High Yield Fund, Cl. Y -- 1,008,253 29,768 978,485 Oppenheimer International Bond Fund, Cl. Y -- 774,461 22,549 751,912 Oppenheimer Limited-Term Government Fund, Cl. Y -- 1,367,069 40,958 1,326,111 Oppenheimer Main Street Fund, Cl. Y -- 121,217 3,489 117,728 Oppenheimer Real Asset Fund, Cl. Y -- 540,767 16,458 524,309 Oppenheimer Real Estate Fund, Cl. Y -- 237,176 6,720 230,456 Oppenheimer Value Fund, Cl. Y -- 187,276 5,434 181,842 VALUE DIVIDEND REALIZED SEE NOTE 1 INCOME LOSS - ---------------------------------------------------------------------------------------------------------------------------- Oppenheimer Capital Appreciation Fund, Cl. Y $ 4,563,028 $ 30,343 $ (2,207) Oppenheimer Core Bond Fund, Cl. Y 25,839,353 480,979 (26,456) Oppenheimer Global Fund, Cl. Y 4,731,060 32,152 (3,062) Oppenheimer High Yield Fund, Cl. Y 9,119,482 247,087 (5,509) Oppenheimer International Bond Fund, Cl. Y 4,451,319 155,090 (3,241) Oppenheimer Limited-Term Government Fund, Cl. Y 13,208,065 183,650 (4,219) Oppenheimer Main Street Fund, Cl. Y 4,521,933 45,568 (1,938) Oppenheimer Real Asset Fund, Cl. Y 4,304,573 123,638 (24,408) Oppenheimer Real Estate Fund, Cl. Y 4,726,661 116,383 (3,103) Oppenheimer Value Fund, Cl. Y 4,453,313 75,784 (4,038) ---------------------------------------------- $ 79,918,787 $1,490,674 $(78,181) ==============================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 22 | CONSERVATIVE INVESTOR FUND STATEMENT OF ASSETS AND LIABILITIES January 31, 2006 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ASSETS - -------------------------------------------------------------------------------- Investments, at value--see accompanying statement of investments: Unaffiliated companies (cost $5,000) $ 5,000 Affiliated companies (cost $78,851,358) 79,918,787 ----------- 79,923,787 - -------------------------------------------------------------------------------- Cash 5,163 - -------------------------------------------------------------------------------- Receivables and other assets: Shares of beneficial interest sold 2,690,308 Interest and dividends 208,258 Other 1,998 ----------- Total assets 82,829,514 - -------------------------------------------------------------------------------- LIABILITIES - -------------------------------------------------------------------------------- Payables and other liabilities: Investments purchased 363,117 Shares of beneficial interest redeemed 115,012 Legal, auditing and other professional fees 19,038 Distribution and service plan fees 15,688 Shareholder communications 12,705 Transfer and shareholder servicing agent fees 4,216 Trustees' compensation 119 Other 8,851 ----------- Total liabilities 538,746 - -------------------------------------------------------------------------------- NET ASSETS $82,290,768 =========== - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS - -------------------------------------------------------------------------------- Par value of shares of beneficial interest $ 7,830 - -------------------------------------------------------------------------------- Additional paid-in capital 80,809,603 - -------------------------------------------------------------------------------- Accumulated net investment income 143,905 - -------------------------------------------------------------------------------- Accumulated net realized gain on investments 262,001 - -------------------------------------------------------------------------------- Net unrealized appreciation on investments 1,067,429 ----------- NET ASSETS $82,290,768 ===========
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 $46,318,136 and 4,400,623 shares of beneficial interest outstanding) $10.53 Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $11.17 - ------------------------------------------------------------------------------------------------------------ Class B Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $9,163,440 and 873,549 shares of beneficial interest outstanding) $10.49 - ------------------------------------------------------------------------------------------------------------ Class C Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $19,144,803 and 1,826,455 shares of beneficial interest outstanding) $10.48 - ------------------------------------------------------------------------------------------------------------ Class N Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $7,568,565 and 720,410 shares of beneficial interest outstanding) $10.51 - ------------------------------------------------------------------------------------------------------------ Class Y Shares: Net asset value, redemption price and offering price per share (based on net assets of $95,824 and 9,089 shares of beneficial interest outstanding) $10.54
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 24 | CONSERVATIVE INVESTOR FUND STATEMENT OF OPERATIONS For the Period Ended January 31, 2006 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INVESTMENT INCOME - -------------------------------------------------------------------------------- Dividends from affiliated companies $1,490,674 - -------------------------------------------------------------------------------- Interest 10,535 ----------- Total investment income 1,501,209 - -------------------------------------------------------------------------------- EXPENSES - -------------------------------------------------------------------------------- Distribution and service plan fees: Class A 43,617 Class B 32,998 Class C 62,739 Class N 9,122 - -------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees: Class A 11,058 Class B 4,274 Class C 6,333 Class N 720 Class Y 69 - -------------------------------------------------------------------------------- Shareholder communications: Class A 12,002 Class B 4,048 Class C 7,095 Class N 709 Class Y 12 - -------------------------------------------------------------------------------- Legal, auditing and other professional fees 25,605 - -------------------------------------------------------------------------------- Trustees' compensation 7,744 - -------------------------------------------------------------------------------- Custodian fees and expenses 821 - -------------------------------------------------------------------------------- Other 11,776 ----------- Total expenses 240,742 Less reduction to custodian expenses (4) Less waivers and reimbursements of expenses (7,387) ----------- Net expenses 233,351 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME 1,267,858 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) - -------------------------------------------------------------------------------- Net realized gain (loss) on: Distributions received from affiliated companies 396,255 Affiliated companies (78,181) ----------- Net realized gain 318,074 - -------------------------------------------------------------------------------- Net change in unrealized appreciation on investments 1,067,429 - -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,653,361 ===========
1. For the period from April 5, 2005 (commencement of operations) to January 31, 2006. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 25 | CONSERVATIVE INVESTOR FUND STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
PERIOD ENDED JANUARY 31, 2006 1 - --------------------------------------------------------------------------------------------- OPERATIONS - --------------------------------------------------------------------------------------------- Net investment income $ 1,267,858 - --------------------------------------------------------------------------------------------- Net realized gain 318,074 - --------------------------------------------------------------------------------------------- Net change in unrealized appreciation 1,067,429 ------------- Net increase in net assets resulting from operations 2,653,361 - --------------------------------------------------------------------------------------------- DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS - --------------------------------------------------------------------------------------------- Dividends from net investment income: Class A (681,145) Class B (105,273) Class C (216,389) Class N (125,016) Class Y (1,638) - --------------------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS - --------------------------------------------------------------------------------------------- Net increase in net assets resulting from beneficial interest transactions: Class A 45,236,761 Class B 9,001,293 Class C 18,835,139 Class N 7,498,474 Class Y 91,201 - --------------------------------------------------------------------------------------------- NET ASSETS - --------------------------------------------------------------------------------------------- Total increase 82,186,768 - --------------------------------------------------------------------------------------------- Beginning of period 104,000 2 ------------- End of period (including accumulated net investment income of $143,905 for the period ended January 31, 2006) $82,290,768 =============
1. For the period from April 5, 2005 (commencement of operations) to January 31, 2006. 2. Reflects the value of the Manager's initial seed money investment on March 15, 2005. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 26 | CONSERVATIVE INVESTOR FUND FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
PERIOD ENDED JANUARY 31, 2006 1 CLASS A CLASS B CLASS C - --------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA - --------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 - --------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 2 .38 .32 .32 Net realized and unrealized gain .33 .32 .31 ------------------------------------------ Total from investment operations .71 .64 .63 - --------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.18) (.15) (.15) - --------------------------------------------------------------------------------------------- Net asset value, end of period $ 10.53 $ 10.49 $ 10.48 ========================================== - --------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 3 7.15% 6.44% 6.37% - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $46,318 $ 9,163 $19,145 - --------------------------------------------------------------------------------------------- Average net assets (in thousands) $21,844 $ 4,018 $ 7,647 - --------------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 4.50% 3.74% 3.78% Total expenses 0.53% 5 1.39% 6 1.36% 7 Expenses after waivers and reimbursements and reduction to custodian expenses 0.51% 1.34% 1.33% - --------------------------------------------------------------------------------------------- Portfolio turnover rate 11% 11% 11%
1. For the period from April 5, 2005 (commencement of operations) to January 31, 2006. 2. Per share amounts calculated based on the average shares outstanding during the period. 3. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. 4. Annualized for periods of less than one full year. 5. Expenses including all underlying fund expenses were 1.19% for January 31, 2006. 6. Expenses including all underlying fund expenses were 2.05% for January 31, 2006. 7. Expenses including all underlying fund expenses were 2.02% for January 31, 2006. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 27 | CONSERVATIVE INVESTOR FUND FINANCIAL HIGHLIGHTS Continued - -------------------------------------------------------------------------------- PERIOD ENDED JANUARY 31, 2006 1 CLASS N CLASS Y - -------------------------------------------------------------------------------- PER SHARE OPERATING DATA Net asset value, beginning of period $10.00 $10.00 - -------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 2 .41 .38 Net realized and unrealized gain .28 .35 ------------------------ Total from investment operations .69 .73 - -------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.18) (.19) - -------------------------------------------------------------------------------- Net asset value, end of period $10.51 $10.54 ======================== - -------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 3 6.98% 7.34% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Net assets, end of period (in thousands) $7,569 $ 96 - -------------------------------------------------------------------------------- Average net assets (in thousands) $2,231 $ 71 - -------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 4.82% 4.42% Total expenses 0.72% 5 0.30% 6 Expenses after waivers and reimbursements and reduction to custodian expenses 0.71% 0.25% - -------------------------------------------------------------------------------- Portfolio turnover rate 11% 11% 1. For the period from April 5, 2005 (commencement of operations) to January 31, 2006. 2. Per share amounts calculated based on the average shares outstanding during the period. 3. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. 4. Annualized for periods of less than one full year. 5. Expenses including all underlying fund expenses were 1.38% for January 31, 2006. 6. Expenses including all underlying fund expenses were 0.96% for January 31, 2006. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 28 | CONSERVATIVE INVESTOR FUND NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Oppenheimer Portfolio Series (the "Fund") is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. Conservative Investor Fund (the "Portfolio") is a series of the Fund whose investment objective is to seek current income with a secondary objective of long-term growth of capital. The Portfolio is a special type of mutual fund known as a "fund of funds" because it invests in other mutual funds. The Portfolio normally invests in a portfolio consisting of a target-weighted allocation in Class A or Class Y shares of other Oppenheimer funds. The Fund's investment advisor is OppenheimerFunds, Inc. (the "Manager"). The Portfolio offers Class A, Class B, Class C, Class N and Class Y shares. Class A shares are sold at their offering price, which is normally net asset value plus a front-end sales charge. Class B, Class C and Class N shares are sold without a front-end sales charge but may be subject to a contingent deferred sales charge (CDSC). Class N shares are sold only through retirement plans. Retirement plans that offer Class N shares may impose charges on those accounts. Class Y shares are sold to certain institutional investors without either a front-end sales charge or a CDSC, however, the institutional investor may impose charges on those accounts. All classes of shares have identical rights and voting privileges with respect to the Portfolio in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class. Class A, B, C and N have separate distribution and/or service plans. No such plan has been adopted for Class Y shares. Class B shares will automatically convert to Class A shares six years after the date of purchase. Under normal market conditions, the Manager will invest the Portfolio's assets in shares of Oppenheimer Core Bond Fund, Oppenheimer Capital Appreciation Fund, Oppenheimer Global Fund, Oppenheimer High Yield Fund, Oppenheimer International Bond Fund, Oppenheimer Limited-Term Government Fund, Oppenheimer Main Street Fund(R), Oppenheimer Real Asset Fund(R), Oppenheimer Real Estate Fund and Oppenheimer Value Fund (individually, an "Underlying Fund" and collectively, the "Underlying Funds"). The following is a summary of significant accounting policies consistently followed by the Portfolio. - -------------------------------------------------------------------------------- SECURITIES VALUATION. The Portfolio calculates the net asset value of each class of shares based upon the net asset value of the applicable Underlying Funds' as of the close of The New York Stock Exchange (the "Exchange"), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading. For each Underlying Fund, the net asset value per share for a class of shares on a "regular business day" is determined by dividing the value of the Underlying Fund's net assets attributable to that class by the number of shares of that class outstanding on that day. To determine net asset values, the Underlying Fund assets are valued primarily on the basis of current market quotations. If market quotations are not readily available or do 29 | CONSERVATIVE INVESTOR FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued not accurately reflect fair value for a security (in the Manager's judgment) or if a security's value has been materially affected by events occurring after the close of the exchange or market on which the security is principally traded, that security may be valued by another method that the Underlying Fund's Board of Trustees/Directors believes accurately reflects the fair value. Because some foreign securities trade in markets and on exchanges that operate on weekends and U.S. holidays, the values of some of the Underlying Fund's foreign investments may change on days when investors cannot buy or redeem Underlying Fund shares. Short-term "money market type" debt securities with remaining maturities of sixty days or less are valued at amortized cost (which approximates market value). - -------------------------------------------------------------------------------- RISKS OF INVESTING IN THE UNDERLYING FUNDS. Each of the Underlying Funds in which the Portfolio invests has its own investment risks, and those risks can affect the value of the Portfolio's investments and therefore the value of the Portfolio's shares. To the extent that the Portfolio invests more of its assets in one Underlying Fund than in another, the Portfolio will have greater exposure to the risks of that Underlying Fund. - -------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Portfolio, along with other affiliated funds advised by the Manager, may transfer uninvested cash balances into joint trading accounts on a daily basis. These balances are invested in one or more repurchase agreements. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. In the event of default by the other party to the agreement, retention of the collateral may be subject to legal proceedings. - -------------------------------------------------------------------------------- ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class. - -------------------------------------------------------------------------------- FEDERAL TAXES. The Portfolio intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders, therefore, no federal income or excise tax provision is required. 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. 30 | CONSERVATIVE INVESTOR FUND NET UNREALIZED APPRECIATION BASED ON COST OF SECURITIES AND UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME INCOME GAIN CARRYFORWARD 1 TAX PURPOSES ------------------------------------------------------------------------ $143,954 $287,411 $-- $1,042,019 1. During the period ended January 31, 2006, the Fund did not have any capital loss carryforward. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Portfolio. Accordingly, the following amounts have been reclassified for January 31, 2006. Net assets of the Portfolio were unaffected by the reclassifications. REDUCTION INCREASE TO ACCUMULATED NET INCREASE TO ACCUMULATED NET REALIZED GAIN TO PAID-IN CAPITAL INVESTMENT INCOME ON INVESTMENTS 2 ------------------------------------------------------------------------ $50,565 $5,508 $56,073 2. $56,073, all of which was long-term capital gain, was distributed in connection with Portfolio share redemptions. The tax character of distributions paid during the period ended January 31, 2006 was as follows: PERIOD ENDED JANUARY 31, 2006 ------------------------------------------------------- Distributions paid from: Ordinary income $1,129,461 The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of January 31, 2006 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 $ 78,881,768 ============= Gross unrealized appreciation $ 1,386,485 Gross unrealized depreciation (344,466) ------------- Net unrealized appreciation $ 1,042,019 ============= - -------------------------------------------------------------------------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded 31 | CONSERVATIVE INVESTOR FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued on the ex-dividend date. Income and capital gain distributions, if any, are declared and paid annually. - -------------------------------------------------------------------------------- INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, which includes accretion of discount and amortization of premium, is accrued as earned. - -------------------------------------------------------------------------------- CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may include interest expense incurred by the Portfolio on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Portfolio pays interest to its custodian on such cash overdrafts to the extent they are not offset by positive cash balances maintained by the Portfolio at a rate equal to the Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item, if applicable, represents earnings on cash balances maintained by the Portfolio during the period. Such interest expense and other custodian fees may be paid with these earnings. - -------------------------------------------------------------------------------- SECURITY TRANSACTIONS. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost. - -------------------------------------------------------------------------------- INDEMNIFICATIONS. The Portfolio's organizational documents provide current and former trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Portfolio. In the normal course of business, the Portfolio may also enter into contracts that provide general indemnifications. The Portfolio's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Portfolio. The risk of material loss from such claims is considered remote. - -------------------------------------------------------------------------------- OTHER. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 32 | CONSERVATIVE INVESTOR FUND - -------------------------------------------------------------------------------- 2. SHARES OF BENEFICIAL INTEREST The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows: PERIOD ENDED JANUARY 31, 2006 1,2 SHARES AMOUNT - -------------------------------------------------------------------------------- CLASS A Sold 4,892,094 $50,465,464 Dividends and/or distributions reinvested 58,785 607,250 Redeemed (560,256) (5,835,953) -------------------------------- Net increase 4,390,623 $45,236,761 ================================ - -------------------------------------------------------------------------------- CLASS B Sold 949,406 $ 9,789,255 Dividends and/or distributions reinvested 9,315 95,942 Redeemed (85,272) (883,904) -------------------------------- Net increase 873,449 $ 9,001,293 ================================ - -------------------------------------------------------------------------------- CLASS C Sold 1,904,973 $19,653,821 Dividends and/or distributions reinvested 19,416 199,792 Redeemed (98,034) (1,018,474) -------------------------------- Net increase 1,826,355 $18,835,139 ================================ - -------------------------------------------------------------------------------- CLASS N Sold 1,007,278 $10,503,896 Dividends and/or distributions reinvested 11,897 122,654 Redeemed (298,865) (3,128,076) -------------------------------- Net increase 720,310 $ 7,498,474 ================================ - -------------------------------------------------------------------------------- CLASS Y Sold 14,752 $ 151,331 Dividends and/or distributions reinvested 157 1,619 Redeemed (5,920) (61,749) -------------------------------- Net increase 8,989 $ 91,201 ================================ 1. For the period from April 5, 2005 (commencement of operations) to January 31, 2006. 2. The Fund sold 10,000 shares of Class A at a value of $100,000 and 100 shares of Class B, Class C, Class N and Class Y at a value of $1,000, respectively, to the Manager upon seeding of the Fund on March 15, 2005. 33 | CONSERVATIVE INVESTOR 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, for the period ended January 31, 2006, were as follows: PURCHASES SALES - -------------------------------------------------------------------------------- Investment securities $83,303,944 $4,374,405 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES MANAGEMENT FEES. Under the investment advisory agreement, the Manager does not charge a management fee, but rather collects indirect management fees from investments in the Underlying Funds. The weighted indirect management fees collected from the Underlying Funds, as a percent of average daily net assets of the Portfolio for the period ended January 31, 2006 was 0.56%. - -------------------------------------------------------------------------------- TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Portfolio. The Portfolio pays OFS a per account fee. For the period ended January 31, 2006, the Portfolio paid $18,168 to OFS for services to the Portfolio. Additionally, Class Y shares are subject to minimum fees of $10,000 per annum for assets of $10 million or more. The Class Y shares are subject to the minimum fees in the event that the per account fee does not equal or exceed the applicable minimum fees. OFS may voluntarily waive the minimum fees. - -------------------------------------------------------------------------------- INITIAL OFFERING AND ORGANIZATIONAL COSTS. The Manager assumed all initial offering and organizational costs associated with the registration and seeding of the Portfolio. - -------------------------------------------------------------------------------- DISTRIBUTION AND SERVICE PLAN (12B-1) FEES. Under its General Distributor's Agreement with the Portfolio, OppenheimerFunds Distributor, Inc. (the Distributor) acts as the Portfolio's principal underwriter in the continuous public offering of the Portfolio's classes of shares. - -------------------------------------------------------------------------------- SERVICE PLAN FOR CLASS A SHARES. The Portfolio has adopted a Service Plan for Class A shares. It reimburses the Distributor for a portion of its costs incurred for services provided to accounts that hold Class A shares. Reimbursement is made periodically at an annual rate of up to 0.25% of the average annual net assets of Class A shares of the Portfolio. The Distributor currently uses all of those fees to pay dealers, brokers, banks and other financial institutions periodically for providing personal services and maintenance of accounts of their customers that hold Class A shares. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent years. Fees incurred by the Portfolio under the Plan are detailed in the Statement of Operations. - -------------------------------------------------------------------------------- DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Portfolio has adopted Distribution and Service Plans for Class B, Class C and Class N shares to compensate the Distributor for its services and costs in connection with the distribution 34 | CONSERVATIVE INVESTOR FUND of those shares and servicing accounts. Under the plans, the Portfolio pays the Distributor an annual asset-based sales charge of 0.75% on Class B and Class C shares and 0.25% on Class N shares. The Distributor also receives a service fee of 0.25% per year under each plan. If either the Class B, Class C or Class N plan is terminated by the Portfolio or by the shareholders of a class, the Board of Trustees and its independent trustees must determine whether the Distributor shall be entitled to payment from the Portfolio of all or a portion of the service fee and/or asset-based sales charge in respect to shares sold prior to the effective date of such termination. The Distributor's aggregate uncompensated expenses under the plan at January 31, 2006 for Class B, Class C and Class N shares were $103,594, $127,362 and $126,713, respectively. Fees incurred by the Portfolio under the plans are detailed in the Statement of Operations. - -------------------------------------------------------------------------------- SALES CHARGES. Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Portfolio. They are deducted from the proceeds of sales of Portfolio shares prior to investment or from redemption proceeds prior to remittance, as applicable. The sales charges retained by the Distributor from the sale of shares and the CDSC retained by the Distributor on the redemption of shares is shown in the table below for the period indicated.
CLASS A CLASS B CLASS C CLASS N CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY PERIOD ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR - -------------------------------------------------------------------------------------------------------- January 31, 2006 $202,862 $-- $3,193 $1,819 $1,832 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees paid directly by the Portfolio to 0.35% of average annual net assets for each class. During the period ended January 31, 2006, OFS waived $60, $3 and $7 for Class B, Class N and Class Y shares, respectively. This undertaking may be amended or withdrawn at any time. The Manager has voluntarily agreed to a total expense limitation on the aggregate amount of combined direct (fund-of-funds level) and indirect expense so that Combined Total Annual and Underlying Fund Operating Expenses as a percentage of average daily net assets will not exceed the following annual rates: 1.25%, 2.00%, 2.00%, 1.50% and 1.00%, for Class A, Class B, Class C, Class N and Class Y, respectively. During the period ended January 31, 2006, the Manager reimbursed the Portfolio $4,011, $1,524, $1,683, $79 and $20, for the Class A, Class B, Class C, Class N and Class Y shares, respectively. The Manager may modify or terminate this undertaking at any time without notice to shareholders. These expense limitations do not include Extraordinary Expenses and other expenses not incurred in the ordinary course of the Portfolio's business. Notwithstanding the foregoing limits, the Manager is not required to waive or reimburse Portfolio expenses in excess of indirect management fees earned from investments in Underlying Funds to assure that expenses do not exceed those limits. 35 | CONSERVATIVE INVESTOR FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 5. LITIGATION A complaint was filed as a putative class action against the Manager and OFS (and other defendants) in the U.S. District Court for the Southern District of New York on January 10, 2005 and was amended on March 4, 2005. Seven of the eight counts in the complaint, including claims against certain of the Oppenheimer funds excluding the Portfolio, as nominal defendants, and against certain present and former Directors, Trustees and officers of the funds, and the Distributor, as defendants, were dismissed with prejudice, under a court order dated March 10, 2006, in response to a motion to dismiss the suit that had been filed by the defendants. The remaining count against the Adviser Defendants alleges, among other things, that the defendants charged excessive fees in violation of section 36(b) of the Investment Company Act of 1940. The plaintiffs seek unspecified damages, an accounting of all fees paid, and an award of attorneys' fees and litigation expenses. The Adviser Defendants believe that the claims asserted in the remaining count under this lawsuit are without merit, and intend to defend the suit vigorously and contest any claimed liability. They believe that it is premature to render any opinion as to the likelihood of an outcome unfavorable to them and that no estimate can yet be made with any degree of certainty as to the amount or range of any potential loss. - -------------------------------------------------------------------------------- 6. CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM At a meeting held on December 14, 2005, the Board of Trustees of the Fund appointed KPMG LLP as the independent registered public accounting firm to the Fund to replace the firm of Ernst & Young LLP, who were dismissed as the independent registered public accounting firm to the Fund. This change in the Fund's auditors was approved by the Fund's audit committee and ratified by the Fund's independent Trustees. The report of Ernst & Young LLP on the Fund's statements of assets and liabilities as of March 15, 2005 contained no adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles. The Fund commenced operations on April 5, 2005. During the period from March 15, 2005 through December 14, 2005, there were no disagreements with Ernst & Young LLP on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures which, if not resolved to the satisfaction of Ernst & Young LLP, would have caused Ernst & Young LLP to make reference to the matter in their report. 36 | 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, 2006, and the related statement of operations, the statement of changes in net assets and the financial highlights 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 audit. We conducted our audit 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, 2006, 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 audit provides 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, 2006, the results of its operations, the changes in its net assets and the financial highlights for the period April 5, 2005 (commencement of operations) to January 31, 2006, in conformity with U.S. generally accepted accounting principles. KPMG LLP Denver, Colorado March 15, 2006 37 | CONSERVATIVE INVESTOR FUND FEDERAL INCOME TAX INFORMATION Unaudited - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- In early 2006, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Portfolio during calendar year 2005. Regulations of the U.S. Treasury Department require the Portfolio to report this information to the Internal Revenue Service. Dividends, if any, paid by the Portfolio during the fiscal year ended January 31, 2006 which are not designated as capital gain distributions should be multiplied by 9.75% 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, 2006 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. $150,724 of the Portfolio's fiscal year taxable income may be eligible for the lower individual income tax rates. In early 2006, shareholders of record received information regarding the percentage of distributions that are eligible for lower individual income tax rates. 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. 38 | CONSERVATIVE INVESTOR FUND REPORT OF SHAREHOLDER MEETING UNAUDITED - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- On September 26, 2005, a shareholder meeting of the Oppenheimer Portfolio Series on behalf of Conservative Investor Fund was held at which the eleven Trustees identified below were elected. The following is a report of the votes cast: - -------------------------------------------------------------------------------- NOMINEE FOR WITHHELD TOTAL - -------------------------------------------------------------------------------- TRUSTEES Matthew P. Fink 1,538,706.782 2,186.093 1,540,892.875 Robert G. Galli 1,538,706.782 2,186.093 1,540,892.875 Phillip A. Griffiths 1,538,706.782 2,186.093 1,540,892.875 Mary F. Miller 1,538,706.782 2,186.093 1,540,892.875 Joel W. Motley 1,538,706.782 2,186.093 1,540,892.875 John V. Murphy 1,538,706.782 2,186.093 1,540,892.875 Kenneth A. Randall 1,538,706.782 2,186.093 1,540,892.875 Russell S. Reynolds, Jr. 1,538,706.782 2,186.093 1,540,892.875 Joseph M. Wikler 1,538,706.782 2,186.093 1,540,892.875 Peter I. Wold 1,538,706.782 2,186.093 1,540,892.875 Clayton K. Yeutter 1,538,706.782 2,186.093 1,540,892.875 39 | 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 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. 40 | 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, TRUSTEES COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL. CLAYTON K. YEUTTER, Director of American Commercial Lines (barge company) (since January 2005); Chairman of the Board Attorney at Hogan & Hartson (law firm) (since June 1993); Director of Danielson of Trustees (since 2003), Holding Corp. (waste-to-energy company) (since 2002); Director of Weyerhaeuser Trustee (since 2005) Corp. (1999-April 2004); Director of Caterpillar, Inc. (1993-December 2002); Age: 74 Director of ConAgra Foods (1993-2001); Director of Texas Instruments (1993- 2001); Director of FMC Corporation (1993-2001). Oversees 38 portfolios in the OppenheimerFunds complex. MATTHEW P. FINK, Trustee of the Committee for Economic Development (policy research founda- Trustee (since 2005) tion) (since 2005); Director of ICI Education Foundation (education foundation) Age: 64 (since October 1991); President of the Investment Company Institute (trade asso- ciation) (1991-2004); Director of ICI Mutual Insurance Company (insurance company) (1991-2004). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT G. GALLI, A trustee or director of other Oppenheimer funds. Oversees 48 portfolios in the Trustee (since 2005) OppenheimerFunds complex. Age: 72 PHILLIP A. GRIFFITHS, Director of GSI Lumonics Inc. (precision medical equipment supplier) (since Trustee (since 2005) 2001); Trustee of Woodward Academy (since 1983); Senior Advisor of The Age: 67 Andrew W. Mellon Foundation (since 2001); Member of the National Academy of Sciences (since 1979); Member of the American Philosophical Society (since 1996); Council on Foreign Relations (since 2002); Director of the Institute for Advanced Study (1991-2004); Director of Bankers Trust New York Corporation (1994-1999). Oversees 38 portfolios in the OppenheimerFunds complex. MARY F. MILLER, Trustee of the American Symphony Orchestra (not-for-profit) (since October Trustee (since 2005) 1998); and Senior Vice President and General Auditor of American Express Age: 63 Company (financial services company) (July 1998-February 2003). Oversees 38 portfolios in the OppenheimerFunds complex. JOEL W. MOTLEY, Director of Columbia Equity Financial Corp. (privately-held financial adviser) Trustee (since 2005) (since 2002); Managing Director of Carmona Motley, Inc. (privately-held financial Age: 53 adviser) (since January 2002); Managing Director of Carmona Motley Hoffman Inc. (privately-held financial adviser) (January 1998-December 2001). Oversees 38 portfolios in the OppenheimerFunds complex. KENNETH A. RANDALL, Director of Dominion Resources, Inc. (electric utility holding company) (since Trustee (since 2005) February 1972); Former Director of Prime Retail, Inc. (real estate investment Age: 78 trust), Dominion Energy Inc. (electric power and oil & gas producer), Lumbermens Mutual Casualty Company, American Motorists Insurance Company and American Manufacturers Mutual Insurance Company; Former President and Chief Executive Officer of The Conference Board, Inc. (interna- tional economic and business research). Oversees 38 portfolios in the OppenheimerFunds complex.
41 | CONSERVATIVE INVESTOR FUND TRUSTEES AND OFFICERS UNAUDITED / CONTINUED - -------------------------------------------------------------------------------- RUSSELL S. REYNOLDS, JR., Chairman of The Directorship Search Group, Inc. (corporate governance consult- Trustee (since 2005) ing and executive recruiting) (since 1993); Life Trustee of International House Age: 73 (non-profit educational organization); Former Trustee of The Historical Society of the Town of Greenwich. Oversees 38 portfolios in the OppenheimerFunds complex. JOSEPH M. WIKLER, Director of the following medical device companies: Medintec (since 1992) and Trustee (since 2005) Cathco (since 1996); Director of Lakes Environmental Association (since 1996); Age: 64 Member of the Investment Committee of the Associated Jewish Charities of Baltimore (since 1994); Director of Fortis/Hartford mutual funds (1994- December 2001). Oversees 39 portfolios in the OppenheimerFunds complex. PETER I. WOLD, President of Wold Oil Properties, Inc. (oil and gas exploration and production Trustee (since 2005) company) (since 1994); Vice President, Secretary and Treasurer of Wold Trona Age: 57 Company, Inc. (soda ash processing and production) (since 1996); Vice President of Wold Talc Company, Inc. (talc mining) (since 1999); Managing Member of Hole-in-the-Wall Ranch (cattle ranching) (since 1979); Director and Chairman of the Denver Branch of the Federal Reserve Bank of Kansas City (1993-1999); and Director of PacifiCorp. (electric utility) (1995-1999). Oversees 39 portfolios in the OppenheimerFunds complex. BRIAN F. WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since September 1995); Trustee (since 2005) Director of Special Value Opportunities Fund, LLC (registered investment com- Age: 62 pany) (since September 2004); Member, Zurich Financial Investment Advisory Board (affiliate of the Manager's parent company) (since October 2004); Board of Governing Trustees of The Jackson Laboratory (non-profit) (since August 1990); Trustee of the Institute for Advanced Study (non-profit educational insti- tute) (since May 1992); Special Limited Partner of Odyssey Investment Partners, LLC (private equity investment) (January 1999-September 2004); Trustee of Research Foundation of AIMR (2000-2002) (investment research, non-profit); Governor, Jerome Levy Economics Institute of Bard College (August 1990- September 2001) (economics research); Director of Ray & Berendtson, Inc. (May 2000-April 2002) (executive search firm); President and Chief Executive Officer of the Delaware Group of Mutual Funds (1992-1995); Chairman, President and Chief Executive Officer of Equitable Capital Management Corporation (1985- 1992); Executive Vice President and Chief Investment Officer at The Equitable Life Assurance Society of the U.S. (1979-1992); Vice President and Co-manager at Smith Barney, Harris Upham and Company (1970-1979); Engineer, Sperry Gyroscope Company (1966-1970); former governor of the Association for Investment Management and Research; former chairman of the Institute of Chartered Financial Analysts; Chartered Financial Analyst. Oversees 48 portfolios in the OppenheimerFunds complex. - ----------------------------------------------------------------------------------------------------------------------------- INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH AND OFFICER FLOOR, NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEF- INITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES. JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President Trustee, President and (since September 2000) of the Manager; President and Director or Trustee of Principal Executive Officer other Oppenheimer funds; President and Director of Oppenheimer Acquisition (since 2005) Corp. ("OAC") (the Manager's parent holding company) and of Oppenheimer Age: 56 Partnership Holdings, Inc. (holding company subsidiary of the Manager) (since
42 | CONSERVATIVE INVESTOR FUND JOHN V. MURPHY, July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Continued Manager) (since November 2001); Chairman and Director of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent sub- sidiaries of the Manager) (since July 2001); President and Director of OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since July 2001); Director of the following investment advisory subsidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment Management Corporation and Tremont Capital Management, Inc. (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 1, 2001) and Director (since July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President of Massachusetts Mutual Life Insurance Company (OAC's parent company) (since February 1997); Director of DLB Acquisition Corporation (holding company par- ent of Babson Capital Management LLC) (since June 1995); Member of the Investment Company Institute's Board of Governors (since October 3, 2003); Chief Operating Officer of the Manager (September 2000-June 2001); President and Trustee of MML Series Investment Fund and MassMutual Select Funds (open-end investment companies) (November 1999-November 2001); Director of C.M. Life Insurance Company (September 1999-August 2000); President, Chief Executive Officer and Director of MML Bay State Life Insurance Company (September 1999-August 2000); Director of Emerald Isle Bancorp and Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June 1998). Oversees 87 portfolios in the OppenheimerFunds complex. - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. SCHADT, OF THE PORTFOLIO WEBMAN, WILBY, WOLFGRUBER AND ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS.VANDEHEY AND WIXTED, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT DEATH OR REMOVAL. RUDI W. SCHADT, Vice President, Director of Research in Product Design and Risk Management of Vice President and Portfolio the Manager. Prior to joining the Manager in February 2002 he was a Director Manager (since 2005) and Senior Quantitative Analyst (2000-2001) at UBS Asset Management prior to Age: 48 which he was an Associate Director of Research (since June 1999) and Senior Researcher and Portfolio Manager (from June 1997) at State Street Global Advisors. An officer of 7 portfolios in the OppenheimerFunds complex. JERRY WEBMAN, Senior Vice President (since February 1996) and Senior Investment Officer and Vice President and Portfolio Director (since 1997) of the Manager's Fixed Income Investments; Senior Vice Manager (since 2005) President (since May 1999) of HarbourView Asset Management Corporation. An Age: 56 officer of 4 portfolios in the OppenheimerFunds complex. WILLIAM L. WILBY, Senior Vice President (since July 1994) and Senior Investment Officer, Director of Vice President and Portfolio Equities (since July 2004) of the Manager. Formerly, Senior Investment Officer, Manager (since 2005) Director of International Equities of the Manager (May 2000-July 2004) and Age: 61 Senior Vice President of HarbourView Asset Management Corporation (May 1999-November 2001). An officer of 6 portfolios in the OppenheimerFunds complex. KURT WOLFGRUBER, Executive Vice President (since March 2003) and Chief Investment Officer and Vice President and Portfolio Director (since July 2003) of the Manager; Director of HarbourView Asset Manager (since 2005) Management Corporation and of OFI Institutional Asset Management, Inc. Age: 55 (since June 2003) and of Tremont Capital Management, Inc. (since October 2001). An officer of 4 portfolios in the OppenheimerFunds complex.
43 | CONSERVATIVE INVESTOR FUND TRUSTEES AND OFFICERS UNAUDITED / CONTINUED - -------------------------------------------------------------------------------- MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since Vice President and Chief March 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Compliance Officer Asset Management Corporation and Shareholder Services, Inc. (since June 1983). (since 2005) Former Vice President and Director of Internal Audit of the Manager (1997- Age: 55 February 2004). An officer of 87 portfolios in the OppenheimerFunds complex. BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of Treasurer and Principal the following: HarbourView Asset Management Corporation, Shareholder Financial Financial and Accounting Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management Officer (since 2005) Corporation, and Oppenheimer Partnership Holdings, Inc. (since March 1999), OFI Age: 46 Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd. (since May 2000), OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since March 1999), Centennial Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March 1995-March 1999). An officer of 87 portfolios in the OppenheimerFunds complex. ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March Secretary (since 2005) 2002) of the Manager; General Counsel and Director of the Distributor (since Age: 57 December 2001); General Counsel of Centennial Asset Management Corporation (since December 2001); Senior Vice President and General Counsel of HarbourView Asset Management Corporation (since December 2001); Secretary and General Counsel of OAC (since November 2001); Assistant Secretary (since September 1997) and Director (since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since December 2002); Director of Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice President, General Counsel and Director of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice President, General Counsel and Director of OFI Private Investments, Inc. and OFI Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since November 2001); Director of OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President (May 1985-December 2003), Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of the following: Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001), and OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of 87 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. 44 | CONSERVATIVE INVESTOR FUND MODERATE INVESTOR FUND TOP HOLDINGS AND ALLOCATIONS - -------------------------------------------------------------------------------- ASSET CLASS ALLOCATION [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Global Equity 10.7% U.S. Equity 35.4 Fixed Income 43.5 Alternative Investments 10.4 Portfolio holdings and allocations are subject to change. Percentages are as of January 31, 2006, 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 THE REPORTING PERIOD OF APRIL 5, 2005 TO JANUARY 31, 2006, FOLLOWED BY A GRAPHICAL COMPARISON OF THE PORTFOLIO'S PERFORMANCE TO AN APPROPRIATE BROAD-BASED MARKET INDEX. MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE. Since its inception on April 5, 2005 to the end of the period on January 31, 2006, the Portfolio outperformed its fixed income benchmark, the Lehman Brothers Aggregate Bond Index, and slightly lagged the return of its equity benchmark, the S&P 500 Index. We attribute the Portfolio's strong outperformance of its fixed income benchmark to its even mix of bond and equity funds. This is also why the Portfolio slightly lagged its equity benchmark. During the reporting period, the Portfolio significantly benefited from its equity exposure, which accounted for approximately 46% of the Portfolio at the end of the period. When the Portfolio was launched in early April 2005, equities had hit year lows and since then the stock indices have rallied. For example, the S&P 500 Index rose 9.96% since the Portfolio's inception, despite returning only -0.81% for the first six months of 2005. Other major contributors to performance included the Portfolio's positions in Oppenheimer Global Fund, Oppenheimer Main Street Opportunity Fund, Oppenheimer Real Estate Fund and Oppenheimer International Bond Fund. On the equity side, the Portfolio's allocation to Oppenheimer Global Fund's Class Y Shares, which posted a return of 24.72% over the period, aided the Portfolio's performance. The strong performance of Oppenheimer Global Fund is a reflection of a successful stock selection strategy. The Portfolio benefited from Oppenheimer Main Street Opportunity Fund's strong security selection as well as its allocation to small to midcap stocks, which outperformed larger cap stocks over the same period. On the alternative investments side, the Portfolio's 5.28% position in Oppenheimer Real Estate Fund's Class Y Shares at period end, which posted a return of 34.44% over the reporting period and ranked favorably within its own peer group, was a boon to the Portfolio's performance. Oppenheimer Real Estate Fund's success can be attributed to its profitable investments in the apartment, office and industrial sectors. On the fixed income side, the Portfolio benefited from its allocation to Oppenheimer International Bond Fund's Class Y Shares, as this Fund outperformed its Lipper peer group and peer benchmark primarily due to its successful investments in local currencies within the emerging markets. On the negative side, the Portfolio's overall exposure to the fixed income markets hampered performance as fixed income as an asset class underperformed equities over the same period. In particular the Portfolio's allocation to Oppenheimer's Limited-Term 10 | MODERATE INVESTOR FUND Government Fund's Class Y Shares detracted from the Portfolio's performance. As the Fed continued to raise short-term interest rates over the period, funds that had a large exposure to the short end of the yield curve, such as Oppenheimer Limited-Term Government Fund, with its significant allocation to short-term treasury notes, were adversely affected since short-term treasuries underperformed long-term treasuries. Lastly, the Portfolio's exposure to commodities through its 5% target weighting allocation to the Oppenheimer Real Asset Fund negatively impacted performance. During the reporting period, oil prices were quite volatile, ranging from the $50's to a high of $70 per barrel in late summer then down slightly to around the $60's per barrel during the reporting period. Although this asset class has rebounded from its springtime lows, its overall underperformance for the period detracted from the Portfolio's performance, with the Oppenheimer Real Asset Fund returning just 8.49% for the period. 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, 2006. Performance is measured from the inception of Classes A, B, C, N and Y on April 5, 2005. The Portfolio's performance reflects the deduction of the maximum initial sales charge on Class A shares, the applicable contingent deferred sales charge on Class B, Class C and Class N shares, and reinvestments of all dividends and capital gains distributions. Past performance cannot guarantee future results. The Portfolio's performance is compared to the performance of the S&P 500 Index and the Lehman Brothers Aggregate Bond Index. The S&P 500 Index is a broad-based measure of domestic stock performance that includes the reinvestment of dividends. The Lehman Brothers Aggregate Bond Index is an index of U.S. Government and corporate bonds that includes reinvestment of dividends. Index performance reflects the reinvestment of income but does not consider the effect of transaction costs, and none of the data in the graphs shows the effect of taxes. The Portfolio's performance reflects the effects of the Portfolio's business and operating expenses. While index comparisons may be useful to provide a benchmark for the Portfolio's performance, it must be noted that the Portfolio's investments are not limited to the investments in the index. 11 | MODERATE INVESTOR FUND PORTFOLIO PERFORMANCE DISCUSSION - -------------------------------------------------------------------------------- CLASS A SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: Oppenheimer Portfolio Series: Moderate Investor Fund (Class A) S&P 500 Index Lehman Brothers Aggregate Bond Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.] Oppenheimer Portfolio Series: Moderate Investor Fund S & P 500 Lehman Brothers (Class A) Index Aggregate Bond Index 04/05/2005 9,425 10,000 10,000 04/30/2005 9,331 9,810 10,135 07/31/2005 9,821 10,514 10,207 10/31/2005 9,774 10,327 10,150 01/31/2006 10,328 11,005 10,293 AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE PORTFOLIO AT 1/31/06 Since Inception (4/5/05) 3.28% 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) S&P 500 Index Lehman Brothers Aggregate Bond Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.] Oppenheimer Portfolio Series: Moderate Investor Fund S & P 500 Lehman Brothers (Class B) Index Aggregate Bond Index 04/05/2005 10,000 10,000 10,000 04/30/2005 9,900 9,810 10,135 07/31/2005 10,390 10,514 10,207 10/31/2005 10,330 10,327 10,150 01/31/2006 10,390 11,005 10,293 AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE PORTFOLIO AT 1/31/06 Since Inception (4/5/05) 3.90% 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 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) S&P 500 Index Lehman Brothers Aggregate Bond Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.] Oppenheimer Portfolio Series: Moderate Investor Fund S & P 500 Lehman Brothers (Class C) Index Aggregate Bond Index 04/05/2005 10,000 10,000 10,000 04/30/2005 9,890 9,810 10,135 07/31/2005 10,380 10,514 10,207 10/31/2005 10,320 10,327 10,150 01/31/2006 10,782 11,005 10,293 AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE PORTFOLIO AT 1/31/06 Since Inception (4/5/05) 7.82% 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) S&P 500 Index Lehman Brothers Aggregate Bond Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.] Oppenheimer Portfolio Series: Moderate Investor Fund S & P 500 Lehman Brothers (Class N) Index Aggregate Bond Index 04/05/2005 10,000 10,000 10,000 04/30/2005 9,900 9,810 10,135 07/31/2005 10,410 10,514 10,207 10/31/2005 10,360 10,327 10,150 01/31/2006 10,835 11,005 10,293 AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE PORTFOLIO AT 1/31/06 Since Inception (4/5/05) 8.35% 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 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) S&P 500 Index Lehman Brothers Aggregate Bond Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.] Oppenheimer Portfolio Series: Moderate Investor Fund S & P 500 Lehman Brothers (Class Y) Index Aggregate Bond Index 04/05/2005 10,000 10,000 10,000 04/30/2005 9,900 9,810 10,135 07/31/2005 10,420 10,514 10,207 10/31/2005 10,390 10,327 10,150 01/31/2006 10,979 11,005 10,293 AVERAGE ANNUAL TOTAL RETURNS OF CLASS Y SHARES OF THE PORTFOLIO AT 1/31/06 Since Inception (4/5/05) 9.79% 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 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). 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 | MODERATE INVESTOR FUND NOTES - -------------------------------------------------------------------------------- CLASS Y shares of the Portfolio were first publicly offered on 4/5/05. Class Y shares are offered only to certain institutional investors under special agreements with the Distributor. An explanation of the calculation of performance is in the Portfolio's Statement of Additional Information. 18 | MODERATE INVESTOR FUND PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- PORTFOLIO EXPENSES. As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and service fees; and other Portfolio expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended January 31, 2006. ACTUAL EXPENSES. The "actual" lines of the table provide information about actual account values and actual expenses. You may use the information on this line for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the "actual" line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio for each class of shares, and an assumed rate of return of 5% per year before expenses, which is not the Portfolio's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as front-end or contingent deferred sales charges (loads), or a $12.00 fee imposed annually on accounts valued at less than $500.00 (subject to exceptions described in 19 | MODERATE INVESTOR FUND PORTFOLIO EXPENSES - -------------------------------------------------------------------------------- the Statement of Additional Information). Therefore, the "hypothetical" lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING VALUE VALUE 6 MONTHS ENDED (8/1/05) (1/31/06) JANUARY 31, 2006 - -------------------------------------------------------------------------------- Class A Actual $1,000.00 $1,051.60 $2.28 - -------------------------------------------------------------------------------- Class A Hypothetical 1,000.00 1,022.99 2.25 - -------------------------------------------------------------------------------- Class B Actual 1,000.00 1,048.10 6.58 - -------------------------------------------------------------------------------- Class B Hypothetical 1,000.00 1,018.80 6.48 - -------------------------------------------------------------------------------- Class C Actual 1,000.00 1,048.40 6.21 - -------------------------------------------------------------------------------- Class C Hypothetical 1,000.00 1,019.16 6.13 - -------------------------------------------------------------------------------- Class N Actual 1,000.00 1,050.40 3.36 - -------------------------------------------------------------------------------- Class N Hypothetical 1,000.00 1,021.93 3.32 - -------------------------------------------------------------------------------- Class Y Actual 1,000.00 1,053.70 0.31 - -------------------------------------------------------------------------------- Class Y Hypothetical 1,000.00 1,024.90 0.31 Hypothetical assumes 5% annual return before expenses. Expenses are equal to the Portfolio's annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Those annualized expense ratios, excluding all underlying fund expenses, based on the 6-month period ended January 31, 2006 are as follows: CLASS EXPENSE RATIOS - -------------------------------- Class A 0.44% - -------------------------------- Class B 1.27 - -------------------------------- Class C 1.20 - -------------------------------- Class N 0.65 - -------------------------------- Class Y 0.06 The expense ratios reflect voluntary waivers or reimbursements of expenses by the Portfolio's Manager and Transfer Agent that can be terminated at any time, without advance notice. The "Financial Highlights" tables in the Portfolio's financial statements, included in this report, also show the gross expense ratios, without such waivers or reimbursements. 20 | MODERATE INVESTOR FUND STATEMENT OF INVESTMENTS January 31, 2006 - --------------------------------------------------------------------------------
VALUE SHARES SEE NOTE 1 - ----------------------------------------------------------------------------------------------------------------- INVESTMENTS IN AFFILIATED COMPANIES--99.0% 1 - ----------------------------------------------------------------------------------------------------------------- GLOBAL EQUITY--10.6% Oppenheimer Global Fund, Cl. Y 307,304 $ 21,729,432 - ----------------------------------------------------------------------------------------------------------------- U. S. EQUITY--35.0% Oppenheimer Capital Appreciation Fund, Cl. Y 452,591 20,656,244 - ----------------------------------------------------------------------------------------------------------------- Oppenheimer Main Street Fund, Cl. Y 533,482 20,491,066 - ----------------------------------------------------------------------------------------------------------------- Oppenheimer Main Street Opportunity Fund, Cl. Y 729,566 10,345,238 - ----------------------------------------------------------------------------------------------------------------- Oppenheimer Value Fund, Cl. Y 829,078 20,304,120 ------------ 71,796,668 - ----------------------------------------------------------------------------------------------------------------- FIXED INCOME--43.2% Oppenheimer Core Bond Fund, Cl. Y 3,823,987 39,004,670 - ----------------------------------------------------------------------------------------------------------------- Oppenheimer High Yield Fund, Cl. Y 2,132,328 19,873,297 - ----------------------------------------------------------------------------------------------------------------- Oppenheimer International Bond Fund, Cl. Y 1,704,413 10,090,125 - ----------------------------------------------------------------------------------------------------------------- Oppenheimer Limited-Term Government Fund, Cl. Y 1,959,654 19,518,148 ------------ 88,486,240 - ----------------------------------------------------------------------------------------------------------------- ALTERNATIVE INVESTMENTS--10.2% Oppenheimer Real Asset Fund, Cl. Y 1,239,352 10,175,085 - ----------------------------------------------------------------------------------------------------------------- Oppenheimer Real Estate Fund, Cl. Y 527,524 10,819,515 ------------ 20,994,600 ------------ Total Investments in Affiliated Companies (Cost $198,352,686) 203,006,940 PRINCIPAL AMOUNT - ----------------------------------------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS--0.2% Undivided interest of 0.05% in joint repurchase agreement (Principal Amount/ Value $781,426,000, with a maturity value of $781,521,291) with UBS Warburg LLC, 4.39%, dated 1/31/06, to be repurchased at $362,044 on 2/1/06, collateralized by Federal Home Loan Mortgage Corp., 5%, 12/1/35, with a value of $799,056,396 (Cost $362,000) $362,000 362,000 - ----------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $198,714,686) 99.2% 203,368,940 - ----------------------------------------------------------------------------------------------------------------- OTHER ASSETS NET OF LIABILITIES 0.8 1,610,395 ----------------------------- NET ASSETS 100.0% $204,979,335 =============================
21 | MODERATE INVESTOR FUND STATEMENT OF INVESTMENTS Continued - -------------------------------------------------------------------------------- FOOTNOTES TO STATEMENT OF INVESTMENTS 1. Affiliated companies. Represents ownership of an affiliated fund, at or during the period ended January 31, 2006. Transactions during the period in which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES APRIL 5, 2005 ADDITIONS REDUCTIONS JAN. 31, 2006 - --------------------------------------------------------------------------------------------------------------------- Oppenheimer Capital Appreciation Fund, Cl. Y -- 453,009 418 452,591 Oppenheimer Core Bond Fund, Cl. Y -- 3,827,191 3,204 3,823,987 Oppenheimer Global Fund, Cl. Y -- 307,594 290 307,304 Oppenheimer High Yield Fund, Cl. Y -- 2,134,105 1,777 2,132,328 Oppenheimer International Bond Fund, Cl. Y -- 1,705,838 1,425 1,704,413 Oppenheimer Limited-Term Government Fund, Cl. Y -- 1,961,301 1,647 1,959,654 Oppenheimer Main Street Fund, Cl. Y -- 533,977 495 533,482 Oppenheimer Main Street Opportunity Fund, Cl. Y -- 730,230 664 729,566 Oppenheimer Real Asset Fund, Cl. Y -- 1,240,394 1,042 1,239,352 Oppenheimer Real Estate Fund, Cl. Y -- 528,030 506 527,524 Oppenheimer Value Fund, Cl. Y -- 829,812 734 829,078 VALUE DIVIDEND REALIZED SEE NOTE 1 INCOME GAIN (LOSS) - --------------------------------------------------------------------------------------------------------------------- Oppenheimer Capital Appreciation Fund, Cl. Y $ 20,656,244 $ 140,045 $ (640) Oppenheimer Core Bond Fund, Cl. Y 39,004,670 649,358 -- Oppenheimer Global Fund, Cl. Y 21,729,432 151,560 (571) Oppenheimer High Yield Fund, Cl. Y 19,873,297 509,937 (195) Oppenheimer International Bond Fund, Cl. Y 10,090,125 341,523 14 Oppenheimer Limited-Term Government Fund, Cl. Y 19,518,148 257,330 -- Oppenheimer Main Street Fund, Cl. Y 20,491,066 210,335 (747) Oppenheimer Main Street Opportunity Fund, Cl. Y 10,345,238 162,372 (365) Oppenheimer Real Asset Fund, Cl. Y 10,175,085 296,172 (396) Oppenheimer Real Estate Fund, Cl. Y 10,819,515 264,614 (46) Oppenheimer Value Fund, Cl. Y 20,304,120 352,032 (748) ----------------------------------------------- $203,006,940 $3,335,278 $(3,694) ===============================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 22 | MODERATE INVESTOR FUND STATEMENT OF ASSETS AND LIABILITIES January 31, 2006 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ASSETS - -------------------------------------------------------------------------------- Investments, at value--see accompanying statement of investments: Unaffiliated companies (cost $362,000) $ 362,000 Affiliated companies (cost $198,352,686) 203,006,940 ------------ 203,368,940 - -------------------------------------------------------------------------------- Cash 5,453 - -------------------------------------------------------------------------------- Receivables and other assets: Shares of beneficial interest sold 3,195,730 Interest and dividends 357,361 Other 2,422 ------------ Total assets 206,929,906 - -------------------------------------------------------------------------------- LIABILITIES - -------------------------------------------------------------------------------- Payables and other liabilities: Investments purchased 1,142,679 Shares of beneficial interest redeemed 694,257 Distribution and service plan fees 39,573 Shareholder communications 16,535 Transfer and shareholder servicing agent fees 16,106 Trustees' compensation 269 Other 41,152 ------------ Total liabilities 1,950,571 - -------------------------------------------------------------------------------- NET ASSETS $204,979,335 ============ - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS - -------------------------------------------------------------------------------- Par value of shares of beneficial interest $ 19,054 - -------------------------------------------------------------------------------- Additional paid-in capital 198,749,039 - -------------------------------------------------------------------------------- Accumulated net investment income 206,552 - -------------------------------------------------------------------------------- Accumulated net realized gain on investments 1,350,436 - -------------------------------------------------------------------------------- Net unrealized appreciation on investments 4,654,254 ------------ NET ASSETS $204,979,335 ============ 23 | MODERATE 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 $107,685,705 and 9,990,294 shares of beneficial interest outstanding) $10.78 Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $11.44 - ------------------------------------------------------------------------------------------------------- Class B Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $36,955,874 and 3,442,105 shares of beneficial interest outstanding) $10.74 - ------------------------------------------------------------------------------------------------------- Class C Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $47,904,460 and 4,466,040 shares of beneficial interest outstanding) $10.73 - ------------------------------------------------------------------------------------------------------- Class N Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $12,116,889 and 1,126,088 shares of beneficial interest outstanding) $10.76 - ------------------------------------------------------------------------------------------------------- Class Y Shares: Net asset value, redemption price and offering price per share (based on net assets of $316,407 and 29,318 shares of beneficial interest outstanding) $10.79
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 24 | MODERATE INVESTOR FUND STATEMENT OF OPERATIONS For the Period Ended January 31, 2006 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INVESTMENT INCOME - -------------------------------------------------------------------------------- Dividends from affiliated companies $3,335,278 - -------------------------------------------------------------------------------- Interest 25,380 ----------- Total investment income 3,360,658 - -------------------------------------------------------------------------------- EXPENSES - -------------------------------------------------------------------------------- Distribution and service plan fees: Class A 89,171 Class B 127,405 Class C 160,182 Class N 17,032 - -------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees: Class A 35,681 Class B 20,272 Class C 17,669 Class N 2,843 Class Y 209 - -------------------------------------------------------------------------------- Shareholder communications: Class A 15,599 Class B 9,748 Class C 7,441 Class N 961 Class Y 101 - -------------------------------------------------------------------------------- Legal, auditing and other professional fees 25,782 - -------------------------------------------------------------------------------- Trustees' compensation 8,081 - -------------------------------------------------------------------------------- Custodian fees and expenses 1,016 - -------------------------------------------------------------------------------- Other 25,173 ----------- Total expenses 564,366 Less reduction to custodian expenses (8) Less waivers and reimbursements of expenses (12,309) ----------- Net expenses 552,049 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME 2,808,609 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) - -------------------------------------------------------------------------------- Net realized gain (loss) on: Distributions received from affiliated companies 1,521,916 Affiliated companies (3,694) ----------- Net realized gain 1,518,222 - -------------------------------------------------------------------------------- Net change in unrealized appreciation on investments 4,654,254 - -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $8,981,085 =========== 1. For the period from April 5, 2005 (commencement of operations) to January 31, 2006. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 25 | MODERATE INVESTOR FUND STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
PERIOD ENDED JANUARY 31, 2006 1 - --------------------------------------------------------------------------------------------- OPERATIONS - --------------------------------------------------------------------------------------------- Net investment income $ 2,808,609 - --------------------------------------------------------------------------------------------- Net realized gain 1,518,222 - --------------------------------------------------------------------------------------------- Net change in unrealized appreciation 4,654,254 -------------- Net increase in net assets resulting from operations 8,981,085 - --------------------------------------------------------------------------------------------- DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS - --------------------------------------------------------------------------------------------- Dividends from net investment income: Class A (1,457,787) Class B (428,124) Class C (555,237) Class N (164,658) Class Y (5,308) - --------------------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS - --------------------------------------------------------------------------------------------- Net increase in net assets resulting from beneficial interest transactions: Class A 104,188,008 Class B 35,779,888 Class C 46,402,364 Class N 11,835,440 Class Y 299,664 - --------------------------------------------------------------------------------------------- NET ASSETS - --------------------------------------------------------------------------------------------- Total increase 204,875,335 - --------------------------------------------------------------------------------------------- Beginning of period 104,000 2 -------------- End of period (including accumulated net investment income of $206,552 for the period ended January 31, 2006) $204,979,335 ==============
1. For the period from April 5, 2005 (commencement of operations) to January 31, 2006. 2. Reflects the value of the manager's initial seed money investments on March 15, 2005. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 26 | MODERATE INVESTOR FUND FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C PERIOD ENDED JANUARY 31, 2006 1 2006 1 2006 1 - ------------------------------------------------------------------------------------------------ PER SHARE OPERATING DATA - ------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 - ------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income 2 .38 .31 .31 Net realized and unrealized gain .57 .58 .57 --------------------------------------------- Total from investment operations .95 .89 .88 - ------------------------------------------------------------------------------------------------ Dividends and/or distributions to shareholders: Dividends from net investment income (.17) (.15) (.15) - ------------------------------------------------------------------------------------------------ Net asset value, end of period $ 10.78 $ 10.74 $ 10.73 ============================================= - ------------------------------------------------------------------------------------------------ TOTAL RETURN, AT NET ASSET VALUE 3 9.58% 8.90% 8.82% - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $107,686 $ 36,956 $ 47,904 - ------------------------------------------------------------------------------------------------ Average net assets (in thousands) $ 43,984 $ 15,521 $ 19,527 - ------------------------------------------------------------------------------------------------ Ratios to average net assets: 4 Net investment income 4.39% 3.56% 3.64% Total expenses 0.47% 5 1.31% 6 1.23% 7 Expenses after waivers and reimbursements and reduction to custodian expenses 0.46% 1.29% 1.22% - ------------------------------------------------------------------------------------------------ Portfolio turnover rate 0% 0% 0%
1. For the period from April 5, 2005 (commencement of operations) to January 31, 2006. 2. Per share amounts calculated based on the average shares outstanding during the period. 3. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. 4. Annualized for periods of less than one full year. 5. Expenses including all underlying fund expenses were 1.15% for January 31, 2006. 6. Expenses including all underlying fund expenses were 1.99% for January 31, 2006. 7. Expenses including all underlying fund expenses were 1.91% for January 31, 2006. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 27 | MODERATE INVESTOR FUND FINANCIAL HIGHLIGHTS Continued - -------------------------------------------------------------------------------- CLASS N CLASS Y PERIOD ENDED JANUARY 31, 2006 1 2006 1 - -------------------------------------------------------------------------------- PER SHARE OPERATING DATA - -------------------------------------------------------------------------------- Net asset value, beginning of period $ 10.00 $ 10.00 - -------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 2 .40 .36 Net realized and unrealized gain .53 .61 -------------------------- Total from investment operations .93 .97 - -------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.17) (.18) - -------------------------------------------------------------------------------- Net asset value, end of period $ 10.76 $ 10.79 ========================== - -------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 3 9.35% 9.79% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Net assets, end of period (in thousands) $12,117 $ 316 - -------------------------------------------------------------------------------- Average net assets (in thousands) $ 4,158 $ 216 - -------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 4.56% 4.20% Total expenses 0.68% 5 0.28% 6 Expenses after waivers and reimbursements and reduction to custodian expenses 0.67% 0.12% - -------------------------------------------------------------------------------- Portfolio turnover rate 0% 0% 1. For the period from April 5, 2005 (commencement of operations) to January 31, 2006. 2. Per share amounts calculated based on the average shares outstanding during the period. 3. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. 4. Annualized for periods of less than one full year. 5. Expenses including all underlying fund expenses were 1.36% for January 31, 2006. 6. Expenses including all underlying fund expenses were 0.96% for January 31, 2006. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 28 | MODERATE INVESTOR FUND NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Oppenheimer Portfolio Series (the "Fund") is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. Moderate Investor Fund (the "Portfolio") is a series of the Fund whose investment objective is to seek long term growth of capital and current income. The Portfolio is a special type of mutual fund known as a "fund of funds" because it invests in other mutual funds. The Portfolio normally invests in a portfolio consisting of a target-weighted allocation in Class A or Class Y shares of other Oppenheimer funds. The Fund's investment advisor is OppenheimerFunds Inc. (the "Manager"). The Portfolio offers Class A, Class B, Class C, Class N and Class Y shares. Class A shares are sold at their offering price, which is normally net asset value plus a front-end sales charge. Class B, Class C and Class N shares are sold without a front-end sales charge but may be subject to a contingent deferred sales charge (CDSC). Class N shares are sold only through retirement plans. Retirement plans that offer Class N shares may impose charges on those accounts. Class Y shares are sold to certain institutional investors without either a front-end sales charge or a CDSC, however, the institutional investor may impose charges on those accounts. All classes of shares have identical rights and voting privileges with respect to the Portfolio in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class. Class A, B, C and N have separate distribution and/or service plans. No such plan has been adopted for Class Y shares. Class B shares will automatically convert to Class A shares six years after the date of purchase. Under normal market conditions, the Manager will invest the Portfolio's assets in shares of Oppenheimer Core Bond Fund, Oppenheimer Capital Appreciation Fund, Oppenheimer Global Fund, Oppenheimer High Yield Fund, Oppenheimer International Bond Fund, Oppenheimer Limited-Term Government Fund, Oppenheimer Main Street Fund(R), Oppenheimer Main Street Opportunity Fund(R), Oppenheimer Real Asset Fund(R), Oppenheimer Real Estate Fund and Oppenheimer Value Fund (individually, an "Underlying Fund" and collectively, the "Underlying Funds"). The following is a summary of significant accounting policies consistently followed by the Portfolio. - -------------------------------------------------------------------------------- SECURITIES VALUATION. The Portfolio calculates the net asset value of each class of shares based upon the net asset value of the applicable Underlying Funds' as of the close of The New York Stock Exchange (the "Exchange"), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading. For each Underlying Fund, the net asset value per share for a class of shares on a "regular business day" is determined by dividing the value of the Underlying Fund's net assets attributable to that class by the number of shares of that class outstanding on that day. To determine net asset values, the Underlying Fund assets are valued primarily on the 29 | MODERATE INVESTOR FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued basis of current market quotations. If market quotations are not readily available or do not accurately reflect fair value for a security (in the Manager's judgment) or if a security's value has been materially affected by events occurring after the close of the exchange or market on which the security is principally traded, that security may be valued by another method that the Underlying Fund's Board of Trustees/Directors believes accurately reflects the fair value. Because some foreign securities trade in markets and on exchanges that operate on weekends and U.S. holidays, the values of some of the Underlying Fund's foreign investments may change on days when investors cannot buy or redeem Underlying Fund shares. Short-term "money market type" debt securities with remaining maturities of sixty days or less are valued at amortized cost (which approximates market value). - -------------------------------------------------------------------------------- RISKS OF INVESTING IN THE UNDERLYING FUNDS. Each of the Underlying Funds in which the Portfolio invests has its own investment risks, and those risks can affect the value of the Portfolio's investments and therefore the value of the Portfolio's shares. To the extent that the Portfolio invests more of its assets in one Underlying Fund than in another, the Portfolio will have greater exposure to the risks of that Underlying Fund. - -------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Portfolio, along with other affiliated funds advised by the Manager, may transfer uninvested cash balances into joint trading accounts on a daily basis. These balances are invested in one or more repurchase agreements. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. In the event of default by the other party to the agreement, retention of the collateral may be subject to legal proceedings. - -------------------------------------------------------------------------------- ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class. - -------------------------------------------------------------------------------- FEDERAL TAXES. The Portfolio intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders, therefore, no federal income or excise tax provision is required. 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. 30 | MODERATE INVESTOR FUND NET UNREALIZED APPRECIATION BASED ON COST OF SECURITIES AND UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME INCOME GAIN CARRYFORWARD 1 TAX PURPOSES -------------------------------------------------------------------------- $206,658 $1,350,436 $-- $4,654,254 1. During the period ended January 31, 2006, the Portfolio did not have any capital loss carryforward. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Portfolio. Accordingly, the following amounts have been reclassified for January 31, 2006. Net assets of the Portfolio were unaffected by the reclassifications. REDUCTION INCREASE TO ACCUMULATED NET INCREASE TO ACCUMULATED NET REALIZED GAIN TO PAID-IN CAPITAL INVESTMENT INCOME ON INVESTMENTS 2 -------------------------------------------------------------------------- $158,729 $9,057 $167,786 2. $167,786, all of which was long-term capital gain, was distributed in connection with Portfolio share redemptions. The tax character of distributions paid during the period ended January 31, 2006 was as follows: PERIOD ENDED JANUARY 31, 2006 ---------------------------------------------------- Distributions paid from: Ordinary income $2,611,114 The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of January 31, 2006 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 $198,714,686 ============= Gross unrealized appreciation $ 5,284,368 Gross unrealized depreciation (630,114) ------------- Net unrealized appreciation $ 4,654,254 ============= - -------------------------------------------------------------------------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. Income and capital gain distributions, if any, are declared and paid annually. 31 | MODERATE INVESTOR FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, which includes accretion of discount and amortization of premium, is accrued as earned. - -------------------------------------------------------------------------------- CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may include interest expense incurred by the Portfolio on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Portfolio pays interest to its custodian on such cash overdrafts to the extent they are not offset by positive cash balances maintained by the Portfolio at a rate equal to the Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item, if applicable, represents earnings on cash balances maintained by the Portfolio during the period. Such interest expense and other custodian fees may be paid with these earnings. - -------------------------------------------------------------------------------- SECURITY TRANSACTIONS. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost. - -------------------------------------------------------------------------------- INDEMNIFICATIONS. The Portfolio's organizational documents provide current and former trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Portfolio. In the normal course of business, the Portfolio may also enter into contracts that provide general indemnifications. The Portfolio's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Portfolio. The risk of material loss from such claims is considered remote. - -------------------------------------------------------------------------------- OTHER. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. - -------------------------------------------------------------------------------- 2. SHARES OF BENEFICIAL INTEREST The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows: 32 | MODERATE INVESTOR FUND PERIOD ENDED JANUARY 31, 2006 1,2 SHARES AMOUNT - -------------------------------------------------------------------------------- CLASS A Sold 10,348,982 $108,067,839 Dividends and/or distributions reinvested 131,505 1,380,804 Redeemed (500,193) (5,260,635) ------------------------------ Net increase 9,980,294 $104,188,008 ============================== - -------------------------------------------------------------------------------- CLASS B Sold 3,602,759 $ 37,460,502 Dividends and/or distributions reinvested 38,687 404,664 Redeemed (199,441) (2,085,278) ------------------------------ Net increase 3,442,005 $ 35,779,888 ============================== - -------------------------------------------------------------------------------- CLASS C Sold 4,610,775 $ 47,936,138 Dividends and/or distributions reinvested 48,772 509,662 Redeemed (193,607) (2,043,436) ------------------------------ Net increase 4,465,940 $ 46,402,364 ============================== - -------------------------------------------------------------------------------- CLASS N Sold 1,274,902 $ 13,414,589 Dividends and/or distributions reinvested 14,511 152,071 Redeemed (163,425) (1,731,220) ------------------------------ Net increase 1,125,988 $ 11,835,440 ============================== - -------------------------------------------------------------------------------- CLASS Y Sold 35,197 $ 362,730 Dividends and/or distributions reinvested 503 5,289 Redeemed (6,482) (68,355) ------------------------------ Net increase 29,218 $ 299,664 ============================== 1. For the period from April 5, 2005 (commencement of operations) to January 31, 2006. 2. The Portfolio sold 10,000 shares of Class A at a value of $100,000 and 100 shares of Class B, Class C, Class N and Class Y at a value of $1,000, respectively, to the Manager upon seeding of the Portfolio on March 15, 2005. - -------------------------------------------------------------------------------- 3. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the period ended January 31, 2006, were as follows: PURCHASES SALES - -------------------------------------------------------------------------------- Investment securities $198,522,519 $166,137 33 | MODERATE INVESTOR FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES MANAGEMENT FEES. Under the investment advisory agreement, the Manager does not charge a management fee, but rather collects indirect management fees from investments in the Underlying Funds. The weighted indirect management fees collected from the Underlying Funds, as a percent of average daily net assets of the Portfolio for the period ended January 31, 2006 was 0.57%. - -------------------------------------------------------------------------------- TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Portfolio. The Portfolio pays OFS a per account fee. For the period ended January 31, 2006, the Portfolio paid $60,548 to OFS for services to the Portfolio. Additionally, Class Y shares are subject to minimum fees of $10,000 per annum for assets of $10 million or more. The Class Y shares are subject to the minimum fees in the event that the per account fee does not equal or exceed the applicable minimum fees. OFS may voluntarily waive the minimum fees. - -------------------------------------------------------------------------------- INITIAL OFFERING AND ORGANIZATIONAL COSTS. The Manager assumed all initial offering and organizational costs associated with the registration and seeding of the Portfolio. - -------------------------------------------------------------------------------- DISTRIBUTION AND SERVICE PLAN (12B-1) FEES. Under its General Distributor's Agreement with the Portfolio, OppenheimerFunds Distributor, Inc. (the Distributor) acts as the Portfolio's principal underwriter in the continuous public offering of the Portfolio's classes of shares. - -------------------------------------------------------------------------------- SERVICE PLAN FOR CLASS A SHARES. The Portfolio has adopted a Service Plan for Class A shares. It reimburses the Distributor for a portion of its costs incurred for services provided to accounts that hold Class A shares. Reimbursement is made periodically at an annual rate of up to 0.25% of the average annual net assets of Class A shares of the Portfolio. The Distributor currently uses all of those fees to pay dealers, brokers, banks and other financial institutions periodically for providing personal services and maintenance of accounts of their customers that hold Class A shares. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent years. Fees incurred by the Portfolio under the Plan are detailed in the Statement of Operations. - -------------------------------------------------------------------------------- DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Portfolio has adopted Distribution and Service Plans for Class B, Class C and Class N shares to compensate the Distributor for its services and costs in connection with the distribution of those shares and servicing accounts. Under the plans, the Portfolio pays the Distributor an annual asset-based sales charge of 0.75% on Class B and Class C shares and 0.25% on Class N shares. The Distributor also receives a service fee of 0.25% per year 34 | MODERATE INVESTOR FUND under each plan. If either the Class B, Class C or Class N plan is terminated by the Portfolio or by the shareholders of a class, the Board of Trustees and its independent trustees must determine whether the Distributor shall be entitled to payment from the Portfolio of all or a portion of the service fee and/or asset-based sales charge in respect to shares sold prior to the effective date of such termination. The Distributor's aggregate uncompensated expenses under the plan at January 31, 2006 for Class B, Class C and Class N shares were $536,339, $358,188 and $112,008, respectively. Fees incurred by the Portfolio under the plans are detailed in the Statement of Operations. - -------------------------------------------------------------------------------- SALES CHARGES. Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Portfolio. They are deducted from the proceeds of sales of Portfolio shares prior to investment or from redemption proceeds prior to remittance, as applicable. The sales charges retained by the Distributor from the sale of shares and the CDSC retained by the Distributor on the redemption of shares is shown in the table below for the period indicated.
CLASS A CLASS B CLASS C CLASS N CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY PERIOD ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR - --------------------------------------------------------------------------------------------------------- January 31, 2006 $568,947 $-- $14,166 $4,881 $3,554 - ---------------------------------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees paid directly by the Portfolio to 0.35% of average annual net assets for each class. During the period ended January 31, 2006, OFS waived $20 for Class B shares. This undertaking may be amended or withdrawn at any time. The Manager has voluntarily agreed to a total expense limitation on the aggregate amount of combined direct (fund-of-funds level) and indirect expense so that Combined Total Annual and Underlying Fund Operating Expenses as a percentage of average daily net assets will not exceed the following annual rates: 1.30%, 2.05%, 2.05%, 1.55% and 1.05%, for Class A, Class B, Class C, Class N and Class Y, respectively. During the period ended January 31, 2006, the Manager reimbursed the Portfolio $5,415, $3,465, $2,682, $442 and $285, for the Class A, Class B, Class C, Class N and Class Y shares, respectively. The Manager may modify or terminate this undertaking at any time without notice to shareholders. These expense limitations do not include Extraordinary Expenses and other expenses not incurred in the ordinary course of the Portfolio's business. Notwithstanding the foregoing limits, the Manager is not required to waive or reimburse Portfolio expenses in excess of indirect management fees earned from investments in Underlying Funds to assure that expenses do not exceed those limits. 35 | MODERATE INVESTOR FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 5. LITIGATION A complaint was filed as a putative class action against the Manager and OFS (and other defendants) in the U.S. District Court for the Southern District of New York on January 10, 2005 and was amended on March 4, 2005. Seven of the eight counts in the complaint, including claims against certain of the Oppenheimer funds excluding the Portfolio, as nominal defendants, and against certain present and former Directors, Trustees and officers of the funds, and the Distributor, as defendants, were dismissed with prejudice, under a court order dated March 10, 2006, in response to a motion to dismiss the suit that had been filed by the defendants. The remaining count against the Adviser Defendants alleges, among other things, that the defendants charged excessive fees in violation of section 36(b) of the Investment Company Act of 1940. The plaintiffs seek unspecified damages, an accounting of all fees paid, and an award of attorneys' fees and litigation expenses. The Adviser Defendants believe that the claims asserted in the remaining count under this lawsuit are without merit, and intend to defend the suit vigorously and contest any claimed liability. They believe that it is premature to render any opinion as to the likelihood of an outcome unfavorable to them and that no estimate can yet be made with any degree of certainty as to the amount or range of any potential loss. - -------------------------------------------------------------------------------- 6. CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM At a meeting held on December 14, 2005, the Board of Trustees of the Fund appointed KPMG LLP as the independent registered public accounting firm to the Fund to replace the firm of Ernst & Young LLP, who were dismissed as the independent registered public accounting firm to the Fund. This change in the Fund's auditors was approved by the Fund's audit committee and ratified by the Fund's independent Trustees. The report of Ernst & Young LLP on the Fund's statements of assets and liabilities as of March 15, 2005 contained no adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles. The Fund commenced operations on April 5, 2005. During the period from March 15, 2005 through December 14, 2005, there were no disagreements with Ernst & Young LLP on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures which, if not resolved to the satisfaction of Ernst & Young LLP, would have caused Ernst & Young LLP to make reference to the matter in their report. 36 | 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, 2006, and the related statement of operations, the statement of changes in net assets and the financial highlights 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 audit. We conducted our audit 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, 2006, 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 audit provides 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, 2006, the results of its operations, the changes in its net assets and the financial highlights for the period April 5, 2005 (commencement of operations) to January 31, 2006, in conformity with U.S. generally accepted accounting principles. KPMG LLP Denver, Colorado March 15, 2006 37 | MODERATE INVESTOR FUND FEDERAL INCOME TAX INFORMATION Unaudited - -------------------------------------------------------------------------------- In early 2006, if applicable, shareholders of record received information regarding all dividends and distributions paid to them by the Portfolio during calendar year 2005. Regulations of the U.S. Treasury Department require the Portfolio to report this information to the Internal Revenue Service. Dividends, if any, paid by the Portfolio during the fiscal year ended January 31, 2006 which are not designated as capital gain distributions should be multiplied by 25.91% 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, 2006 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. $829,224 of the Portfolio's fiscal year taxable income may be eligible for the lower individual income tax rates. In early 2006, shareholders of record received information regarding the percentage of distributions that are eligible for lower individual income tax rates. 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. 38 | MODERATE INVESTOR FUND REPORT OF SHAREHOLDER MEETING Unaudited - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- On September 26, 2005, a shareholder meeting of the Oppenheimer Portfolio Series on behalf of Moderate Investor Fund was held at which the eleven Trustees identified below were elected. The following is a report of the votes cast: - -------------------------------------------------------------------------------- NOMINEE FOR WITHHELD TOTAL - -------------------------------------------------------------------------------- TRUSTEES Matthew P. Fink 2,782,283.921 6,766.185 2,789,050.106 Robert G. Galli 2,782,283.921 6,766.185 2,789,050.106 Phillip A. Griffiths 2,782,005.577 7,044.529 2,789,050.106 Mary F. Miller 2,781,930.964 7,119.142 2,789,050.106 Joel W. Motley 2,780,164.294 8,885.812 2,789,050.106 John V. Murphy 2,782,283.921 6,766.185 2,789,050.106 Kenneth A. Randall 2,781,540.319 7,509.787 2,789,050.106 Russell S. Reynolds, Jr. 2,782,283.921 6,766.185 2,789,050.106 Joseph M. Wikler 2,782,283.921 6,766.185 2,789,050.106 Peter I. Wold 2,782,283.921 6,766.185 2,789,050.106 Clayton K. Yeutter 2,780,441.416 8,608.690 2,789,050.106 39 | MODERATE INVESTOR FUND PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited - -------------------------------------------------------------------------------- The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities ("portfolio proxies") held by the Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund's web-site at www.oppenheimerfunds.com, and (iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund's voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at www.sec.gov. The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund's Form N-Q filings are available on the SEC's website at http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 40 | MODERATE INVESTOR FUND TRUSTEES AND OFFICERS UNAUDITED - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------- NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS FUND, LENGTH OF SERVICE, AGE HELD; NUMBER OF PORTFOLIOS IN THE FUND COMPLEX CURRENTLY OVERSEEN INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, TRUSTEES COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL. CLAYTON K. YEUTTER, Director of American Commercial Lines (barge company) (since January 2005); Chairman of the Board Attorney at Hogan & Hartson (law firm) (since June 1993); Director of Danielson of Trustees (since 2003), Holding Corp. (waste-to-energy company) (since 2002); Director of Trustee (since 2005) Weyerhaeuser Corp. (1999-April 2004); Director of Caterpillar, Inc. (1993- Age: 74 December 2002); Director of ConAgra Foods (1993-2001); Director of Texas Instruments (1993-2001); Director of FMC Corporation (1993-2001). Oversees 38 portfolios in the OppenheimerFunds complex. MATTHEW P. FINK, Trustee of the Committee for Economic Development (policy research founda- Trustee (since 2005) tion) (since 2005); Director of ICI Education Foundation (education foundation) Age: 64 (since October 1991); President of the Investment Company Institute (trade asso- ciation) (1991-2004); Director of ICI Mutual Insurance Company (insurance company) (1991-2004). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT G. GALLI, A trustee or director of other Oppenheimer funds. Oversees 48 portfolios in the Trustee (since 2005) OppenheimerFunds complex. Age: 72 PHILLIP A. GRIFFITHS, Director of GSI Lumonics Inc. (precision medical equipment supplier) (since Trustee (since 2005) 2001); Trustee of Woodward Academy (since 1983); Senior Advisor of The Age: 67 Andrew W. Mellon Foundation (since 2001); Member of the National Academy of Sciences (since 1979); Member of the American Philosophical Society (since 1996); Council on Foreign Relations (since 2002); Director of the Institute for Advanced Study (1991-2004); Director of Bankers Trust New York Corporation (1994-1999). Oversees 38 portfolios in the OppenheimerFunds complex. MARY F. MILLER, Trustee of the American Symphony Orchestra (not-for-profit) (since October Trustee (since 2005) 1998); and Senior Vice President and General Auditor of American Express Age: 63 Company (financial services company) (July 1998-February 2003). Oversees 38 portfolios in the OppenheimerFunds complex. JOEL W. MOTLEY, Director of Columbia Equity Financial Corp. (privately-held financial adviser) Trustee (since 2005) (since 2002); Managing Director of Carmona Motley, Inc. (privately-held financial Age: 53 adviser) (since January 2002); Managing Director of Carmona Motley Hoffman Inc. (privately-held financial adviser) (January 1998-December 2001). Oversees 38 portfolios in the OppenheimerFunds complex. KENNETH A. RANDALL, Director of Dominion Resources, Inc. (electric utility holding company) (since Trustee (since 2005) February 1972); Former Director of Prime Retail, Inc. (real estate investment Age: 78 trust), Dominion Energy Inc. (electric power and oil & gas producer), Lumbermens Mutual Casualty Company, American Motorists Insurance Company and American Manufacturers Mutual Insurance Company; Former President and Chief Executive Officer of The Conference Board, Inc. (interna- tional economic and business research). Oversees 38 portfolios in the OppenheimerFunds complex.
41 | MODERATE INVESTOR FUND TRUSTEES AND OFFICERS Unaudited / Continued - -------------------------------------------------------------------------------- RUSSELL S. REYNOLDS, JR., Chairman of The Directorship Search Group, Inc. (corporate governance consulting Trustee (since 2005) and executive recruiting) (since 1993); Life Trustee of International House (non- Age: 73 profit educational organization); Former Trustee of The Historical Society of the Town of Greenwich. Oversees 38 portfolios in the OppenheimerFunds complex. JOSEPH M. WIKLER, Director of the following medical device companies: Medintec (since 1992) and Trustee (since 2005) Cathco (since 1996); Director of Lakes Environmental Association (since 1996); Age: 64 Member of the Investment Committee of the Associated Jewish Charities of Baltimore (since 1994); Director of Fortis/Hartford mutual funds (1994- December 2001). Oversees 39 portfolios in the OppenheimerFunds complex. PETER I. WOLD, President of Wold Oil Properties, Inc. (oil and gas exploration and production Trustee (since 2005) company) (since 1994); Vice President, Secretary and Treasurer of Wold Trona Age: 57 Company, Inc. (soda ash processing and production) (since 1996); Vice President of Wold Talc Company, Inc. (talc mining) (since 1999); Managing Member of Hole-in-the-Wall Ranch (cattle ranching) (since 1979); Director and Chairman of the Denver Branch of the Federal Reserve Bank of Kansas City (1993-1999); and Director of PacifiCorp. (electric utility) (1995-1999). Oversees 39 portfolios in the OppenheimerFunds complex. BRIAN F. WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since September 1995); Trustee (since 2005) Director of Special Value Opportunities Fund, LLC (registered investment com- Age: 62 pany) (since September 2004); Member, Zurich Financial Investment Advisory Board (affiliate of the Manager's parent company) (since October 2004); Board of Governing Trustees of The Jackson Laboratory (non-profit) (since August 1990); Trustee of the Institute for Advanced Study (non-profit educational insti- tute) (since May 1992); Special Limited Partner of Odyssey Investment Partners, LLC (private equity investment) (January 1999-September 2004); Trustee of Research Foundation of AIMR (2000-2002) (investment research, non-profit); Governor, Jerome Levy Economics Institute of Bard College (August 1990- September 2001) (economics research); Director of Ray & Berendtson, Inc. (May 2000-April 2002) (executive search firm); President and Chief Executive Officer of the Delaware Group of Mutual Funds (1992-1995); Chairman, President and Chief Executive Officer of Equitable Capital Management Corporation (1985- 1992); Executive Vice President and Chief Investment Officer at The Equitable Life Assurance Society of the U.S. (1979-1992); Vice President and Co-manager at Smith Barney, Harris Upham and Company (1970-1979); Engineer, Sperry Gyroscope Company (1966-1970); former governor of the Association for Investment Management and Research; former chairman of the Institute of Chartered Financial Analysts; Chartered Financial Analyst. Oversees 48 portfolios in the OppenheimerFunds complex. - ----------------------------------------------------------------------------------------------------------------------------- INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH AND OFFICER FLOOR, NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEF- INITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES. JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President Trustee, President and (since September 2000) of the Manager; President and Director or Trustee of Principal Executive Officer other Oppenheimer funds; President and Director of Oppenheimer Acquisition (since 2005) Corp. ("OAC") (the Manager's parent holding company) and of Oppenheimer Age: 56 Partnership Holdings, Inc. (holding company subsidiary of the Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since November 2001); Chairman and Director of Shareholder
42 | MODERATE INVESTOR FUND JOHN V. MURPHY, Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent sub- Continued sidiaries of the Manager) (since July 2001); President and Director of OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since July 2001); Director of the following investment advisory subsidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment Management Corporation and Tremont Capital Management, Inc. (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 1, 2001) and Director (since July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President of Massachusetts Mutual Life Insurance Company (OAC's parent company) (since February 1997); Director of DLB Acquisition Corporation (holding company par- ent of Babson Capital Management LLC) (since June 1995); Member of the Investment Company Institute's Board of Governors (since October 3, 2003); Chief Operating Officer of the Manager (September 2000-June 2001); President and Trustee of MML Series Investment Fund and MassMutual Select Funds (open-end investment companies) (November 1999-November 2001); Director of C.M. Life Insurance Company (September 1999-August 2000); President, Chief Executive Officer and Director of MML Bay State Life Insurance Company (September 1999-August 2000); Director of Emerald Isle Bancorp and Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June 1998). Oversees 87 portfolios in the OppenheimerFunds complex. - ----------------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. SCHADT, THE PORTFOLIO WEBMAN, WILBY, WOLFGRUBER AND ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS.VANDEHEY AND WIXTED, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION, RETIREMENT DEATH OR REMOVAL. RUDI W. SCHADT, Vice President, Director of Research in Product Design and Risk Management of Vice President and Portfolio the Manager. Prior to joining the Manager in February 2002 he was a Director Manager (since 2005) and Senior Quantitative Analyst (2000-2001) at UBS Asset Management prior to Age: 48 which he was an Associate Director of Research (since June 1999) and Senior Researcher and Portfolio Manager (from June 1997) at State Street Global Advisors. An officer of 7 portfolios in the OppenheimerFunds complex. JERRY WEBMAN, Senior Vice President (since February 1996) and Senior Investment Officer and Vice President and Portfolio Director (since 1997) of the Manager's Fixed Income Investments; Senior Vice Manager (since 2005) President (since May 1999) of HarbourView Asset Management Corporation. An Age: 56 officer of 4 portfolios in the OppenheimerFunds complex. WILLIAM L. WILBY, Senior Vice President (since July 1994) and Senior Investment Officer, Director of Vice President and Portfolio Equities (since July 2004) of the Manager. Formerly, Senior Investment Officer, Manager (since 2005) Director of International Equities of the Manager (May 2000-July 2004) and Senior Age: 61 Vice President of HarbourView Asset Management Corporation (May 1999- November 2001). An officer of 6 portfolios in the OppenheimerFunds complex. KURT WOLFGRUBER, Executive Vice President (since March 2003) and Chief Investment Officer and Vice President and Portfolio Director (since July 2003) of the Manager; Director of HarbourView Asset Manager (since 2005) Management Corporation and of OFI Institutional Asset Management, Inc. Age: 55 (since June 2003) and of Tremont Capital Management, Inc. (since October 2001). An officer of 4 portfolios in the OppenheimerFunds complex.
43 | MODERATE INVESTOR FUND TRUSTEES AND OFFICERS Unaudited / Continued - -------------------------------------------------------------------------------- MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since Vice President and Chief March 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Compliance Officer Asset Management Corporation and Shareholder Services, Inc. (since June 1983). (since 2005) Former Vice President and Director of Internal Audit of the Manager (1997- Age: 55 February 2004). An officer of 87 portfolios in the OppenheimerFunds complex. BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer Treasurer and Principal of the following: HarbourView Asset Management Corporation, Shareholder Financial and Accounting Financial Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Officer (since 2005) Management Corporation, and Oppenheimer Partnership Holdings, Inc. (since Age: 46 March 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd. (since May 2000), OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since March 1999), Centennial Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March 1995-March 1999). An officer of 87 portfolios in the OppenheimerFunds complex. ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March Secretary (since 2005) 2002) of the Manager; General Counsel and Director of the Distributor (since Age: 57 December 2001); General Counsel of Centennial Asset Management Corporation (since December 2001); Senior Vice President and General Counsel of HarbourView Asset Management Corporation (since December 2001); Secretary and General Counsel of OAC (since November 2001); Assistant Secretary (since September 1997) and Director (since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since December 2002); Director of Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice President, General Counsel and Director of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice President, General Counsel and Director of OFI Private Investments, Inc. and OFI Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since November 2001); Director of OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President (May 1985-December 2003), Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of the following: Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001), and OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of 87 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. 44 | MODERATE 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 the registrant does not have an audit committee financial expert serving on its Audit Committee. In this regard, no member of the Audit Committee was identified as having all of the technical attributes identified in Instruction 2(b) to Item 3 of Form N-CSR to qualify as an "audit committee financial expert," whether through the type of specialized education or experience described in that Instruction. The Board has concluded that while the members of the Audit Committee collectively have the necessary attributes and experience required to serve effectively as an Audit Committee, no single member possesses all of the required technical attributes through the particular methods of education or experience set forth in the Instructions to be designated as an audit committee financial expert. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Audit Fees The principal accountant for the audit of the registrant's annual financial statements billed $58,000 in fiscal 2006 and no such fees in fiscal 2005. (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 $156,805 in fiscal 2006 and $39,500 in fiscal 2005 to the registrant's investment adviser or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant. Such services: internal control reviews. (c) Tax 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 $5,000 in fiscal 2006 and $6,000 in fiscal 2005 to the registrant's investment adviser or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant. Such services include: Computations of capital gain tax liability, preparation of tax returns, preparation of Form 5500 and tax consultations on pass through of foreign withholding taxes and mortgage dollar roll transactions. (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 $161,805 in fiscal 2006 and $45,500 in fiscal 2005 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) The registrant's audit committee of the board of trustees has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. THE FUND'S GOVERNANCE COMMITTEE PROVISIONS WITH RESPECT TO NOMINATIONS OF DIRECTORS/TRUSTEES TO THE RESPECTIVE BOARDS 1. The Fund's Governance Committee (the "Committee") will evaluate potential Board candidates to assess their qualifications. The Committee shall have the authority, upon approval of the Board, to retain an executive search firm to assist in this effort. The Committee may consider recommendations by business and personal contacts of current Board members and by executive search firms which the Committee may engage from time to time and may also consider shareholder recommendations. The Committee may consider the advice and recommendation of the Funds' investment manager and its affiliates in making the selection. 2. The Committee shall screen candidates for Board membership. The Committee has not established specific qualifications that it believes must be met by a trustee nominee. In evaluating trustee nominees, the Committee considers, among other things, an individual's background, skills, and experience; whether the individual is an "interested person" as defined in the Investment Company Act of 1940; and whether the individual would be deemed an "audit committee financial expert" within the meaning of applicable SEC rules. The Committee also considers whether the individual's background, skills, and experience will complement the background, skills, and experience of other nominees and will contribute to the Board. There are no differences in the manner in which the Committee evaluates nominees for trustees based on whether the nominee is recommended by a shareholder. 3. The Committee may consider nominations from shareholders for the Board at such times as the Committee meets to consider new nominees for the Board. The Committee shall have the sole discretion to determine the candidates to present to the Board and, in such cases where required, to shareholders. Recommendations for trustee nominees should, at a minimum, be accompanied by the following: o the name, address, and business, educational, and/or other pertinent background of the person being recommended; o a statement concerning whether the person is an "interested person" as defined in the Investment Company Act of 1940; o any other information that the Funds would be required to include in a proxy statement concerning the person if he or she was nominated; and o the name and address of the person submitting the recommendation and, if that person is a shareholder, the period for which that person held Fund shares. The recommendation also can include any additional information which the person submitting it believes would assist the Committee in evaluating the recommendation. 4. Shareholders should note that a person who owns securities issued by Massachusetts Mutual Life Insurance Company (the parent company of the Funds' investment adviser) would be deemed an "interested person" under the Investment Company Act of 1940. In addition, certain other relationships with Massachusetts Mutual Life Insurance Company or its subsidiaries, with registered broker-dealers, or with the Funds' outside legal counsel may cause a person to be deemed an "interested person." 5. Before the Committee decides to nominate an individual as a trustee, Committee members and other directors customarily interview the individual in person. In addition, the individual customarily is asked to complete a detailed questionnaire which is designed to elicit information which must be disclosed under SEC and stock exchange rules and to determine whether the individual is subject to any statutory disqualification from serving as a trustee of a registered investment company. ITEM 11. CONTROLS AND PROCEDURES. Based on their evaluation of the registrant's disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR 270.30a-3(c)) as of January 31, 2006, the registrant's principal executive officer and principal financial officer found the registrant's disclosure controls and procedures to provide reasonable assurances that information required to be disclosed by the registrant in the reports that it files under the Securities Exchange Act of 1934 (a) is accumulated and communicated to registrant's management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure, and (b) is recorded, processed, summarized and reported, within the time periods specified in the rules and forms adopted by the U.S. Securities and Exchange Commission. There have been no changes in the registrant's internal controls over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a) (1) 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, consisting of: Active Allocation Fund, Aggressive Investor Fund, Conservative Investor Fund, and Moderate Investor Fund By: /s/ John V. Murphy ---------------------------- John V. Murphy Principal Executive Officer Date: March 15, 2006 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ John V. Murphy ---------------------------- John V. Murphy Principal Executive Officer Date: March 15, 2006 By: /s/ Brian W. Wixted ---------------------------- Brian W. Wixted Principal Financial Officer Date: March 15, 2006 EX-99.CODE ETH 2 ra550_31494ethics.txt RA550_31494ETHICS EX-99.CODE ETH CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS OF THE OPPENHEIMER FUNDS AND OF OPPENHEIMERFUNDS, INC. This Code of Ethics for Principal Executive and Senior Financial Officers (referred to in this document as the "Code") has been adopted by each of the investment companies for which OppenheimerFunds, Inc. or one of its subsidiaries or affiliates (referred to collectively in this document as "OFI") acts as investment adviser (individually, a "Fund" and collectively, the "Funds"), and by OFI to effectuate compliance with Section 406 under the Sarbanes-Oxley Act of 2002 and the rules adopted to implement Section 406. This Code applies to each Fund's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions ("Covered Officers"). A listing of positions currently within the ambit of Covered Officers is attached as EXHIBIT A. 1 1. PURPOSE OF THE CODE This Code sets forth standards and procedures that are reasonably designed to deter wrongdoing and promote: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely, and understandable disclosure in reports and documents that a Fund files with, or submits to, the U.S. Securities and Exchange Commission ("SEC") and in other public communications made by the Fund; o compliance with applicable governmental laws, rules and regulations; o the prompt internal reporting of violations of this Code to the Code Administrator identified below; and - ---------- 1 The obligations imposed by this Code on Covered Officers are separate from and in addition to any obligations that may be imposed on such persons as Covered Persons under the Code of Ethics adopted by the Oppenheimer Funds dated May 15, 2002, under Rule 17j-1 of the Investment Company Act of 1940, as amended and any other code of conduct applicable to Covered Officers in whatever capacity they serve. This Code does not incorporate by reference any provisions of the Rule 17j-1 Code of Ethics and accordingly, any violations or waivers granted under the Rule 17j-1 Code of Ethics will not be considered a violation or waiver under this Code. o accountability for adherence to this Code. In general, the principles that govern honest and ethical conduct, including the avoidance of conflicts of interest between personal and professional relationships, reflect, at the minimum, the following: (1) the duty at all times in performing any responsibilities as a Fund financial officer, controller, accountant or principal executive officer to place the interests of the Funds ahead of personal interests; (2) the fundamental standard that Covered Officers should not take inappropriate advantage of their positions; (3) the duty to assure that a Fund's financial statements and reports to its shareholders are prepared honestly and accurately in accordance with applicable rules, regulations and accounting standards; and (4) the duty to conduct the Funds' business and affairs in an honest and ethical manner. Each Covered Officer should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. It is acknowledged that, as a result of the contractual relationship between each Fund and OFI, of which the Covered Officers are also officers or employees, and subject to OFI's fiduciary duties to each Fund, the Covered Officers will, in the normal course of their duties, be involved in establishing policies and implementing decisions that will have different effects on OFI and the Funds. It is further acknowledged that the participation of the Covered Officers in such activities is inherent in the contractual relationship between each Fund and OFI and is consistent with the expectations of the Board of Trustees/Directors of the performance by the Covered Officers of their duties as officers of the Funds. 2. PROHIBITIONS The specific provisions and reporting requirements of this Code are concerned primarily with promoting honest and ethical conduct and avoiding conflicts of interest in personal and professional relationships. No Covered Officer may use information concerning the business and affairs of a Fund, including the investment intentions of a Fund, or use his or her ability to influence such investment intentions, for personal gain to himself or herself, his or her family or friends or any other person or in a manner detrimental to the interests of a Fund or its shareholders. No Covered Officer may use his or her personal influence or personal relationships to influence the preparation and issuance of financial reports of a Fund whereby the Covered Officer would benefit personally to the detriment of the Fund and its shareholders. No Covered Officer shall intentionally for any reason take any action or fail to take any action in connection with his or her official acts on behalf of a Fund that causes the Fund to violate applicable laws, rules and regulations. No Covered Officer shall, in connection with carrying out his or her official duties and responsibilities on behalf of a Fund: (i) employ any device, scheme or artifice to defraud a Fund or its shareholders; (ii) intentionally cause a Fund to make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading in its official documents, regulatory filings, financial statements or communications to the public; (iii) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any Fund or its shareholders; (iv) engage in any manipulative practice with respect to any Fund; (v) use his or her personal influence or personal relationships to influence any business decision, investment decisions, or financial reporting by a Fund whereby the Covered Officer would benefit personally to the detriment of the Fund or its shareholders; (vi) intentionally cause a Fund to fail to comply with applicable laws, rules and regulations, including failure to comply with the requirement of full, fair, accurate, understandable and timely disclosure in reports and documents that a Fund files with, or submits to, the SEC and in other public communications made by the Fund; (vii) intentionally mislead or omit to provide material information to the Fund's independent auditors or to the Board of Trustees/Directors or the officers of the Fund or its investment adviser in connection with financial reporting matters; (viii) fail to notify the Code Administrator or the Chief Executive Officer of the Fund or its investment adviser promptly if he or she becomes aware of any existing or potential violations of this Code or applicable laws; (ix) retaliate against others for, or otherwise discourage the reporting of, actual or apparent violations of this Code; or (x) fails to acknowledge or certify compliance with this Code if requested to do so. 3. REPORTS OF CONFLICTS OF INTERESTS If a Covered Officer becomes aware of a conflict of interest under this Code or, to the Covered Officer's reasonable belief, the appearance of one, he or she must immediately report the matter to the Code's Administrator. If the Code Administrator is involved or believed to be involved in the conflict of interest or appearance of conflict of interest, the Covered Officer shall report the matter directly to the OFI's Chief Executive Officer. Upon receipt of a report of a conflict, the Code Administrator will take prompt steps to determine whether a conflict of interest exists. If the Code Administrator determines that an actual conflict of interest exists, the Code Administrator will take steps to resolve the conflict. If the Code Administrator determines that the appearance of a conflict exists, the Code Administrator will take appropriate steps to remedy such appearance. If the Code Administrator determines that no conflict or appearance of a conflict exists, the Code Administrator shall meet with the Covered Officer to advise him or her of such finding and of his or her reason for taking no action. In lieu of determining whether a conflict or appearance of conflict exists, the Code Administrator may in his or her discretion refer the matter to the Fund's Board of Trustees/Directors. 4. WAIVERS Any Covered Officer requesting a waiver of any of the provisions of this Code must submit a written request for such waiver to the Code Administrator, setting forth the basis of such request and all necessary facts upon which such request can be evaluated. The Code Administrator shall review such request and make a written determination thereon, which shall be binding. The Code Administrator may in reviewing such request, consult at his discretion with legal counsel to OFI or to the Fund. In determining whether to waive any of the provisions of this Code, the Code Administrator shall consider whether the proposed waiver: (i) is prohibited by this Code; (ii) is consistent with honest and ethical conduct; and (iii) will result in a conflict of interest between the Covered Officer's personal and professional obligations to a Fund. In lieu of determining whether to grant a waiver, the Code Administrator in his or her discretion may refer the matter to the appropriate Fund's Board of Trustees/Directors. 5. REPORTING REQUIREMENTS (a) Each Covered Officer shall, upon becoming subject to this Code, be provided with a copy of this Code and shall affirm in writing that he or she has received, read, understands and shall adhere to this Code. (b) At least annually, all Covered Officers shall be provided with a copy of this Code and shall certify that they have read and understand this Code and recognize that they are subject thereto. (c) At least annually, all Covered Officers shall certify that they have complied with the requirements of this Code and that they have disclosed or reported any violations of this Code to the Code Administrator or the Chief Executive Officer of the Fund or its investment adviser. (d) The Code Administrator shall submit a quarterly report to the Board of Trustees/Directors of each Fund containing (i) a description of any report of a conflict of interest or apparent conflict and the disposition thereof; (ii) a description of any request for a waiver from this Code and the disposition thereof; (iii) any violation of the Code that has been reported or found and the sanction imposed; (iv) interpretations issued under the Code by the Code Administrator; and (v) any other significant information arising under the Code including any proposed amendments. (e) Each Covered Officer shall notify the Code Administrator promptly if he or she knows of or has a reasonable belief that any violation of this Code has occurred or is likely to occur. Failure to do so is itself a violation of this Code. (f) Any changes to or waivers of this Code, including "implicit" waivers as defined in applicable SEC rules, will, to the extent required, be disclosed by the Code Administrator or his or her designee as provided by applicable SEC rules. 2 6. ANNUAL RENEWAL At least annually, the Board of Trustees/Directors of each Fund shall review the Code and determine whether any amendments (including any amendments that may be recommended by OFI or the Fund's legal counsel) are necessary or desirable, and shall consider whether to renew and/or amend the Code. 7. SANCTIONS Any violation of this Code of Ethics shall be subject to the imposition of such sanctions by OFI as may be deemed appropriate under the circumstances to achieve the purposes of this Code and may include, without limitation, a letter of censure, suspension from employment or termination of employment, in the sole discretion of OFI. 8. ADMINISTRATION AND CONSTRUCTION (a) The administration of this Code of Ethics shall be the responsibility of OFI's General Counsel or his designee as the "Code Administrator" of this Code, acting under the terms of this Code and the oversight of the Trustees/Directors of the Funds. (b) The duties of such Code Administrator will include: (i) Continuous maintenance of a current list of the names of all Covered Officers; (ii) Furnishing all Covered Officers a copy of this Code and initially and periodically informing them of their duties and obligations thereunder; (iii) Maintaining or supervising the maintenance of all records required by this Code, including records of waivers granted hereunder; - ---------- 2 An "implicit waiver" is the failure to take action within a reasonable period of time regarding a material departure from a provision of this Code that has been made known to the General Counsel, the Code Administrator, an executive officer of the Fund or OFI. (iv) Issuing interpretations of this Code which appear to the Code Administrator to be consistent with the objectives of this Code and any applicable laws or regulations; (v) Conducting such inspections or investigations as shall reasonably be required to detect and report any violations of this Code, with his or her recommendations, to the Chief Executive Officer of OFI and to the Trustees/Directors of the affected Fund(s) or any committee appointed by them to deal with such information; and (vi) Periodically conducting educational training programs as needed to explain and reinforce the terms of this Code. (c) In carrying out the duties and responsibilities described under this Code, the Code Administrator may consult with legal counsel, who may include legal counsel to the applicable Funds, and such other persons as the Administrator shall deem necessary or desirable. The Code Administrator shall be protected from any liability hereunder or under any applicable law, rule or regulation, for decisions made in good faith based upon his or her reasonable judgment. 9. REQUIRED RECORDS The Administrator shall maintain and cause to be maintained in an easily accessible place, the following records for the period required by applicable SEC rules (currently six years following the end of the fiscal year of OFI in which the applicable event or report occurred): (a) A copy of any Code which has been in effect during the period; (b) A record of any violation of any such Code and of any action taken as a result of such violation, during the period; (c) A copy of each annual report pursuant to the Code made by a Covered Officer during the period; (d) A copy of each report made by the Code Administrator pursuant to this Code during the period; (e) A list of all Covered Officers who are or have been required to make reports pursuant to this Code during the period, plus those person(s) who are or were responsible for reviewing these reports; (f) A record of any request to waive any requirement of this Code, the decision thereon and the reasons supporting the decision; and (g) A record of any report of any conflict of interest or appearance of a conflict of interest received by the Code Administrator or discovered by the Code Administrator during the period, the decision thereon and the reasons supporting the decision. 10. AMENDMENTS AND MODIFICATIONS This Code may not be amended or modified except by an amendment in writing which is approved or ratified by OFI and by a majority vote of the Independent Trustees/Directors of each of the applicable Funds. 11. CONFIDENTIALITY. This Code is identified for the internal use of the Funds and OFI. Reports and records prepared or maintained under this Code are considered confidential and shall be maintained and protected accordingly to the extent permitted by applicable laws, rules and regulations. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Trustees/Directors of the affected Fund(s) and their counsel, the independent auditors of the affected Funds and/or OFI, and to OFI, except as such disclosure may be required pursuant to applicable judicial or regulatory process. Dated as of: June 25, 2003 Adopted by Board I of the Oppenheimer Funds June 13, 2003 /s/ ROBERT G. ZACK - ------------------ Robert G. Zack, Secretary Adopted by Board II of the Oppenheimer/Centennial Funds June 24, 2003 /s/ ROBERT G. ZACK - ------------------ Robert G. Zack, Secretary Adopted by Board III of the Oppenheimer Funds June 9, 2003 /s/ ROBERT G. ZACK - ------------------ Robert G. Zack, Secretary Adopted by Board IV of the Oppenheimer Funds May 21, 2003 /s/ ROBERT G. ZACK - ------------------ Robert G. Zack, Secretary Adopted by the Boards of Directors of OppenheimerFunds, Inc. and its subsidiaries and affiliates that act as investment adviser to the Oppenheimer or Centennial funds June 1, 2003 /s/ ROBERT G. ZACK - ------------------ Robert G. Zack, Senior Vice President and General Counsel Exhibit A Positions Covered by this Code of Ethics for Senior Officers EACH OPPENHEIMER OR CENTENNIAL FUND Principal Executive Officer Principal Financial Officer Treasurer Assistant Treasurer PERSONNEL OF OFI WHO BY VIRTUE OF THEIR JOBS PERFORM CRITICAL FINANCIAL AND ACCOUNTING FUNCTIONS FOR OFI ON BEHALF OF A FUND, INCLUDING: Treasurer Senior Vice President/Fund Accounting Vice President/Fund Accounting EX-99.CERT 3 ra550_31494cert.txt RA550_31494CERT Exhibit 99.CERT Section 302 Certifications CERTIFICATIONS I, John V. Murphy, certify that: 1. I have reviewed this report on Form N-CSR of Oppenheimer Portfolio Series, consisting of: Active Allocation Fund, Aggressive Investor Fund, Conservative Investor Fund, and Moderate Investor Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of Trustees (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 15, 2006 /s/ John V. Murphy - ---------------------------- John V. Murphy Principal Executive Officer Exhibit 99.CERT Section 302 Certifications CERTIFICATIONS I, Brian W. Wixted, certify that: 1. I have reviewed this report on Form N-CSR of Oppenheimer Portfolio Series, consisting of: Active Allocation Fund, Aggressive Investor Fund, Conservative Investor Fund, and Moderate Investor Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of Trustees (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 15, 2006 /s/ Brian W. Wixted - ---------------------------- Brian W. Wixted Principal Financial Officer EX-99.906CERT 4 ra550_31494ex906.txt RA550_31494EX906 EX-99.906CERT Section 906 Certifications CERTIFICATION PURSUANT TO 18 U.S.C SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 John V. Murphy, Principal Executive Officer, and Brian W. Wixted, Principal Financial Officer, of Oppenheimer Portfolio Series, consisting of: Active Allocation Fund, Aggressive Investor Fund, Conservative Investor Fund, and Moderate Investor Fund (the "Registrant"), each certify to the best of his knowledge that: 1. The Registrant's periodic report on Form N-CSR for the period ended January 31, 2006 (the "Form N-CSR") fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. ss. 1350 and is not being filed as part of the Form N-CSR filed with the Commission.
Principal Executive Officer Principal Financial Officer Oppenheimer Portfolio Series, consisting of: Oppenheimer Portfolio Series, consisting of: Active Allocation Fund, Aggressive Investor Active Allocation Fund, Aggressive Investor Fund, Conservative Investor Fund, and Moderate Fund, Conservative Investor Fund, and Investor Fund Moderate Investor Fund /s/ John V. Murphy /s/ Brian W. Wixted - ------------------------------------ --------------------------------- John V. Murphy Brian W. Wixted Date: March 15, 2006 Date: March 15, 2006
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