<PAGE> 1
ANNUAL REPORT OCTOBER 31, 1997
OPPENHEIMER
QUEST SMALL CAP
VALUE FUND
[PHOTO]
[OPPENHEIMERFUNDS LOGO]
THE RIGHT WAY TO INVEST
<PAGE> 2
CONTENTS
3 President's Letter
4 Fund Performance
6 An Interview
with the Fund's
Managers
10 Statement of
Investments
14 Statement of
Assets & Liabilities
16 Statement of
Operations
17 Statements of
Changes in
Net Assets
18 Financial Highlights
20 Notes to Financial
Statements
26 Report of
Independent
Accountants
27 Federal Income
Tax Information
28 Shareholder
Meeting
29 Officers & Trustees
32 Information &
Services
REPORT HIGHLIGHTS
- - THE FUND'S POSITIVE PERFORMANCE comes primarily from individual stock
selections, where we value businesses based on their intrinsic worth, not based
on their value relative to the overall stock market or benchmark.
- - WE LOOK FOR THREE CHARACTERISTICS when selecting small-cap stocks for the
portfolio:
- --FIRST, the companies we choose should have a competitive advantage;
- --SECOND, they should have strong management teams that use their capital in a
way that would benefit shareholders;
- --THIRD, the stock of these companies should be priced inexpensively.
AVG ANNUAL TOTAL RETURNS
For the 1-year period ended
10/31/97 (without sales charges)(1)
CLASS A
32.72%
CLASS B
32.05%
Class C
32.05%
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
IN REVIEWING PERFORMANCE AND RANKINGS, PLEASE REMEMBER THAT PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST.
1. Includes changes in net asset value per share without deducting any sales
charges. Such performance would have been lower if sales charges were taken
into account.
2 Oppenheimer Quest Small Cap Value Fund
<PAGE> 3
[PHOTO]
BRIDGET A. MACASKILL
President
Oppenheimer Quest
Small Cap Value Fund
Dear SHAREHOLDER,
- --------------------------------------------------------------------------------
As you are no doubt aware, during the end of October and early November many
stock markets around the world recorded their all-time largest point declines,
followed by subsequent gains and continued volatility, leaving investors
uncertain about what would occur next.
To put those events in focus, let's look at a "snapshot" of the
two-week time period. Sharp declines in the overseas stock markets,
particularly in Asia, triggered a series of sell-offs throughout Europe, Latin
America and the United States. In response, the U.S. stock market, as measured
by the Dow Jones Industrial Average, dropped 554 points on October 27, its
largest point decline in history. However, almost as quickly, the U.S. stock
market bounced back over the succeeding few days, regaining nearly all of its
losses.
While no one could have predicted the timing or extent of these
fluctuations, many analysts, including our fund managers here at
OppenheimerFunds, had warned of a correction for several months. We believed
that U.S. valuations were too high, stocks were expensive relative to bonds,
recent corporate earnings were somewhat disappointing and that Federal Reserve
Chairman Alan Greenspan could possibly seek a short-term interest rate hike.
While only one short-term interest rate hike occurred in March of 1997, the
other factors have held true.
We'd like to take this opportunity to remind shareholders that stock
market volatility is a normal and expected part of the business cycle. As Alan
Greenspan suggested, in years to come this period will likely be remembered as
a positive change for a market that was growing too quickly.
For frequent market updates, please visit our website at
WWW.OPPENHEIMERFUNDS.COM or call 1-800-835-3104 to listen to our recorded
messages. In the meantime, thank you for your confidence in OppenheimerFunds,
The Right Way to Invest. We look forward to helping you reach your investment
goals in the future.
/s/ BRIDGET A. MACASKILL
Bridget A. Macaskill
November 21, 1997
3 Oppenheimer Quest Small Cap Value Fund
<PAGE> 4
AVG ANNUAL TOTAL RETURNS
For the Period Ended 9/30/97(1)
<TABLE>
<CAPTION>
CLASS A
Since
1 year 5 year Inception
<S> <C> <C>
29.00% 16.39% 14.62%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
Since
1 year 5 year Inception
<S> <C> <C>
31.13% N/A 14.45%
</TABLE>
<TABLE>
<CAPTION>
CLASS C
Since
1 year 5 year Inception
<S> <C> <C>
35.20% N/A 14.78%
</TABLE>
CUMULATIVE TOTAL RETURN
For the Period Ended 9/30/97(1)
<TABLE>
<CAPTION>
CLASS A
5-year
<S> <C>
113.62% $20,420(3)
</TABLE>
PERFORMANCE UPDATE
- --------------------------------------------------------------------------------
Oppenheimer Quest Small Cap Value Fund performed in line with our expectations,
outperforming during weak market periods and underperforming during periods of
strong growth. For the one-year period ended October 31, 1997, the Fund's Class
A shares provided an average annual total return without sales charges of
32.72%.(2)
<TABLE>
<CAPTION>
GROWTH OF $10,000
Over five years
(without sales charges)(3)
Oppenheimer Quest
Small Cap Value Fund
Class A Shares Russell 2000(4)
<S> <C>
$10000 $10000
11260.5 11492.1
12121 11983.4
12319.6 12245
12893.3 13315.6
13311.3 13665
12920.9 13302.3
12363.3 12784.3
13207.7 13671.7
13272.3 13416
12806 14034.5
13869.3 15350.1
14703.4 16866.1
14920.7 17231.6
15600.5 18110.7
16167 19016.7
16559.1 19081.1
17799.6 20073.8
17730.4 19035.6
20667.3 22122.3
22664.9 25414.6
</TABLE>
1. Total returns include changes in share price and reinvestment of dividends
and capital gains distributions in a hypothetical investment for the periods
shown. Class A returns include the current maximum initial sales charge of
5.75%. Class A shares were first publicly offered on 1/3/89. The Fund's maximum
sales charge for Class A shares was lower prior to 11/24/95, so actual
performance may have been higher. Class B returns include the applicable
contingent deferred sales charge of 5% (1-year) and 2% (since inception on
9/1/93). Class C returns for the one-year result include the contingent
deferred sales charge of 1%. Class C shares have an inception date of 9/1/93.
An explanation of the different performance calculations is in the Fund's
prospectus. Class B and C shares are subject to an annual 0.75% asset-based
sales charge and Class A shares are subject to an annual 0.25% asset-based
sales charge.
OppenheimerFunds, Inc. became the Fund's advisor on 11/22/95. The Fund's
subadvisor is OpCap Advisors, which was the Fund's advisor prior to 11/22/95.
The portfolio manager is employed by the Fund's subadvisor.
4 Oppenheimer Quest Small Cap Value Fund
<PAGE> 5
<TABLE>
<CAPTION>
SECTOR WEIGHTINGS(5)
<S> <C>
Industrial 20.4%
Technology 19.5
Financial 15.8
Consumer Cyclical 15.5
Consumer Non-Cyclical 11.9
Basic Materials 7.6
Energy 5.6
Utilities 3.7
</TABLE>
PORTFOLIO REVIEW
- --------------------------------------------------------------------------------
Oppenheimer Quest Small Cap Value Fund is for investors aggressively seeking
capital appreciation from small company stocks.
WHAT WE LOOK FOR:
- - Good businesses identified through FUNDAMENTAL ANALYSIS.
- - MANAGEMENT motivated to work for shareholders.
- - Securities that can be purchased at a REASONABLE PRICE.
- - HIGH RETURN ON CAPITAL vs. high growth.
<TABLE>
<CAPTION>
TOP 10 STOCK HOLDINGS(5)
.................................................................................
<S> <C> <C> <C>
Wang Laboratories, Inc. 4.4% St. Mary Land &
Exploration Co. 2.5%
.................................................................................
Schulman (A.), Inc. 3.3 Auspex Systems, Inc. 2.5
.................................................................................
E.W. Blanch Flowserve Corp. 2.4
Holdings, Inc. 2.8
.................................................................................
Magellan Health WestPoint Stevens, Inc. 2.3
Services, Inc. 2.8
.................................................................................
Paxar Corp. 2.5 Lydall, Inc. 2.3
.................................................................................
</TABLE>
2. Includes changes in net asset value without deducting any sales charges.
Such performance would have been lower if sales charges were taken into
account.
3. Results of a hypothetical $10,000 investment in Class A shares on September
30, 1992.
4. The Fund's investments are not limited to securities in the Russell 2000,
which cannot be purchased directly by investors. The Russell 2000 Index is a
capitalization-weighted index of 2,000 U.S. issuers with market values ranging
from $25 million to $1 billion.
5. Portfolio is subject to change. Percentages are as of October 31, 1997 and
are based on total market value of stock holdings.
5 Oppenheimer Quest Small Cap Value Fund
<PAGE> 6
"WE TRY NOT TO DEVIATE FROM OUR DISCIPLINED INVESTMENT APPROACH."
AN INTERVIEW WITH YOUR FUND'S MANAGERS
- --------------------------------------------------------------------------------
HOW HAS THE FUND PERFORMED OVER THE PAST TWELVE MONTHS?
Oppenheimer Quest Small Cap Value Fund performed in line with our expectations.
It is common for our value style of investing to outperform in weak markets and
underperform in strong growth markets. And, because the past 12 months had been
difficult for the small-cap universe as large caps dominated the market, our
value style enabled us to provide strong performance. For the one-year period
ended October 31, 1997, the Fund's Class A shares provided an average annual
total return, without sales charges, of 32.72%.(1) In addition, for the
one-year period ended September 30, 1997, the Fund's Class A shares provided an
average annual total return, without sales charges, of 36.87%, compared to the
average total return for small-cap funds calculated by Lipper Analytical
Services of 29.79%.(2)
HOW DO YOU EVALUATE POTENTIAL INVESTMENTS?
First, we look for companies with a competitive advantage that will allow them
to maintain a high return on invested capital. Second, we look for companies
with strong management teams who use their capital in ways that provide
long-term benefits to shareholders, such as increasing production efficiencies.
Third, we look for stocks that appear inexpensive. We value businesses based on
their intrinsic worth, not based on their value relative to the overall stock
market or to the Russell 2000 Index. Rigorously focusing on value may provide
a level of protection for the portfolio at times of volatility.
1. Includes changes in net asset value without deducting any sales charges.
Such performance would have been lower if sales charges were taken into
account.
2. Source: Lipper Analytical Services, Inc., 9/30/97. Based on the comparisons
between changes in net asset value without considering sales charges, with
dividends and capital gains distributions of the Fund's Class A shares
reinvested. The Fund's Class A shares were ranked 136 of 433 (1-year), and 103
of 125 (5-year) among small cap funds for the period ended 9/30/97.
6 Oppenheimer Quest Small Cap Value Fund
<PAGE> 7
[PHOTO]
PORTFOLIO MANAGER
Timothy McCormack
WHAT INVESTMENT DECISIONS MADE POSITIVE CONTRIBUTIONS TO PERFORMANCE?
We don't focus on industry weightings, nor do we try to match the Russell 2000
in terms of sectors. Our positive contributions come strictly from individual
stock selections. With that said, one of our single best performers was
Magellan Health Services, the nation's largest provider of mental health
services in the United States. One of the reasons that Magellan has done so
well is that the company sold its hospitals in early 1997, freeing up capital
to provide growing services such as managing mental health care programs for
clients.
Another strong performer for the Fund was E.W. Blanch Holdings, Inc, an
innovative insurance brokerage firm that has been able to generate new sources
of steady revenues to offset the often-volatile level of commissions typical in
the property and casualty insurance field. In addition, a successful stock was
St. Mary Land & Exploration Company, a small exploration and production company
that has had a very good track record of finding oil and natural gas. A
combination of having success with some of their higher risk development
projects as well as continued success in some of their long-held properties has
allowed for significant cash flow generation.
7 Oppenheimer Quest Small Cap Value Fund
<PAGE> 8
"SMALL-CAP STOCKS HAVE EXPERIENCED A REBOUND IN THE PAST FOUR MONTHS."
AN INTERVIEW WITH YOUR FUND'S MANAGERS
- --------------------------------------------------------------------------------
WHAT ABOUT AN INVESTMENT THAT DIDN'T DO WELL?
Wang Laboratories, once a leader in the computer hardware business, now
provides computer consulting services to companies. The stock hasn't performed
well, primarily because the company is still having trouble with investors who
remember the company's former life as a troubled hardware manufacturer.
However, we believe Wang Laboratories will eventually perform better, now that
they've developed a cash flow stream from network maintenance and don't have
the manufacturing costs associated with their former business.
WHAT IS YOUR OUTLOOK?
In our last report, we said that we believed that small-cap stocks were
historically inexpensive in relation to large-cap stocks. In the past four
months, the market also came to that conclusion, and small caps have
experienced a rebound. Today, the valuation gap between small caps and large
caps is not as great, but we still believe that small caps are undervalued on a
relative basis. Regardless of what the market is doing, we are still going to
continue what we've been doing, which is to seek investments in good businesses
at good prices. In the event of a market decline, we feel that our style of
valuing stocks on their intrinsic worth may help preserve our clients' capital.
8 Oppenheimer Quest Small Cap Value Fund
<PAGE> 9
FINANCIALS
- --------------------------------------------------------------------------------
9 Oppenheimer Quest Small Cap Value Fund
<PAGE> 10
STATEMENT OF INVESTMENTS October 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
===========================================================================================================
<S> <C> <C>
COMMON STOCKS--86.5%
- ---------------------------------------------------------------------------------------------------------
BASIC MATERIALS--6.6%
- ---------------------------------------------------------------------------------------------------------
CHEMICALS--4.3%
McWhorter Technologies, Inc.(1) 155,600 $ 4,016,425
- ---------------------------------------------------------------------------------------------------------
Schulman (A.), Inc. 364,600 8,203,500
-------------
12,219,925
- ---------------------------------------------------------------------------------------------------------
METALS--1.1%
Chicago Bridge & Iron Co., NV 171,500 3,033,406
- ---------------------------------------------------------------------------------------------------------
PAPER--1.2%
Harland (John H.) Co. 58,400 1,310,350
- ---------------------------------------------------------------------------------------------------------
Rock-Tenn Co., Cl. A 110,700 2,220,919
-------------
3,531,269
- ---------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--13.4%
- ---------------------------------------------------------------------------------------------------------
AUTOS & HOUSING--5.6%
Borg-Warner Automotive, Inc. 72,200 3,934,900
- ---------------------------------------------------------------------------------------------------------
Champion Enterprises, Inc.(1) 272,500 4,785,781
- ---------------------------------------------------------------------------------------------------------
Harman International Industries, Inc. 49,700 2,683,800
- ---------------------------------------------------------------------------------------------------------
Security Capital Group, Inc.(1) 3,103 4,655,310
-------------
16,059,791
- ---------------------------------------------------------------------------------------------------------
MEDIA--2.6%
Bowne & Co., Inc. 89,700 3,128,287
- ---------------------------------------------------------------------------------------------------------
Hollinger International, Inc. 320,700 4,189,144
-------------
7,317,431
- ---------------------------------------------------------------------------------------------------------
RETAIL: GENERAL--4.1%
Burlington Industries, Inc.(1) 111,100 1,659,556
- ---------------------------------------------------------------------------------------------------------
Guilford Mills, Inc. 180,100 4,299,887
- ---------------------------------------------------------------------------------------------------------
WestPoint Stevens, Inc.(1) 141,600 5,805,600
-------------
11,765,043
- ---------------------------------------------------------------------------------------------------------
RETAIL: SPECIALTY--1.1%
Jostens, Inc. 134,900 3,144,856
- ---------------------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS--10.2%
- ---------------------------------------------------------------------------------------------------------
BEVERAGES--0.0%
Beringer Wine Estates Holdings, Inc., Cl. B(1) 4,800 148,800
- ---------------------------------------------------------------------------------------------------------
FOOD--1.6%
Triarc Cos.(1) 205,200 4,642,650
</TABLE>
10 Oppenheimer Quest Small Cap Value Fund
<PAGE> 11
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE/DRUGS--3.6%
Dentsply International, Inc. 129,000 $ 3,660,375
- ---------------------------------------------------------------------------------------------------------
SpaceLabs Medical, Inc.(1) 141,100 3,121,837
- ---------------------------------------------------------------------------------------------------------
Trigon Healthcare, Inc.(1) 141,100 3,448,131
-------------
10,230,343
- ---------------------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES--5.0%
CorVel Corp.(1) 136,800 5,403,600
- ---------------------------------------------------------------------------------------------------------
Magellan Health Services, Inc.(1) 240,800 6,938,050
- ---------------------------------------------------------------------------------------------------------
Vital Signs, Inc. 109,800 2,127,375
-------------
14,469,025
- ---------------------------------------------------------------------------------------------------------
ENERGY--4.8%
- ---------------------------------------------------------------------------------------------------------
ENERGY SERVICES & PRODUCERS--2.5%
Newfield Exploration Co.(1) 32,300 876,137
- ---------------------------------------------------------------------------------------------------------
St. Mary Land & Exploration Co. 152,100 6,198,075
-------------
7,074,212
- ---------------------------------------------------------------------------------------------------------
OIL-INTEGRATED--2.3%
KCS Energy, Inc. 102,900 2,707,556
- ---------------------------------------------------------------------------------------------------------
Nuevo Energy Co.(1) 97,200 4,027,725
-------------
6,735,281
- ---------------------------------------------------------------------------------------------------------
FINANCIAL--13.7%
- ---------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL--1.8%
BA Merchant Services, Inc., A Shares(1) 205,100 3,063,681
- ---------------------------------------------------------------------------------------------------------
MoneyGram Payment Systems, Inc.(1) 150,200 2,149,737
-------------
5,213,418
- ---------------------------------------------------------------------------------------------------------
INSURANCE--11.9%
CNA Surety Corp.(1) 276,900 4,205,419
- ---------------------------------------------------------------------------------------------------------
Delphi Financial Group, Inc., Cl. A 91,330 3,767,362
- ---------------------------------------------------------------------------------------------------------
E.W. Blanch Holdings, Inc. 207,500 6,951,250
- ---------------------------------------------------------------------------------------------------------
Enhance Financial Services Group, Inc. 53,500 2,825,469
- ---------------------------------------------------------------------------------------------------------
Gryphon Holdings, Inc.(1) 195,900 3,158,887
- ---------------------------------------------------------------------------------------------------------
Horace Mann Educators Corp. 63,800 3,588,750
- ---------------------------------------------------------------------------------------------------------
RenaissanceRe Holdings Ltd. 87,700 3,814,950
- ---------------------------------------------------------------------------------------------------------
United Wisconsin Services, Inc. 203,900 5,670,969
-------------
33,983,056
- ---------------------------------------------------------------------------------------------------------
INDUSTRIAL--17.7%
- ---------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--2.1%
AMETEK, Inc. 101,400 2,389,238
- ---------------------------------------------------------------------------------------------------------
Oak Industries, Inc.(1) 121,900 3,497,006
-------------
5,886,244
</TABLE>
11 Oppenheimer Quest Small Cap Value Fund
<PAGE> 12
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL MATERIALS--1.2%
Dal-Tile International, Inc.(1) 73,100 $ 808,669
- ---------------------------------------------------------------------------------------------------------
Interpool, Inc. 166,200 2,659,200
-------------
3,467,869
- ---------------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES--3.8%
Culligan Water Technologies, Inc.(1) 10,647 453,828
- ---------------------------------------------------------------------------------------------------------
Lydall, Inc.(1) 278,600 5,711,300
- ---------------------------------------------------------------------------------------------------------
National Data Corp. 70,100 2,589,319
- ---------------------------------------------------------------------------------------------------------
National Patent Development Corp.(1) 155,400 2,165,888
-------------
10,920,335
- ---------------------------------------------------------------------------------------------------------
MANUFACTURING--10.6%
Baldwin Technology Co., Inc., Cl. A(1) 677,200 3,301,350
- ---------------------------------------------------------------------------------------------------------
EASCO, Inc. 165,400 2,005,475
- ---------------------------------------------------------------------------------------------------------
Flowserve Corp. 198,800 5,914,300
- ---------------------------------------------------------------------------------------------------------
JLG Industries, Inc. 184,600 2,342,113
- ---------------------------------------------------------------------------------------------------------
OmniQuip International, Inc. 202,000 3,383,500
- ---------------------------------------------------------------------------------------------------------
Paxar Corp.(1) 366,900 6,237,300
- ---------------------------------------------------------------------------------------------------------
Roper Industries, Inc. 52,600 1,403,763
- ---------------------------------------------------------------------------------------------------------
United Dominion Industries Ltd. 73,100 1,909,738
- ---------------------------------------------------------------------------------------------------------
Varlen Corp. 13,100 494,525
- ---------------------------------------------------------------------------------------------------------
Watts Industries, Inc., Cl. A 136,200 3,456,075
-------------
30,448,139
- ---------------------------------------------------------------------------------------------------------
TECHNOLOGY--16.9%
- ---------------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE--2.2%
Kaydon Corp. 122,400 3,717,900
- ---------------------------------------------------------------------------------------------------------
Tracor, Inc.(1) 93,200 2,493,100
-------------
6,211,000
- ---------------------------------------------------------------------------------------------------------
COMPUTER HARDWARE--6.0%
Auspex Systems, Inc.(1) 526,500 6,120,563
- ---------------------------------------------------------------------------------------------------------
Wang Laboratories, Inc.(1) 476,200 11,012,125
-------------
17,132,688
- ---------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES--3.9%
BancTec, Inc.(1) 168,000 3,843,000
- ---------------------------------------------------------------------------------------------------------
BDM International, Inc.(1) 84,500 1,869,563
- ---------------------------------------------------------------------------------------------------------
BISYS Group, Inc. (The)(1) 179,500 5,586,938
-------------
11,299,501
</TABLE>
12 Oppenheimer Quest Small Cap Value Fund
<PAGE> 13
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
ELECTRONICS--2.2%
Exar Corp.(1) 147,100 $ 3,530,400
- ---------------------------------------------------------------------------------------------------------
Watkins-Johnson Co. 88,200 2,734,200
-------------
6,264,600
- ---------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-TECHNOLOGY--2.6%
CommScope, Inc.(1) 284,800 3,132,800
- ---------------------------------------------------------------------------------------------------------
TCA Cable TV, Inc. 102,600 4,232,250
-------------
7,365,050
- ---------------------------------------------------------------------------------------------------------
UTILITIES--3.2%
- ---------------------------------------------------------------------------------------------------------
GAS UTILITIES--1.9%
Cabot Oil & Gas Corp., Cl. A 228,500 5,484,000
- ---------------------------------------------------------------------------------------------------------
TELEPHONE UTILITIES--1.3%
ACC Corp.(1) 92,800 3,677,200
-------------
Total Common Stocks (Cost $208,114,289) 247,725,132
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
=========================================================================================================
<S> <C> <C>
SHORT-TERM NOTES--13.3%(2)
- ---------------------------------------------------------------------------------------------------------
Deere (John) Capital Corp.:
5.47%, 11/6/97 $1,741,000 1,739,677
5.48%, 11/24/97 8,998,000 8,966,497
- ---------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 5.50%, 11/3/97 6,275,000 6,273,083
- ---------------------------------------------------------------------------------------------------------
Ford Motor Credit Corp., 5.50%, 11/5/97 1,786,000 1,784,909
- ---------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 5.51%, 12/1/97 5,708,000 5,681,696
- ---------------------------------------------------------------------------------------------------------
Household Finance Corp., 5.49%, 11/13/97 3,930,000 3,922,808
- ---------------------------------------------------------------------------------------------------------
IBM Credit Corp.:
5.50%, 11/10/97 1,071,000 1,069,527
5.50%, 11/3/97 7,500,000 7,497,729
- ---------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 5.53%, 11/5/97 991,000 990,391
------------
Total Short-Term Notes (Cost $37,926,317) 37,926,317
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $246,040,606) 99.8% 285,651,449
- ---------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.2 587,910
---------- ------------
NET ASSETS 100.0% $286,239,359
========== ============
</TABLE>
1. Non-income producing security.
2. Short-term notes are generally traded on a discount basis; the interest rate
is the discount rate received by the Fund at the time of purchase.
See accompanying Notes to Financial Statements.
13 Oppenheimer Quest Small Cap Value Fund
<PAGE> 14
STATEMENT OF ASSETS AND LIABILITIES October 31, 1997
<TABLE>
<S> <C>
==================================================================================================================
ASSETS
Investments, at value (cost $246,040,606)--see accompanying statement $285,651,449
- ------------------------------------------------------------------------------------------------------------------
Receivables:
Shares of beneficial interest sold 3,236,709
Investments sold 651,984
Interest and dividends 61,920
- ------------------------------------------------------------------------------------------------------------------
Other 3,055
------------
Total assets 289,605,117
==================================================================================================================
LIABILITIES
Bank overdraft 59,876
- ------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 1,580,048
Shares of beneficial interest redeemed 1,519,364
Distribution and service plan fees 60,737
Transfer agent and accounting services fees 20,458
Other 125,275
------------
Total liabilities 3,365,758
==================================================================================================================
NET ASSETS $286,239,359
============
==================================================================================================================
COMPOSITION OF NET ASSETS
Par value of shares of beneficial interest $ 129,536
- ------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 221,279,505
- ------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions 25,219,475
- ------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Note 3 39,610,843
------------
Net assets $286,239,359
============
</TABLE>
14 Oppenheimer Quest Small Cap Value Fund
<PAGE> 15
<TABLE>
<S> <C>
=============================================================================================================
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $181,972,857 and 8,174,792 shares of beneficial interest outstanding) $22.26
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $23.62
- -------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets
of $79,754,417 and 3,654,046 shares of beneficial interest outstanding) $21.83
- -------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets
of $24,512,085 and 1,124,775 shares of beneficial interest outstanding) $21.79
</TABLE>
See accompanying Notes to Financial Statements.
15 Oppenheimer Quest Small Cap Value Fund
<PAGE> 16
STATEMENT OF OPERATIONS For the Year Ended October 31, 1997
<TABLE>
<S> <C>
=====================================================================================================================
INVESTMENT INCOME
Interest $ 1,550,682
- --------------------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $9,430) 1,319,016
-----------
Total income 2,869,698
====================================================================================================================
EXPENSES
Management fees--Note 4 1,959,159
- --------------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 656,188
Class B 473,134
Class C 173,642
- --------------------------------------------------------------------------------------------------------------------
Transfer agent and accounting services fees--Note 4 290,422
- --------------------------------------------------------------------------------------------------------------------
Shareholder reports 124,984
- --------------------------------------------------------------------------------------------------------------------
Registration and filing fees 53,099
- --------------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 27,684
- --------------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 18,087
- --------------------------------------------------------------------------------------------------------------------
Legal and auditing fees 17,011
- --------------------------------------------------------------------------------------------------------------------
Other 26,009
-----------
Total expenses 3,819,419
====================================================================================================================
NET INVESTMENT LOSS (949,721)
====================================================================================================================
REALIZED AND UNREALIZED GAIN
Net realized gain on investments 26,283,370
- --------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 26,186,257
-----------
Net realized and unrealized gain 52,469,627
====================================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $51,519,906
===========
</TABLE>
See accompanying Notes to Financial Statements.
16 Oppenheimer Quest Small Cap Value Fund
<PAGE> 17
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1997 1996
===========================================================================================================================
<S> <C> <C>
OPERATIONS
Net investment loss $ (949,721) $ (16,011)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized gain 26,283,370 19,244,292
- ---------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 26,186,257 4,837,245
------------ ------------
Net increase in net assets resulting from operations 51,519,906 24,065,526
===========================================================================================================================
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Class A -- (758,969)
Class B -- (44,363)
Class C -- (29,083)
- ---------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (12,867,588) (6,609,655)
Class B (4,078,752) (1,335,461)
Class C (1,743,582) (506,878)
===========================================================================================================================
BENEFICIAL INTEREST TRANSACTIONS
Net increase (decrease) in net assets resulting from
beneficial interest transactions--Note 2:
Class A 56,911,663 (24,805,861)
Class B 41,289,209 4,861,970
Class C 8,515,292 3,040,987
===========================================================================================================================
NET ASSETS
Total increase (decrease) 139,546,148 (2,121,787)
- ---------------------------------------------------------------------------------------------------------------------------
Beginning of period 146,693,211 148,814,998
------------ ------------
End of period $286,239,359 $146,693,211
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
17 Oppenheimer Quest Small Cap Value Fund
<PAGE> 18
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1997 1996(2) 1995 1994 1993
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $19.03 $17.31 $16.33 $17.68 $14.60
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment
income (loss) (.07) .03 .11(3) (.03)(3) (.04)(3)
Net realized and unrealized gain 5.66 2.79 1.29 .01 4.26
------ ------ ------ ------ ------
Total income (loss) from
investment operations 5.59 2.82 1.40 (.02) 4.22
- ------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income -- (.11) -- -- --
Distributions from net
realized gain (2.36) (.99) (.42) (1.33) (1.14)
------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (2.36) (1.10) (.42) (1.33) (1.14)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $22.26 $19.03 $17.31 $16.33 $17.68
====== ====== ====== ====== ======
==============================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) 32.72% 17.17% 8.82% 0.04% 30.21%
==============================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (in thousands) $181,973 $102,746 $116,307 $120,102 $104,898
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $131,503 $117,765 $119,440 $115,276 $ 75,500
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) (0.32)% 0.11% 0.67% (0.14)% (0.36)%
Expenses 1.78% 1.90% 1.80% 1.88% 1.89%
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 82.1% 70.4% 76.0% 67.0% 74.0%
Average brokerage commission rate(7) $0.0550 $0.0515 -- -- --
</TABLE>
1. For the period from September 1, 1993 (inception of offering) to October 31,
1993.
2. On November 22, 1995, OppenheimerFunds, Inc. became the investment advisor
to the Fund.
3. Based on average shares outstanding for the period.
4. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), 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.
5. Annualized.
18 Oppenheimer Quest Small Cap Value Fund
<PAGE> 19
<TABLE>
<CAPTION>
CLASS B CLASS C
- ------------------------------------------------------------- ----------------------------------------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
1997 1996(2) 1995 1994 1993(1) 1997 1996(2) 1995 1994 1993(1)
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$18.79 $17.11 $16.24 $17.66 $17.19 $18.76 $17.11 $16.23 $17.67 $17.19
- -----------------------------------------------------------------------------------------------------------------------------
(.05) (.06) .02(3) (.11)(3) (.02)(3) (.08) (.05) .01(3) (.13)(3) (.02)(3)
5.45 2.76 1.27 .02 .49 5.47 2.75 1.29 .02 .50
- ------- ------ ------ ------ ------ ------- ------ ------ ------ ------
5.40 2.70 1.29 (.09) .47 5.39 2.70 1.30 (.11) .48
- ------------------------------------------------------------- ----------------------------------------------------------
-- (.03) -- -- -- -- (.06) -- -- --
(2.36) (.99) (.42) (1.33) -- (2.36) (.99) (.42) (1.33) --
- ------- ------ ------ ------ ------ ------- ------ ------ ------ ------
(2.36) (1.02) (.42) (1.33) -- (2.36) (1.05) (.42) (1.33) --
- -----------------------------------------------------------------------------------------------------------------------------
$21.83 $18.79 $17.11 $16.24 $17.66 $21.79 $18.76 $17.11 $16.23 $17.67
======= ====== ====== ====== ====== ======= ======= ======= ====== ======
=============================================================================================================================
32.05% 16.57% 8.17% (0.39)% 2.73% 32.05% 16.55% 8.24% (0.51)% 2.79%
=============================================================================================================================
$79,754 $30,766 $23,440 $16,144 $1,754 $24,512 $13,181 $9,068 $3,344 $235
- -----------------------------------------------------------------------------------------------------------------------------
$47,462 $26,478 $20,105 $ 9,401 $ 934 $17,401 $11,501 $6,114 $1,381 $138
- -----------------------------------------------------------------------------------------------------------------------------
(0.80)% (0.37)% 0.09% (0.70)% (1.15)%(5) (0.81)% (0.40)% 0.08% (0.81)% (1.20)%(5)
2.27% 2.38% 2.37% 2.48% 2.57%(5) 2.28% 2.40% 2.38% 2.59% 2.57%(5)
- -----------------------------------------------------------------------------------------------------------------------------
82.1% 70.4% 76.0% 67.0% 74.0% 82.1% 70.4% 76.0% 67.0% 74.0%
$0.0550 $0.0515 -- -- -- $0.0550 $0.0515 -- -- --
</TABLE>
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended October 31, 1997 were $202,399,264 and $142,092,083,
respectively.
7. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.
See accompanying Notes to Financial Statements.
19 Oppenheimer Quest Small Cap Value Fund
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Quest Small Cap Value Fund (the Fund), a series of Oppenheimer
Quest for Value Funds, is a diversified open-end management investment company
registered under the Investment Company Act of 1940, as amended. The Fund's
investment objective is to seek capital appreciation. It is the intention of
the Fund to invest in a diversified portfolio which under normal conditions
will have at least 65% of its assets invested in equity securities of companies
with market capitalizations under $1 billion. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager). The Fund offers Class A, Class B and
Class C shares. Class A shares are sold with a front-end sales charge. Class B
and Class C shares may be subject to a contingent deferred sales charge. All
three classes of shares have identical rights to earnings, assets and voting
privileges, except that each class has its own distribution and/or service
plan, expenses directly attributable to that class and exclusive voting rights
with respect to matters affecting that class. Class B shares will automatically
convert to Class A shares six years after the date of purchase. The following
is a summary of significant accounting policies consistently followed by the
Fund.
- --------------------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Trustees. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is
reliable and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Trustees to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost
(or last determined market value) adjusted for amortization to maturity of any
premium or discount.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily 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.
20 Oppenheimer Quest Small Cap Value Fund
<PAGE> 21
================================================================================
FEDERAL TAXES. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders are
recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes. The character of the distributions made during the year from net
investment income or net realized gains may differ from its ultimate
characterization for federal income tax purposes due to capital loss
carryforwards. Also, due to timing of dividend distributions, the fiscal year
in which amounts are distributed may differ from the fiscal year in which the
income or realized gain was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders
to reflect the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, during the year ended October 31, 1997, amounts have been
reclassified to reflect a decrease in accumulated net realized gain on
investments of $949,722. Distributions in excess of net investment income were
decreased by the same amount.
- --------------------------------------------------------------------------------
OTHER. Investment transactions are accounted for on the date the investments
are purchased or sold (trade date) and dividend income is recorded on the
ex-dividend date. Interest income is accrued on a daily basis. Realized gains
and losses on investments and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for
federal income tax purposes.
The preparation of financial statements in conformity with 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.
21 Oppenheimer Quest Small Cap Value Fund
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $.01 par value shares of
beneficial interest. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, 1997 YEAR ENDED OCTOBER 31, 1996
---------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 4,335,222 $ 89,701,871 1,937,231 $ 35,893,630
Dividends and distributions
reinvested 702,966 12,330,011 420,196 7,076,100
Redeemed (2,262,183) (45,120,219) (3,676,057) (67,775,591)
---------- ------------ ---------- ------------
Net increase (decrease) 2,776,005 $ 56,911,663 (1,318,630) $(24,805,861)
========== ============ ========== ============
- ---------------------------------------------------------------------------------------------------------------
Class B:
Sold 2,332,167 $ 48,062,468 551,514 $10,124,916
Dividends and distributions
reinvested 224,295 3,875,823 78,798 1,315,750
Redeemed (539,908) (10,649,082) (362,432) (6,578,696)
---------- ------------ ---------- ------------
Net increase 2,016,554 $ 41,289,209 267,880 $ 4,861,970
========== ============ ========== ============
- ---------------------------------------------------------------------------------------------------------------
Class C:
Sold 824,415 $ 16,750,151 389,343 $ 7,061,411
Dividends and distributions
reinvested 98,870 1,705,500 31,101 518,457
Redeemed (501,181) (9,940,359) (247,719) (4,538,881)
---------- ------------ ---------- ------------
Net increase 422,104 $ 8,515,292 172,725 $ 3,040,987
========== ============ ========== ============
</TABLE>
================================================================================
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At October 31, 1997, net unrealized appreciation on investments of $39,610,843
was composed of gross appreciation of $43,885,923, and gross depreciation of
$4,275,080.
22 Oppenheimer Quest Small Cap Value Fund
<PAGE> 23
================================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 1.00% of the first
$400 million of average annual net assets, 0.90% of the next $400 million, and
0.85% of average annual net assets over $800 million. The Manager acts as the
accounting agent for the Fund at an annual fee of $55,000, plus out-of-pocket
costs and expenses reasonably incurred.
The Manager pays OpCap Advisors (the Sub-Advisor) based on the fee
schedule set forth in the Prospectus. For the year ended October 31, 1997, the
Manager paid $739,156 to the Sub-Advisor. On February 13, 1997 PIMCO Advisors
L.P., signed a definitive agreement with Oppenheimer Group, Inc. and its
subsidiary Oppenheimer Financial Corp. for PIMCO Advisors L.P. and its
affiliate, Thomson Advisory Group, Inc., to acquire the one-third managing
general partner interest in Oppenheimer Capital (the parent of OpCap Advisors)
and the 1.0% general interest in Oppenheimer Capital L.P.
For the year ended October 31, 1997, commissions (sales charges paid
by investors) on sales of Class A shares totaled $765,109, of which $219,548
was retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by affiliated broker/dealers. Sales
charges advanced to broker/dealers by OFDI on sales of the Fund's Class B and
Class C shares totaled $1,252,080 and $104,474, of which $62,365 and $2,223,
respectively, were paid to an affiliated broker/dealer. During the year ended
October 31, 1997, OFDI received contingent deferred sales charges of $89,524
and $9,244, respectively, upon redemption of Class B and Class C shares as
reimbursement for sales commissions advanced by OFDI at the time of sale of
such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund and for other registered
investment companies. The Fund pays OFS an annual maintenance fee of $14.85 for
each Fund shareholder account and reimburses OFS for its out-of-pocket
expenses. During the year ended October 31, 1997, the Fund paid OFS $219,098.
23 Oppenheimer Quest Small Cap Value Fund
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED)
The Fund has adopted a Distribution and Service Plan for Class A shares to
compensate OFDI for a portion of its costs incurred in connection with the
personal service and maintenance of accounts that hold Class A shares. Under
the Plan, the Fund pays an annual asset-based sales charge to OFDI of 0.25% per
year on Class A shares. The Fund also pays a service fee to OFDI of 0.25% per
year. Both fees are computed on the average annual net assets of Class A
shares of the Fund, determined as of the close of each regular business day.
OFDI uses all of the service fee and a portion of the asset-based sales charge
to compensate brokers, dealers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of their
customers that hold Class A shares. OFDI retains the balance of the asset-based
sales charge to reimburse itself for its other expenditures under the Plan.
During the year ended October 31, 1997, OFDI paid $147,485 to an affiliated
broker/dealer as compensation for Class A personal service and maintenance
expenses.
The Fund has adopted Distribution and Service Plans for Class B and
Class C shares to compensate OFDI for its costs in distributing Class B and
Class C shares and servicing accounts. Under the Plans, the Fund pays OFDI an
annual asset-based sales charge of 0.75% per year on Class B and Class C shares
for its services rendered in distributing Class B and Class C shares. OFDI also
receives a service fee of 0.25% per year to compensate dealers for providing
personal services for accounts that hold Class B and C shares. Each fee is
computed on the average annual net assets of Class B and Class C shares,
determined as of the close of each regular business day. During the year ended
October 31, 1997, OFDI paid $15,758 and $24,479, respectively, to an affiliated
broker/dealer as compensation for Class B and Class C personal service and
maintenance expenses and retained $390,068 and $72,899, respectively, as
compensation for Class B and Class C sales commissions and service fee
advances, as well as financing costs. If either Plan is terminated by the Fund,
the Board of Trustees may allow the Fund to continue payments of the
asset-based sales charge to OFDI for distributing shares before the Plan was
terminated. At October 31, 1997, OFDI had incurred unreimbursed expenses of
$1,086,533 for Class B and $148,557 for Class C.
24 Oppenheimer Quest Small Cap Value Fund
<PAGE> 25
================================================================================
5. BANK BORROWINGS
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the year ended October
31, 1997.
25 Oppenheimer Quest Small Cap Value Fund
<PAGE> 26
REPORT OF INDEPENDENT ACCOUNTANTS
================================================================================
To the Board of Trustees and Shareholders of
Oppenheimer Quest for Value Funds
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Oppenheimer Quest Small Cap Value
Fund (one of the portfolios constituting Oppenheimer Quest for Value Funds,
hereafter referred to as the Fund), at October 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as financial statements) are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1997 by correspondence with the
custodian and the application of alternative auditing procedures where
securities purchased had not been received, provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
Denver, Colorado
November 21, 1997
26 Oppenheimer Quest Small Cap Value Fund
<PAGE> 27
FEDERAL INCOME TAX INFORMATION (Unaudited)
================================================================================
In early 1998 shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1997. Regulations
of the U.S. Treasury Department require the Fund to report this information to
the Internal Revenue Service.
Distributions of $2.3613 per share were paid to Class A, Class B and
Class C shareholders, respectively, on December 16, 1996, of which, for each
class of shares, $1.3765 was designated as a "capital gain distribution" for
federal income tax purposes. Whether received in stock or in cash, the capital
gain distribution should be treated by shareholders as a gain from the sale of
capital assets held for more than one year (long-term capital gains).
Dividends paid by the Fund during the fiscal year ended October 31,
1997 which are not designated as capital gain distributions should be
multiplied by 10.90% to arrive at the net amount eligible for the corporate
dividend-received deduction.
The foregoing information is presented to assist shareholders in
reporting distributions received from the Fund to the Internal Revenue Service.
Because of the complexity of the federal regulations which may affect your
individual tax return and the many variations in state and local tax
regulations, we recommend that you consult your tax advisor for specific
guidance.
27 Oppenheimer Quest Small Cap Value Fund
<PAGE> 28
SHAREHOLDER MEETING (Unaudited)
================================================================================
On May 27, 1997, a special shareholder meeting was held at which the selection
of Price Waterhouse LLP as the independent accountants and auditors of the Fund
for the fiscal year beginning November 1, 1996 was ratified (Proposal No. 1),
the proposed changes to certain of the Fund's fundamental investment policies,
including changes to the investment objective were approved (Proposal No. 2),
the investment Advisory Agreement between the Fund and OppenheimerFunds, Inc.
was approved (Proposal No. 3), the subadvisory Agreement between
OppenheimerFunds, Inc. and OpCap Advisors was approved (Proposal No. 4), the
Fund's Class A 12b-1 Distribution and Service Plan was approved by Class A
shareholders (Proposal No. 5), the Fund's Class B 12b-1 Distribution and
Service Plan was approved by Class B shareholders (Proposal No. 6), and the
Fund's Class C 12b-1 Distribution and Service Plan was approved by Class C
shareholders (Proposal No. 7) as described in the Fund's proxy statement for
that meeting. The following is a report of the votes cast:
<TABLE>
<CAPTION>
WITHHELD/ BROKER
PROPOSAL FOR AGAINST ABSTAIN NON-VOTES TOTAL
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Proposal No. 1 4,573,260.008 102,258.928 238,209.437 3,644,377 4,913,728.373
Proposal No. 2 4,365,776.796 229,202.907 319,134.617 3,644,377 4,914,114.320
Proposal No. 3 4,442,937.771 170,133.736 301,316.167 3,644,377 4,914,387.674
Proposal No. 4 4,403,574.847 193,195.260 316,961.266 3,644,377 4,913,731.373
Proposal No. 5 3,040,021.433 112,679.822 226,964.553 2,456,535 3,379,665.808
Proposal No. 6 937,906.228 88,314.690 84,145.865 865,177 1,110,366.783
Proposal No. 7 391,277.414 12,387.117 20,028.251 322,664 423,692.782
</TABLE>
28 Oppenheimer Quest Small Cap Value Fund
<PAGE> 29
OPPENHEIMER QUEST SMALL CAP VALUE FUND
A series of Oppenheimer Quest for Value Funds
<TABLE>
<S> <C>
====================================================================================================================================
OFFICERS AND TRUSTEES Bridget A. Macaskill, Chairman of the Board of Trustees and President
Paul Y. Clinton, Trustee
Thomas W. Courtney, Trustee
Lacy B. Herrmann, Trustee
George Loft, Trustee
Robert C. Doll, Jr., Vice President
George C. Bowen, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Andrew J. Donohue, Secretary
Robert G. Zack, Assistant Secretary
====================================================================================================================================
INVESTMENT ADVISOR OppenheimerFunds, Inc.
====================================================================================================================================
SUB-ADVISOR OpCap Advisors
====================================================================================================================================
DISTRIBUTOR OppenheimerFunds Distributor, Inc.
====================================================================================================================================
TRANSFER AND SHAREHOLDER OppenheimerFunds Services
SERVICING AGENT
====================================================================================================================================
CUSTODIAN OF State Street Bank and Trust Company
PORTFOLIO SECURITIES
====================================================================================================================================
INDEPENDENT ACCOUNTANTS Price Waterhouse LLP
====================================================================================================================================
LEGAL COUNSEL Gordon Altman Butowsky Weitzen Shalov & Wein
This is a copy of a report to shareholders of Oppenheimer Quest Small Cap
Value Fund. This report must be preceded or accompanied by a Prospectus of
Oppenheimer Quest Small Cap Value Fund. For material information concerning
the Fund, see the Prospectus.
Shares of Oppenheimer funds are not deposits or obligations of any bank,
are not guaranteed by any bank, and are not insured by the FDIC or any
other agency, and involve investment risks, including possible loss of the
principal amount invested.
</TABLE>
29 Oppenheimer Quest Small Cap Value Fund
<PAGE> 30
OPPENHEIMERFUNDS FAMILY
<TABLE>
<S> <C> <C>
====================================================================================================================================
REAL ASSET FUNDS
- ------------------------------------------------------------------------------------------------------------------------------------
Real Asset Fund Gold & Special Minerals Fund
====================================================================================================================================
STOCK FUNDS
- ------------------------------------------------------------------------------------------------------------------------------------
Developing Markets Fund Capital Appreciation Fund(1) Disciplined Value Fund
Enterprise Fund Quest Capital Value Fund Quest Value Fund
International Growth Fund Growth Fund MidCap Fund
Discovery Fund Global Fund International Small
Quest Small Cap Value Fund Quest Global Value Fund Company Fund
====================================================================================================================================
STOCK & BOND FUNDS
- ------------------------------------------------------------------------------------------------------------------------------------
Main Street Income & Quest Growth &Income Disciplined Allocation Fund
Growth Fund Value Fund Multiple Strategies Fund(2)
Quest Opportunity Value Fund Global Growth &Income Fund Bond Fund for Growth
Total Return Fund Equity Income Fund
====================================================================================================================================
BOND FUNDS
- ------------------------------------------------------------------------------------------------------------------------------------
International Bond Fund Champion Income Fund U.S. Government Trust
High Yield Fund Strategic Income Fund Limited-Term Government Fund
Bond Fund
====================================================================================================================================
MUNICIPAL FUNDS
- ------------------------------------------------------------------------------------------------------------------------------------
California Municipal Fund(3) Pennsylvania Municipal Fund(3) Rochester Division:
Florida Municipal Fund(3) Municipal Bond Fund Rochester Fund Municipals
New Jersey Municipal Fund(3) Insured Municipal Fund Limited Term New York
New York Municipal Fund(3) Intermediate Municipal Fund Municipal Fund
====================================================================================================================================
MONEY MARKET FUNDS(4)
- ------------------------------------------------------------------------------------------------------------------------------------
Money Market Fund Cash Reserves
====================================================================================================================================
LIFESPAN
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Fund Balanced Fund Income Fund
</TABLE>
1. On 12/18/96, the Fund's name was changed from "Target Fund."
2. On 3/16/97, the Fund's name was changed from "Asset Allocation Fund."
3. Available only to investors in certain states.
4. An investment in money market funds is neither insured nor guaranteed by the
U.S. government and there can be no assurance that a money market fund will be
able to maintain a stable net asset value of $1.00 per share. Oppenheimer funds
are distributed by OppenheimerFunds Distributor, Inc., Two World Trade Center,
New York, NY 10048-0203.
(C) Copyright 1997 OppenheimerFunds, Inc. All rights reserved.
30 Oppenheimer Quest Small Cap Value Fund
<PAGE> 31
INTERNET
24-hr access to account
information
WWW.OPPENHEIMERFUNDS.COM
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Mon-Fri 8:30am-9pm ET
Sat 10am-4pm ET
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Mon-Fri 8:30am-2pm ET
1-800-843-4461
OPPENHEIMERFUNDS
INFORMATION HOTLINE
24 hours a day, timely and
insightful messages on the
economy and issues that
affect your investments
1-800-835-3104
INFORMATION AND SERVICES
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As an Oppenheimer fund shareholder, you have some special privileges. Whether
it's automatic investment plans, informative newsletters and hotlines, or ready
account access, you can benefit from services designed to make investing
simple.
And when you need help, our Customer Service Representatives are only a
toll-free phone call away. They can provide information about your account and
handle administrative requests. You can reach them at our General Information
number.
When you want to make a transaction, you can do it easily by calling our
toll-free Telephone Transactions number. And, by enrolling in AccountLink, a
convenient service that "links" your Oppenheimer funds accounts and your bank
checking or savings account, you can use the Telephone Transactions number to
make investments.
For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week.
PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.
You can count on us whenever you need assistance. That's why the
International Customer Service Association, an independent, nonprofit
organization made up of over 3,200 customer service management professionals
from around the country, honored the Oppenheimer funds' transfer agent,
OppenheimerFunds Services, with their Award of Excellence in 1993.
So call us today, or visit us at our website at
www.oppenheimerfunds.com--we're here to help.
[OPPENHEIMERFUNDS LOGO]
RA0251.001.1097 December 30, 1997
