<PAGE> 1
ANNUAL REPORT OCTOBER 31, 1998
OPPENHEIMER
QUEST SMALL CAP
VALUE FUND
[PHOTO]
[OPPENHEIMERFUNDS LOGO]
THE RIGHT WAY TO INVEST
<PAGE> 2
CONTENTS
3 President's Letter
4 An Interview
with Your Fund's
Managers
8 Fund Performance
13 Financial
Statements
29 Report of
Independent
Accountants
30 Federal
Income Tax
Information
31 Officers and
Trustees
32 Information and
Services
REPORT HIGHLIGHTS
- --------------------------------------------------------------------------------
- - THE FUND WAS ADVERSELY IMPACTED by a slowing U.S. economy and investor
aversion to risk in the wake of the Asian economic turmoil.
- - THE PORTFOLIO INCLUDES many companies that are less sensitive to a slowing
economy.
AVG ANNUAL TOTAL RETURNS
For the 1-Year Period
Ended 10/31/98
CLASS A
Without With
Sales Chg.(1) Sales Chg.(2)
- -----------------------------------
- -15.05% -19.93%
- -----------------------------------
CLASS B
Without With
Sales Chg.(1) Sales Chg.(2)
- -----------------------------------
- -15.47% -19.32%
- -----------------------------------
CLASS C
Without With
Sales Chg.(1) Sales Chg.(2)
- -----------------------------------
- -15.45% -16.22%
- -----------------------------------
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. BECAUSE OF ONGOING
MARKET VOLATILITY, THE FUND'S PERFORMANCE MAY BE SUBJECT TO SUBSTANTIAL
SHORT-TERM CHANGES. FOR UPDATES ON THE FUND'S PERFORMANCE, PLEASE CONTACT YOUR
FINANCIAL ADVISOR, CALL US AT 1-800-525-7048 OR VISIT OUR WEBSITE,
WWW.OPPENHEIMERFUNDS.COM. 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.
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. Class A return includes the current maximum initial sales charge of 5.75%.
Class B return includes the applicable contingent deferred sales charge of 5%.
Class C return includes the applicable contingent deferred sales charge of 1%.
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. An
explanation of the different performance calculations is in the Fund's
prospectus.
2 Oppenheimer Quest Small Cap Value Fund
<PAGE> 3
[PHOTO]
BRIDGET A. MACASKILL
President
Oppenheimer Quest
Small Cap Value Fund
DEAR SHAREHOLDER,
- --------------------------------------------------------------------------------
In retrospect, 1998 has been an unsettling year for the financial markets.
Around the world, stock and bond markets experienced considerable instability,
with particular tumult being felt in Southeast Asia, Russia and Latin America.
The U.S. stock market was not immune from the extreme volatility, as it climbed
to record levels through July before correcting sharply in the third quarter and
rebounding to new highs in the fourth quarter. In the bond market, yields on
U.S. Treasury securities declined to record lows before rising modestly late in
the year.
Does the swift recovery of the U.S. stock market and the favorable
economic environment for the bond market mean that domestic stocks and bonds
will continue to prosper? We are optimistic over the long term, but we do expect
that concerns about corporate earnings growth in a slow-growth economy will
contribute to more stock market volatility in 1999. In the bond market, the
Federal Reserve Board's decisions to reduce short-term interest rates should
help create a positive climate for fixed-income securities. While lower interest
rates are generally good for bond prices, it will become more difficult for bond
funds to maintain their dividends at current levels if yields decline further.
As an Oppenheimer fund shareholder, you may wonder how this potential
volatility will affect you. If you maintain a long-term perspective, as we do,
short-term volatility over the coming months should have little bearing on your
ability to achieve your future financial goals. That's why we continue to
suggest that you adhere to your long-term investment plan. In fact, we are very
encouraged that most of our shareholders stayed the course during last summer's
stock market correction, avoiding the temptation of selling into a temporarily
declining market.
Finally, I would like to thank those shareholders who contacted us about
our revised account statement. Response has been very positive, and we are
pleased that many of you find the new format easier to read and more
informative. If you have any questions about the new statement or any other
matter, please don't hesitate to call us at 1-800-525-7048. In the meantime,
thank you for choosing OppenheimerFunds, The Right Way to Invest.
Sincerely,
/s/ BRIDGET A. MACASKILL
Bridget A. Macaskill
November 20, 1998
3 Oppenheimer Quest Small Cap Value Fund
<PAGE> 4
"WE ARE BEGINNING TO SEE SOME TREMENDOUS VALUE IN THE SMALL CAP AREA."
AN INTERVIEW WITH YOUR FUND'S MANAGERS
- --------------------------------------------------------------------------------
HOW HAS THE FUND PERFORMED DURING THE FISCAL YEAR THAT ENDED OCTOBER 31, 1998?
The past 12 months have been a very difficult period for small cap stocks and
for Oppenheimer Quest Small Cap Value Fund. As the U.S. economy slowed during
mid-1998, small company stocks were generally hurt more than large companies.
The reason: investors generally believe that small companies don't have as much
of a financial cushion to weather a downturn. In addition, Asia's troubles,
Russia's collapsing economy and other trouble spots around the world have made
investors more risk averse. As a result, larger U.S. companies have been
perceived to be a safer place to invest in turbulent times.
During this uncertain period, we continued to invest conservatively by
focusing on a company's fundamental value rather than next quarter's projected
earnings. This strategy has served us well in a very difficult environment.
LET'S DISCUSS ONE OF THE FUND'S BIGGEST HOLDINGS.
The Fund's largest position, Annuity & Life RE Holdings Ltd. did reasonably well
during the year. The company is a start-up, Bermuda-based insurer that is run by
an experienced management team with an excellent track record in the reinsurance
industry. In addition to successful management, the company has benefited from
the downturn in the stock market and the reduction in available capital. Over
the past few years, there has been excess capacity in the insurance industry
because of the availability of capital through initial public offerings, as well
as the appreciation of stock values in many insurance company portfolios. When
insurance companies have too much
4 Oppenheimer Quest Small Cap Value Fund
<PAGE> 5
[PHOTO]
PORTFOLIO MANAGEMENT
TEAM (L TO R)
Gavin Albert
Timothy McCormack
capital, they tend to offer policies at steep discounts in order to increase
their business volume. On the other hand, when their capital base is shrinking,
companies tend to be less aggressive in pricing their policies. The impact of
the stock market correction is that capital has been less prevalent for this
industry, which will help well-managed companies such as Annuity & Life
Reinsurance Holdings Ltd. be more profitable.
WHAT'S ANOTHER EXAMPLE OF A STOCK THAT HAS HELD UP FAIRLY WELL DURING THE
PERIOD?
The Fund also invested in a company specializing in handling workers'
compensation claims. If a worker gets hurt on the job, this firm may be hired by
that company to handle the claim from the point of injury to the point of
getting the employee back to work. Since workers' compensation is a
state-mandated benefit, there are 50 sets of rules, regulations and fee
schedules. Workers' compensation is an expensive employee benefit because the
employer has to pay the employee during the disability. That's one of the
reasons why it's important to get the employee back to work quickly. This
company tries to lower the cost to the employer by rehabilitating the employee
to get him or her back to work as soon as possible. The company has been
consistently profitable since it went public in 1991.
5 Oppenheimer Quest Small Cap Value Fund
<PAGE> 6
AVG ANNUAL TOTAL RETURNS
For the Periods Ended 9/30/98(1)
CLASS A
Since
1 year 5 year Inception
- -----------------------------------
- -25.21% 5.63% 10.38%
- -----------------------------------
CLASS B
Since
1 year 5 year Inception
- -----------------------------------
- -24.68% 6.03% 6.48%
- -----------------------------------
CLASS C
Since
1 year 5 year Inception
- -----------------------------------
- -21.78% 6.34% 6.63%
- -----------------------------------
AN INTERVIEW WITH YOUR FUND'S MANAGERS
- --------------------------------------------------------------------------------
LET'S TALK ABOUT A STOCK THAT HAS BEEN SOMEWHAT OF A DISAPPOINTMENT.
Paxar Corp., based in White Plains, N.Y., makes labels such as price tags and
bar code tags for the apparel industry. Recently, the company made two large
acquisitions that it had some difficulty assimilating, but we believe Paxar's
problems are behind it. During the past few months, apparel stocks have
weakened, and the company has been aggressively buying back its stock. We like
companies such as Paxar that generate a lot of cash flow and make decisions to
repurchase stock, which is advantageous to shareholders. In fact, we have
recently added to the position.
WHAT IS YOUR OUTLOOK FOR SMALL CAP STOCKS?
This past year has been a difficult period for small cap stocks in general.
However, we are beginning to see some tremendous value in this area. Overall,
small cap stocks have better earnings growth potential than large companies,
while selling at more attractive relative price levels.
Certainly, a re-acceleration of the U.S. economy and an improved global
picture would be helpful to the Fund. In the meantime, we remain more focused on
the fundamentals of the companies that we own, rather than trying to predict
shifts in the economy.
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 1% (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. 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. An explanation
of the different performance calculations is in the fund's prospectus.
6 Oppenheimer Quest Small Cap Value Fund
<PAGE> 7
ASSET ALLOCATION(2)
[PIE CHART]
<TABLE>
<S> <C>
- - Equities 88.7%
- - Cash Equivalents 11.3
</TABLE>
We remain disciplined about investing in reasonably valued businesses that we
believe are well managed, generate strong cash flow and have active share
repurchase programs, which is an effective way to create long-term value when
share prices decline. This active management style is what makes Oppenheimer
Quest Small Cap Value Fund part of The Right Way to Invest.
<TABLE>
<CAPTION>
TOP 10 STOCK HOLDINGS(2)
- ---------------------------------------------------------------------------------------------
<S> <C>
Annuity & Life RE Holdings Ltd. 3.9%
- ---------------------------------------------------------------------------------------------
Wang Laboratories, Inc. 3.6
- ---------------------------------------------------------------------------------------------
RenaissanceRe Holdings Ltd. 3.0
- ---------------------------------------------------------------------------------------------
Paxar Corp. 3.0
- ---------------------------------------------------------------------------------------------
Schulman (A.), Inc. 2.7
- ---------------------------------------------------------------------------------------------
Triarc Cos. 2.7
- ---------------------------------------------------------------------------------------------
Volt Information Sciences, Inc. 2.4
- ---------------------------------------------------------------------------------------------
Enhance Financial Services Group, Inc. 2.4
- ---------------------------------------------------------------------------------------------
Terra Nova (Bermuda) Holdings Ltd., Cl. A 2.3
- ---------------------------------------------------------------------------------------------
Delphi Financial Group, Inc., Cl. A 2.3
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TOP 5 INDUSTRIES(2)
- ---------------------------------------------------------------------------------------------
<S> <C>
Insurance 21.1%
- ---------------------------------------------------------------------------------------------
Chemicals 6.1
- ---------------------------------------------------------------------------------------------
Electronics 5.9
- ---------------------------------------------------------------------------------------------
Telecommunications/Technology 5.8
- ---------------------------------------------------------------------------------------------
Computer Hardware 5.7
- ---------------------------------------------------------------------------------------------
</TABLE>
2. Portfolio is subject to change. Percentages are as of October 31, 1998, and
are based on total market value of investments.
7 Oppenheimer Quest Small Cap Value Fund
<PAGE> 8
FUND PERFORMANCE
- --------------------------------------------------------------------------------
HOW HAS THE FUND PERFORMED? Below is a discussion, by the Manager, of the Fund's
performance during its fiscal year ended October 31, 1998, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index.
- MANAGEMENT'S DISCUSSION OF PERFORMANCE. During the fiscal year that
ended October 31, 1998, investors generally shunned small company stocks. After
a strong first quarter of 1998, the U.S. economy began to slow in the second and
third quarters, and investors began to expect a possible recession in 1999.
That, combined with the continuing turmoil in Asian and Russian economies, has
created a preference for large blue chip companies that investors perceive can
withstand slower economic growth. As a result, the Fund's performance suffered.
The Fund's portfolio holdings, allocations and management strategies are subject
to change.
- COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that
follow show the performance of a hypothetical $10,000 investment in each class
of shares of the Fund held until October 31, 1998. In the case of Class A
shares, performance is measured from the inception of the class on January 3,
1989; in the case of Class B and Class C, performance is measured from inception
of those classes on September 1, 1993. The Fund's performance reflects the
deduction of the 5.75% maximum initial sales charge on Class A shares, the 5%
(1-year) and 1% (since inception) applicable contingent deferred sales charge
for Class B, and the 1% (1-year) contingent deferred sales charge for Class C
shares. The graphs assume that all dividends and capital gains distributions
were reinvested in additional shares.
8 Oppenheimer Quest Small Cap Value Fund
<PAGE> 9
The Fund's performance is compared to that of the Russell 2000 Index. The
Russell 2000 is a capitalization-weighted index of 2,000 U.S. issuers whose
common stocks are traded on the New York and American Stock Exchanges and
NASDAQ, and is widely recognized as a measure of the performance of
"mid-capitalization" stocks. Index performance reflects the reinvestment of
dividends but does not consider the effect of capital gains or transaction
costs, and none of the data in the graphs shows the effect of taxes. The Fund's
performance reflects the effects of Fund business and operating expenses. While
index comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not limited to the
securities in the index.
9 Oppenheimer Quest Small Cap Value Fund
<PAGE> 10
FUND PERFORMANCE
- --------------------------------------------------------------------------------
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Quest Small Cap Value Fund (Class A) and Russell 2000 Index
[The following table was originally a line graph in the printed materials.]
<TABLE>
<CAPTION>
Oppenheimer Quest
Small Cap Value Russell 2000
Date Fund Class A Index
<S> <C> <C>
1/3/89 $ 9,425 $ 10,000
10/31/89 10,283 11,505
10/31/90 8,398 8,367
10/31/91 13,018 13,273
10/31/92 14,528 14,532
10/31/93 18,917 19,243
10/31/94 18,925 19,175
10/31/95 20,593 22,693
10/31/96 24,128 26,462
10/31/97 32,022 34,223
10/31/98 27,203 30,171
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS A SHARES OF THE FUND AT 10/31/98(1)
1 YEAR -19.93% 5 YEAR 6.27% LIFE 10.72%
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Quest Small Cap Value Fund (Class B) and Russell 2000 Index
[The following table was originally a line graph in the printed materials.]
<TABLE>
<CAPTION>
Oppenheimer Quest
Small Cap Value Russell 2000
Date Fund Class B Index
<S> <C> <C>
09/01/93 $ 10,000 $ 10,000
10/31/93 10,273 10,547
10/31/94 10,233 10,510
10/31/95 11,069 12,438
10/31/96 12,904 14,503
10/31/97 17,040 18,757
10/31/98 14,306 16,536
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS B SHARES OF THE FUND AT 10/31/98(2)
1 YEAR -19.32% 5 YEAR 6.70% LIFE 7.18%
10 Oppenheimer Quest Small Cap Value Fund
<PAGE> 11
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Quest Small Cap Value Fund (Class C) and Russell 2000 Index
[The following table was originally a line graph in the printed materials.]
<TABLE>
<CAPTION>
Oppenheimer Quest
Small Cap Value Russell 2000
Date Fund Class C Index
<S> <C> <C>
09/01/93 $ 10,000 $ 10,000
10/31/93 10,279 10,547
10/31/94 10,227 10,510
10/31/95 11,069 12,438
10/31/96 12,901 14,503
10/31/97 17,037 18,757
10/31/98 14,404 16,536
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS C SHARES OF THE FUND AT 10/31/98(3)
1 YEAR -16.22% 5 YEAR 6.98% LIFE 7.32%
The returns and the ending account values in the graphs show change in share
value and include reinvestment of all dividends and capital gains distributions.
The performance information for the Russell 2000 Index in the graphs begins on
12/31/88 for Class A and 8/31/93 for both Class B and Class C.
1. The inception date of the Fund (Class A Shares) was 1/3/89. The average
annual total returns are shown net of the applicable 5.75% Maximum initial sales
charge.
2. Class B shares of the Fund were first publicly offered on 9/1/93. The average
annual total returns are shown net of the applicable 5% and 1% contingent
deferred sales charges, respectively, for the one-year period and the life of
the class. The ending account value in the graph is net of the applicable 1%
contingent deferred sales charge.
3. Class C shares of the Fund were first publicly offered on 9/1/93. The average
annual total returns are shown net of the applicable 1% contingent deferred
sales charge for the one-year period. Past performance is not predictive of
future performance. Graphs are not drawn to the same scale.
11 Oppenheimer Quest Small Cap Value Fund
<PAGE> 12
FINANCIALS
- --------------------------------------------------------------------------------
12 Oppenheimer Quest Small Cap Value Fund
<PAGE> 13
STATEMENT OF INVESTMENTS October 31, 1998
MARKET VALUE
SHARES SEE NOTE 1
=========================================================================
COMMON STOCKS--88.6%
- -------------------------------------------------------------------------
BASIC MATERIALS--6.0%
- -------------------------------------------------------------------------
CHEMICALS--6.0%
M. A. Hanna Co. 290,000 $ 4,259,375
- -------------------------------------------------------------------------
McWhorter Technologies, Inc.(1) 114,100 2,324,787
- -------------------------------------------------------------------------
Schulman (A.), Inc. 420,100 8,349,487
- -------------------------------------------------------------------------
Tetra Technologies, Inc.(1) 306,500 3,697,156
-----------
18,630,805
- -------------------------------------------------------------------------
CONSUMER CYCLICALS--13.0%
- -------------------------------------------------------------------------
AUTOS & HOUSING--2.8%
Borg-Warner Automotive, Inc. 147,400 6,909,375
- -------------------------------------------------------------------------
Security Capital Group, Inc., Cl. B(1) 103,451 1,648,750
-----------
8,558,125
- -------------------------------------------------------------------------
LEISURE & ENTERTAINMENT--2.3%
Air Express International Corp. 331,400 6,959,400
- -------------------------------------------------------------------------
MEDIA--2.0%
Hollinger International, Inc. 483,700 6,288,100
- -------------------------------------------------------------------------
RETAIL: GENERAL--2.9%
Guilford Mills, Inc. 409,700 5,121,250
- -------------------------------------------------------------------------
WestPoint Stevens, Inc.(1) 134,200 3,816,312
-----------
8,937,562
- -------------------------------------------------------------------------
TEXTILES/APPAREL--3.0%
Paxar Corp.(1) 1,010,200 9,154,937
13 Oppenheimer Quest Small Cap Value Fund
<PAGE> 14
STATEMENT OF INVESTMENTS (Continued)
MARKET VALUE
SHARES SEE NOTE 1
- -------------------------------------------------------------------------
CONSUMER NON-CYCLICALS--10.6%
- -------------------------------------------------------------------------
FOOD--3.5%
Agribrands International, Inc.(1) 85,000 $ 2,491,563
- -------------------------------------------------------------------------
Triarc Cos.(1) 534,300 8,348,438
------------
10,840,001
- -------------------------------------------------------------------------
HEALTHCARE/DRUGS--1.8%
Dentsply International, Inc. 65,800 1,694,350
- -------------------------------------------------------------------------
Trigon Healthcare, Inc.(1) 105,100 3,941,250
------------
5,635,600
- -------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES--5.3%
CorVel Corp.(1) 136,800 5,010,300
- -------------------------------------------------------------------------
Magellan Health Services, Inc.(1) 553,700 5,017,906
- -------------------------------------------------------------------------
United Wisconsin Services, Inc.(1) 480,100 4,080,850
Vital Signs, Inc. 141,800 2,268,800
------------
16,377,856
- -------------------------------------------------------------------------
ENERGY--5.5%
- -------------------------------------------------------------------------
ENERGY SERVICES & PRODUCERS--3.2%
Basin Exploration, Inc.(1) 242,700 3,883,200
- -------------------------------------------------------------------------
St. Mary Land & Exploration Co. 291,500 6,121,500
------------
10,004,700
- -------------------------------------------------------------------------
OIL-INTEGRATED--2.3%
KCS Energy, Inc. 675,400 3,419,213
- -------------------------------------------------------------------------
Nuevo Energy Co.(1) 177,600 3,762,900
------------
7,182,113
14 Oppenheimer Quest Small Cap Value Fund
<PAGE> 15
MARKET VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------
FINANCIAL--21.1%
- ------------------------------------------------------------------------
INSURANCE--21.1%
American Medical Security Group, Inc. 527,800 $ 4,618,250
- ------------------------------------------------------------------------
Annuity & Life RE Holdings Ltd.(1) 510,800 11,939,950
- ------------------------------------------------------------------------
Chartwell Re Corp. 203,300 5,057,088
- ------------------------------------------------------------------------
CNA Surety Corp.(1) 375,300 5,277,656
- ------------------------------------------------------------------------
Delphi Financial Group, Inc., Cl. A 149,450 6,968,106
- ------------------------------------------------------------------------
E.W. Blanch Holdings, Inc. 152,500 5,937,969
- ------------------------------------------------------------------------
Enhance Financial Services Group, Inc. 295,300 7,253,306
- ------------------------------------------------------------------------
Horace Mann Educators Corp. 49,100 1,405,488
- ------------------------------------------------------------------------
RenaissanceRe Holdings Ltd. 246,100 9,290,275
- ------------------------------------------------------------------------
Terra Nova (Bermuda) Holdings Ltd., Cl. A 258,000 7,159,500
------------
64,907,588
- ------------------------------------------------------------------------
INDUSTRIAL--11.7%
- ------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--1.1%
Technitrol, Inc. 123,900 3,376,275
- ------------------------------------------------------------------------
INDUSTRIAL MATERIALS--1.5%
AEP Industries, Inc.(1) 47,300 1,016,950
- ------------------------------------------------------------------------
Interpool, Inc. 262,000 3,700,750
------------
4,717,700
- ------------------------------------------------------------------------
INDUSTRIAL SERVICES--5.4%
Albany International Corp., Cl. A 173,420 3,164,924
- ------------------------------------------------------------------------
GP Strategies Corp.(1) 349,300 4,038,781
- ------------------------------------------------------------------------
Lydall, Inc.(1) 393,100 3,980,138
- ------------------------------------------------------------------------
Wallace Computer Services, Inc. 252,200 5,516,875
------------
16,700,718
15 Oppenheimer Quest Small Cap Value Fund
<PAGE> 16
STATEMENT OF INVESTMENTS (Continued)
MARKET VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------
MANUFACTURING--3.7%
Baldwin Technology Co., Inc., Cl. A(1) 587,000 $ 3,301,875
- ------------------------------------------------------------------------
EASCO, Inc. 15,200 134,900
- ------------------------------------------------------------------------
Flowserve Corp. 379,400 6,829,200
- ------------------------------------------------------------------------
U.S. Industries, Inc. 63,900 1,042,369
-----------
11,308,344
- ------------------------------------------------------------------------
TECHNOLOGY--19.0%
- ------------------------------------------------------------------------
COMPUTER HARDWARE--5.7%
Adaptec, Inc.(1) 126,500 2,047,719
- ------------------------------------------------------------------------
Artesyn Technologies, Inc.(1) 299,600 4,325,475
- ------------------------------------------------------------------------
Wang Laboratories, Inc.(1) 521,300 11,142,788
-----------
17,515,982
- ------------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES--1.6%
BancTec, Inc.(1) 395,800 4,898,025
- ------------------------------------------------------------------------
ELECTRONICS--5.9%
CTS Corp. 178,400 5,285,100
- ------------------------------------------------------------------------
Exar Corp.(1) 357,400 6,165,150
- ------------------------------------------------------------------------
Unitrode Corp.(1) 528,700 6,641,794
-----------
18,092,044
- ------------------------------------------------------------------------
TELECOMMUNICATIONS/TECHNOLOGY--5.8%
General Semiconductor, Inc.(1) 414,900 3,293,269
- ------------------------------------------------------------------------
Harman International Industries, Inc. 171,900 6,951,206
- ------------------------------------------------------------------------
Volt Information Sciences, Inc.(1) 313,500 7,504,406
-----------
17,748,881
- ------------------------------------------------------------------------
UTILITIES--1.7%
- ------------------------------------------------------------------------
GAS UTILITIES--1.7%
Cabot Oil & Gas Corp., Cl. A 310,600 5,280,200
-------------
Total Common Stocks (Cost $298,434,701) 273,114,956
16 Oppenheimer Quest Small Cap Value Fund
<PAGE> 17
FACE MARKET VALUE
AMOUNT SEE NOTE 1
===============================================================================
SHORT-TERM NOTES--11.3%(2)
- -------------------------------------------------------------------------------
American Express Credit Corp., 5.28%, 11/3/98 $11,589,000 $ 11,585,749
- -------------------------------------------------------------------------------
Ford Motor Credit Corp., 5.06%, 11/16/98 4,626,000 4,616,247
- -------------------------------------------------------------------------------
General Electric Capital Services, 5.49%, 12/14/98 1,268,000 1,260,291
- -------------------------------------------------------------------------------
General Motors Acceptance Corp., 5.09%, 12/2/98 501,000 498,804
- -------------------------------------------------------------------------------
Household Finance Corp., 5.25%, 11/12/98 2,952,000 2,947,264
- -------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 5.09%, 12/7/98 5,674,000 5,645,119
- -------------------------------------------------------------------------------
Norwest Financial, Inc., 5.11%, 12/1/98 8,117,000 8,082,435
- -------------------------------------------------------------------------------
UBS Finance, Inc., 5.65%, 11/2/98 130,000 129,980
------------
Total Short-Term Notes (Cost $34,765,889) 34,765,889
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $333,200,590) 99.9% 307,880,845
- -------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.1 434,258
------- ------------
NET ASSETS 100.0% $308,315,103
======= ============
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.
17 Oppenheimer Quest Small Cap Value Fund
<PAGE> 18
STATEMENT OF ASSETS AND LIABILITIES October 31, 1998
<TABLE>
========================================================================================
<S> <C>
ASSETS
Investments, at value (cost $333,200,590)--see accompanying statement $307,880,845
- ----------------------------------------------------------------------------------------
Cash 16,522
- ----------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 1,713,714
Interest and dividends 94,244
Investments sold 46,930
Other 34,360
------------
Total assets 309,786,615
========================================================================================
LIABILITIES
Payables and other liabilities:
Investments purchased 893,001
Shares of beneficial interest redeemed 357,758
Distribution and service plan fees 60,191
Shareholder reports 58,490
Transfer and shareholder servicing agent fees 43,421
Trustees' fees 8,314
Other 50,337
-----------
Total liabilities 1,471,512
========================================================================================
NET ASSETS $308,315,103
============
========================================================================================
COMPOSITION OF NET ASSETS
Par value of shares of beneficial interest $ 180,246
- ----------------------------------------------------------------------------------------
Additional paid-in capital 323,683,887
- ----------------------------------------------------------------------------------------
Accumulated net investment loss (8,314)
- ----------------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions 9,779,029
- ----------------------------------------------------------------------------------------
Net unrealized depreciation on investments--Note 3 (25,319,745)
------------
Net assets $308,315,103
============
</TABLE>
18 Oppenheimer Quest Small Cap Value Fund
<PAGE> 19
<TABLE>
=========================================================================================
<S> <C>
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$183,566,647 and 10,613,924 shares of beneficial interest outstanding) $17.29
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $18.34
- -----------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $98,041,456 and
5,822,034 shares of beneficial interest outstanding) $16.84
- -----------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $26,707,000 and
1,588,622 shares of beneficial interest outstanding) $16.81
See accompanying Notes to Financial Statements.
</TABLE>
19 Oppenheimer Quest Small Cap Value Fund
<PAGE> 20
<TABLE>
STATEMENT OF OPERATIONS For the Year Ended October 31, 1998
========================================================================================
<S> <C>
INVESTMENT INCOME
Interest $ 2,431,612
- ----------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $1,544) 2,123,922
------------
Total income 4,555,534
========================================================================================
EXPENSES
Management fees--Note 4 3,283,570
- ----------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 1,009,736
Class B 977,677
Class C 286,409
- ----------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 616,141
- ----------------------------------------------------------------------------------------
Shareholder reports 117,609
- ----------------------------------------------------------------------------------------
Registration and filing fees 93,722
- ----------------------------------------------------------------------------------------
Accounting service fees--Note 4 55,000
- ----------------------------------------------------------------------------------------
Trustees' fees and expenses 32,989
- ----------------------------------------------------------------------------------------
Legal, auditing and other professional fees 26,838
- ----------------------------------------------------------------------------------------
Custodian fees and expenses 26,231
- ----------------------------------------------------------------------------------------
Other 34,351
------------
Total expenses 6,560,273
========================================================================================
NET INVESTMENT LOSS (2,004,739)
========================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain on investments 9,954,218
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (64,930,588)
------------
Net realized and unrealized loss (54,976,370)
========================================================================================
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(56,981,109)
============
</TABLE>
See accompanying Notes to Financial Statements.
20 Oppenheimer Quest Small Cap Value Fund
<PAGE> 21
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1998 1997
===============================================================================================
<S> <C> <C>
OPERATIONS
Net investment loss $ (2,004,739) $ (949,721)
- -----------------------------------------------------------------------------------------------
Net realized gain 9,954,218 26,283,370
- -----------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (64,930,588) 26,186,257
----------- ------------
Net increase (decrease) in net assets resulting from operations (56,981,109) 51,519,906
===============================================================================================
DISTRIBUTIONS TO SHAREHOLDERS Distributions from net realized
gain:
Class A (15,926,177) (12,867,588)
Class B (7,220,162) (4,078,752)
Class C (2,252,552) (1,743,582)
===============================================================================================
BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets resulting from
beneficial interest transactions--Note 2:
Class A 51,212,817 56,911,663
Class B 43,679,239 41,289,209
Class C 9,563,688 8,515,292
===============================================================================================
NET ASSETS
Total increase 22,075,744 139,546,148
- -----------------------------------------------------------------------------------------------
Beginning of period 286,239,359 146,693,211
------------ ------------
End of period (including accumulated net investment loss
of $8,314 for the year ended October 31, 1998) $308,315,103 $286,239,359
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
21 Oppenheimer Quest Small Cap Value Fund
<PAGE> 22
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CLASS A
-------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1998 1997 1996(1) 1995 1994
=======================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $22.26 $19.03 $17.31 $16.33 $17.68
- -----------------------------------------------------------------------------------------------------------------------
Income(loss) from investment operations:
Net investment income(loss) (.09) (.07) .03 .11(2) (.03)(2)
Net realized and
unrealized gain(loss) (3.02) 5.66 2.79 1.29 .01
------ ------- ------- ------- -------
Total income(loss) from
investment operations (3.11) 5.59 2.82 1.40 (.02)
- -----------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income -- -- (.11) -- --
Distributions from net realized gain (1.86) (2.36) (.99) (.42) (1.33)
Total dividends and distributions ------ ------ ------ ------- ------
to shareholders (1.86) (2.36) (1.10) (.42) (1.33)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.29 $22.26 $19.03 $17.31 $16.33
====== ====== ====== ====== ======
=======================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) (15.05)% 32.72% 17.17% 8.82% 0.04%
=======================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $183,567 $181,973 $102,746 $116,307 $120,102
- -----------------------------------------------------------------------------------------------------------------------
Average net assets(in thousands) $201,952 $131,503 $117,765 $119,440 $115,276
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income(loss) (0.42)% (0.32)% 0.11% 0.67% (0.14)%
Expenses 1.80% 1.78% 1.90% 1.80% 1.88%
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 65.0% 82.1% 70.4% 76.0% 67.0%
</TABLE>
22 Oppenheimer Quest Small Cap Value Fund
<PAGE> 23
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1998 1997 1996(1) 1995 1994
================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $21.83 $18.79 $17.11 $16.24 $17.66
- ----------------------------------------------------------------------------------------------------------------
Income(loss) from investment operations:
Net investment income(loss) (.12) (.05) (.06) .02(2) (.11)(2)
Net realized and
unrealized gain(loss) (3.01) 5.45 2.76 1.27 .02
------ ------ ----- ----- ------
Total income(loss) from
investment operations (3.13) 5.40 2.70 1.29 (.09)
- ----------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income -- -- (.03) -- --
Distributions from net realized gain (1.86) (2.36) (.99) (.42) (1.33)
------ ------ ----- ----- ------
Total dividends and distributions
to shareholders (1.86) (2.36) (1.02) (.42) (1.33)
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $16.84 $21.83 $18.79 $17.11 $16.24
====== ====== ====== ====== ======
================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) (15.47)% 32.05% 16.57% 8.17% (0.39)%
================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $98,041 $79,754 $30,766 $23,440 $16,144
- ----------------------------------------------------------------------------------------------------------------
Average net assets(in thousands) $97,818 $47,462 $26,478 $20,105 $9,401
- ----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income(loss) (0.92)% (0.80)% (0.37)% 0.09% (0.70)%
Expenses 2.31% 2.27% 2.38% 2.37% 2.48%
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 65.0% 82.1% 70.4% 76.0% 67.0%
</TABLE>
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1998 1997 1996(1) 1995 1994
==================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $21.79 $18.76 $17.11 $16.23 $17.67
- ------------------------------------------------------------------------------------------------------------------
Income(loss) from investment operations:
Net investment income(loss) (.13) (.08) (.05) .01(2) (.13)(2)
Net realized and
unrealized gain(loss) (2.99) 5.47 2.75 1.29 .02
------ ----- ----- ----- -----
Total income(loss) from
investment operations (3.12) 5.39 2.70 1.30 (.11)
- ------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income -- -- (.06) -- --
Distributions from net realized gain (1.86) (2.36) (.99) (.42) (1.33)
------ ----- ----- ----- -----
Total dividends and distributions
to shareholders (1.86) (2.36) (1.05) (.42) (1.33)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $16.81 $21.79 $18.76 $17.11 $16.23
======= ======= ======= ======= =======
==================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) (15.45)% 32.05% 16.55% 8.24% (0.51)%
==================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $26,707 $24,512 $13,181 $9,068 $3,344
- ------------------------------------------------------------------------------------------------------------------
Average net assets(in thousands) $28,647 $17,401 $11,501 $6,114 $1,381
- ------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income(loss) (0.92)% (0.81)% (0.40)% 0.08% (0.81)%
Expenses 2.31% 2.28% 2.40% 2.38% 2.59%
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 65.0% 82.1% 70.4% 76.0% 67.0%
</TABLE>
1. On November 22, 1995, OppenheimerFunds, Inc. became the investment advisor
to the Fund.
2. Based on average shares outstanding for the period.
3. 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.
4. 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, 1998, were $265,305,166 and $184,939,375,
respectively.
See accompanying Notes to Financial Statements.
23 Oppenheimer Quest Small Cap Value Fund
<PAGE> 24
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. The Fund seeks its
investment objective through investments in a diversified portfolio which under
normal conditions will have at least 65% of its total assets invested in equity
securities of companies with market capitalizations under $1 billion. The
Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The Manager
has entered into a sub-advisory agreement with OpCap Advisors. 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 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, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), 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.
24 Oppenheimer Quest Small Cap Value Fund
<PAGE> 25
================================================================================
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.
- --------------------------------------------------------------------------------
TRUSTEES' FEES AND EXPENSES. The Fund has adopted a nonfunded retirement plan
for the Fund's independent trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the year ended
October 31, 1998, a provision of $8,314 was made for the Fund's projected
benefit obligations, resulting in an accumulated liability of $8,314 as of
October 31, 1998.
- --------------------------------------------------------------------------------
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. 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, 1998, amounts have been
reclassified to reflect a decrease in additional paid-in capital of $2,000,652,
a decrease in accumulated net investment loss of $1,996,425, and an increase in
accumulated net realized gain on investments of $4,227.
- --------------------------------------------------------------------------------
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.
25 Oppenheimer Quest Small Cap Value Fund
<PAGE> 26
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 of each class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, 1998 YEAR ENDED OCTOBER 31, 1997
--------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 5,051,210 $102,403,615 4,335,222 $ 89,701,871
Distributions reinvested 768,695 15,266,280 702,966 12,330,011
Redeemed (3,380,773) (66,457,078) (2,262,183) (45,120,219)
---------- ------------ ---------- ------------
Net increase 2,439,132 $ 51,212,817 2,776,005 $ 56,911,663
========== ============ ========== ============
- -----------------------------------------------------------------------------------------------------------------------------
Class B:
Sold 3,034,078 $ 60,041,228 2,332,167 $ 48,062,468
Distributions reinvested 356,031 6,914,130 224,295 3,875,823
Redeemed (1,222,121) (23,276,119) (539,908) (10,649,082)
---------- ------------ ---------- ------------
Net increase 2,167,988 $ 43,679,239 2,016,554 $ 41,289,209
========== ============ ========== ============
- -----------------------------------------------------------------------------------------------------------------------------
Class C:
Sold 941,618 $ 18,583,330 824,415 $ 16,750,151
Distributions reinvested 109,265 2,118,649 98,870 1,705,500
Redeemed (587,036) (11,138,291) (501,181) (9,940,359)
---------- ------------ ---------- ------------
Net increase 463,847 $ 9,563,688 422,104 $ 8,515,292
========== ============ ========== ============
</TABLE>
================================================================================
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
As of October 31, 1998, net unrealized depreciation on investments of
$25,319,745 was composed of gross appreciation of $19,588,855, and gross
depreciation of $44,908,600.
================================================================================
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 Fund's management fee for the year
ended October 31, 1998, was 1.00% of the average annual net assets for Class A,
Class B and Class C shares.
26 Oppenheimer Quest Small Cap Value Fund
<PAGE> 27
================================================================================
The Manager pays OpCap Advisors (the Sub-Advisor) based on the fee schedule set
forth in the Prospectus. For the year ended October 31, 1998, the Manager paid
$1,135,595 to the Sub-Advisor.
For the year ended October 31, 1998, commissions (sales charges
paid by investors) on sales of Class A shares totaled $1,143,435, of which
$295,105 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 A, Class B and Class C shares totaled $123,967, $1,799,099 and
$133,944, respectively. Amounts paid to an affiliated broker/dealer for Class B
and Class C shares were $138,436 and $3,206, respectively. During the year
ended October 31, 1998, OFDI received contingent deferred sales charges of
$212,431 and $16,482, 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 other Oppenheimer
funds. The Fund pays OFS an annual maintenance fee of $18.00 for each Fund
shareholder account and reimburses OFS for its out-of-pocket expenses. During
the year ended October 31, 1998, the Fund paid OFS $573,830. Effective May 1,
1998, the Board of Trustees approved an increase in the annual maintenance fee
from $14.85 to $18.00 for each shareholder account.
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 shareholder 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. Each fee is 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, 1998, OFDI paid
$24,233 to an affiliated broker/dealer as compensation for Class A personal
service and maintenance expenses and retained $362,025 as compensation for
Class A sales commissions and service fee advances, as well as financing costs.
27 Oppenheimer Quest Small Cap Value Fund
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED)
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 Class C shares. Each fee is
computed on the average annual net assets of Class B or Class C shares,
determined as of the close of each regular business day. During the year ended
October 31, 1998, OFDI paid $2,551 to an affiliated broker/dealer as
compensation for Class B personal service and maintenance expenses and retained
$849,276 and $175,804, 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. As of October 31, 1998, OFDI had incurred
excess distribution and servicing costs of $2,391,281 for Class B and $257,631
for Class C.
================================================================================
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, 1998.
================================================================================
6. OTHER MATTERS
Effective September 24, 1998, the Fund changed its custodian bank from State
Street Bank and Trust Company to Citibank, N.A.
================================================================================
7. SUBSEQUENT EVENT
Effective November 1, 1998, the Manager discontinued the accounting services fee
charged to the Fund. The Manager will continue to act as accounting agent for
the Fund.
28 Oppenheimer Quest Small Cap Value Fund
<PAGE> 29
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, 1998, 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, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Denver, Colorado
November 20, 1998
29 Oppenheimer Quest Small Cap Value Fund
<PAGE> 30
FEDERAL INCOME TAX INFORMATION (Unaudited)
================================================================================
In early 1999 shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1998. Regulations
of the U.S. Treasury Department require the Fund to report this information to
the Internal Revenue Service.
Distributions of $1.8608 per share were paid to Class A, Class B
and Class C shareholders on December 16, 1997, of which, for each class of
shares, $0.9407 was designated as a capital gain distribution in the "28% Rate
Group" and $0.0798 was designated as a capital gain distribution in the "20%
Rate Group" for federal income tax purposes. Whether received in stock or cash,
the capital gain distribution should be treated by shareholders as a gain from
the sale of capital assets.
None of the dividends paid by the Fund during the fiscal year ended
October 31, 1998, are 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.
30 Oppenheimer Quest Small Cap Value Fund
<PAGE> 31
OPPENHEIMER QUEST SMALL CAP VALUE FUND
A Series of Oppenheimer Quest for Value Funds
================================================================================
OFFICERS AND TRUSTEES Bridget A. Macaskill, Chairman of the
Board of Trustees and President
Paul Y. Clinton, Trustee
Thomas W. Courtney, Trustee
Robert G. Galli, Trustee
Lacy B. Herrmann, Trustee
George Loft, Trustee
Gavin Albert, Vice President
Robert C. Doll, Jr., Vice President
Timothy McCormack, 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 Citibank, N.A.
PORTFOLIO SECURITIES
================================================================================
INDEPENDENT ACCOUNTANTS PricewaterhouseCoopers 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, are
not insured by the FDIC or any other
agency, and involve investment risks,
including the possible loss of the
principal amount invested.
31 Oppenheimer Quest Small Cap Value Fund
<PAGE> 32
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As an Oppenheimer fund shareholder, you have some special privileges. Whether
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And when you need help, our Customer Service Representatives are only a
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When you want to make a transaction, you can do it easily by calling our
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For added convenience, you can get automated information with
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You can count on us whenever you need assistance. That's why the
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RA0251.001.1098 December 30, 1998
