Oppenheimer Quest Value Fund, Inc.
Prospectus dated November 24, 1995
Oppenheimer Quest Value Fund, Inc. (the "Fund") is a mutual fund
that seeks capital appreciation through investment in securities
(primarily equity securities) of companies believed to be undervalued in
the marketplace in relation to factors such as the companies' assets,
earnings, growth potential and cash flows. Equity securities in which the
Fund may invest are common stocks and preferred stocks; bonds, debentures
and notes convertible into common stocks; and depository receipts for such
securities. Please refer to "Investment Restrictions and Techniques" and
"Risk Factors" for more information about the types of securities the Fund
invests in and the risks of investing in the Fund.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it
for future reference. You can find more detailed information about the
Fund in the November 24, 1995 Statement of Additional Information. For
a free copy, call Oppenheimer Shareholder Services, the Fund's Transfer
Agent, at 1-800-525-7048, or write to the Transfer Agent at the address
on the back cover. The Statement of Additional Information has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference (which means that it is legally part of this
Prospectus).
(OppenheimerFunds logo)
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of the
principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies of the Fund
Risk Factors
Investment Restrictions and Techniques
Investment Management Agreement
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends and Distributions
Additional Information
Appendix A: Sales Charges and Waivers for Certain Former Quest
Shareholders, and for Certain Shares Purchased Prior to the Date of this
Prospectus
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services, and
those expenses are subtracted from the Fund's assets to calculate the
Fund's net asset value per share. All shareholders therefore pay those
expenses indirectly. Shareholders pay other expenses directly, such as
sales charges and account transaction charges. The following tables are
provided to help you understand your direct expenses of investing in the
Fund and your share of the Fund's business operating expenses that you
might expect to bear indirectly, based upon the Fund's fees and expenses
in effect as of the date of this Prospectus after giving effect to the
acquisition by Oppenheimer Management Corporation described below.
- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to "About Your Account," from
pages 20 through 40, for an explanation of how and when these charges
apply.
<TABLE>
<CAPTION>
Class Class Class
A Shares B Shares C Shares
<S> <C> <C> <C>
Maximum Sales Charge
on Purchases
(as a % of
offering price) 5.75% None None
Sales Charge on
Reinvested Dividends None None None
Deferred Sales Charge
(as a % of the
lower of the
original purchase
price or redemption
proceeds) None(1) 5% in the first 1% if
year, declining redeemed
to 1% in the within 12
sixth year months of
and eliminated purchase(2)
thereafter(2)
Redemption Fee None None None
Exchange Fee None None None
</TABLE>
(1) If you invest $1 million or more ($500,000 or more for purchases by
OppenheimerFunds prototype 401(k) plans) in Class A shares, you may
have to pay a sales charge of up to 1% if you sell your shares
within 12, 18 or 24 calendar months from the end of the calendar
month during which you purchased those shares, depending upon when
you purchased such shares. See "How to Buy Shares - Class A
Shares," below.
(2) See "How to Buy Shares - Class B Shares" and "How to Buy Shares -
Class C Shares" below, for more information on the contingent
deferred sales charges.
- Annual Fund Operating Expenses are paid out of the Fund's assets
and represent the Fund's expenses in operating its business. For example,
the Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (referred to in this Prospectus as the "Manager").
The rates of the Manager's fees are set forth in "Investment Management
Agreement," below. The Fund has other regular expenses for services, such
as transfer agent fees, custodial fees paid to the bank that holds its
portfolio securities, audit fees and legal expenses. Those expenses are
detailed in the Fund's Financial Statements in the Statement of Additional
Information.
The numbers in the table below are projections of the Fund's
business expenses based on the Fund's expenses in its last fiscal year.
These amounts are shown as a percentage of the average net assets of each
class of the Fund's shares for that year. The 12b-1 Fees for Class A
shares are service fees (the maximum fee is 0.25% of average annual net
assets of that class) and the asset-based sales charge of 0.25% of the
average annual net assets of that class. For Class B and Class C shares,
the 12b-1 Fees are the service fees (the maximum fee is 0.25% of average
annual net assets of those classes) and the annual asset-based sales
charge of 0.75% of the average annual net assets of the class. These
plans are described in greater detail in "How to Buy Shares."
The actual expenses for each class of shares in future years may be
more or less than the numbers in the table, depending on a number of
factors, including changes in the actual value of the Fund's assets
represented by each class of shares.
<TABLE>
<CAPTION>
Class Class Class
A Shares B Shares C Shares
<S> <C> <C> <C>
Management Fees 1.00% 1.00% 1.00%
12b-1 Distribution
Plan Fees 0.50% 1.00% 1.00%
Other Expenses 0.21% 0.24% 0.28%
----- ----- -----
Total Fund Operating
Expenses 1.71% 2.24% 2.28%
</TABLE>
- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, and the Fund's annual return is 5%, and that its operating
expenses for each class are the ones shown in the Annual Fund Operating
Expenses table above and that Class B shares automatically convert into
Class A shares six years after their purchase. If you were to redeem your
shares at the end of each period shown below, your investment would incur
the following expenses by the end of 1, 3, 5 and 10 years:
1 year 3 years 5 years 10 years*
Class A Shares $74 $108 $145 $248
Class B Shares $73 $100 $140 $232
Class C Shares $33 $71 $122 $262
If you did not redeem your investment, it would incur the following
expenses:
Class A Shares $74 $108 $145 $248
Class B Shares $23 $70 $120 $232
Class C Shares $23 $71 $122 $262
*The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after 6 years. Because of the asset-based
sales charge and the contingent deferred sales charge on Class B and Class
C shares, long term Class B and Class C shareholders could pay the
economic equivalent of more than the maximum front-end sales charge
allowed under applicable regulations. For Class B shareholders, the
automatic conversion of Class B shares to Class A shares is designed to
minimize the likelihood that this will occur. Please refer to "How to Buy
Shares - Class B Shares" for more information.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment
returns of the Fund, all of which will vary.
<PAGE>
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below,
with references to the section of this Prospectus where more complete
information can be found. You should carefully read the entire Prospectus
before making a decision about investing in the Fund. Keep the Prospectus
for reference after you invest, particularly for information about your
account, such as how to sell or exchange shares.
- What Is The Fund's Investment Objective? The Fund seeks capital
appreciation through investment in securities (primarily equity
securities) of companies believed to be undervalued in the marketplace in
relation to factors such as the companies' assets, earnings, growth
potential and cash flows. For the purposes of this Prospectus the term
equity securities is defined as common stocks and preferred stocks; bonds,
debentures and notes convertible into common stocks; and depository
receipts for such securities.
- Who Manages The Fund? The Fund's investment adviser (the
"Manager") is Oppenheimer Management Corporation, which (including a
subsidiary) manages investment companies currently having over $38 billion
in assets. The Manager is paid an advisory fee by the Fund, based on its
net assets. The Fund's subadvisor is OpCap Advisors (the "Sub-Adviser"),
a subsidiary of Oppenheimer Capital, which is paid a fee by the Manager.
The Fund's portfolio manager is employed by the Sub-Adviser and is
primarily responsible for the selection of the Fund's securities. The
Fund's Board of Directors, elected by shareholders, oversees the Manager,
the Sub-Adviser and the portfolio manager. Please refer to "Investment
Management Agreement," starting on page ___ for more information about the
Manager and its fees.
- How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic
Investment Plan under AccountLink. Please refer to "How To Buy Shares"
on page ___ for more details.
- Will I Pay A Sales Charge to Buy Shares? The Fund has three
classes of shares. All classes have the same investment portfolio but
different expenses. Class A shares are offered with a front-end sales
charge, starting at 5.75%, and reduced for larger purchases. Purchases
of $1 million or more of Class A shares have no initial sales charge but
are subject to a contingent deferred sales charge of up to 1% if held for
less than 12, 18 or 24 months, depending upon when you purchased such
shares. Class B shares are offered without a front-end sales charge, but
if you sell your shares within six years of buying them, you will normally
pay a contingent deferred sales charge that varies depending on how long
you owned your shares. Class C shares are offered without a front-end
sales charge, but may be subject to a contingent deferred sales charge of
1% if redeemed within one year of buying them. There is also an annual
asset-based sales charge on each class of shares. Please review "How To
Buy Shares" starting on page ___ for more details, including a discussion
about factors you and your financial advisor should consider in
determining which class may be appropriate for you.
- How Can I Sell My Shares? Shares can be redeemed by mail or by
telephone call to the Transfer Agent on any business day, or through your
dealer. Please refer to "How To Sell Shares" on page ___. The Fund also
offers exchange privileges with other Oppenheimer funds, described in "How
To Exchange Shares" on page __.
- How Has The Fund Performed? The Fund measures performance by
quoting its average annual total return and cumulative total return, which
measure historical performance. Those returns can be compared to the
returns (over similar periods) of other funds. Of course, other funds may
have different objectives, investments, and levels of risk. Please
remember that past performance does not guarantee future results.
Financial Highlights
The table on the following pages presents selected financial
information about the Fund, including per share data, expense ratios and
other data based on the Fund's average net assets. Information for each
of the years in the five year period ended October 31, 1994 has been
audited by KPMG Peat Marwick LLP, the Fund's independent auditors, whose
report thereon appears in the Statement of Additional Information.
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND
DISTRIBUTIONS
---------------------------------------- ---------------------------
Dividends to Distributions to
Net Asset Net Net Realized Shareholders Shareholders
Value, Investment and Unrealized Total from from Net from Net
Total
Beginning Income Gain (Loss) on Investment Investment Realized Gain on
Dividends and
of Period (Loss) Investments Operations Income Investments
Distributions
<S> <C> <C> <C> <C> <C> <C>
<C>
QUEST FOR VALUE FUND, INC.
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 12.51 $ 0.09 $ 0.50 $ 0.59 $ (0.04) $ (0.47) $
(0.51)
1993 11.71 0.05 1.34 1.39 (0.05) (0.54) (0.59)
1992 10.61 0.04 1.77 1.81 (0.07) (0.64) (0.71)
1991 7.84 0.09 2.84 2.93 (0.16) -- (0.16)
1990(2) 9.85 0.18 (1.38) (1.20) (0.26) (0.55) (0.81)
Class B,
YEAR ENDED OCTOBER 31, 1994 12.51 0.02 0.50 0.52 (0.03) (0.47)
(0.50)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.66(3) (0.01) (0.14) (0.15) -- --
--
Class C,
YEAR ENDED OCTOBER 31, 1994 12.50 0.01 0.51 0.52 (0.03) (0.47)
(0.50)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.66(3) (0.01) (0.15) (0.16) -- --
- --
<CAPTION>
RATIOS
---------------------------------------
Ratio of Net Ratio of Net
Net Asset Net Assets Operating Investment
Value, End of Expenses Income (Loss) Portfolio
End of Total Period to Average to Average Turnover
Period Return* (000's) Net Assets Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
QUEST FOR VALUE FUND, INC.
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 12.59 5.01% $ 238,085 1.71%(1) 0.72%(1) 49%
1993 12.51 12.27% 245,320 1.75% 0.40% 27%
1992 11.71 18.45% 142,939 1.75% 0.53% 41%
1991 10.61 37.94% 79,914 1.83% 1.06% 48%
1990(2) 7.84 (13.43%) 49,740 1.82% 1.71% 51%
Class B,
YEAR ENDED OCTOBER 31, 1994 12.53 4.43% 14,373 2.24%(1) 0.14%(1) 49%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.51 (1.19%) 2,015 2.27%(5) (1.19%)(5) 27%
Class C,
YEAR ENDED OCTOBER 31, 1994 12.52 4.45% 3,581 2.28%(1) 0.09%(1) 49%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.50 (1.26%) 221 2.27%(5) (0.90%)(5) 27%
<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1994, FOR CLASSES A, B,
AND C WERE $237,922,657, $8,341,111, AND $1,724,870, RESPECTIVELY.
(2) SHARE AND PER SHARE DATA HAVE BEEN RETROACTIVELY RESTATED TO REFLECT A 200%
STOCK DIVIDEND AS OF JULY 1, 1991.
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
</TABLE>
<PAGE>
Investment Objective And Policies Of The Fund
The Sub-Adviser, OpCap Advisors (formerly known as Quest for
Value Advisors), manages the portfolio of the Fund in accordance with the
Fund's investment objective and policies, described below pursuant to a
Subadvisory Agreement with the Manager.
The Fund seeks capital appreciation through investment in securities
(primarily equity securities) of companies believed by the Sub-Adviser to
be undervalued in the marketplace in relation to factors such as the
companies' assets, earnings, growth potential and cash flows. For the
purposes of this Prospectus the term equity securities is defined as
common stocks and preferred stocks; bonds, debentures and notes
convertible into common stocks; and depository receipts for such
securities. Investments of the Fund are managed by Eileen Rominger,
Managing Director of Oppenheimer Capital. She has been portfolio manager
of the Fund since 1988. Ms. Rominger has been an analyst and portfolio
manager at Oppenheimer Capital since 1981. The Sub-Adviser's equity
investment policy is overseen by George Long, Managing Director and Chief
Investment Officer for Oppenheimer Capital, the parent of OpCap Advisors.
Mr. Long has been with Oppenheimer Capital since 1982.
To provide liquidity for the purchase of new instruments and to
effect redemptions of shares, the Fund typically invests a part of its
assets in various types of U.S. government securities and high quality,
short-term debt securities with remaining maturities of one year or less
such as government obligations, certificates of deposit, bankers'
acceptances, commercial paper, short-term corporate securities and
repurchase agreements ("money market instruments"). For temporary
defensive purposes, the Fund may invest up to 100% of its assets in such
securities. At any time that the Fund for temporary defensive purposes
invests in such securities, to the extent of such investments, it is not
pursuing its investment objective.
Except as indicated, the investment objective and policies described
above are fundamental and may not be changed without a vote of the
shareholders. It is anticipated that the Fund will have an annual turnover
rate (excluding turnover of securities having a maturity of one year or
less) of 100% or less. To the extent that higher portfolio turnover
increases capital gains, more taxes will be payable.
Risk Factors
The value of the Fund's shares will fluctuate and on redemption
the value of your shares may be more or less than your investment.
There are two types of risk generally associated with owning equity
securities: market risk and financial risk. Market risk is the risk
associated with the movement of the stock market in general. Financial
risk is associated with the financial condition and profitability of the
underlying company. Smaller capitalization companies may experience higher
growth rates and higher failure rates than do larger capitalization
companies. The trading volume of securities of smaller capitalization
companies is normally less than that of larger capitalization companies
and, therefore, may disproportionately affect their market price, tending
to make them rise more in response to buying demand and fall more in
response to selling pressure than is the case with larger capitalization
companies.
There are two types of risk associated with owning debt securities:
interest rate risk and credit risk. Interest rate risk relates to
fluctuations in market value arising from changes in interest rates. If
interest rates rise, the value of debt securities will normally decline
and if interest rates fall, the value of debt securities will normally
increase. All debt securities, including U.S. government securities, which
are generally considered to be the most creditworthy of all debt
obligations, are subject to interest rate risk. Securities with longer
maturities generally will have a more pronounced reaction to interest rate
changes than shorter term securities.
Credit risk relates to the ability of the issuer to make periodic
interest payments and ultimately repay principal at maturity. Bonds rated
Baa3 by Moody's Investors Services, Inc. ("Moody's") or BBB- by Standard
& Poor's Corporation ("S&P") which the Fund may acquire, are described by
those rating agencies as having speculative elements. If a debt security
is rated below investment grade by one rating agency and as investment
grade by a different rating agency, the Sub-Adviser will make a
determination as to the debt security's investment grade quality. It is
the present intention of the Fund to invest no more than 5% of its assets
in bonds rated below Baa3 by Moody's or BBB- by S&P (commonly known as
"high yield" or "junk bonds"). In the event that the Fund intends in the
future to invest more than 5% of its assets in such bonds, appropriate
disclosures will be made to existing and prospective shareholders.
Securities rated Ba by Moody's are judged to have speculative elements;
their future cannot be considered as well assured and often the protection
of interest and principal payments may be very moderate. Securities rated
BB by S&P are regarded as having predominantly speculative characteristics
and, while such obligations have less near-term vulnerability to default
than other speculative grade debt, they face major ongoing uncertainties
or exposure to adverse business, financial or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payment. Securities rated Caa by Moody's or CCC by S&P are considered to
have predominantly speculative characteristics with respect to capacity
to pay interest and repay principal and to be of poor standing. Securities
rated Ca by Moody's are speculative to a high degree; such issues are
often in default or have other marked shortcomings. A security rated C by
Moody's has extremely poor prospects of ever attaining any real investment
standing. Securities rated CI by S&P are income bonds on which no interest
is being paid, and securities rated D by S&P are in payment default. Debt
obligations of issuers outside the United States and its territories are
rated on substantially the same basis as domestic corporate and municipal
issues. The ratings measure the creditworthiness of the issuer but do not
take into account potential actions by the government controlling the
currency of denomination which might have a negative effect on exchange
rates. See the Appendix in the Statement of Additional Information ("SAI")
for a more complete general description of Moody's and S&P ratings. The
ratings of Moody's and S&P represent their opinions as to the quality of
the obligations which they undertake to rate. It should be emphasized,
however, that ratings are relative and subjective and although ratings may
be useful in evaluating the safety of interest and principal payments,
they do not evaluate the market risk of these securities. Therefore,
although these ratings may be an initial criterion for selection of such
investments, the Sub-Adviser also will evaluate these securities and the
ability of the issuers of such securities to pay interest and principal.
The market price and yield of securities rated Ba or lower by
Moody's and BB or lower by S&P are more volatile than those of higher
rated securities. The market values of certain lower rated debt securities
tend to reflect individual corporate developments to a greater extent than
do higher rated securities, which react primarily to fluctuations in the
general level of interest rates, and tend to be more sensitive to economic
conditions than higher rated securities. Companies that issue such
securities are often highly leveraged and may not have available to them
more traditional methods of financing. Consequently, the risk associated
with acquiring the securities of such issuers is greater than with higher
rated securities. The Fund is not obliged to dispose of securities due to
changes by the rating agencies. Although there is no minimum rating for
the investments of the Fund, the Fund does not intend to invest in bonds
which are in default.
Higher portfolio turnover can be expected to result in a higher
incidence of short-term capital gains upon which taxes will be payable and
will also result in correspondingly higher transaction costs.
Additional Risks of Foreign Securities: The Fund may purchase
foreign securities that are listed on a domestic or foreign securities
exchange, traded in domestic or foreign over-the counter markets or
represented by American Depository Receipts. There is no limit to the
amount of such foreign securities the Fund may acquire. Certain factors
and risks are presented by investment in foreign securities which are in
addition to the usual risks inherent in domestic securities. Foreign
companies are not necessarily subject to uniform accounting, auditing and
financial reporting standards or other regulatory requirements comparable
to those applicable to U.S. companies. Thus, there may be less available
information concerning non-U.S. issuers of securities held by a Fund than
is available concerning U.S. companies. In addition, with respect to some
foreign countries, there is the possibility of nationalization,
expropriation or confiscatory taxation; income earned in the foreign
nation being subject to taxation, including withholding taxes on interest
and dividends (see "Shareholder Account Rules and Policies"), or other
taxes imposed with respect to investments in the foreign nation;
limitations on the removal of securities, property or other assets of a
fund; difficulties in pursuing legal remedies and obtaining judgments in
foreign courts, or political or social instability or diplomatic
developments which could affect U.S. investments in those countries. For
a description of the risks of possible losses through holding of
securities in foreign custodian banks and depositories, see "Risk Factors
and Special Considerations" in the SAI.
Securities of many non-U.S. companies may be less liquid and their
prices more volatile than securities of comparable U.S. companies.
Non-U.S. stock exchanges and brokers are generally subject to less
governmental supervision and regulation than in the U.S. and commissions
on foreign stock exchanges are generally higher than negotiated
commissions on U.S. transactions. In addition, there may in certain
instances be delays in the settlement of non-U.S. stock exchange
transactions. Certain countries restrict foreign investments in their
securities markets. These restrictions may limit or preclude investment
in certain countries, industries or market sectors, or may increase the
cost of investing in securities of particular companies. Purchasing the
shares of investment companies which invest in securities of a given
country may be the only or the most efficient way to invest in that
country. This may require the payment of a premium above the net asset
value of such investment companies and the return will be reduced by the
operating expenses of those investment companies.
A decline in the value of the U.S. dollar against the value of any
particular currency will cause an increase in the U.S. dollar value of the
Fund's holdings denominated in such currency. Conversely, a decline in the
value of any particular currency against the U.S. dollar will cause a
decline in the U.S. dollar value of the Fund's holdings of securities
denominated in such currency. Some foreign currency values may be volatile
and there is the possibility of governmental controls on currency exchange
or governmental intervention in currency markets which could adversely
affect the Fund. The Fund does not intend to speculate in foreign currency
in connection with the purchase or sale of securities on a foreign
securities exchange but may enter into foreign currency contracts to hedge
its foreign currency exposure. While those transactions may minimize the
impact of currency appreciation and depreciation, the Fund will bear a
cost for entering into the transaction and such transactions do not
protect against a decline in the security's value relative to other
securities denominated in that currency.
Emerging Market Countries: Certain developing countries may have
relatively unstable governments, economies based on only a few industries
that are dependent upon international trade and reduced secondary market
liquidity. Foreign investment in certain emerging market countries is
restricted or controlled in varying degrees. In the past, securities in
these countries have experienced greater price movement, both positive and
negative, than securities of companies located in developed countries.
Lower-rated high-yielding emerging market securities may be considered to
have speculative elements.
Options and Futures: Different uses of futures and options have different
risk and return characteristics. Generally, selling futures contracts,
purchasing put options and writing call options are strategies designed
to protect against falling security prices and can limit potential gains
if prices rise. Purchasing futures contracts, purchasing call options and
writing put options are strategies whose returns tend to rise and fall
together with securities prices and can cause losses if prices fall. If
securities prices remain unchanged over time, option writing strategies
tend to be profitable while option buying strategies tend to be
unprofitable. The Fund intends to engage only in futures contracts,
options on futures contracts or options on stock indexes for bona fide
hedging or other non-speculative purposes. The Fund will not enter into
any leveraged futures transactions.
Repurchase Agreements: The Fund may acquire securities subject to
repurchase agreements. Repurchase agreements involve certain risks.
For a further description of options and futures, repurchase
agreements and other investment techniques used by the Fund, see
"Investment Restrictions and Techniques," below.
Investment Restrictions And Techniques
The Fund is subject to certain investment restrictions which are
fundamental policies changeable only by shareholder vote. The restrictions
in a, b and c below do not apply to U.S. government securities. The Fund
may not: (a) Purchase more than 10% of the voting securities of any one
issuer; (b) Purchase more than 10% of any class of security of any issuer,
with all outstanding debt securities and all preferred stock of an issuer
each being considered as one class; (c) Concentrate its investments in any
particular industry, but if deemed appropriate for attaining its
investment objective, the Fund may invest up to 25% of its total assets
(valued at the time of investment) in any one industry classification used
by the Fund for investment purposes (for this purpose, a foreign
government is considered an industry). Concentration of investment in
securities of one issuer may tend to increase the Fund's financial risk
(See "Risk Factors," p. _); (d) Borrow money in excess of 33 1/3% of the
value of the Fund's total assets; the Fund may, but has no present
intention to, borrow for leveraging purposes; (e) Invest more than 15% of
the Fund's total assets in illiquid securities, including securities for
which there is no readily available market, repurchase agreements which
have a maturity of longer than seven days, securities subject to legal or
contractual restrictions and certain over-the-counter options (it is the
opinion of the Wisconsin Securities Commission that investments in
restricted securities in excess of 5% of the Fund's total assets may be
considered a speculative activity and therefore involve greater risk and
increase the Fund's expenses; to comply with Wisconsin's securities laws,
the Fund has agreed to limit investments in restricted securities to 5%
of its total assets, although the restriction is not a fundamental policy
of the Fund); and (f) Invest more than 15% of the Fund's total assets in
securities of issuers having a record, together with predecessors, of less
than three years of continuous operation.
Notwithstanding investment restriction (e) above, the Fund may
purchase securities which are not registered under the Securities Act of
1933 ("1933 Act") but which can be sold to "qualified institutional
buyers" in accordance with Rule 144A under the 1933 Act. Any such security
will not be considered illiquid so long as it is determined by the Board
of Directors or the Sub-Adviser, acting under guidelines approved and
monitored by the Board, which has the ultimate responsibility for any
determination regarding liquidity, that an adequate trading market exists
for that security. This investment practice could have the effect of
increasing the level of illiquidity in the Fund during any period that
qualified institutional buyers become uninterested in purchasing these
restricted securities. The ability to sell to qualified institutional
buyers under Rule 144A is a relatively recent development and it is not
possible to predict how this market will develop. The Board will carefully
monitor any investments by the Fund in these securities. Other investment
restrictions are described in the SAI.
The investment techniques or instruments described below are used
for investment programs of the Fund.
- Repurchase Agreements. The Fund may acquire securities subject
to repurchase agreements. Under a typical repurchase agreement, the Fund
acquires a debt security for a relatively short period (usually for one
day and very seldom for more than one week) subject to an obligation of
the seller to repurchase (and the Fund's obligation to resell) the
security at an agreed-upon higher price, thereby establishing a fixed
investment return during the holding period. Pending such repurchase, the
seller of the instrument maintains securities as collateral equal in
market value to the repurchase price.
In the event a seller defaulted on its repurchase obligation, the
Fund might suffer a loss to the extent that the proceeds from the sale of
the collateral were less than the repurchase price. In the event of a
seller's bankruptcy, the Fund might be delayed in, or prevented from,
selling the collateral for the Fund's benefit. The Fund's Board of
Directors has established procedures, which are periodically reviewed by
the Board, pursuant to which the Sub-Adviser will monitor the
creditworthiness of the dealers and banks with which the Fund enters into
repurchase agreement transactions.
- Loans of Portfolio Securities. The Fund may lend portfolio
securities if collateral (cash, U.S. Government or agency obligations or
letters of credit) securing such loans is maintained daily in an amount
at least equal to the market value of the securities loaned and if the
Fund does not incur any fees (except transaction fees of the custodian
bank) in connection with such loans. The Fund may call the loan at any
time on five days' notice and reacquire the loaned securities. The Fund
would receive the cash equivalent of the interest or dividends paid by the
issuer on the securities loan and would have the right to receive the
interest on investment of the cash collateral in short-term debt
instruments. A portion of either or both kinds of such interest may be
paid to the borrower of such securities. The Fund would continue to retain
any voting rights with respect to the securities. The value of the
securities loaned, if any, is not expected to exceed 10% of the value of
the total assets of the Fund. There is a risk that the borrower of the
securities may default and the Fund may have difficulty in reacquiring the
loaned securities.
- Options and Futures. The Fund may buy and sell options on stock
indexes, futures contracts and options on futures to hedge its investments
against changes in value or as a temporary substitute for purchases or
sales of actual securities. When the Fund anticipates a significant market
or market sector advance, the purchase of a futures contract affords a
hedge against not participating in the advance at a time when the Fund is
not fully invested ("anticipatory hedge"). Such a purchase of a futures
contract would serve as a temporary substitute for the purchase of
individual securities, which may be purchased in an orderly fashion once
the market has stabilized. As individual securities are purchased, an
equivalent amount of futures contracts could be terminated by offsetting
sales. The Fund may sell futures contracts in anticipation of or in a
general market or market sector decline or increase in interest rates that
may adversely affect the market value of the Fund's securities ("defensive
hedge"). To the extent that the Fund's portfolio of securities changes in
value in correlation with the underlying security or index, the sale of
futures contracts would substantially reduce the risk to the Fund of a
market decline and by so doing, provide an alternative to the liquidation
of securities positions in the Fund with attendant transaction costs. All
options purchased or sold by the Fund will be traded on a U.S. or foreign
commodities exchange or will result from separate, privately negotiated
transactions with a primary government securities dealer recognized by the
Board of Governors of the Federal Reserve System or with other
broker-dealers approved by the Fund's Board. Options on securities,
futures contracts and options on futures contracts that are traded on
foreign exchanges are subject to the risk of governmental action affecting
trading in or the prices of foreign currencies or securities. The value
of such positions also could be adversely affected by (i) other complex
foreign political and economic factors, (ii) lesser availability than in
the United States of data on which to make trading decisions, (iii) delays
in the Fund's ability to act upon economic events occurring in foreign
markets during nonbusiness hours in the United States, (iv) the imposition
of different exercise and settlement terms and procedures and margin
requirements than in the United States, (v) lesser trading volume and
(vi) in certain circumstances, currency fluctuations.
So long as Commodities Futures Trading Commission rules so require,
the Fund will not enter into any financial futures or options contract
unless such transactions are for bona-fide hedging purposes or for other
purposes only if the aggregate initial margins and premiums required to
establish such non-hedging positions would not exceed 5% of the
liquidation value of the Fund's total assets. A call option written by
the Fund is "covered" if the Fund owns the underlying security covered by
the call or has an absolute and immediate right to acquire that security
without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon
conversion or exchange of other securities held in its portfolio. A call
option is also covered if the Fund holds a call on the same security and
in the same principal amount as the call written where the exercise price
of the call held (a) is equal to or less than the exercise price of the
call written or (b) is greater than the exercise price of the call written
if the difference is maintained by the Fund in cash, U.S. Government
Securities or other liquid high-grade debt securities in a segregated
account with its custodian. A put option written by the Fund is "covered"
if the Fund maintains cash, U.S. Government securities or other liquid
high-grade debt securities with a value equal to the exercise price in a
segregated account with its custodian, or else holds a put on the same
security and in the same principal amount as the put written where the
exercise price of the put held is equal to or greater than the exercise
price of the put written. As a result, the Fund forgoes the opportunity
of trading the segregated assets or writing calls against those assets.
There may not be a complete correlation between the price of options or
futures and the market prices of the underlying securities. The Fund may
lose the ability to profit from an increase in the market value of the
underlying securities or may lose its premium payment. If due to a lack
of a market the Fund could not effect a closing purchase transaction with
respect to an OTC option, it would have to hold the callable securities
until the call lapsed or was exercised.
- When-Issued and Delayed Delivery Securities and Firm Commitments.
The Fund may purchase securities on a "when-issued" or "delayed delivery"
basis or may either purchase or sell securities on a "firm commitment
basis", whereby the price is fixed at the time of commitment but delivery
and payment may be as much as a month or more later. The underlying
securities are subject to market fluctuations and no interest accrues
prior to delivery of the securities.
Investment Management Agreement
The Fund is managed by the Manager, Oppenheimer Management
Corporation, which supervises the Fund's investment program and handles
its day-to-day business. The Manager carries out its duties, subject to
the policies established by the Board of Directors, under an Investment
Advisory Agreement with the Fund which states the Manager's
responsibilities. The Agreement sets forth the fees paid by the Fund to
the Manager and describes the expenses that the Fund pays to conduct its
business.
The Manager has operated as an investment adviser since 1959.
The Manager (including a subsidiary) currently manages investment
companies, including other Oppenheimer funds, with assets of more than $38
billion as of September 30, 1995, and with more than 2.8 million
shareholder accounts. The Manager is owned by Oppenheimer Acquisition
Corp., a holding company that is owned in part by senior officers of the
Manager and controlled by Massachusetts Mutual Life Insurance Company.
For its services under the Investment Advisory Agreement, the
Fund pays the Manager the following annual fees based on the Fund's daily
net assets: 1.00% of the first $400 million of average net assets, 0.90%
of the next $400 million, and 0.85% of net assets in excess of $800
million.
The Manager has retained the Sub-Adviser to provide day-to-day
portfolio management of the Fund. The Sub-Adviser is a majority-owned
subsidiary of Oppenheimer Capital, a registered investment advisor, whose
employees perform all investment advisory services provided to the Fund
by OpCap Advisors. The Manager will pay the Sub-Adviser an annual fee
based on the average daily net assets of the Fund equal to 40% of the
advisory fee collected by the Manager based on the total net assets of the
Fund as of November 22, 1995 (the "Base Amount") plus 30% of the
investment advisory fee collected by the Manager based on the total net
assets of the Fund that exceed the base amount. Oppenheimer Financial
Corp., a holding company holds a 33% interest in Oppenheimer Capital, and
Oppenheimer Capital, L.P., a Delaware limited partnership whose units are
traded on the New York Stock Exchange and of which Oppenheimer Financial
Corp. is the sole general partner, owns the remaining 67% interest.
Oppenheimer Capital has operated as an investment advisor since 1968.
Prior to the date of this Prospectus, the Sub-Adviser was named
Quest for Value Advisors and was the investment adviser to the Fund.
Effective the date of this Prospectus, the Manager acquired the investment
advisory and other contracts and business relationships and certain assets
and liabilities of Quest for Value Advisors, Quest for Value Distributors
and Oppenheimer Capital relating to twelve Quest for Value mutual funds,
including the Fund. Pursuant to this acquisition and Fund shareholder
approval received on November 3, 1995, the Fund entered into the following
agreements, effective the date of this Prospectus: the Investment Advisory
Agreement between the Fund and the Manager, and the distribution and
service plans and agreements between the Fund and the Distributor.
Further, the Manager entered into a subadvisory agreement with the Sub-
Adviser for the benefit of the Fund. The distribution and service plans
are described below.
OpCap Advisors may select its affiliate Oppenheimer & Co., Inc.
("Opco"), a registered broker-dealer to execute transactions for the Fund,
provided that the commissions, fees or other remuneration received by Opco
are reasonable and fair compared to those paid to other brokers in
connection with comparable transactions. When selecting broker-dealers
other than Opco, OpCap Advisors may consider their record of sales of
shares of the Fund.
The Fund is responsible for bearing certain expenses attributable
to the Fund but not to a particular class ("Fund Expenses"), including
deferred organization expenses; taxes; registration fees; typesetting of
prospectuses and financial reports required for distribution to
shareholders; brokerage commissions; fees and related expenses of
directors who are not interested persons; legal, accounting and audit
expenses; custodian fees; insurance premiums; and trade association dues.
Fund Expenses will be allocated based on the total net assets of each
class. Each class of shares of the Fund will also be responsible for
certain expenses attributable only to that class ("Class Expenses"). These
Class Expenses may include distribution and service fees, transfer and
shareholder servicing agent fees, professional fees, printing and postage
expenses for materials distributed to current shareholders, state
registration fees and shareholder meeting expenses. Such items are
considered Class Expenses provided such fees and expenses relate solely
to such Class. A portion of printing expenses, such as typesetting costs,
will be divided equally among the Fund, while other printing expenses,
such as the number of copies printed, will be considered Class Expenses.
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors three different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will
likely have different share prices.
- Class A Shares. If you buy Class A shares, you may pay an initial
sales charge on investments up to $1 million (up to $500,000 for purchases
by OppenheimerFunds prototype 401(k) plans). If you purchase Class A
shares as part of an investment of at least $1 million ($500,000 for
OppenheimerFunds prototype 401(k) plans) in shares of one or more
OppenheimerFunds or former Quest Funds, you will not pay an initial sales
charge, but if you sell any of those shares within 12, 18 or 24 months of
buying them, you may pay a contingent deferred sales charge at a rate that
depends upon when you bought such shares. The amount of that sales charge
will vary depending on the amount you invested. Sales charges are
described in "Buying Class A Shares" below.
- Class B Shares. If you buy Class B shares, you pay no sales
charge at the time of purchase, but if you sell your shares within six
years you will normally pay a contingent deferred sales charge that
varies, depending on how long you have owned your shares. It is described
in "Buying Class B Shares" below.
- Class C Shares. When you buy Class C shares, you pay no sales
charge at the time of purchase, but if you sell your shares within 12
months of buying them, you will normally pay a contingent deferred sales
charge of 1%. It is described in "Buying Class C Shares" below.
Which Class of Shares Should You Choose? Once you decide that a Fund is
an appropriate investment for you, the decision as to which class of
shares is better suited to your needs depends on a number of factors which
you should discuss with your financial advisor. The Fund's operating
costs that apply to a class of shares and the effect of the different
types of sales charges on your investment will vary your investment
results over time. The most important factors are how much you plan to
invest, how long you plan to hold your investment, and whether you
anticipate exchanging your shares for shares of other Oppenheimer funds
(not all of which currently offer Class B and Class C shares). If your
goals and objectives change over time and you plan to purchase additional
shares, you should re-evaluate those factors to see if you should consider
another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the
sales charge rates that apply to each class, and considered the effect of
the asset-based sales charges on Class B and Class C expenses (which will
affect your investment return). For the sake of comparison, we have
assumed that there is a 10% rate of appreciation in the investment each
year. Of course, the actual performance of your investment cannot be
predicted and will vary, based on the Fund's actual investment returns and
the operating expenses borne by each class of shares, and which class you
invest in.
The factors discussed below are not intended to be investment advice
or recommendations, because each investor's financial considerations are
different. The discussion below of the factors to consider in purchasing
a particular class of shares assumes that you will purchase only one class
of shares and not a combination of shares of different classes.
- How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how long you
expect to hold your investment will assist you in selecting the
appropriate class of shares. Because of the effect of class-based
expenses, your choice will also depend on how much you plan to invest.
For example, the reduced sales charges available for larger purchases of
Class A shares may, over time, offset the effect of paying an initial
sales charge on your investment (which reduces the amount of your
investment dollars used to buy shares for your account), compared to the
effect over time of higher class-based expenses on Class B or C shares for
which no initial sales charge is paid.
Investing for the Short Term. If you have a short-term investment
horizon (that is, you plan to hold your shares for not more than six
years), you should probably consider purchasing Class A or Class C shares
rather than Class B shares, because of the effect of the Class B
contingent deferred sales charge if you redeem within 6 years, as well as
the effect of the Class B asset-based sales charge on the investment
return for that class in the short-term. Class C shares might be the
appropriate choice (especially for investments of less than $100,000),
because there is no initial sales charge on Class C Shares, and the
contingent deferred sales charge does not apply to amounts you sell after
holding them one year.
However, if you plan to invest more than $100,000 for the shorter
term, then the more you invest and the more your investment horizon
increases toward six years, Class C shares might not be as advantageous
as Class A shares. That is because the annual asset-based sales charge
on Class C shares will have a greater impact on your account over the
longer term than the reduced front-end sales charge available for larger
purchases of Class A shares. For example, Class A might be more
advantageous than Class C (as well as Class B) for investments of more
than $100,000 expected to be held for 5 or 6 years (or more). For
investments over $250,000 expected to be held 4 to 6 years (or more),
Class A shares may become more advantageous than Class C (and B). If
investing $500,000 or more, Class A may be more advantageous as your
investment horizon approaches 3 years or more.
And for most investors who invest $1 million or more, in most cases
Class A shares will be the most advantageous choice, no matter how long
you intend to hold your shares. For that reason, the Distributor normally
will not accept purchase orders of $500,000 or $1 million or more of Class
B or C shares, respectively, from a single investor.
Investing for the Longer Term. If you are investing for the longer
term, for example, for retirement, and do not expect to need access to
your money for seven years or more, Class B shares may be an appropriate
consideration, if you plan to invest less than $100,000. If you plan to
invest more than $100,000 over the long term, Class A shares will likely
be more advantageous than Class B shares or C shares, as discussed above,
because of the effect of the expected lower expenses for Class A shares
and the reduced initial sales charges available for larger investments in
Class A shares under the Fund's Right of Accumulation.
Of course, these examples are based on approximations of the effect
of current sales charges and expenses on a hypothetical investment over
time, using the assumed annual performance return stated above, and
therefore should not be relied on as rigid guidelines.
- Are There Differences in Account Features That Matter to You?
Because some account features may not be available for Class B or Class
C shareholders, you should carefully review how you plan to use your
investment account before deciding which class of shares is better for
you. For example, share certificates are not available for Class B or
Class C shares, and if you are considering using your shares as collateral
for a loan, that may be a factor to consider. Additionally, dividends
payable to Class B and Class C shareholders will be reduced by the
additional expenses borne solely by those classes, such as the asset-based
sales charges described below and in the Statement of Additional
Information.
- How Does It Affect Payments to My Broker? A salesperson, such as
a broker, or any other person who is entitled to receive compensation for
selling Fund shares may receive different compensation for selling one
class rather than another class. It is important that investors
understand that the purpose of the contingent deferred sales charges and
asset-based sales charges for Class B and Class C shares are the same as
the purpose of the front-end sales charge on sales of Class A shares: to
compensate the Distributor for commissions it pays to dealers and
financial institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any time
with as little as $25. There are reduced minimum investments under special
investment plans:
With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial and
subsequent investments of as little as $25; and subsequent purchases of
at least $25 can be made by telephone through AccountLink.
Under pension and profit-sharing plans and Individual Retirement
Accounts (IRAs), you can make an initial investment of as little as $250
(if your IRA is established under an Asset Builder Plan, the $25 minimum
applies), and subsequent investments may be as little as $25.
There is no minimum investment requirement if you are buying shares
by reinvesting dividends from the Fund or other Oppenheimer funds (a list
of them appears in the Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the
Distributor.
- How Are Shares Purchased? You can buy shares several ways:
through any dealer, broker or financial institution that has a sales
agreement with the Distributor, directly through the Distributor, or
automatically from your bank account through an Asset Builder Plan under
the OppenheimerFunds AccountLink service. When you buy shares, be sure to
specify Class A, Class B or Class C shares. If you do not choose, your
investment will be made in Class A shares.
- Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "Oppenheimer Funds Distributor, Inc." Mail it to P.O. Box 5270,
Denver, Colorado 80217. If you don't list a dealer on the application,
the Distributor will act as your agent in buying the shares. However, we
recommend that you discuss your investment first with a financial advisor,
to be sure it is appropriate for you.
- Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member, to transmit funds electronically to purchase shares, to have the
Transfer Agent send redemption proceeds, or to transmit dividends and
distributions.
Shares are purchased for your account on the regular business day
the Distributor is instructed by you to initiate the ACH transfer to buy
shares. You can provide those instructions automatically, under an Asset
Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. You should request
AccountLink privileges on the application or dealer settlement
instructions used to establish your account. Please refer to "AccountLink"
below for more details.
- Asset Builder Plans. You may purchase shares of the Fund (and up
to four other Oppenheimer funds) automatically each month from your
account at a bank or other financial institution under an Asset Builder
Plan with AccountLink. Details are on the Application and in the Statement
of Additional Information.
- At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value (and any initial sales charge
that applies) that is next determined after the Distributor receives the
purchase order in Denver. In most cases, to enable you to receive that
day's offering price, the Distributor must receive your order by the time
of day the New York Stock Exchange closes, which is normally 4:00 P.M.,
New York time, but may be earlier on some days (all references to time in
this Prospectus mean "New York time"). The net asset value of each class
of shares is determined as of that time on each day the New York Stock
Exchange is open (which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your
order by the regular close of business of the New York Stock Exchange on
a regular business day and transmit it to the Distributor so that it is
received before the Distributor's close of business that day, which is
normally 5:00 P.M. The Distributor may reject any purchase order for the
Fund's shares, in its sole discretion.
Buying Class A Shares. Class A shares are sold at their offering price,
which is normally net asset value plus an initial sales charge. However,
in some cases, described below, where purchases are not subject to an
initial sales charge, the offering price may be net asset value. In some
cases, reduced sales charges may be available, as described below. Out
of the amount you invest, the Fund receives the net asset value to invest
for your account. The sales charge varies depending on the amount of your
purchase. A portion of the sales charge may be retained by the
Distributor and allocated to your dealer as commission. The current sales
charge rates and commissions paid to dealers and brokers are as follows:
- -------------------------------------------------------------------------
Front-End Sales Charge Commission
As a Percentage of as Percentage
Offering Amount of Offering
Amount of Purchase Price Invested Price
- ------------------------------------------------------------------------
Less than $25,000 5.75% 6.10% 4.75%
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter"
under Federal securities laws.
- Class A Contingent Deferred Sales Charge. There is no initial
sales charge on purchases of Class A shares of any one or more of the
Oppenheimer funds in the following cases:
- Purchases aggregating $1 million or more, or
- Purchases by an Oppenheimer funds prototype 401(k) plan that: (1)
buys shares costing $500,000 or more, or (2) has, at the time of
purchase, 100 or more eligible participants, or (3) certifies that it
projects to have annual plan purchases of $200,00 or more.
Shares of any of the Oppenheimer funds that offer only one class of
shares that has no designation are considered "Class A shares" for this
purpose. The Distributor pays dealers of record commissions on those
purchases in an amount equal to the sum of 1.0% of the first $2.5 million,
plus 0.50% of the next $2.5 million, plus 0.25% of purchases over $5
million. That commission will be paid only on the amount of those
purchases in excess of $1 million ($500,000 for purchases by
OppenheimerFunds 401(k) prototype plans) that were not previously subject
to a front-end sales charge and dealer commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
(1) the aggregate net asset value of the redeemed shares (not including
shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate commissions the Distributor paid to your dealer on all Class A
shares of all Oppenheimer funds you purchased subject to the Class A
contingent deferred sales charge. Class A shares of the Fund purchased
without a sales charge on or prior to the date of this Prospectus will be
subject to a contingent deferred sales charge at the applicable rate set
forth in Appendix A to this Prospectus.
In determining whether a contingent deferred sales charge is payable,
the Fund will first redeem shares that are not subject to the sales
charge, including shares purchased by reinvestment of dividends and
capital gains, and then will redeem other shares in the order that you
purchased them. The Class A contingent deferred sales charge is waived
in certain cases described in "Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges
of shares under the Fund's exchange privilege (described below). However,
if the shares acquired by exchange are redeemed within 12, 18 or 24 months
of the end of the calendar month of the purchase of the exchanged shares,
depending upon the date of purchase, the sales charge will apply.
- Special Arrangements With Dealers. The Distributor may advance up
to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients. Dealers whose sales of Class A shares of Oppenheimer funds
(other than money market funds) under OppenheimerFunds-sponsored 403(b)(7)
custodial plans exceed $5 million per year (calculated per quarter), will
receive monthly one-half of the Distributor's retained commissions on
those sales, and if those sales exceed $10 million per year, those dealers
will receive the Distributor's entire retained commission on those sales.
Reduced Sales Charges for Class A Share Purchases. You may be eligible
to buy Class A shares at reduced sales charge rates in one or more of the
following ways:
- Right of Accumulation. To qualify for the lower sales charge rates
that apply to larger purchases of Class A shares, you and your spouse can
add together Class A and Class B shares you purchase for your individual
accounts, or jointly, or for trust or custodial accounts on behalf of your
children who are minors. A fiduciary can cumulate shares purchased for
a trust, estate or other fiduciary account (including one or more employee
benefit plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and
Class B shares of the Fund and other Oppenheimer funds to reduce the sales
charge rate that applies to current purchases of Class A shares. You can
also count Class A and Class B shares of Oppenheimer funds you previously
purchased subject to an initial or contingent deferred sales charge to
reduce the sales charge rate for current purchases of Class A shares,
provided that you still hold that investment in one of the Oppenheimer
funds. The value of those shares will be based on the greater of the
amount you paid for the shares or their current value (at offering price).
The Oppenheimer funds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Transfer Agent. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
- Letter of Intent. Under a Letter of Intent, if you purchase Class
A shares or Class A and Class B shares of the Fund and other Oppenheimer
funds during a 13-month period, you can reduce the sales charge rate that
applies to your purchases of Class A shares. The total amount of your
intended purchases of both Class A and Class B shares will determine the
reduced sales charge rate for the Class A shares purchased during that
period. This can include purchases made up to 90 days before the date of
the Letter. More information is contained in the Application and in
"Reduced Sales Charges" in the Statement of Additional Information.
- Waivers of Class A Sales Charges. The Class A sales charges are
not imposed in the circumstances described below. There is an explanation
of this policy in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not
subject to any Class A sales charges:
- the Manager or its affiliates;
- present or former officers, directors, trustees and employees (and
their "immediate families" as defined in "Reduced Sales Charges" in the
Statement of Additional Information) of the Fund, the Manager and its
affiliates, and retirement plans established by them for their employees;
- registered management investment companies, or separate accounts
of insurance companies having an agreement with the Manager or the
Distributor for that purpose;
- dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees;
- employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that have
entered into sales arrangements with such dealers or brokers (and are
identified to the Distributor) or with the Distributor; the purchaser must
certify to the Distributor at the time of purchase that the purchase is
for the purchaser's own account (or for the benefit of such employee's
spouse or minor children);
- dealers, brokers or registered investment advisers that have
entered into an agreement with the Distributor providing specifically for
the use of shares of the Fund in particular investment products made
available to their clients;
- dealers, brokers or registered investment advisers that have
entered into an agreement with the Distributor to sell shares of defined
contribution employee retirement plans for which the dealer, broker or
investment adviser provides administrative services;
- directors, trustees, officers or full time employees of the Sub-
Adviser or its affiliates, their relatives or any trust, pension, profit
sharing or other benefit plan for any of them;
- accounts advised by Oppenheimer Capital or persons who are
directors or trustees of such accounts;
- purchases made with the proceeds of maturing principal of any
Qualified Unit Investment Liquid Trust Series;
- any unit investment trust that has entered into an appropriate
agreement with the Distributor; or
- purchases by a Quest-sponsored TRAC-2000 401(k) plan that
originally purchased Class B or Class C shares of a former Quest fund and
which shares were exchanged for Class A shares at net asset value due to
the termination of the Class B and Class C shares TRAC-2000 program (any
such TRAC-2000 shareholders on the date of this Prospectus will be
assessed an administrative fee equal to 1.0% of their account value on the
date of this Prospectus).
See Appendix A for further details regarding sales charge waivers on
purchases by certain shareholders of the former Quest for Value funds.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following
transactions are not subject to Class A sales charges:
- shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
- shares purchased by the reinvestment of loan repayments by a
participant in a retirement plan for which the Manager or its affiliates
acts as sponsor;
- shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds (other
than Oppenheimer Cash Reserves) or unit investment trusts for which
reinvestment arrangements have been made with the Distributor; or
- shares purchased and paid for with the proceeds of shares redeemed
in the prior 12 months from a mutual fund (other than a fund managed by
the Manager or any of its subsidiaries) on which an initial sales charge
or contingent deferred sales charge was paid (this waiver also applies to
shares purchased by exchange of shares of Oppenheimer Money Market Fund,
Inc. that were purchased and paid for in this manner); this waiver must
be requested when the purchase order is placed for your shares of the
Fund, and the Distributor may require evidence of your qualification for
this waiver.
See Appendix A for further details regarding sales charge waivers in
certain transactions involving shareholders of the former Quest for Value
funds.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge does not apply
to purchases of Class A shares at net asset value without sales charge as
described in the two sections above. It is also waived if shares that
would otherwise be subject to the contingent deferred sales charge are
redeemed in the following cases:
- for retirement distributions or loans to participants or
beneficiaries from qualified retirement plans, deferred compensation plans
or other employee benefit plans, including OppenheimerFunds prototype
401(k) plans (these are all referred to as "Retirement Plans");
- to return excess contributions made to Retirement Plans;
- to make Automatic Withdrawal Plan payments that are limited
annually to no more than 12% of the original account value;
- involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see "Shareholder Account Rules
and Policies," below);
- if, at the time a purchase order is placed for Class A shares that
would otherwise be subject to the Class A contingent deferred sales
charge, the dealer agrees to accept the dealer's portion of the commission
payable on the sale in installments of 1/18th of the commission per month
(and no further commission will be payable if the shares are redeemed
within 18 months of purchase); or
- for distributions from OppenheimerFunds prototype 401(k) plans for
any of the following cases or purposes: (1) following the death or
disability (as defined in the Internal Revenue Code) of the participant
or beneficiary (the death or disability must occur after the participant's
account was established); (2) hardship withdrawals, as defined in the
plan; (3) under a Qualified Domestic Relations Order, as defined in the
Internal Revenue Code; (4) to meet the minimum distribution requirements
of the Internal Revenue Code; (5) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal Revenue
Code, or (6) separation from service.
The Class A contingent deferred sales charge will be waived for
certain additional types of redemptions, if the shares were purchased
prior to the date of this Prospectus, as set forth in Appendix A to this
Prospectus.
- Distribution and Service Plan for Class A Shares. The Fund has
adopted a Distribution and Service Plan for Class A shares to reimburse
the Distributor 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 the Distributor of 0.25% of the average annual net assets of the
class. The Fund also pays a service fee to the Distributor of 0.25% of
the average annual net assets of the class. The Distributor uses all of
the service fee and a portion of the asset-based sales charge (equal to
0.15% annually for Class A shares purchased prior to September 1, 1993 and
0.10% for Class A shares purchased on or after September 1, 1993) to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of
their customers that hold Class A shares. The Distributor retains the
balance of the asset-based sales charge to reimburse itself for its other
expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of Additional
Information.
Buying Class B Shares. Class B shares are sold at net asset value per
share without an initial sales charge. However, if Class B shares are
redeemed within 6 years of their purchase, a contingent deferred sales
charge will be deducted from the redemption proceeds. That sales charge
will not apply to shares purchased by the reinvestment of dividends or
capital gains distributions. The charge will be assessed on the lesser of
the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price (including increases
due to the reinvestment of dividends and capital gains distributions). The
Class B contingent deferred sales charge is paid to the Distributor to
reimburse its expenses of providing distribution-related services to the
Fund in connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 6 years, and (3) shares held the longest during the
6-year period.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
Years Since Contingent Deferred Sales Charge
Beginning of Month In Which on Redemptions in that Year
Purchase Order was Accepted (As % of Amount Subject to Charge)
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None
In the table, a "year" is a 12-month period. All purchases are considered
to have been made on the first regular business day of the month in which
the purchase was made.
- Automatic Conversion of Class B Shares. Six years after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution Plan, described below. The conversion is based on the
relative net asset value of the two classes, and no sales load or other
charge is imposed. When Class B shares convert, any other Class B shares
that were acquired by the reinvestment of dividends and distributions on
the converted shares will also convert to Class A shares. The conversion
feature is subject to the continued availability of a tax ruling described
in "Alternative Sales Arrangements - Class A, Class B and Class C Shares"
in the Statement of Additional Information.
- Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate
the Distributor for distributing Class B shares and servicing accounts.
Under the Plan, the Fund pays the Distributor an annual "asset-based sales
charge" of 0.75% per year on Class B shares that are outstanding for 6
years or less. The Distributor also receives a service fee of 0.25% per
year. Both fees are computed on the average annual net assets of Class
B shares, determined as of the close of each regular business day. The
asset-based sales charge allows investors to buy Class B shares without
a front-end sales charge while allowing the Distributor to compensate
dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class B shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fee increase
Class B expenses by 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class B shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 3.75% of the
purchase price to dealers from its own resources at the time of sale.
The Fund pays the asset-based sales charge to the Distributor for its
services rendered in connection with the distribution of Class B shares.
Those payments, retained by the Distributor, are at a fixed rate which is
not related to the Distributor's expenses. The services rendered by the
Distributor include paying and financing the payment of sales commissions,
service fees, and other costs of distributing and selling Class B shares.
If the Plan is terminated by the Fund, the Board of Directors may allow
the Fund to continue payments of the service fee and/or asset-based sales
charge to the Distributor for distributing Class B shares before the Plan
was terminated.
- Waivers of Class B Sales Charges. The Class B contingent deferred
sales charge will not apply to shares purchased in certain types of
transactions, nor will it apply to shares redeemed in certain
circumstances, as described below under "Buying Class C Shares - Waivers
of Class B and Class C Sales Charges."
Buying Class C Shares. Class C shares are sold at net asset value per
share without an initial sales charge. However, if Class C shares are
redeemed within 12 months of their purchase, a contingent deferred sales
charge of 1.0% will be deducted from the redemption proceeds. That sales
charge will not apply to shares purchased by the reinvestment of dividends
or capital gains distributions. The charge will be assessed on the lesser
of the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price (including increases
due to the reinvestment of dividends and capital gains distributions). The
Class C contingent deferred sales charge is paid to the Distributor to
reimburse its expenses of providing distribution-related services to the
Fund in connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 12 months, and (3) shares held the longest during the
12-month period.
- Distribution and Service Plan for Class C Shares. The Fund has
adopted a Distribution and Service Plan for Class C shares to compensate
the Distributor for distributing Class C shares and servicing accounts.
Under the Plan, the Fund pays the Distributor an annual "asset-based sales
charge" of 0.75% per year on Class C shares. The Distributor also
receives a service fee of 0.25% per year. Both fees are computed on the
average annual net assets of Class C shares, determined as of the close
of each regular business day. The asset-based sales charge allows
investors to buy Class C shares without a front-end sales charge while
allowing the Distributor to compensate dealers that sell Class C shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class C shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class C expenses by 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class C shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 0.75% of the
purchase price to dealers from its own resources at the time of sale. The
total up-front commission paid by the Distributor to the dealer at the
time of sale of Class C shares is 1.00% of the purchase price. The
Distributor plans to pay the asset-based sales charge as an ongoing
commission to the dealer on Class C shares that have been outstanding for
a year or more.
The Fund pays the asset-based sales charge to the Distributor for its
services rendered in connection with the distribution of Class C shares.
Those payments are at a fixed rate which is not related to the
Distributor's expenses. The services rendered by the Distributor include
paying and financing the payment of sales commissions, service fees, and
other costs of distributing and selling Class C shares, including
compensation of personnel of the Distributor who support distribution of
Class C shares. If the Plan is terminated by the Fund, the Board of
Directors may allow the Fund to continue payments of the service fee
and/or asset-based sales charge to the Distributor for distributing Class
C shares before the plan was terminated.
- Waivers of Class B and Class C Sales Charges. The Class B and
Class C contingent deferred sales charges will not be applied to shares
purchased in certain types of transactions nor will it apply to shares
redeemed in certain circumstances as described below. The reasons for
this policy are in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers for Redemptions in Certain Cases. The Class B and Class C
contingent deferred sales charges will be waived for redemptions of shares
in the following cases:
- distributions to participants or beneficiaries from Retirement
Plans, if the distributions are made (a) under an Automatic Withdrawal
Plan after the participant reaches age 59-1/2, as long as the payments are
no more than 10% of the account value annually (measured from the date the
Transfer Agent received the request), or (b) following the death or
disability (as defined in the Internal Revenue Code ("IRC")) of the
participant or beneficiary (the death or disability must have occurred
after the account was established);
- redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder (the death or
disability must have occurred after the account was established, and for
disability you must provide evidence of a determination of disability by
the Social Security Administration);
- returns of excess contributions to Retirement Plans;
- distributions from IRAs (including SEP-IRAs and SAR/SEP accounts)
before the participant is age 59-1/2, and distributions from 403(b)(7)
custodial plans or pension or profit sharing plans before the participant
is age 59-1/2 but only after the participant has separated from service,
if the distributions are made in substantially equal periodic payments
over the life (or life expectancy) of the participant or the joint lives
(or joint life and last survivor expectancy) of the participant and the
participant's designated beneficiary (and the distributions must comply
with other requirements for such distributions under the IRC and may not
exceed 10% of the account value annually, measured from the date the
Transfer Agent received the request);
- shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies," below; or
- distributions from OppenheimerFunds prototype 401(k) plans: (1)
for hardship withdrawals; (2) under a Qualified Domestic Relations
Order, as defined in the IRC; (3) to meet minimum distribution
requirements as defined in the IRC; (4) to make "substantially equal
periodic payments" as described in Section 72(t) of the IRC; (5) for
separation from service.
Waivers for Shares Sold or Issued in Certain Transactions. The
contingent deferred sales charge is also waived on Class B and Class C
shares sold or issued in the following cases:
- shares sold to the Manager or its affiliates;
- shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; or
- shares issued in plans or reorganization to which the Fund is a
party.
The Class B and Class C contingent deferred sales charge will be
waived for certain additional types of redemptions, if the shares were
purchased prior to the date of this Prospectus, as set forth in Appendix
A to this Prospectus.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions. These include purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges must be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder
listed in the registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent receives
written instructions terminating or changing those privileges. After you
establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the
Transfer Agent signed by all shareholders who own the account.
- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase shares
in amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
- PhoneLink. PhoneLink is the Oppenheimer funds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be used
on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number: 1-
800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
- Exchanging Shares. With the Oppenheimer funds exchange privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another Oppenheimer funds account you have already
established by calling the special PhoneLink number. Please refer to "How
to Exchange Shares," below, for details.
- Selling Shares. You can redeem shares by telephone automatically
by calling the PhoneLink number and the Fund will send the proceeds
directly to your AccountLink bank account. Please refer to "How to Sell
Shares," below, for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
Oppenheimer funds account on a regular basis:
- Automatic Withdrawal Plans. If your Fund account is $5,000 or more,
you can establish an Automatic Withdrawal Plan to receive payments of at
least $50 on a monthly, quarterly, semi-annual or annual basis. The checks
may be sent to you or sent automatically to your bank account on
AccountLink. You may even set up certain types of withdrawals of up to
$1,500 per month by telephone. You should consult the Application and
Statement of Additional Information for more details.
- Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of
up to five other Oppenheimer funds on a monthly, quarterly, semi-annual
or annual basis under an Automatic Exchange Plan. The minimum purchase
for each other Oppenheimer funds account is $25. These exchanges are
subject to the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A shares,
you have up to 6 months to reinvest all or part of the redemption proceeds
in Class A shares of a Fund or other Oppenheimer funds without paying a
sales charge. This privilege applies to Class A shares that you purchased
subject to an initial sales charge and to Class A shares on which you paid
a contingent deferred sales charge when you redeemed them. It does not
apply to Class C shares. Please consult the Statement of Additional
Information for more details.
Retirement Plans. Fund shares are available as an investment for your
retirement plans. If you participate in a plan sponsored by your employer,
the plan trustee or administrator must make the purchase of shares for
your retirement plan account. The Distributor offers a number of different
retirement plans that can be used by individuals and employers:
- Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
- 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
- SEP-IRAs (Simplified Employee Pension Plans) for small business
owners or people with income from self-employment, including SAR/SEP IRAs
- Pension and Profit-Sharing Plans for self-employed persons and
small business owners
- 401(k) prototype retirement plans for businesses
Please call the Distributor for the OppenheimerFunds plan documents,
which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account on any regular
business day by selling (redeeming) some or all of your shares. Your
shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. The Fund offers you
a number of ways to sell your shares in writing or by telephone. You can
also set up Automatic Withdrawal Plans to redeem shares on a regular
basis, as described above. If you have questions about any of these
procedures, and especially if you are redeeming shares in a special
situation, such as due to the death of the owner, or from a retirement
plan, please call the Transfer Agent first, at 1-800-525-7048, for
assistance.
- Retirement Accounts. To sell shares in an Oppenheimer funds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax withholding
requirements for distributions from retirement plans and you must submit
a withholding form with your request to avoid delay. If your retirement
plan account is held for you by your employer, you must arrange for the
distribution request to be sent by the plan administrator or trustee.
There are additional details in the Statement of Additional Information.
- Certain Requests Require A Signature Guarantee. To protect you and
the Fund from fraud, certain redemption requests must be in writing and
must include a signature guarantee in the following situations (there may
be other situations also requiring a signature guarantee):
- You wish to redeem more than $50,000 worth of shares and receive
a check
- The redemption check is not payable to all shareholders listed on
the account statement
- The redemption check is not sent to the address of record on your
statement
- Shares are being transferred to a Fund account with a different
owner or name
- Shares are redeemed by someone other than the owners (such as an
Executor)
- Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or by a foreign bank that has a U.S. correspondent
bank, or by a U.S. registered dealer or broker in securities, municipal
securities or government securities, or by a U.S. national securities
exchange, a registered securities association or a clearing agency. If you
are signing as a fiduciary or on behalf of a corporation, partnership or
other business, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
- Your name
- The Fund's name
- Your Fund account number (from your account statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling
- The signatures of all registered owners exactly as the account is
registered, and
- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell shares.
Use the following address for Send courier or Express Mail
request by mail: requests to:
Oppenheimer Shareholder Services Oppenheimer Shareholder Services
P.O. Box 5270 10200 E. Girard Avenue, Building D
Denver, Colorado 80217 Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M. but may be earlier on some days. Shares held in an
OppenheimerFunds retirement plan or under a share certificate may not be
redeemed by telephone.
- To redeem shares through a service representative, call 1-800-852-
8457
- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address
on the account statement, or, if you have linked your Fund account to your
bank account on AccountLink, you may have the proceeds wired to that bank
account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone, once in each 7-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account. This service is not available within 30 days of changing the
address on an account.
- Telephone Redemptions Through AccountLink. There are no dollar
limits on telephone redemption proceeds sent to a bank account designated
when you establish AccountLink. Normally the ACH wire to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be wired.
Selling Shares Through Your Dealer. The Distributor has made arrangements
to repurchase Fund shares from dealers and brokers on behalf of their
customers. Brokers or dealers may charge for that service. Please refer
to "Special Arrangements for Repurchase of Shares from Dealers and
Brokers" in the Statement of Additional Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer
funds at net asset value per share at the time of exchange, without sales
charge. To exchange shares, you must meet several conditions:
- Shares of the fund selected for exchange must be available for sale
in your state of residence
- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege
- You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the account is
open 7 days, you can exchange shares every regular business day
- You must meet the minimum purchase requirements for the fund you
purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of the
same class in the other Oppenheimer funds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, Oppenheimer Money Market Fund, Inc. offers only one class of
shares, which are considered Class A shares for this purpose. In some
cases, sales charges may be imposed on exchange transactions. Please
refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
Exchanges may be requested in writing or by telephone:
- Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at the addresses listed in "How to Sell Shares."
- Telephone Exchange Requests. Telephone exchange requests may be
made either by calling a service representative at 1-800-852-8457 or by
using PhoneLink for automated exchanges, by calling 1-800-533-3310.
Telephone exchanges may be made only between accounts that are registered
with the same name(s) and address. Shares held under certificates may not
be exchanged by telephone.
You can find a list of Oppenheimer funds currently available for
exchanges in the Statement of Additional Information or by calling a
service representative at 1-800-525-7048. Exchanges of shares involve a
redemption of the shares of the fund you own and a purchase of shares of
the other fund.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day
on which the Transfer Agent receives an exchange request that is in proper
form by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M. but may be earlier on some days. However, either fund
may delay the purchase of shares of the fund you are exchanging into if
it determines it would be disadvantaged by a same-day transfer of the
proceeds to buy shares. For example, the receipt of multiple exchange
requests from a dealer in a "market-timing" strategy might require the
disposition of securities at a time or price disadvantageous to the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange privilege at
any time. Although the Fund will attempt to provide you notice whenever
it is reasonably able to do so, it may impose these changes at any time.
- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
<PAGE>
Shareholder Account Rules and Policies
- Net Asset Value Per Share is determined for each class of shares
as of the close of the New York Stock Exchange, which is normally 4:00
P.M. but may be earlier on some days, on each day the Exchange is open by
dividing the value of the Fund's net assets attributable to a class by the
number of shares of that class that are outstanding. The Fund's Board of
Directors has established procedures to value the Fund's securities to
determine net asset value. In general, securities values are based on
market value. There are special procedures for valuing illiquid and
restricted securities and obligations for which market values cannot be
readily obtained. These procedures are described more completely in the
Statement of Additional Information.
- The offering of shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may
be suspended by the Board of Directors at any time the Board believes it
is in the Fund's best interest to do so.
- Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone privileges
apply to each owner of the account and the dealer representative of record
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
- The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither it nor a Fund will be liable for
losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable to reach the Transfer Agent
during periods of unusual market activity, you may not be able to complete
a telephone transaction and should consider placing your order by mail.
- Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time
to time, the Transfer Agent in its discretion may waive certain of the
requirements for redemptions stated in this Prospectus.
- Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing
Corporation are responsible for obtaining their clients' permission to
perform those transactions and are responsible to their clients who are
shareholders of the Fund if the dealer performs any transaction
erroneously.
- The redemption price for shares will vary from day to day because
the value of the securities in the Fund's portfolio fluctuates, and the
redemption price, which is the net asset value per share, will normally
be different for Class A, Class B and Class C shares. Therefore, the
redemption value of your shares may be more or less than their original
cost.
- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the shareholder
under the redemption procedures described above) within 7 days after the
Transfer Agent receives redemption instructions in proper form, except
under unusual circumstances determined by the Securities and Exchange
Commission delaying or suspending such payments. For accounts registered
in the name of a broker-dealer, payment will be forwarded within 3
business days. The Transfer Agent may delay forwarding a check or
processing a payment via AccountLink for recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much
as 10 days from the date the shares were purchased. That delay may be
avoided if you purchase shares by certified check or arrange with your
bank to provide telephone or written assurance to the Transfer Agent that
your purchase payment has cleared.
- Involuntary redemptions of small accounts may be made by the Fund
if the account value has fallen below $500 for reasons other than the fact
that the market value of shares has dropped, and in some cases involuntary
redemptions may be made to repay the Distributor for losses from the
cancellation of share purchase orders.
- Under unusual circumstances, shares of the Fund may be redeemed "in
kind", which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to the Statement of
Additional Information for more details.
- "Backup Withholding" of Federal income tax may be applied at the
rate of 31% from dividends, distributions and redemption proceeds
(including exchanges) if you fail to furnish the Fund a certified Social
Security or taxpayer identification number when you sign your application,
or if you violate Internal Revenue Service regulations on tax reporting
of dividends.
- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charges when redeeming certain
Class A, Class B and Class C shares.
- To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048
to ask that copies of those materials be sent personally to that
shareholder.
- Transfer Agent and Shareholder Servicing Agent. The transfer agent
and shareholder servicing agent is Oppenheimer Shareholder Services.
Unified Management Corporation (1-800-346-4601) is the shareholder
servicing agent for former shareholders of the AMA Family of Funds and
clients of AMA Investment Advisers, L.P. who acquire shares of the Fund,
and for former shareholders of the Unified Funds and Liquid Green Trusts,
accounts which participated or participate in a retirement plan for which
Unified Investment Advisers, Inc. or an affiliate acts as custodian or
trustee, and other accounts for which Unified Management Corporation is
the dealer of record.
Dividends and Distributions
The Fund declares and pays dividends from net investment income on
an annual basis following the end of its fiscal year, October 31. The Fund
may at times make payments from sources other than income or net capital
gains. Payments from such sources would, in effect, represent a return of
each shareholder's investment. All or a portion of such payments would not
be taxable to shareholders.
Distributions from net long-term capital gains, if any, for the Fund
normally is declared and paid annually, subsequent to the end of its
fiscal year. Distributions from net short-term capital gains, if any, for
the Fund will be made annually. Short-term capital gains include the gains
from the disposition of securities held less than one year, a portion of
the premiums from expired put and call options written by the Fund and net
gains from closing transactions with respect to such options. If required
by tax laws to avoid excise or other taxes, dividends and/or capital gains
distributions may be made more frequently.
Dividends paid by the Fund with respect to Class A, B and C shares,
to the extent any dividends are paid, will be calculated in the same
manner at the same time on the same day, with each class bearing its own
distribution and other class-related expenses. Accordingly, the higher
distribution fees paid by Class B and C shares and the higher resulting
expense ratio will cause such shares to be paid lower per share dividends
than those paid on Class A shares. However, a Class B or C shareholder
will receive more shares at the time of purchase than a Class A
shareholder investing the same dollar amount since no sales charge is
deducted from the amount invested in Class B or C shares.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are reinvested.
For other accounts, you have four options:
- Reinvest All Distributions in the Fund. You can elect to reinvest
all dividends and long-term capital gains distributions in additional
shares of the Fund.
- Reinvest Capital Gains Only. You can elect to reinvest long-term
capital gains in the Fund while receiving dividends by check or sent to
your bank account on AccountLink.
- Receive All Distributions in Cash. You can elect to receive a check
for all dividends and long-term capital gains distributions or have them
sent to your bank on AccountLink.
- Reinvest Your Distributions in Another Oppenheimer Funds Account.
You can reinvest all distributions in another Oppenheimer Funds account
you have established.
Taxes. If your account is not a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the
Fund. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders. It does not matter how long you held your
shares. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. Distributions are subject to
federal income tax and may be subject to state or local taxes. Your
distributions are taxable when paid, whether you reinvest them in
additional shares or take them in cash. Every year the Fund will send you
and the IRS a statement showing the amount of each taxable distribution
you received in the previous year.
- "Buying a Dividend": When the Fund goes ex-dividend, its share
price is reduced by the amount of the distribution. If you buy shares on
or just before the ex-dividend date, or just before the Fund declares a
capital gains distribution, you will pay the full price for the shares and
then receive a portion of the price back as a taxable dividend or capital
gain.
- Taxes on Transactions: Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. A capital gain or loss is
the difference between the price you paid for the shares and the price you
received when you sold them.
- Returns of Capital: In certain cases distributions made by the Fund
may be considered a non-taxable return of capital to shareholders. If
that occurs, it will be identified in notices to shareholders. A non-
taxable return of capital may reduce your tax basis in your Fund shares.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax
adviser about the effect of an investment in the Fund on your particular
tax situation.
Additional Information
- Organization of the Fund. The Fund is an open-end diversified
management investment company incorporated in Maryland on August 6, 1979.
The Fund is governed by a Board of Directors, which is responsible for
protecting the interests of shareholders under Maryland law. Although the
Fund is not required by law to hold annual shareholder meetings, special
meetings may be called for the Fund as required by applicable law or as
requested in writing by holders of 10% or more of the outstanding shares
of the Fund for the purpose of voting upon the question of removal of a
director. The Fund will assist shareholders in communicating with one
another in connection with such a meeting. Stock certificates for Class
B or Class C shares will not be issued. No stock certificates will be
issued for Class A shares unless specifically requested in writing.
Each class of shares represents identical interests in the Fund's
investment portfolio. As such, they have the same rights, privileges and
preferences, except with respect to the: (a) designation of each class,
(b) effect of the respective sales charges, if any, for each class,
(c) distribution fees borne by each class, (d) expenses allocable
exclusively to each class, (e) voting rights on matters exclusively
affecting a single class and (f) exchange privilege of each class.
- Performance Information. From time to time the Fund may advertise
yield and total return figures, based on historical earnings. The figures
are not intended to indicate future performance. "Yield" is calculated by
dividing the net investment income for the stated period (exclusive of
gains, if any, from options and futures transactions) by the value, at
maximum offering price on the last day of the period, of the average
number of shares entitled to receive dividends during the period. The
yield formula assumes that net investment income is earned at a constant
rate and reinvested semi-annually. "Total Return" refers to the average
annual compounded rates of return over some representative period that
would equate an initial amount invested at the beginning of a stated
period to the ending redeemable value of the investment, after giving
effect to the reinvestment of all dividends and distributions and
deductions of expenses during the period. The Fund also may advertise its
total return over different periods of time by means of aggregate,
average, year by year or other types of total return figures. In addition,
reference in advertisements may be made to ratings and rankings among
similar funds by independent evaluators such as Lipper Analytical
Services, Inc. or Morningstar and the performance of the Fund may be
compared to recognized indices of market performance. Performance data
will be computed separately for each Class of shares in accordance with
formulas specified by the Securities and Exchange Commission.
- Possible Conflicts of Interest Between Classes. The Board of the
Fund has determined that currently no conflict of interest exists between
Class A, B and/or C shares of the Fund. On an ongoing basis, the Board
will monitor the Fund for the existence of any material conflicts between
the interests of the classes of outstanding shares. The Board will take
such action as is reasonably necessary to eliminate any such conflicts
that may develop, up to and including establishing a new Fund.
- Custodian. The custodian of the assets for the Fund is State
Street Bank and Trust Company, whose principal business address is P.O.
Box 8505, Boston, MA 02266-8505. Cash balances of the Fund with the
Custodian in excess of $100,000 are unprotected by Federal deposit
insurance. Such uninsured balances may at times be substantial.
- Transfer Agent and Shareholder Servicing Agent. The transfer agent
and shareholder servicing agent is Oppenheimer Shareholder Services, a
subsidiary of the Manager, whose address is P.O. Box 5270, Denver,
Colorado 80217.
- Shareholder Servicing Agent for Certain Shareholders. Unified
Management Corporation (1-800-346-4601) is the shareholder servicing agent
for former shareholders of the AMA Family of Fund and clients of AMA
Investment Advisers, L.P. who acquire shares of the Fund, and for former
shareholders of the Unified Funds and Liquid Green Trusts, accounts which
participated or participate in a retirement plan for which Unified
Investment Advisers, Inc. or an affiliate acts as custodian or trustee,
accounts which have a Money Manager brokerage account, and other accounts
for which Unified Management Corporation is the dealer of record.
<PAGE>
APPENDIX A
Sales Charges and Waivers for Certain Former
Quest Shareholders, and for Certain Shares
Purchased Prior to the Date of this Prospectus
A. Class A Sales Charge
1. Class A Reduced Sales Charge for Certain Former Quest
Shareholders.
- Group and Association Purchases and Purchases by Certain Qualified
Retirement Plans. The following table sets forth the applicable sales
charge for purchases of Class A shares made through a single broker or
dealer by qualified retirement plans which, for purposes of this Appendix
A only, are 401(k) plans, 403(b) plans and SEP/IRA and IRA plans of a
single employer, and by members of associations formed for any purpose
other than the purchase of securities that purchased shares of any former
Quest Fund or that received a proposal from OCC Distributors prior to the
date of this Prospectus:
<TABLE>
<CAPTION>
Front-End Front-End
Sales Charge Sales Charge
As a % of As a % of Commission as %
Number of Eligible Offering Amount of Offering
Employees or Members Price Invested Price
<S> <C> <C> <C>
9 or less 2.50% 2.56% 2.00%
Between 10 & 49 2.00% 2.04% 1.60%
50 or more 0% See "Class A Contingent
Deferred Sales Charge,"
of the Prospectus.
</TABLE>
Purchases made under the Group Purchase provision will qualify for
the lower of the sales charge computed according to the table based on the
number of eligible employees in a plan or members of an association or the
sales charge level under the Rights of Accumulation described above.
Purchases by retirement plans covering 50 or more eligible employees or
by associations or groups with 50 or more members shall be entitled to the
sales charge waiver applicable to purchases of $1 million or more. In
addition, purchases by 401(k) plans can qualify for this sales charge
waiver if, in the opinion of OCC Distributors, the distributor of the
prior Quest funds, the initial purchase plus projected contributions to
be invested in the plan for the following 12 months will exceed
$1,000,000. Individuals who qualify for reduced sales charges as members
of associations, groups or eligible employees in plans as set forth in the
above table also may purchase shares for their individual or custodial
accounts at the same sales charge level, upon request to the Fund's
Distributor.
2. Rate of Class A Contingent Deferred Sales Charge. Class A
shares of the Fund purchased without a sales charge prior to July 1, 1994
are subject to a contingent deferred sales charge if they are redeemed
within 24 months of the end of the calendar month in which they were
purchased in an amount equal to 1% if the redemption occurs within the
first 12 months and equal to .5 of 1% if the redemption occurs in the next
12 months. Class A shares of the Fund purchased without a sales charge
on or after July 1, 1994 but prior to the date of this prospectus are
subject to a contingent deferred sales charge if they are redeemed within
12 months of the end of the calendar month of their purchase in an amount
equal to 1%.
3. Waiver of Class A Initial and Contingent Deferred Sales Charge
for Certain Former Quest Shareholders. Class A shares of the Fund
purchased by the following investors are not subject to any Class A sales
charges:
- Shareholders of the AMA Family of Funds who acquired shares of any
of the former Quest for Value Funds pursuant to a combination of a Quest
Fund with a portfolio of the AMA Family of Funds who were shareholders of
the AMA Family of Funds on February 28, 1991;
- Shareholders who acquired shares of any former Quest for Value Fund
pursuant to the combination of certain Quest Funds with portfolios of the
Unified Funds.
4. Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions Involving Former Quest Shareholders. The Class A contingent
deferred sales charge will not apply with respect to Class A shares of the
Fund purchased by certain investors who were shareholders of any former
Quest for Value Funds prior to the date of this Prospectus, as follows:
- Special Fiduciary Relationships. The contingent deferred sales
charge will not apply with respect to purchases of Class A shares for
which the selling dealer is not permitted to receive a sales load or
redemption fee imposed on a shareholder with whom such dealer has a
fiduciary relationship in accordance with provisions of the Employee
Retirement Income Security Act and regulations thereunder.
- Purchases by Strategic Alliances. The contingent deferred sales
charge will not apply with respect to purchases of Class A shares by
participants in qualified retirement plans that are part of strategic
alliances. No sales charge will be imposed on such purchases and the
Distributor will pay to the selling dealer a commission described above
in "Class A Contingent Deferred Sales Charge."
5. Waiver of Class A Initial and Contingent Deferred Sales Charge.
The Class A initial and contingent deferred sales charge will not apply
to qualified retirement plans that are part of strategic alliances that
purchase shares on or after the date of this Prospectus but prior to March
31, 1996.
B. Class A, Class B and Class C Contingent Deferred Sales Charge Waivers
1. Waivers for Redemptions with Respect to Purchases Prior to March
6, 1995. The contingent deferred sales charge will be waived in the case
of redemptions of Class A, B or C shares of the Fund purchased prior to
March 6, 1995 in connection with (i) distributions to participants or
beneficiaries of plans qualified under Section 401(a) of the Internal
Revenue Code ("IRC") or from custodial accounts under IRC
Section 403(b)(7), individual retirement accounts under IRC
Section 408(a), deferred compensation plans under IRC section 457 and
other employee benefit plans ("plans"), and returns of excess
contributions made to these plans, (ii) withdrawals under an automatic
withdrawal plan where the annual withdrawal does not exceed 10% of the
opening value of the account (only for Class B and C shares); and
(iii) liquidation of a shareholder's account if the aggregate net asset
value of shares held in the account is less than the required minimum.
2. Waivers for Redemptions with Respect to Purchases on or After
March 6, 1995 but Prior to Date of the Prospectus. The contingent deferred
sales charge will be waived in the case of redemptions of Class A, B or
C shares of the Fund purchased on or after March 6, 1995, but prior to the
date of this Prospectus in connection with (1) distributions to
participants or beneficiaries from individual retirement accounts under
Section 408(a) of the IRC and retirement plans under Section 401(a),
401(k), 403(b) and 457 of the IRC, which distributions are made either
(a) to an individual participant as a result of separation from service
or (b) following the death or disability (as defined in the IRC) of the
participant or beneficiary; (2) returns of excess contributions to such
retirement plans; (3) redemptions other than from retirement plans
following the death or disability of the shareholder(s) (as evidenced by
a determination of total disability by the U.S. Social Security
Administration); (4) withdrawals under an automatic withdrawal plan where
the annual withdrawals do not exceed 10% of the opening value of the
account (only for Class B and C shares); and (5) liquidation of a
shareholder's account if the aggregate net asset value of shares held in
the account is less than the required minimum. A shareholder will be
credited with any contingent deferred sales charge paid in connection with
the redemption of any Class A, B or C shares if within 90 days after such
redemption, the proceeds are invested in the same Class of shares in the
same and/or another Oppenheimer fund.
C. Dealer Arrangements
1. Dealers who previously sold Class B shares of the Fund to Quest
prototype 401(k) plan accounts maintained on the TRAC-2000 recordkeeping
system and whose accounts were transferred to the OppenheimerFunds
prototype 401(k) plan, shall be eligible for an additional payment by the
Distributor of 1% of the value of the assets so transferred, such payment
not to exceed $5,000.
2. Dealers who previously sold Class C shares of the Fund to Quest
prototype 401(k) plan accounts maintained on the TRAC-2000 recordkeeping
system and (i) which shares in such accounts were exchanged for Class A
shares, or (ii) whose accounts were transferred to the OppenheimerFunds
prototype 401(k) plan, shall be eligible for an additional payment by the
Distributor of 1% of the value of the assets so transferred, such payment
not to exceed $5,000.
<PAGE>
Oppenheimer Quest Value Fund, Inc.
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Sub-Adviser
OpCap Advisors
One World Financial Center
New York, New York 10281
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
State Street Bank and Trust Company
P.O. Box 8505
Boston, Massachusetts 02266-8505
Independent Auditors
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, broker, salesperson or any other person has been authorized to
give any information or to make any representations other than those
contained in this Prospectus or the Statement of Additional Information,
and if given or made, such information and representations must not be
relied upon as having been authorized by the Fund, Oppenheimer Management
Corporation, Oppenheimer Funds Distributor, Inc. or any affiliate thereof.
This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any of the securities offered hereby in any state to any
person to whom it is unlawful to make such an offer in such state.
OPPENHEIMER QUEST VALUE FUND, INC.
Two World Trade Center, New York, New York 10048
1-800-525-7048
Statement of Additional Information dated November 24, 1995
This Statement of Additional Information (the "Additional Statement") is
not a Prospectus. Investors should understand that this Additional State-
ment should be read in conjunction with the Prospectus dated November 24,
1995 (the "Prospectus") of Oppenheimer Quest for Value Fund, Inc. (the
"Fund"), which may be obtained by written request to Oppenheimer
Shareholder Services ("OSS") P.O. Box 5270, Denver Colorado 80217 or by
calling SSI at (800) 525-7048.
Contents
Page
Investment Policies and Special Investment Methods 2
Risks of Stock Index Futures and Related Options 5
Investment Restrictions 7
Directors and Officers 9
Investment Management Services 12
Distribution and Service Plans 16
Determination of Net Asset Value 18
Total Return and Tax Information 19
Additional Information 23
Financial Statements A-1
<PAGE>
INVESTMENT POLICIES AND SPECIAL INVESTMENT METHODS
The investment objectives and policies of the Fund are described in
the Prospectus. In seeking to achieve its objectives, the Fund may use
the following investment methods.
Borrowing. The Fund may from time to time increase its ownership of
securities above the amounts otherwise possible by borrowing from banks
on an unsecured basis at fixed rates of interest and investing the
borrowed funds. Any such borrowing will be made only from banks, and will
only be made to the extent that the value of the Fund's assets, less its
liabilities (other than such borrowings) is equal to at least 300% of all
borrowings including the proposed borrowing. If the value of the Fund's
assets computed as above should fail to meet the 300% coverage described
above, the Fund, within three days, is required to reduce its bank debt
to the extent necessary to meet such asset coverage and may have to sell
a portion of its investments at a time when independent investment
judgment would not dictate such action.
Interest paid on money borrowed is an expense of the Fund which it
would not otherwise incur so that it may have little or not net investment
income when its borrowings are substantial.
Borrowing for investment increases both investment opportunity and
investment risk. Since substantially all of the Fund's assets fluctuate
in value, and the obligation resulting from borrowing is fixed, the net
asset value per share of the Fund will tend to increase more when the
portfolio assets increase in value, and decrease more when the portfolio
assets decrease in value, than would otherwise be the case if no borrowing
had been done. This is the speculative factor known as leverage; such
borrowings will be used only for the purchase of securities.
During the past fiscal year, the Fund has not invested in warrants,
restricted securities, securities of small, unseasoned companies, or
options on indices, and has no current intention of doing so in the
foreseeable future, nor did the Fund borrow for investment purposes.
Investment in Warrants. The Fund may not invest more than 5% of its
assets at the time of purchase in warrants (other than those that have
been acquired in units or attached to other securities). Of such 5%, not
more than 2% of the assets at the time of purchase may be invested in
warrants that are not listed on the New York or American Stock Exchanges.
Warrants are pure speculation in that they have no voting rights, pay no
dividends, and have no rights with respect to the assets of the
corporation issuing them. Warrants are basically an option to purchase
equity securities at a specific price valid for a specific period of time.
They do not represent ownership of the securities, but only the right to
buy them. The prices of warrants do not necessarily move parallel to the
prices of the underlying securities.
Restricted Securities. From time to time, the Fund may invest in
securities the disposition of which would be subject to legal
restrictions. It may be difficult to sell such securities at a price
representing, in the opinion of OpCap Advisors, their fair value until
such time as such securities may be sold publicly. Whether the Fund or
the issuer or seller of the restricted securities will pay the expenses
of their registration under the Securities Act of 1933 will in each case
be the subject of negotiation at the time the securities are purchased.
The Fund will ordinarily acquire the right to have such securities
registered within some specified period of time.
When registration is required, a considerable period may elapse
between a decision to sell the securities and the time when the Fund would
be permitted to sell. Thus, the Fund may not be able to obtain as
favorable a price as that prevailing at the time of the decision to sell.
The Fund may also acquire securities through private placements under
which it may agree to contractual restrictions on the resale of such
securities. Such restrictions might prevent the sale of such securities
at a time when such sale would otherwise be desirable.
No restricted securities for which there is no readily available
market ("illiquid securities") will be acquired which at the time of
acquisition will cause the aggregate current value of restricted
securities (including private placements and repurchase transactions
maturing beyond seven days) to exceed 10% of the value of the Fund's net
assets. When as a result of either the increase in the value of some or
all of the restricted and illiquid securities held, or the diminution in
the value of unrestricted marketable securities in the portfolio, the
restricted and illiquid securities come to represent a larger percentage
of the value of the Fund's net assets,OpCap Advisors will consider
appropriate steps to protect the Fund's flexibility.
Investment in Small Unseasoned Companies. Assets of the Fund may be
invested in securities of small, unseasoned companies as well as those of
large and well-known companies. The former may have a limited trading
market, which may adversely affect their disposition by the Fund and can
result in their shares being priced at a lower level than might otherwise
be the case. In addition, there are other investment companies (including
those advised by OpCap Advisors' affiliates) and other investment media
engaged in trading this type of security and, to the extent that these
organizations trade in the same securities, the Fund may be forced to
dispose of its holdings at prices lower than might otherwise be obtained.
The Fund will not make investments that will result in more than 15% of
the Fund's net assets (at the time of purchase) being invested in
securities of companies that have operated less than three years,
including the operation of predecessors.
Investment in Foreign Securities. The Fund may purchase foreign
securities provided that they are listed on a domestic or foreign
securities exchange or represented by American depository receipts listed
on a domestic securities exchange or traded in the United States' over-
the-counter market. There is no limit on the amount of such foreign
securities that the Fund might acquire. The Fund does not intend to
speculate in foreign currency nor invest in foreign currency contracts.
The Fund will only hold foreign currency in connection with the purchase
or sale of securities on a foreign securities exchange. To the extent
that foreign currency is so held, there may be a risk due to foreign
currency exchange rate fluctuations. Such foreign currency and foreign
securities will be held by the Fund's custodian bank, or by a foreign
branch of a U.S. bank, acting as subcustodian. The custodian bank will
hold such foreign securities pursuant to such arrangements as are
permitted by applicable foreign and domestic law and custom. In
connection with purchases on foreign securities exchanges, although the
Fund may purchase securities issued by companies in any country, developed
or underdeveloped, the Fund does not presently intend to purchase
securities issued by companies in underdeveloped countries.
Investments in foreign companies involve certain considerations which
are not typically associated with investing in domestic companies. An
investment may be affected by changes in currency rates and in exchange
control regulations (e.g. currency blockage). The Fund may bear a
transaction charge in connection with the exchange of currency. There may
be less publicly available information about a foreign company than about
a domestic company. Foreign companies are generally not subject to
uniform accounting, auditing and financial reporting standards comparable
to those applicable to domestic companies. Most foreign stock markets
have substantially less volume than the New York Stock Exchange and
securities of some foreign companies are less liquid and more volatile
than securities of comparable domestic companies. There is generally less
government regulation of foreign stock exchanges, brokers, and listed
companies than there is in the United States. In addition, with respect
to certain foreign countries, there is a possibility of expropriation or
confiscatory taxation, political or social instability, or diplomatic
developments which could adversely affect investment in securities of
issuers located in those countries. Individual foreign economies may
differ favorable or unfavorably from the United States economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.
If it should become necessary, the Fund would normally encounter greater
difficulties in commencing a lawsuit against the issuer of a foreign
security that it would against a United States issuer.
Risks of Options on Indices. The Fund's purchase and sale of options
on indices will be subject to certain risks, notwithstanding the use of
such options solely to hedge the value of the Fund's equity portfolio.
The index option hedging strategy to be employed by OpCap Advisors will
involve primarily the purchase of put options against indices which, in
the opinion of OpCap Advisors, will be affected by market conditions in
a substantially similar fashion to the Fund's equity portfolio. Put
options will be sold only to close out long positions. Price movements
in the Fund's portfolio probably will not correlate exactly to movements
in the level of the index and, therefore, the Fund bears the risk that the
price of the securities held by the Fund may decrease more than the
corresponding value of the long index put option position may increase.
It is also possible that the price of the index may rise while the value
of the Fund portfolio may fall. If this happened the Fund would
experience a loss on the value of its portfolio which is not offset by an
increase in the value of its hedging option position. However, OpCap
Advisors believes that the value of a diversified Fund portfolio, will,
over time, tend to move in the same direction as the market and that
movements in the value of the Fund in the opposite direction as the market
will be likely to occur only for a short period or to a small degree.
Index prices may be distorted if trading or certain stocks included
in the indices in interrupted. Trading in index options also may be
interrupted in certain circumstances such as if trading is halted in a
substantial number of stocks included in the index. If this occurred the
Fund would not be able to close out options which it had purchased, which
could result in losses to the Fund if the underlying index moved adversely
before trading resumed. However, it is the Fund's policy to purchase
options only on indices which include a sufficient number of stocks so
that the likelihood of a trading halt in the index is minimized.
The purchase of an index option may also be subject to a timing risk.
If an option is exercised before final determination of the closing index
value for that day, the risk exists that the level of the underlying index
may subsequently change. If such a change caused the exercised option to
fall out of the money (i.e. the exercising of the option would result in
a loss not a gain) the holder would be required to pay the difference
between the closing index value and the exercise price of the option
(times the applicable multiple) to the assigned writer. Although the Fund
may be able to minimize this risk by withholding exercise instructions
until just before the daily cutoff time, it may not be possible to
eliminate the risk entirely because the exercise cutoff time for index
options may be different than those fixed for other types of options and
may occur before definitive closing index values are announced.
Alternatively, when the index level is close to the exercise price, the
Fund may sell rather than exercise its option.
Although the markets for certain option contracts have developed
rapidly, the markets for other index options are still relatively
illiquid. The ability to establish and close out positions on such
options will be subject to the development and maintenance of a liquid
secondary market. It is not certain that this market will develop in all
index option contracts. The Fund will not purchase or sell any index
option contract unless and until, in the opinion of OpCap Advisors, the
market for such option has developed sufficiently that the risk in
connection with such transactions is no greater than the risk in
connection with options on stocks.
Lower Rated Bonds. The Fund may invest up to 5% of its assets in
bonds rated below Baa3 by Moody's Investors Service Inc. ("Moody's") or
BBB by Standard & Poor's Corporation ("S&P") (commonly known as "junk
bonds"). Securities rated less than Baa by Moody's or BBB by S&P are
classified as non-investment grade securities and are considered
speculative by those rating agencies. Junk bonds may be issued as a
consequence of corporate restructurings, such as leveraged buyouts,
mergers, acquisitions, debt recapitalizations, or similar events or by
smaller or highly leveraged companies. Although the growth of the high
yield securities market in the 1980s had paralleled a long economic
expansion, recently many issuers have been affected by adverse economic
and market conditions. It should be recognized that an economic downturn
or increase in interest rates is likely to have a negative effect on (i)
the high yield bond market, (ii) the value of high yield securities and
(iii) the ability of the securities' issuers to service their principal
and interest payment obligations, to meet their projected business goals
or to obtain additional financing. The market for junk bonds may be less
liquid than the market for investment grade bonds. In periods of reduced
market liquidity, junk bond prices may become more volatile and may
experience sudden and substantial price declines. Also, there may be
significant disparities in the prices quoted for junk bonds by various
dealers. Under such conditions, the Fund may have to use subjective
rather than objective criteria to value its junk bond investments accu-
rately and rely more heavily on the judgment of the Fund's Board of
Directors. Prices for junk bonds also may be affected by legislative and
regulatory developments. For example, new federal rules require that
savings and loans gradually reduce their holdings of high-yield
securities. Also, from time to time, Congress has considered legislation
to restrict or eliminate the corporate tax deduction for interest payments
or to regulate corporate restructurings such as takeovers, mergers or
leveraged buyouts. Such legislation, if enacted, may depress the prices
of outstanding junk bonds.
Additional Risks. Securities in which the Fund may invest are
subject to the provisions of bankruptcy, insolvency and other laws
affecting the rights and remedies of creditors and shareholders, such as
the federal Bankruptcy Code, and laws, if any, which may be enacted by
Congress or the state legislatures extending the time for payment of
principal or interest, or both or imposing other constraints upon en-
forcement of such obligations.
Investment in Other Investment Companies. The Fund has no present
intention of investing in the securities of other investment companies.
RISKS OF STOCK INDEX FUTURES AND RELATED OPTIONS
Unlike when the Fund purchases or sells a security, no price is paid
or received by the Fund upon the purchase or sale of a futures contract.
Instead, the Fund will be required to deposit with its broker an amount
of cash or U.S. Treasury bills equal to approximately 5% of the contract
amount. This is known as initial margin. Such initial margin is in the
nature of a performance bond or good faith deposit on the contract which
is returned to the Fund upon termination of the futures contract assuming
all contractual obligations have been satisfied. In addition, because
under current futures industry practice daily variations in gains and
losses on open contracts are required to be reflected in cash in the form
of variation margin payments, the Fund may be required to make additional
payments during the term of the contract to its broker. Such payments
would be required where during the term of a stock index futures contract
purchased by the Fund, the price of the underlying stock index declined,
thereby making the Fund's position less valuable. In all instances
involving the purchase of stock index futures contracts by the Fund
resulting in a net long position, an amount of cash and cash equivalents
equal to the market value of the futures contracts will be deposited in
a segregated account with the Fund's custodian to collateralize the
position and thereby insure that the use of such futures is unleveraged.
At any time prior to the expiration of the futures contract, the Fund may
elect to close the position by taking an opposite position which will
operate to terminate the Fund's position in the futures contract.
There are several risks in connection with the use of stock index
futures in the Fund as a hedging device. One risk arises because of the
imperfect correlation between the price of the stock index future and the
price of the securities which are the subject of the hedge. This risk of
imperfect correlation increases as the composition of the Fund portfolio
diverges from the securities included in the applicable stock index. The
price of the stock index future may move more than or less than the price
of the securities being hedged. If the price of the stock index future
moves less than the price of the securities which are the subject of the
hedge, the hedge will not be fully effective, but, if the price of the
securities being hedged has moved in an unfavorable direction, the Fund
would be in a better position than if it had not hedged at all. If the
price of the securities being hedged has moved in a favorable direction
this advantage will be partially offset by the future. If the price of
the futures moves more than the price of the stock the Fund will
experience a loss or a gain on the future which will be completely offset
by movement in the price of the securities which are the subject of the
hedge. To compensate for the imperfect correlation of movements in the
price of securities being hedged and movements in the price of the stock
index futures, the Fund may buy or sell stock index futures in a greater
dollar amount than the dollar amount of the securities being hedged if the
historical volatility of the prices of such securities has been greater
than the historical volatility of the index. Conversely, the Fund may buy
or sell fewer stock index futures contracts if the historical volatility
of the price of the securities being hedged is less than the historical
volatility of the stock index. It is possible that where the Fund has
sold futures to hedge its portfolio against a decline in the market, the
market may advance and the Fund's portfolio may decline. If this
occurred, the Fund would lose money on the futures and also experience a
decline in the value of its portfolio securities. While this should
occur, if at all, for a very brief period or to a very small degree, OpCap
Advisors believes that over time the value of a diversified portfolio will
tend to move in the same direction as the market indices upon which the
futures are based. It is also possible that if the Fund has hedged
against the possibility of a decline in the market adversely affecting
stocks held in its portfolio and stock prices increase instead, the Fund
will lose part or all of the benefit of the increased value of its stock
which it had hedged because it will have offsetting losses in its futures
positions. In addition, in such situations, if the Fund has insufficient
cash, it may have to sell securities to meet daily variation margin
requirements. Such sales of securities may be but will not necessarily
be, at increase prices which reflect the rising market. The Fund may also
have to sell securities at a time when it may be disadvantageous to do so.
Where futures are purchased to hedge against a possible increase in
the price of stocks before the Fund is able to invest its cash (or cash
equivalents) in stock (or options) in an orderly fashion, it is possible
the market may decline instead. If the Fund then concluded to not invest
in stock or options at the time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss on the
futures contract that is not offset by a reduction in the price of
securities purchased.
In addition to the possibility that there may be an imperfect
correlation or no correlation at all between movements in the stock index
future and the portion of the portfolio being hedged, the price of stock
index futures may not correlate perfectly with movements in the stock
index due to certain market distortions. All participants in the futures
market are subject to margin deposit and maintenance requirements. Rather
than meeting additional margin deposit requirements, investors may close
futures contracts through offsetting transactions which could distort the
normal relationship between the index and futures markets. Moreover, the
deposit requirements in the futures market are less onerous than margin
requirements in the securities market and may therefore cause increased
participation by speculators in the market. Such increased participation
may also cause temporary price distortions. Due to the possibility of
price distortion in the futures market and because of the imperfect
correlation between movements in the stock index and movements in the
price of stock index futures, the value of stock index futures contracts
as a hedging device may be reduced.
Currently, stock index futures contracts can be purchased or sold
with respect to several different stock indices, each based on a different
measure of market performance. Positions in stock index futures may be
closed out only on an exchange or board of trade which provides a
secondary market for such futures. Although the Fund intends to purchase
or sell futures only on exchanges or boards of trade where there appears
to be an active secondary market, as with stock options, there is no
assurance that a liquid secondary market or an exchange or board of trade
will exist for any particular contract or at any particular time. In such
event it may not be possible to close a futures position and in the event
of adverse price movements, the Fund would continue to be required to make
daily cash payments of variation margin. However, in the event futures
contracts have been used to hedge portfolio securities, such securities
will not be sold until the futures contract can be terminated. In such
circumstances, an increase in the price of the securities, if any, may
partially or completely offset losses on the futures contract. However,
as described above, there is no guarantee that the price of securities
will, in fact, correlate with the price movements in the futures contract
and thus provide an offset to losses on a futures contract.
In addition, if the Fund has insufficient cash it may at times have
to sell securities to meet variation margin requirements. Such sales may
have to be effected at a time when it is disadvantageous to do so.
INVESTMENT RESTRICTIONS
The Fund's significant investment restrictions are described in the
Prospectus. The following are also fundamental policies and cannot be
changed without shareholder approval. Under these additional
restrictions, the Fund cannot:
(a) Invest in real estate or interests in real estate (including
limited partnership interests), but may purchase readily
marketable securities of companies holding real estate or
interests therein;
(b) Purchase securities on margin;
(c) Underwrite securities of other companies, except insofar as it
might be deemed to be an underwriter for purposes of the
Securities Act of 1933 in the resale of any securities held in
its own portfolio (except that the Fund may in the future invest
all of its investable assets in an open-end management
investment company with substantially the same investment
objective and restrictions as the Fund);
(d) Mortgage, hypothecate or pledge any of its assets;
(e) Invest or hold securities of any issuer if the Officers and
Directors of the Fund or its Manager or Subadvisor owning
individually more then 1/2 of 1% of the securities of such
issuer together own more than 5% of the securities of such
issuer; or
(f) Invest in companies for the primary purpose of acquiring control
or management thereof (except that the Fund may in the future
invest all of its investable assets in an open-end management
investment company with substantially the same investment
objective and restrictions as the Fund);
(g) Invest in physical commodities or physical commodity contracts,
or speculate in financial commodity contracts, but may purchase
and sell stock futures contracts and options on such futures
contracts exclusively for hedging purposes;
(h) Write, purchase or sell puts, calls, or combinations thereof on
individual stocks, but may purchase or sell exchange traded put
and call options on stock indices to protect the Fund's assets.
In addition, the Fund may not, with respect to 75% of its assets,
invest more than 5% of the value of its total assets in the securities of
any one issuer . Although not a fundamental policy, in order to comply
with a state's securities laws, the Fund has agreed not to make loans to
any person or individual (except that portfolio securities may be loaned
within the limitations set forth in the Prospectus), not to make short
sales of securities except "against-the-box" and not to invest in
interests in oil, gas or other mineral exploration or development programs
or leases.
MAJOR SHAREHOLDERS
To the knowledge of the Fund, the following shareholders held as
beneficial or record owners 5% or more of each specified class of shares
of the Fund as of September 7, 1995:
Percentage
Name and Address of 5% Ownerof Ownership
Class A
Unified Management Corp. 11.08%
Omnibus Account - Value
Attn: Control Dept.
429 N. Pennsylvania St.
Indianapolis, IN 48204-1873
DIRECTORS AND OFFICERS
The directors and officers of the Fund, and their principal
occupations during the past five years, are set forth below. Directors
who are "interested persons", as defined in the 1940 Act, are denoted by
an asterisk. The address of each is Two World Trade Center, New York, New
York 10048, except as noted. As of November 13, 1995, all of the
Directors and Officers of the Fund as a group owned less than 1% of its
outstanding shares.
Bridget A. Macaskill, Chairman of the Board of Directors, Vice
President; Age: 47.
Chief Executive Officer of Oppenheimer Management Corporation (the
"Manager"); President and Chief Operating Officer of the Manager; prior
thereto, Chief Operating Officer of the Manager and Executive Vice
President of the Manager. Vice President and a Director of Oppenheimer
Acquisition Corp., Director of Oppenheimer Partnership Holdings, Inc.,
Chairman and a Director of Shareholder Services, Inc., Director of Main
Street Advisers, Inc., and Director of HarbourView Asset Management
Corporation, all of which are subsidiaries of the Manager; a Trustee of
certain Oppenheimer funds.
Paul Y. Clinton, Trustee; Age: 64
946 Morris Avenue, Bryn Mawr, Pennsylvania 19010
Director, External Affairs, Kravco Corporation, a national real estate
owner and property management corporation; formerly President of Essex
Management Corporation, a management consulting company; Trustee of
Capital Cash Management Trust, Prime Cash Fund and Short Term Asset
Reserves, each of which is a money-market fund; Director of Oppenheimer
Quest Value Fund, Inc., Oppenheimer Quest Global Value Fund, Inc., and
Quest Cash Reserves, Inc. and Trustee of Quest For Value Accumulation
Trust, all of which are open-end investment companies. Formerly a general
partner of Capital Growth Fund, a venture capital partnership; formerly
a general partner of Essex Limited Partnership, an investment partnership;
formerly President of Geneve Corp., a venture capital fund; formerly
Chairman of Woodland Capital Corp., a small business investment company;
formerly Vice President of W.R. Grace & Co.
Thomas W, Courtney, Trustee; Age: 62
P.O. Box 580, Sewickley, Pennsylvania 15143
Principal of Courtney Associates, Inc., a venture capital firm; former
General Partner of Trivest Venture Fund, a private venture capital fund;
former President of Investment Counseling Federated Investors, Inc.;
Trustee of Cash Assets Trust, a money market fund; Director of Quest Cash
Reserves, Inc., Oppenheimer Quest Value Fund, Inc. and Oppenheimer Quest
Global Value Fund, Inc. and Trustee of Quest for Value Accumulation Trust,
all of which are open-end investment companies; former President of Boston
Company Institutional Investors; Trustee of Hawaiian Tax-Free Trust and
Tax Free Trust of Arizona, tax-exempt bond funds; Director of several
privately owned corporations; former Director of Financial Analysts
Federation.
Lacy B. Herrmann, Trustee; Age: 66
380 Madison Avenue, Suite 2300, New York, New York 10017
President and Chairman of the Board of Aquila Management Corporation, the
sponsoring organization and Administrator and/or Sub-Adviser to the
following open-end investment companies, and Chairman of the Board of
Directors and President of each: Churchill Cash Reserves Trust, Short Term
Asset Reserves, Pacific Capital Cash Assets Trust, Pacific Capital U.S.
Treasuries Cash Assets Trust, Pacific Capital Tax-Free Cash Assets Trust,
Prime Cash Fund, Narragansett Insured Tax-Free Income Fund, Tax-Free Fund
For Utah, Churchill Tax-Free Fund of Kentucky, Tax-Free Fund of Colorado,
Tax-Free Trust of Oregon, Tax-Free Trust of Arizona, Hawaiian Tax-Free
Trust, and Aquila Rocky Mountain Equity Fund; Vice President, Director,
Secretary, and formerly Treasurer of Aquila Distributors, Inc.,
distributor of the above funds; President and Chairman of the Board of
Directors of Capital Cash Management Trust ("CCMT"), and an Officer and
Director/Director of its predecessors; President and Director of STCM
Management Company, Inc., sponsor and adviser to CCMT; Chairman, President
and a Director of InCap Management Corporation, formerly sub-adviser and
administrator of Prime Cash Fund and Short Term Asset Reserves; Director
or Trustee of Quest Cash Reserves, Inc., Oppenheimer Quest Global Value
Fund, Inc. and Oppenheimer Quest Value Fund, Inc. and Trustee of Quest for
Value Accumulation Trust and The Saratoga Advantage Trust, each of which
is an open-end investment company; Trustee of Brown University.
George Loft, Director; Age: 80
51 Herrick Road
Sharon, Connecticut 06069
Private Investor; Director of Quest Cash Reserves, Inc., Oppenheimer Quest
Value Fund, Inc. and Oppenheimer Quest Global Value Fund, Inc. and Trustee
of Quest for Value Accumulation Trust and The Saratoga Advantage Trust,
all of which are open-end investment companies, and Director of the Quest
for Value Dual Purpose Fund, Inc., a closed-end investment company.
Robert C. Doll, Jr., Vice President; Age: 41
Executive Vice President and Director of Equity Investments of the
Manager; an officer and Portfolio Manager of other Oppenheimer Funds.
Andrew J. Donohue, Secretary; Age: 45
Executive Vice President and General Counsel of the Manager and the
Distributor; an officer of other Oppenheimer funds; formerly Senior Vice
President and Associate General Counsel of the Manager and the
Distributor, partner in Kraft & McManimon (a law firm), an officer of
First Investors Corporation (a broker-dealer) and First Investors
Management Company, Inc. (broker-dealer and investment adviser), and a
director and an officer of First Investors Family of Funds and First
Investors Life Insurance Company.
George C. Bowen, Treasurer; Age: 59
3410 South Galena Street Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView Asset Management Corporation;
Senior Vice President, Treasurer, Assistant Secretary and a director of
Centennial Asset Management Corporation, an investment advisory subsidiary
of the Manager; Vice President, Treasurer and Secretary of the Transfer
Agent and Shareholder Financial Services, Inc., a transfer agent
subsidiary of the Manager; an officer of other Oppenheimer funds.
Robert Bishop, Assistant Treasurer; Age: 37
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an officer
of other OppenheimerFunds; formerly a Fund Controller for the Manager,
prior to which he was an Accountant for Yale & Seffinger, P.C., an
accounting firm, and previously an Accountant and Commissions Supervisor
for Stuart James Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer; Age: 30
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an officer
of other OppenheimerFunds; formerly a Fund Controller for the Manager,
prior to which he was an International Mutual Fund Supervisor for Brown
Brothers, Harriman Co., a bank, and previously a Senior Fund Accountant
for State Street Bank & Trust Company.
Robert G. Zack, Assistant Secretary; Age: 47
Senior Vice President and Associate General Counsel of the Manager,
Assistant Secretary of SSI, SFSI; an officer of other OppenheimerFunds.
- Remuneration of Directors. All officers of the Trust and Ms.
Macaskill, a Trustee, are officers or directors of the Manager and receive
no salary or fee from the Fund. The following table sets forth the
aggregate compensation received by the non-interested Trustees during the
fiscal year ended October 31, 1994 from the Fund and in the aggregate from
the five funds (Oppenheimer Quest Small Cap Value Fund, Oppenheimer Quest
Growth & Income Value Fund, Oppenheimer Quest Opportunity Value Fund,
Oppenheimer Quest Value Fund, Inc. and Oppenheimer Quest Global Value
Fund, Inc.) for which OpCap Advisors is currently the Sub-Adviser and for
which it was the investment manager during that period. Oppenheimer Quest
Officers Value Fund commenced operations following October 31, 1994.
<TABLE>
<CAPTION>
Pension or
Retirement
Aggregate Benefits Estimated Total
Compensation Accrued as Annual Compensation
from the Part of FundBenefits UponFrom Fund
Name of Person Fund Expenses Retirement Complex
<S> <C> <C> <C> <C>
Paul Y. Clinton $4,200 None None $19,800
Thomas W. Courtney 4,200 None None $19,800
Lacy B. Herrmann 4,200 None None $19,800
George Loft 4,200 None None $19,800
</TABLE>
- AMA Family of Funds Indemnification. In connection with the
combination of each of the U.S. Government Income Fund and the Growth and
Income Fund with a portfolio of AMA Family of Funds, Inc., each Fund has
agreed to assume the obligation of such portfolio of the AMA Family of
Funds to indemnify the directors of the AMA Family of Funds, Inc. to the
fullest extent permitted by law and the By-Laws of the AMA Family of
Funds, Inc.
- Unified Funds Indemnification. In connection with the combination
of Growth and Income Fund with Unified Income Fund and Unified Mutual
Shares, Growth and Income Fund has agreed to assume the obligation of
Unified Income Fund and Unified Mutual Shares to indemnify the directors
of such Unified Funds to the fullest extent permitted by law and the By-
Laws of such Unified Funds.
INVESTMENT MANAGEMENT SERVICES
The Manager and its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by
MassMutual. OAC is also owned in part by certain of the Manager's
directors and officers, some of whom also serve as officers of the Fund
and one of whom (Ms. Macaskill) also serves as Director of the Fund.
The Manager and the Fund has a Code of Ethics. It is designed to
detect and prevent improper personal trading by certain employees,
including portfolio managers, that would compete with or take advantage
of the Fund's portfolio transactions. Compliance with the Code of Ethics
is carefully monitored and strictly enforced by the Manager.
The Investment Advisory Agreement. The Manager acts as investment
adviser to the Fund pursuant to the terms of an Investment Advisory
Agreement dated as of November 22, 1995.
Under the Investment Advisory Agreement, the Manager acts as the
investment adviser for the Fund and supervises the investment program of
the Fund. The Investment Advisory Agreement provides that the Manager
will provide administrative services for the Fund including the completion
and maintenance of records, preparation and filing of reports required by
the Securities and Exchange Commission, reports to shareholders and
composition of proxy statements and registration statements required by
Federal and state securities laws. The Manager will furnish the Fund with
office space, facilities and equipment and arrange for its employees to
serve as officers of the Fund. The administrative services to be provided
by the Manager under the Investment Advisory Agreement will be at its own
expense.
Expenses not assumed by the Manager under the Investment Advisory
Agreement or paid by the Distributor will be paid by Fund including
interest, taxes, brokerage commissions, insurance premiums, compensation,
expenses and fees of non-interested Directors, legal and audit expenses,
transfer agent and custodian fees and expenses, registration fees,
expenses of printing and mailing reports and proxy statements to
shareholders, expenses of shareholders meetings and non-recurring expenses
including litigation. The Investment Advisory Agreement contains no
expense limitation. However, independently of the Investment Advisory
Agreement, the Manager has undertaken to reimburse the Fund to the extent
that the total expenses of the Fund in any fiscal year (including the
investment advisory fee but exclusive of taxes, interest, brokerage
commissions, distribution plan payments and any extraordinary non-
recurring expenses, including litigation) exceeds the most stringent state
regulatory limitation application to the Fund. At present, that
limitation is imposed by California and limits expenses (with specified
exclusions) to 2.5% of the first $30 million of average annual net assets,
2% of the next $70 million and 1.5% of average annual net assets in excess
of $100 million.
The payment of the management fee at the end of any month will be
reduced or eliminated such that there will not be any accrued but unpaid
liability under this expense limitation. The Manager reserves the right
to terminate or amend the undertaking at any time. Any assumption of the
Fund's expenses under this undertaking would lower the Fund's overall
expense ratio and increase its total return during any period in which
expenses are limited.
The Investment Advisory Agreement provides that in the absence or
willful misfeasance, bad faith, or gross negligence in the performance of
its duty, or reckless disregard for its obligations and duties under the
advisory agreement, the Manager is not liable from any loss resulting from
a good faith or omission on its part with respect to any of its duties
thereunder. The Investment Advisory Agreement permits the Manager to act
as investment adviser for any other person, firm or corporation and to use
the name "Oppenheimer" in connection with its other investment companies
for which it may act as an investment advisor or general distributor. If
the Manager shall no longer act as investment adviser to the Fund, the
right of the Fund to use "Oppenheimer" as part of its name may be
withdrawn.
For the services and facilities to be provided by the Manager under
the Investment Advisory Agreement the Fund will pay a monthly fee computed
as a percentage of the Fund's average daily net assets at the rate of
1.00% of the first $400 million of net assets, .90% of the next $400
million of net assets and .85% of net assets over $800 million.
Fees Paid Under the Prior Investment Advisory Agreement
OpCap Advisors served as investment adviser to the Fund from its
inception until November 22, 1995. The following fees were paid by the
Fund to OpCap Advisors for services under the prior Investment Advisory
Agreement: $1,223,192 for the fiscal year ended October 31, 1992;
$2,052,883 for the fiscal year ended October 31, 1993; and $2,479,887 for
the fiscal year ended October 31, 1994.
Expenses not expressly assumed by the Manager under the Investment
Advisory Agreement or by the Distributor are paid by the Fund. The Fund
is responsible for bearing certain expenses attributable to the Fund but
not to a particular class ("Fund Expenses"), including deferred
organization expenses; taxes; registration fees; typesetting of
prospectuses and financial reports required for distribution to
shareholders; brokerage commissions; fees and related expenses of
directors who are not interested persons; legal, accounting and audit
expenses; custodian fees; insurance premiums; and trade association dues.
Fund Expenses will be allocated based on the total net assets of each
class. Each class of shares of each Fund will also be responsible for
certain expenses attributable only to that class ("Class Expenses").
These Class Expenses may include distribution and service fees, transfer
and shareholder servicing agent fees, professional fees, printing and
postage expenses for materials distributed to current shareholders, state
registration fees and shareholder meeting expenses. Such items are
considered Class Expenses provided such fees and expenses relate solely
to such Class. A portion of printing expenses, such as typesetting costs,
will be divided equally among the Fund, while other printing expenses,
such as the number of copies printed, will be considered Class Expenses.
The Investment Advisory Agreement was approved by the Board of
Directors, including a majority of the Directors who are not "interested
persons" of the Fund (as defined in the 1940 Act) and who have no direct
or indirect financial interest in such Agreement, on June 22, 1995 and
by the shareholders of the Fund at a meeting held for that purpose on
November 3, 1995.
The Investment Advisory Agreement provides that the Manager may enter
into sub advisory agreements with other affiliated or unaffiliated
registered investment advisers in order to obtain specialized services for
the Fund provided that the Fund is not required to pay any additional fees
for such services. The Manager has retained OpCap Advisors (previously
called Quest for Value Advisors) pursuant to a Subadvisory Agreement dated
as of November 22, 1995 with respect to each Fund.
The Subadvisory Agreement
The Subadvisory Agreement provides that OpCap Advisors shall
regularly provide investment advice with respect to the Fund and invest
and reinvest cash, securities and the property comprising the assets of
the Funds. Under the Subadvisory Agreement, OpCap Advisors agrees not to
change the Portfolio Manager of the Fund without the written approval of
the Manager and to provide assistance in the distribution and marketing
of the Fund. The Subadvisory Agreement was approved by the Board of
Directors, including a majority of the Directors who are not "interested
persons" of the Fund (as defined in the 1940 Act) and who have no direct
or indirect financial interest in such agreements on June 22, 1995 and by
the shareholders of the Fund at a meeting held for that purpose on
November 3, 1995.
Under the Subadvisory Agreement, the Manager will pay OpCap Advisors
an annual fee payable monthly, based on the average daily net assets of
the Fund, equal to 40% of the investment advisory fee collected by the
Manager of the Fund based on the total net assets of the Fund as of the
effective date of the Subadvisory Agreement (the "base amount") plus 30%
of the investment advisory fee collected by the Manager based on the total
net assets of the Fund that exceed the base amount.
The Subadvisory Agreement provides that in the absence of willful
misfeasance, bad faith, negligence or reckless disregard of its duties or
obligations, OpCap Advisors shall not be liable to the Manager for any act
or omission in the course of or connected with rendering services under
the Subadvisory Agreement or for any losses that may be sustained in the
purchase, holding or sale of any security.
Portfolio Transactions. Portfolio decisions are based upon
recommendations of the portfolio manager and the judgment of the portfolio
managers. The Fund will pay brokerage commissions on transactions in
listed options and equity securities. Prices of portfolio securities
purchased from underwriters of new issues include a commission or
concession paid by the issuer to the underwriter, and prices of debt
securities purchased from dealers include a spread between the bid and
asked prices.
The Investment Advisory Agreement contains provisions relating to
the selection of broker-dealers ("brokers") for the Fund's portfolio
transactions. The Manager and the Subadvisor may use such brokers as may,
in their best judgment based on all relevant factors, implement the policy
of the Fund to achieve best execution of portfolio transactions. While
the Manager need not seek advance competitive bidding or base its
selection on posted rates, it is expected to be aware of the current rates
of most eligible brokers and to minimize the commissions paid to the
extent consistent with the interests and policies of the Fund as
established by its Board and the provisions of the Investment Advisory
Agreement.
The Investment Advisory Agreement also provides that, consistent with
obtaining the best execution of the Fund's portfolio transactions, the
Manager and the Subadvisor, in the interest of the Fund, may select
brokers other than affiliated brokers, because they provide brokerage
and/or research services to the Fund and/or other accounts of the Manager
or any Subadvisor. The commissions paid to such brokers may be higher
than another qualified broker would have charged if a good faith
determination is made by the Manager or the Subadvisor that the
commissions are reasonable in relation to the services provided, viewed
either in terms of that transaction or the Manager's or the Subadvisor's
overall responsibilities to all its accounts. No specific dollar value
need be put on the services, some of which may or may not be used by the
Manager or the Subadvisor for the benefit of the Fund or other of its
advisory clients. To show that the determinations were made in good
faith, the Manager or any Subadvisor must be prepared to show that the
amount of such commissions paid over a representative period selected by
the Board was reasonable in relation to the benefits to the Fund. The
Investment Advisory Agreement recognizes that an affiliated broker-dealer
may act as one of the regular brokers for the Fund provided that any
commissions paid to such broker are calculated in accordance with
procedures adopted by the Fund's Board under applicable SEC rules.
The Subadvisory Agreement permits OpCap Advisors to enter into "soft
dollar" arrangements through the agency of third parties to obtain
services for the Fund. Pursuant to these arrangements, OpCap Advisors
will undertake to place brokerage business with broker-dealers who pay
third parties that provide services. Any such "soft dollar" arrangements
will be made in accordance with policies adopted by the Board of the Fund
and in compliance with applicable law.
Transactions may be directed to dealers during the course of an
underwriting in return for their brokerage and research services, which
are intangible and on which no dollar value can be placed. There is no
formula for such allocation. The research information may or may not be
useful to one or more of the Fund and/or other accounts of the Manager or
OpCap Advisors; information received in connection with directed orders
of other accounts managed by the Manager or OpCap Advisors or its
affiliates may or may not be useful to one or more of the funds managed
by the Manager or OpCap Advisors. Such information may be in written or
oral form and includes information on particular companies and industries
as well as market, economic or institutional activity areas. It serves
to broaden the scope and supplement the research activities of the Manager
or OpCap Advisors, to make available additional views for consideration
and comparison, and to enable the Manager or OpCap Advisors to obtain
market information for the valuation of securities held in the Fund's
assets.
The following table presents information as to the allocation of brokerage
commissions paid to Opco and other brokers during the Fund's last three
completed fiscal years.
<TABLE>
<CAPTION>
Total Amount of Transactions
For the Total Brokerage Commissions Where Brokerage Commissions
Fiscal Year Brokerage Paid to Opco Paid to Opco
Ended Commissions Dollar Dollar
October 31, Paid Amounts % Amounts %
<S> <C> <C> <C> <C> <C>
1992 160,939 109,542 68.1 60,032,554 71.6
1993 152,344 73,313 48.1 58,028,142 55.2
1994 318,014 162,914 51.2 103,314,410 53.2
</TABLE>
The Fund does not effect principal transactions with Opco. When the
Fund effects principal transactions with other broker-dealers, commissions
are imputed. During the fiscal year ended October 31, 1994, the Fund
directed $6,592,325 of brokerage transactions to brokers because of
research services provided. The commissions related to such transactions
were $9,500.
During the fiscal year ended October 31, 1994 the Fund acquired
common stock of Morgan Stanley Group Incorporated, the parent of one of
the Fund's regular broker-dealers. The value of the Fund's holdings of
Morgan Stanley Group Incorporated was $5,883,750 at October 31, 1994.
The Distributor. Under a General Distributor's Agreement with the Fund
dated as of November 22, 1995, the Distributor acts as the Fund's
principal underwriter in the continuous public offering of the Class A,
Class B and Class C shares of the Fund but is not obligated to sell a
specific number of shares. Expenses normally attributable to sales,
including advertising and the cost of printing and mailing prospectuses,
other than those furnished to existing shareholders, are borne by the
Distributor. For additional information about distribution of the Fund's
shares and the expenses connected with such activities, please refer to
"Distribution and Service Plans" below.
DISTRIBUTION AND SERVICE PLANS
The Fund entered into an Amended and Restated Distribution and
Service Plan and Agreement as of November 22, 1995 (a "Plan") with
Oppenheimer Funds Distributor, Inc. (the "Distributor") with respect to
each Class of shares (the "Plans"). The Plans were approved on June 22,
1995 by the Directors, including the non-interested Directors, and by the
shareholders of each class of shares of the Fund at a meeting held for
that purpose on November 3, 1995.
The fees under each Plan consist of a service fee at the annual rate
of .25% of the average net assets of the shares and a distribution fee
at the annual rate of .25% of the average net assets of Class A shares of
the Fund and at the annual rate of .75% of the average net assets of Class
B and Class C shares of the Fund.
The Distributor will be authorized under the Plans to pay broker
dealers, banks or other entities (the "Recipients") that render assistance
in the distribution of shares or provide administrative support with
respect to shares held by customers. The service fee payments made under
the Plans will compensate the Distributor and the Recipients for providing
administrative support with respect to shareholder accounts. The
distribution fee payments made under the Plans will compensate the
Distributor and the Recipients for providing distribution assistance in
connection with the sale of Fund shares.
The Plans provide that payments may be made by the Manager or by the
Distributor to the Recipients from their own resources or from borrowings.
The Distributor and the Manager may, in their sole discretion, increase
or decrease the amount of payments they make from their own resources to
Recipients.
The Plans may not be amended to increase materially the amount of
payments to be made without the approval of the relevant class of
shareholders of the Fund. In addition, because Class B shares of the Fund
automatically convert into Class A shares after six years, the Fund is
required to obtain the approval of Class B as well as Class A shareholders
for the proposed amendment to the Class A Plan that would materially
increase the amount to be paid by Class A shareholders under the Class A
Plan. Such approval must be by a "majority" of the Class A and Class B
shares (as defined in the Investment Company Act), voting separately by
class. All material amendments must be approved by the Independent
Directors.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Fund's Board of Directors at least
quarterly on the amount of all payments made pursuant to each Plan, the
purpose for which the payment was made and the identity of each Recipient
that received any such payment. Those reports, including the allocations
on which they are based, will be subject to the review and approval of the
Independent Directors in the exercise of their fiduciary duty. Each Plan
further provides that while it is in effect, the selection and nomination
of those Directors of the Fund who are not "interested persons" of the
Fund is committed to the discretion of the Independent Directors. This
does not prevent the involvement of others in such selection and
nomination if the final decision on any such selection or nomination is
approved by a majority of such Independent Directors.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers does not exceed a minimum amount,
if any, that may be determined from time to time by a majority of the
Fund's Independent Directors. Initially, the Board of Directors has set
the fee at the maximum rate and set no minimum amount.
Each Plan will remain in effect only if its continuance is
specifically approved at least annually by the vote of both a majority of
the Directors and a majority of the non-interested Directors who have no
direct or indirect individual financial interest in the operation of the
Plans or any agreements related thereto (the "Qualified Directors"). The
Plans may be terminated at any time by vote of a majority of the Qualified
Directors or by a vote of a majority of the relevant class of Shares of
the Fund. In the event of such termination, the Board including the
Qualified Directors shall determine whether the Distributor is entitled
to payment by the Fund of all or a portion of the service fee and/or the
distribution fee with respect to shares sold prior to the effective date
of such termination.
The service fee and the distribution fee payable under the Plans are
subject to reduction or elimination under the limits imposed by the Rules
of Fair Practice of the National Association of Securities Dealers, Inc.
("NASD Rules"). The Plans are intended to comply with NASD Rules and Rule
12b-1 adopted under the 1940 Act. Rule 12b-1 requires that the selection
and nomination of Directors who are not "interested persons" of the Fund
be committed to the discretion of the Qualified Directors and that the
Directors receive quarterly reports on the payments made under the Plans
and the purposes for those payments.
The Prior Plans. From the inception date of the Fund through November 22,
1995, OpCap Distributors served as Distributor to the Fund and provided
distribution services pursuant to plans adopted under the Investment
Company Act (the "Prior Plans").
For the fiscal year ended October 31, 1994, the total distribution
fee for Class A shares was $1,189,613, the total distribution fee for
Class B shares was $83,411 and the total distribution fee for Class C
shares was $17,249 under the Prior Plans.
It is estimated that OpCap Distributors spent approximately the
following amounts with respect to Class A, B and C shares of the Fund for
the fiscal year ended October 31, 1994.
<PAGE>
<TABLE>
<CAPTION>
Printing and
Mailing of
Prospectuses to
Sales Materialother than CurrentCompensationCompensation to
Class and Advertising Shareholders to Dealers Sales PersonnelOther(1)
<S> <C> <C> <C> <C> <C>
A $247,915 $146,955 $594,808 $577,489 $322,936
B 47,277 30,176 482,866 112,084 63,783
C 30,691 19,494 29,138 72,813 41,356
</TABLE>
(1) Includes costs of telephone and overhead.
During the fiscal year ended October 31, 1994, OpCap Distributors
received the following compensation with respect to the Fund:
Portion of
Sales Charge on Compensation on
Class A Shares Redemptions (CDSCs)
136,398 $ 10,000
OpCap Distributors paid $276,738 in distribution and service fees to
Oppenheimer & Co., Inc., an affiliated broker-dealer, with respect to the
Fund
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined each day the
New York Stock Exchange (the "Exchange") is open, as of the close of the
regular trading session of the Exchange (currently 4:00 p.m., Eastern
Time) that day, by dividing the value of the Fund's net assets by the
total number of its shares outstanding. The Exchange's most recent annual
announcement (which is subject to change) states that it will close on New
Year's Day, Presidents' Day, Good Friday, Memorial Day, July 4, Labor Day,
Thanksgiving and Christmas Day. It may also close on other days.
Although the legal rights of Class A, B and C shares are identical, the
different expenses borne by each class may result in differing net asset
values and dividends for each class.
Securities listed on a national securities exchange or designated as
national market system securities are valued at the last reported sale
price on that day or, if there has been no sale on such day or on the
previous day on which the Exchange was open (if a week has not elapsed
between such days), then the value of such security is taken to be the
reported bid price at the time of which the value is being ascertained.
Securities actively traded in the over-the-counter market but not
designated as national market system securities are valued at the last
quoted bid price. Any securities or other assets for which current market
quotations are not readily available are valued at their fair value as
determined in good faith under procedures established by and under general
supervision and responsibility of the Fund's Board of Directors. Debt
securities having remaining maturities in excess of sixty days when
purchased and debt securities originally purchased with maturities in
excess of sixty days but which currently have maturities of sixty days or
less are valued at cost adjusted for amortization of premiums and
accretion of discounts. Accumulated unrealized appreciation or
depreciation on the sixty-first day, if any, is amortized to maturity.
Concerning the valuation of an open short sale against-the-box, the
Fund would value securities covering such a sale at the market price
thereof and offset such value by the short position.
Investors should be aware that because of the difference between the
bid and asked prices of the over-the-counter securities which the Fund may
invest in, there may be an immediate reduction in the net asset value of
the shares of the Fund after the Fund has completed a purchase of such
securities.
TOTAL RETURN AND TAX INFORMATION
Total Return Calculation. Total returns quoted in advertising reflect all
aspects of the Fund's return, including the effect of reinvesting
dividends and capital gain distributions, and any change in the Fund's net
asset value per share over the period. Average annual returns are
calculated by determining the growth or decline in value of a hypothetical
investment in the Fund over a stated period, and then calculating the
annually compounded percentage rate that would have produced the same
result if the rate of growth or decline in value had been constant over
the period. For example, a cumulative return of 100% over ten years would
produce an average annual return of 7.18%, which is the steady annual
return that would result in 100% growth on a compounded basis in ten
years.
Total return information may be useful to investors in reviewing the
Fund's performance. However, certain factors should be considered before
using this information as a basis for comparison with alternative invest-
ments. No adjustment is made for taxes payable on distributions. The
total return for any given past period is not an indication or
representation by the Fund of future rates of return on its shares. When
comparing the Fund's total return with that of other alternatives,
investors should understand that as the Fund is an equity fund seeking
capital appreciation, its shares are subject to greater market risks than
shares of funds having other investment objectives and that the Fund is
designed for investors who are willing to accept greater risk of loss in
the hope of realizing greater gains.
Average annual total return is calculated according to the following
formula:
P (1+t)n = ERV
Where: P = a hypothetical initial investment of $1,000
t = average annual total return
n = number of years
ERV = ending redeemable value of P at the end of each
period.
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return through October 31, 1994 for the period beginning:
4/30/89 Class A
9/2/93 Class B
and Class C
11/1/93 (1 year) 11/1/89 (5 years) 11/1/84 (10 years) (since inception)
Without With Without With Without With Without With
deductiondeduction deductiondeduction deductiondeduction deductiondeduction
of salesof maximum of sales of maximumof sales of maximum of salesof maximum
Class charge sales chargecharge sales chargecharge sales chargecharge sales charge
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A 5.01 -1.02(1) 10.76 9.46(1) 12.67 12.01(1) 18.06 17.58(1)
B 4.43 -.57 N/A N/A N/A N/A 2.74 -.66
C 4.45 3.45 N/A N/A N/A N/A 2.68 2.68
</TABLE>
(1) These numbers have been restated to reflect the maximum sales charge
of 5.75% as if it had been in effect throughout the above periods.
In addition to average annual returns, each class of shares of the
Fund may quote unaveraged or cumulative total returns reflecting the
simple change in value of an investment over a stated period. Average
annual and cumulative total returns may be quoted as a percentage or as
a dollar amount and may be calculated for a single investment, a series
of investments and/or a series of redemptions over any time period. Total
returns and other performance information may be quoted numerically or in
a table, graph, or similar illustration. Total returns may be quoted with
or without taking the Fund's sales charge into account. Excluding the
Fund's sales charge from a total return calculation produces a higher
total return figure.
The cumulative total returns on an investment made in Class A shares
of the Fund for the one, five and ten year periods ended October 31, 1994
and for the one year period for B and C and since inception for Class A,
B and C shares were as follows:
<TABLE>
<CAPTION>
For the one year for the five year For the ten year From inception(1)
period ended 10/31/94 period ended 10/31/94 period ended 10/31/94 through 10/31/94
Without With Without With Without With Without With
deduction deduction deduction deduction deduction deduction deduction deduction
of sales of maximum of sales of maximum of sales of maximum of sales of maximum
Class charge sales charge charge sales charge charge sales chargecharge sales charge(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A 5.01% -1.02(3) 66.77% 57.18%(3) 229.91% 210.94%(3) 1,013.52% 949.49%(3)
B 4.43% -.57% N/A N/A N/A N/A 3.19% -.76%
C 4.45% 3.45% N/A N/A N/A N/A 3.13% 3.13%
</TABLE>
(1) The Quest for Value Fund commenced operations on 4/30/80. Class B and
C shares of the Fund were first offered on 9/2/93.
(2) Reflects deduction of front-end sales charge for Class A shares and
Contingent Deferred Sales Charge for Class B and C shares.
(3) These numbers have been restated to reflect the maximum sales charge
of 5.75% as if it had been in effect throughout the above periods.
From time to time the Fund may refer in advertisements to rankings
and performance statistics published by (1) recognized mutual fund
performance rating services including but not limited to Lipper Analytical
Services, Inc. and Morningstar, Inc.; (2) recognized indexes including but
not limited to the Standard & Poor's Composite Stock Price Index, Consumer
Price Index and Dow Jones Industrial Average; and (3) Money Magazine and
other financial publications including magazines, newspapers and
newsletters. Performance statistics may include total returns, measures
of volatility, or other methods of performance based on the method used
by the publishers of the information. Advertising materials for the Fund
may also compare the Fund's total return to money market fund yields and
rates on certificates of deposit, U.S. Government Securities and corporate
bonds, and may refer to current or historic financial or economic trends
or conditions.
The performance of the Fund may be compared to the performance of
other mutual funds in general, or to the performance of particular types
of mutual funds. These comparisons may be expressed as mutual fund
rankings prepared by Lipper Analytical Services, Inc. ("Lipper"), and
Morningstar, Inc. ("Morningstar"), independent services located in Summit,
New Jersey and Chicago, Illinois, respectively, that monitor the
performance of mutual funds. Lipper and Morningstar generally rank funds
on the basis of total return, assuming reinvestment of distributions, but
do not take sales charges or redemption fees into consideration, and are
prepared without regard to tax consequences. In addition to the mutual
fund rankings, performance may be compared to mutual fund performance
indices prepared by Lipper.
From time to time, the Fund's performance also may be compared to
other mutual funds tracked by financial or business publications and
periodicals, For example, the Fund may quote Morningstar ratings in its
advertising materials. Morningstar rates mutual funds on a one star to
five star scale on the basis of risk-adjusted performance.
The Distributor may provide information designed to help individuals
understand their investment goals and explore various financial strategies
such as general principles of investing, asset allocation,
diversification, risk tolerance; goal setting; and a questionnaire
designed to help create a personal financial profile.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides
historical returns of the capital markets in the United States, including
common stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on CPI), and combinations of
various capital markets. The performance of these capital markets is
based on the returns of different indices.
The Distributor may use the performance of these capital markets in
order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly
to those of the Fund. The Fund may also compare performance to that of
other compilations or indices that may be developed and made available in
the future.
In advertising materials, the Distributor may reference or discuss
its products and services, which may include: other Oppenheimer funds;
retirement investing; brokerage products and services; the effects of
dollar-cost averaging and saving for college; and the risk of market
timing. In addition, the Distributor may quote financial or business
publications and periodicals, including model portfolios or allocations,
as they relate to fund management, investment philosophy, and investment
techniques. The Distributor may also reprint, and use as advertising and
sales literature, articles from a quarterly magazine provided free of
charge to Oppenheimer fund shareholders.
The Fund may present its fund number, Quotron symbol, CUSIP number,
and discuss or quote its current portfolio manager.
Volatility. The Fund may quote various measures of volatility and
benchmark correlation in advertising. In addition, the Fund may compare
these measures to those of other funds. Measures of volatility seek to
compare a fund's historical share price fluctuations or total returns to
those of a benchmark. Measures of benchmark correlation indicate how
valid a comparative benchmark may be. All measures of volatility and
correlation are calculated using averages of historical data.
Momentum Indicators indicate the Fund's price movements over specific
periods to time. Each point on the momentum indicator represents the
Fund's percentage change in price movements over that period.
The Fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a
program, an investor invests a fixed dollar amount in a fund at periodic
intervals, thereby purchasing fewer shares when prices are high and more
shares when prices are low. While such a strategy does not assure a
profit or guard against a loss in a declining market, the investor's
average cost per share can be lower than if fixed numbers of shares are
purchased at the same intervals. In evaluating such a plan, investors
should consider their ability to continue purchasing shares during period
of low price levels.
The Fund may be available for purchase through retirement plans or
other programs offering deferral of or exemption from income taxes, which
may produce superior after-tax returns over time. For example, a $1,000
investment earning a taxable return of 10% annually would have an after-
tax value of $1,949 after ten years, assuming tax was deducted from the
return each year at a 28% rate. An equivalent tax-deferred investment
would have an after-tax value of $2,100 after ten years, assuming tax was
deducted at a 31% rate from the tax-deferred earnings at the end of the
ten-year plan.
Tax Status of the Fund's Dividends and Disbursements. The Federal tax
treatment of the Fund's dividends and distributions is explained in the
Prospectus under the caption "Tax Status." The Code provides for a 70%
dividends-received deduction (the "deduction") by corporations. Special
provisions are contained in the Code as to the eligibility of payments to
shareholders made by mutual funds for the deduction. Long-term capital
gains distributions are not eligible for the deduction. In addition, the
amount of dividends paid by the Fund which may qualify for the deduction
is limited to the aggregate amount of qualifying dividends which the Fund
derives from its portfolio investments which the Fund has held for a
minimum period, usually 46 days. It should also be noted that a
shareholder will not be eligible for the deduction on dividends paid with
respect to shares which are held by the shareholder for 45 days or less.
The Fund will be subject to a nondeductible 4% excise tax to the extent
that it fails to distribute by the end of any calendar year substantially
all its ordinary income for that year and capital gain net income for the
one year period ending on October 31 of that year.
ADDITIONAL INFORMATION
Description of the Fund. The Fund was formed under the laws of Maryland
on August 6, 1979. When issued, the shares of each class of the Fund are
fully paid and have no preemptive, conversion, or other subscription
rights. Each class of shares represents identical interests in the
applicable Fund's investment portfolio. As such, they have the same
rights, privileges and preferences, except with respect to: (a) the
designation of each class, (b) the effect of the respective sales charges,
if any, for each class, (c) the distribution fees borne by each class, (d)
the expenses allocable exclusively to each class, (e) voting rights on
matters exclusively affecting a single class and (f) the exchange
privilege of each class. Upon liquidation of the Fund, shareholders are
entitled to share pro rata in the net assets available for distribution
to shareholders after all debts and expenses have been paid. The shares
do not have cumulative voting rights.
It is expected that the investment company will not be required to
hold annual meetings, but will hold special meetings of shareholders when,
in the judgment of the Directors, it is necessary or desirable to submit
matters for shareholder vote.
Independent Auditors. KPMG Peat Marwick LLP, 345 Park Avenue, New York,
New York, are the independent auditors of the Fund. Their services
include auditing the financial statements of the Fund as well as other
related services.
Custodian. State Street Bank and Trust Company acts as custodian of the
assets for the Fund.
Transfer Agent and Shareholder Servicing Agent. Shareholder Services,
Inc. acts as the transfer agent and shareholder servicing agent for the
Fund.
Distribution Options. Shareholders may change their distribution options
by giving the Transfer Agent three days prior notice in writing.
Shareholder Servicing Agent for Certain Shareholders. Unified Management
Corporation (1-800-346-4601) is the shareholder servicing agent for former
shareholders of the AMA Family of Funds and clients of AMA Investment
Advisers, Inc. (which acted as the investment advisor to the AMA Family
of Funds) who acquire shares of any former Quest Fund, and for former
shareholders of the Unified Funds and Liquid Green Trusts, accounts which
participated or participate in a retirement plan for which Unified
Investment Advisers, Inc. or an affiliate acts as custodian or trustee,
accounts which have a Money Manager brokerage account, and other accounts
for which Unified Management Corporation is the dealer of record.
Retirement Plans. The Distributor may print advertisements and brochures
concerning retirement plans, lump sum distributions, and 401-k plans.
These materials may include descriptions of tax rules, strategies for
reducing risk, and descriptions of the 401-k program offered by the
Distributors. From time to time, hypothetical investment programs
illustrating various tax-deferred investment strategies will be used in
brochures, sales literature, and omitting prospectuses. The following
example illustrates the general approaches that will be followed. These
hypotheticals will be modified with different investment amounts,
reflecting the amounts that can be invested in different types of
retirement programs, different assumed tax rates, and assumed rates of
return. They should not be viewed as indicative of past or future
performance of any Oppenheimer product.
<TABLE>
<CAPTION>
Benefits of Long Term Tax-Free Benefits of Long Term Tax-Free
Compounding - Single Sum Compounding - Periodic Investment
Amount of Contribution: $100,000 Amount Invested Annually: $2,000
Rates of Return Rates of Return
<S> <C> <C> <C> <C> <C> <C> <C>
Years 8.00% 10.00% 12.00% Years 8.00% 10.00% 12.00%
Value at End Value at End
5 $ 146,933 $ 161,051 $ 176,234 5 $ 12,672 $ 13,431 $ 14,230
10 $ 215,892 $ 259,374 $ 310,585 10 $ 31,291 $ 35,062 $ 39,309
15 $ 317,217 $ 417,725 $ 547,357 15 $ 58,649 $ 69,899 $ 83,507
20 $ 466,096 $ 672,750 $ 964,629 20 $ 98,846 $126,005 $161,397
25 $ 684,848 $1,083,471 $1,700,006 25 $157,909 $216,364 $298,668
30 $1,006,266 $1,744,940 $2,995,992 30 $244,692 $361,887 $540,585
Comparison of Taxable and Tax-Free Investing - Periodic Investments (Assumed Tax Rate: 28%)
Amount of Annual Contribution (Pre-Tax): $2,000 Annual Contribution (After Tax): $1,440
Tax Deferred Rates of Return Fully Taxed Rates of Return
Years 8.00% 10.00% 12.00% Years 5.76% 7.20% 8.64%
Value at End Value at End
5 $ 12,672 $ 13,431 $ 14,230 5 $ 8,544 $ 8,913 $ 9,296
10 $ 31,291 $ 35,062 $ 39,309 10 $ 19,849 $ 21,531 $ 23,364
15 $ 58,649 $ 69,899 $ 83,507 15 $ 34,807 $ 39,394 $ 44,654
20 $ 98,846 $126,005 $161,397 20 $ 54,598 $ 64,683 $ 76,874
25 $157,909 $216,364 $298,668 25 $ 80,785 $100,485 $125,635
30 $244,692 $361,887 $540,585 30 $115,435 $151,171 $199,492
</TABLE>
Comparison of Tax Deferred Investing -- Deducting Taxes at End
(Amount of Tax Rate as End: 28%)
Amount of Annual Contribution: $2,000
<TABLE>
Tax Deferred Rates of Return
Years 8.00% 10.00% 12.00%
Value at End
<S> <C> <C> <C>
5 $ 11,924 $ 12,470 $ 13,046
10 $ 28,130 $ 30,485 $ 33,903
15 $ 50,627 $ 58,728 $ 68,525
20 $ 82,369 $101,924 $127,406
25 $127,694 $169,782 $229,041
30 $192,978 $277,359 $406,021
<PAGE>
OPPENHEIMER QUEST VALUE FUND, INC.
<PAGE>
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
QUEST FOR VALUE FUND, INC.
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY BILLS -- 0.1%
$ 350,000 5.06%, 4/06/95
(cost -- $342,326) $ 342,031
------------
<CAPTION>
SHORT-TERM CORPORATE NOTES -- 10.7%
BANKING -- 3.3%
$ 8,632,000 Norwest Financial, Inc.
4.95%, 12/05/94 $ 8,591,645
------------
ENERGY -- 0.8%
2,000,000 Chevron Oil Finance Co.
4.91%, 11/28/94 1,992,635
------------
INSURANCE -- 0.9%
2,300,000 Prudential Funding Corp.
4.85%, 11/14/94 2,295,972
------------
MACHINERY & ENGINEERING -- 3.1%
7,900,000 Deere (John) Capital Corp.
4.92%, 11/07/94 7,893,522
------------
MISCELLANEOUS FINANCIAL SERVICES -- 2.6%
1,470,000 Beneficial Corp.
4.88%, 11/21/94 1,466,015
1,300,000 Commercial Credit Co.
4.85%, 11/21/94 1,296,497
4,000,000 Household Finance Corp.
4.97%, 12/01/94 3,983,433
------------
6,745,945
------------
Total Short-Term Corporate Notes
(cost -- $27,519,719) $ 27,519,719
------------
CONVERTIBLE CORPORATE BONDS -- 0.8%
REAL ESTATE
$ 2,310,156 Security Capital Realty, Inc.
12.00%, 6/30/14
(cost -- $2,177,494) (A) $ 1,997,340
------------
CONVERTIBLE PREFERRED STOCKS -- 1.1%
METALS/MINING
60,000 Freeport McMoRan, Inc.
$4.375 Conv. Pfd.
(cost -- $2,654,325) $ 2,880,000
------------
COMMON STOCKS -- 88.0%
AEROSPACE -- 10.1%
215,000 AlliedSignal, Inc. $ 7,444,375
129,000 Martin Marietta Corp. 5,917,875
59,000 McDonnell Douglas Corp. 8,319,000
90,000 Sundstrand Corp. 4,095,000
------------
25,776,250
------------
BANKING -- 6.1%
75,000 Citicorp 3,581,250
68,000 First Interstate Bancorp 5,440,000
120,810 Mellon Bank Corp. 6,720,056
------------
15,741,306
------------
CHEMICALS -- 3.1%
27,000 Hercules, Inc. 3,152,250
64,000 Monsanto Co. 4,872,000
------------
8,024,250
------------
CONGLOMERATES -- 1.7%
90,200 General Electric Co. 4,408,525
------------
CONSUMER PRODUCTS -- 7.5%
80,000 Avon Products, Inc. 5,060,000
252,000 Hasbro, Inc. 8,316,000
50,000 Unilever N.V. 5,937,500
------------
19,313,500
------------
DRUGS & MEDICAL PRODUCTS -- 5.4%
213,000 Becton, Dickinson & Co. 10,064,250
48,000 Warner-Lambert Co. 3,660,000
------------
13,724,250
------------
ELECTRONICS -- 2.6%
177,000 Arrow Electronics, Inc.* 6,681,750
INSURANCE -- 20.5%
82,000 American International Group, Inc. 7,677,250
411,000 EXEL Ltd. 16,183,125
38,500 General Reinsurance Corp. 4,312,000
205,000 John Alden Financial Corp. 6,150,000
202,500 Progressive Corp., Ohio 7,695,000
101,000 Transamerica Corp. 4,961,625
121,000 UNUM Corp. 5,550,875
------------
52,529,875
------------
MANUFACTURING -- 4.2%
260,000 Case Corp. 5,460,000
290,000 Pall Corp. 5,256,250
------------
10,716,250
------------
<FN>
* Non-income producing security.
</TABLE>
A-1
<PAGE>
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
QUEST FOR VALUE FUND, INC. (cont'd)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------------------------
<C> <S> <C>
METALS/MINING -- 1.7%
2,844 Freeport McMoRan, Copper & Gold (Class A) $ 64,701
227,000 Freeport McMoRan, Inc. 4,171,125
------------
4,235,826
------------
MISCELLANEOUS FINANCIAL SERVICES -- 9.9%
200,000 American Express Co. 6,150,000
340,000 Countrywide Credit Industries, Inc. 5,015,000
152,000 Federal Home Loan Mortgage Corp. 8,284,000
90,000 Morgan Stanley Group, Inc. 5,883,750
------------
25,332,750
------------
REAL ESTATE -- 1.1%
3,050 Security Capital Realty, Inc. (A) 2,758,036
------------
RETAIL -- 3.5%
213,000 May Department Stores Co. 8,014,125
21,000 Mercantile Stores Co., Inc. 955,500
------------
8,969,625
------------
TECHNOLOGY -- 3.1%
127,000 Intel Corp. 7,889,875
------------
TELECOMMUNICATIONS -- 1.9%
344 Bell Atlantic Corp. 18,017
145,200 Sprint Corp. 4,737,150
------------
4,755,167
------------
TEXTILES/APPAREL -- 2.1%
280,600 Warnaco Group, Inc. (Class A)* 5,296,325
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 3.5%
116,000 Dole Food Co. $ 3,117,500
240,000 Sara Lee Corp. 5,910,000
------------
9,027,500
------------
Total Common Stocks
(cost -- $192,374,371) $225,181,060
------------
Total Investments
(cost -- $225,068,235) 100.7% $257,920,150
Other Liabilities in Excess of
Other Assets (0.7) (1,881,015)
----- ------------
TOTAL NET ASSETS 100.0% $256,039,135
----- ------------
----- ------------
OPPORTUNITY FUND
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM CORPORATE NOTES -- 20.6%
AUTOMOTIVE -- 0.7%
$ 1,450,000 Ford Motor Credit Co.
4.91%, 11/28/94 $ 1,444,660
------------
BANKING -- 4.9%
10,600,000 Norwest Financial, Inc.
4.95%, 12/05/94 10,550,445
------------
CONGLOMERATES -- 0.5%
950,000 General Electric Capital Corp.
4.90%, 11/14/94 948,319
------------
ENERGY -- 3.5%
Chevron Oil Finance Co.
6,100,000 4.82%, 11/28/94 6,077,949
1,450,000 4.91%, 11/28/94 1,444,661
------------
7,522,610
------------
INSURANCE -- 0.6%
1,300,000 Prudential Funding Corp.
5.00%, 11/14/94 1,297,653
------------
<FN>
* Non-income producing security.
(A) Restricted Securities (the Fund will not bear any costs, including those
involved in registration under the Securities Act of 1933, in connection
with the disposition of these securities.):
VALUATION
DESCRIPTION DATE OF PAR SHARES UNIT AS OF
ACQUISITION AMOUNT COST OCTOBER 31,
1994
- --------------------------------------------------------------------------------
Security Capital Realty, Inc.
12.00%, 6/30/14 9/15/94 $2,310,156 -- $ .94 $ .86
Security Capital Realty, Inc.
Common Stock 9/15/94 -- 3,050 926 904
</TABLE>
A-2
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------
<S> <C> <C>
MACHINERY & ENGINEERING -- 1.8%
Deere (John) Capital Corp.
$ 800,000 4.83%, 11/21/94 $ 797,853
3,100,000 4.92%, 11/07/94 3,097,458
------------
3,895,311
------------
MISCELLANEOUS FINANCIAL SERVICES -- 8.6%
Beneficial Corp.
4,950,000 4.88%, 11/21/94 4,936,580
1,100,000 5.00%, 11/07/94 1,099,083
1,800,000 CIT Group Holdings, Inc.
5.05%, 11/07/94 1,798,485
1,200,000 Commercial Credit Co.
4.85%, 11/21/94 1,196,767
Household Finance Corp.
2,500,000 4.52%, 11/02/94 2,499,686
6,100,000 4.85%, 11/28/94 6,077,811
800,000 4.88%, 11/14/94 798,590
------------
18,407,002
------------
Total Short-Term Corporate Notes
(cost -- $44,066,000) $ 44,066,000
------------
U.S. TREASURY NOTES -- 1.5%
$ 1,000,000 7.50%, 11/15/01 $ 992,030
1,000,000 7.50%, 5/15/02 990,470
550,000 7.875%, 4/15/98 560,054
550,000 7.875%, 8/15/01 557,304
------------
Total U.S. Treasury Notes
(cost -- $3,149,370) $ 3,099,858
------------
CONVERTIBLE PREFERRED STOCKS -- 1.1%
METALS/MINING
50,000 Freeport McMoRan, Inc.
$4.375 Conv. Pfd.
(cost -- $2,211,938) $ 2,400,000
------------
COMMON STOCKS -- 76.5%
AEROSPACE -- 8.9%
115,000 McDonnell Douglas Corp. $ 16,215,000
60,000 Sundstrand Corp. 2,730,000
------------
18,945,000
------------
BANKING -- 15.2%
120,000 Citicorp $ 5,730,000
34,000 First Empire State Corp. 5,108,500
226,000 Mellon Bank Corp. 12,571,250
10,000 U.S. Bancorp 240,000
60,000 Wells Fargo & Co. 8,917,500
------------
32,567,250
------------
CHEMICALS -- 4.7%
75,000 Hercules, Inc. 8,756,250
18,000 Monsanto Co. 1,370,250
------------
10,126,500
------------
CONSUMER PRODUCTS -- 3.8%
60,000 Avon Products, Inc. 3,795,000
50,000 Hasbro, Inc. 1,650,000
92,500 Mattel, Inc. 2,705,625
------------
8,150,625
------------
DRUGS & MEDICAL PRODUCTS -- 5.9%
120,000 Becton, Dickinson & Co. 5,670,000
90,000 Warner-Lambert Co. 6,862,500
------------
12,532,500
------------
ENERGY -- 5.4%
139,200 Tenneco, Inc. 6,159,600
149,300 Triton Energy Corp.* 5,300,150
------------
11,459,750
------------
HEALTHCARE SERVICES -- 2.9%
435,000 National Health
Laboratories, Inc. 6,253,125
------------
INSURANCE -- 5.3%
160,000 EXEL Ltd. 6,300,000
60,000 Transamerica Corp. 2,947,500
60,000 Travelers, Inc. 2,085,000
------------
11,332,500
------------
MANUFACTURING -- 1.3%
160,000 Collins & Aikman Corp.* 1,420,000
100,100 Shaw Industries, Inc. 1,463,962
------------
2,883,962
------------
<FN>
* Non-income producing security.
</TABLE>
A-3
<PAGE>
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
OPPORTUNITY FUND (cont'd)
<TABLE>
<CAPTION>
- --------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------
<S> <C> <C>
MISCELLANEOUS FINANCIAL SERVICES -- 16.5%
240,000 American Express Co. $ 7,380,000
321,700 Countrywide Credit
Industries, Inc. 4,745,075
210,000 Federal Home Loan Mortgage
Corp. 11,445,000
55,000 Federal National Mortgage
Assoc. 4,180,000
110,000 Lehman Brothers Holdings,
Inc. 1,705,000
90,000 Morgan Stanley Group, Inc. 5,883,750
------------
35,338,825
------------
TECHNOLOGY -- 4.8%
70,000 Alliant Techsystems, Inc.* 2,406,250
110,000 Intel Corp. 6,833,750
50,500 Unitrode Corp.* 972,125
------------
10,212,125
------------
TELECOMMUNICATIONS -- 1.8%
120,100 Sprint Corp. 3,918,263
------------
Total Common Stocks
(cost -- $149,478,552) $163,720,425
------------
Total Investments
(cost -- $198,905,860) 99.7% $213,286,283
Other Assets in Excess of
Other Liabilities 0.3 659,462
----- ------------
TOTAL NET ASSETS 100.0% $213,945,745
----- ------------
----- ------------
SMALL CAPITALIZATION FUND
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
SHORT-TERM CORPORATE NOTES -- 8.5%
AUTOMOTIVE -- 0.7%
$1,038,000 Ford Motor Credit Co.
4.91%, 11/28/94 $ 1,034,178
------------
BANKING -- 5.0%
7,041,000 Norwest Financial, Inc.
4.95%, 12/05/94 7,008,083
------------
CONGLOMERATES -- 0.7%
930,000 General Electric Capital
Corp.
4.82%, 11/21/94 927,510
------------
INSURANCE -- 1.1%
$1,468,000 Prudential Funding Corp.
4.85%, 11/28/94 $ 1,462,660
------------
MISCELLANEOUS FINANCIAL SERVICES -- 1.0%
925,000 Beneficial Corp.
4.88%, 11/21/94 922,492
475,000 Federal National Mortgage
Assoc.
4.75%, 11/01/94 475,000
------------
1,397,492
------------
Total Short-Term Corporate Notes
(cost -- $11,829,923) $ 11,829,923
------------
CORPORATE NOTES & BONDS -- 0.7%
ENERGY -- 0.3%
$ 375,000 Global Marine, Inc.
12.75%, 12/15/99 $ 405,000
------------
PRINTING & PUBLISHING -- 0.4%
700,000 U.S. Banknote Corp.
10.375%, 6/01/02 602,000
------------
Total Corporate Notes & Bonds
(cost -- $1,104,862) $ 1,007,000
------------
CONVERTIBLE CORPORATE BONDS -- 0.9%
REAL ESTATE
$1,363,500 Security Capital Realty, Inc.
12.00%, 6/30/14
(cost -- $1,285,200) (A) $ 1,178,870
------------
SHARES VALUE
- ------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 0.2%
RETAIL
36,000 Family Bargain Corp.
$0.95 Conv. Pfd.
(cost -- $360,000) $ 346,500
------------
COMMON STOCKS -- 86.3%
ADVERTISING -- 4.7%
100,000 Foote, Cone & Belding
Communications, Inc. 4,475,000
39,000 Omnicom Group, Inc. 2,076,750
------------
6,551,750
------------
AEROSPACE -- 1.2%
200,000 BE Aerospace, Inc.* 1,737,500
------------
AUTOMOTIVE -- 0.2%
126,000 Collins Industries, Inc.* 283,500
------------
BUILDING & CONSTRUCTION -- 3.9%
146,000 CRSS, Inc. 1,642,500
102,600 D.R. Horton, Inc. 1,346,625
120,000 Martin Marietta Materials,
Inc. 2,475,000
------------
5,464,125
------------
CHEMICALS -- 2.0%
141,400 OM Group, Inc. 2,828,000
------------
<FN>
* Non-income producing security.
</TABLE>
A-4
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
COMPUTER SERVICES -- 4.1%
147,700 BancTec, Inc.* $ 2,954,000
34,600 Globalink, Inc.* 484,400
90,000 National Data Corp. 1,867,500
70,000 Sudbury, Inc.* 481,250
------------
5,787,150
------------
DRUGS & MEDICAL PRODUCTS -- 3.6%
40,000 Beckman Instruments, Inc. 1,175,000
108,900 Sybron International Corp.* 3,770,662
------------
4,945,662
------------
ELECTRICAL EQUIPMENT -- 0.7%
80,000 Instrument Systems Corp.* 600,000
16,000 Marshall Industries* 418,000
------------
1,018,000
------------
ENERGY -- 9.5%
136,800 Aquila Gas Pipeline Corp. 1,043,100
195,500 BWIP Holdings, Inc. (Class
A) 3,519,000
330,155 Global Natural Resources,
Inc.* 2,476,162
125,000 Nahama & Weagant
Energy Co.* 54,687
137,500 Noble Drilling Corp.* 1,014,063
72,000 St. Mary Land &
Exploration Co. 967,500
65,000 Triton Energy Corp.* 2,307,500
92,530 UGI Corp. 1,862,166
------------
13,244,178
------------
HEALTHCARE SERVICES -- 1.7%
90,000 Community Health Systems,
Inc.* 2,362,500
------------
INSURANCE -- 3.3%
123,300 Financial Security Assurance
Holdings, Ltd. 2,758,838
112,500 Guaranty National Corp. 1,884,375
------------
4,643,213
------------
LEISURE -- 0.7%
43,700 Club Med, Inc. 977,787
------------
MANUFACTURING -- 6.8%
89,000 Collins & Aikman Corp.* 789,875
97,000 Exabyte Corp.* 2,134,000
50,000 Giddings & Lewis, Inc. 775,000
181,300 Interlake Corp.* 430,587
65,100 Masland Corp. 1,049,738
170,000 North American Watch Co. 2,210,000
85,600 Welbilt Corp.* 2,118,600
------------
9,507,800
------------
MEDIA/BROADCASTING -- 0.6%
25,000 Pulitzer Publishing Co. 893,750
------------
METALS/MINING -- 0.5%
50,000 Olympic Steel, Inc.* 737,500
------------
MISCELLANEOUS FINANCIAL SERVICES -- 3.6%
221,400 SafeCard Services, Inc. 3,542,400
100,800 Union Corp.* 1,499,400
------------
5,041,800
------------
PAPER PRODUCTS -- 0.7%
61,500 CSS Industries, Inc.* $ 1,022,438
------------
PRINTING & PUBLISHING -- 3.8%
72,000 Commerce Clearing House,
Inc. (Class B) 1,206,000
216,300 Nu-Kote Holdings, Inc.
(Class A)* 4,028,588
------------
5,234,588
------------
REAL ESTATE -- 10.6%
151,800 Cousins Properties, Inc. 2,352,900
44,000 Post Properties, Inc. 1,292,500
219,750 Property Trust of America 3,543,469
230,000 Security Capital Industrial
Trust, Inc. 3,507,500
1,800 Security Capital Realty,
Inc. (A) 1,627,848
239,000 Taubman Centers, Inc. 2,479,625
------------
14,803,842
------------
RETAIL -- 4.3%
190,000 AmeriCredit Corp.* 1,258,750
72,700 Brookstone, Inc.* 1,090,500
350,700 Cash America International,
Inc. 2,893,275
15,600 Finish Line, Inc. 113,100
52,500 Fred's, Inc. 603,750
------------
5,959,375
------------
SECURITY/INVESTIGATION SERVICES -- 0.5%
202,910 Automated Security Holdings
PLC ADS 532,639
498,184 Holmes Protection Group,
Inc. 187,409
------------
720,048
------------
TECHNOLOGY -- 8.1%
100,400 Dionex Corp.* 3,714,800
202,000 Rational Software Corp.* 505,000
130,000 Stratus Computer, Inc.* 4,842,500
113,100 Unitrode Corp.* 2,177,175
------------
11,239,475
------------
TEXTILES/APPAREL -- 3.5%
18,000 Blair Corp. 756,000
70,000 Dyersburg Corp. 437,500
42,700 Fab Industries, Inc. 1,318,363
128,000 Warnaco Group, Inc. (Class
A)* 2,416,000
------------
4,927,863
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 2.1%
70,900 Morningstar Group, Inc. 514,025
220,118 Sylvan Food Holdings, Inc.* 2,366,268
------------
2,880,293
------------
TRANSPORTATION -- 2.0%
183,700 Interpool, Inc.* 2,525,875
18,000 MTL, Inc. 279,000
------------
2,804,875
------------
UTILITIES -- 1.7%
221,200 Sithe Energies, Inc.* 2,322,600
------------
<FN>
* Non-income producing security.
</TABLE>
A-5
<PAGE>
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
SMALL CAPITALIZATION FUND (cont'd)
<TABLE>
<CAPTION>
- -------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
OTHER -- 1.9%
142,000 McGrath RentCorp. $ 2,165,500
89,200 National Education Corp.* 434,850
------------
2,600,350
------------
Total Common Stocks
(cost -- $114,775,894) $120,539,962
------------
Total Investments
(cost -- $129,355,879) 96.6% $134,902,255
Other Assets in Excess of
Other Liabilities 3.4 4,687,545
----- ------------
TOTAL NET ASSETS 100.0% $139,589,800
----- ------------
----- ------------
GROWTH AND INCOME FUND
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
SHORT-TERM CORPORATE NOTES -- 13.5%
AUTOMOTIVE -- 3.4%
$ 1,150,000 Ford Motor Credit Co.
4.76%, 11/07/94 $ 1,149,088
------------
CONGLOMERATES -- 2.6%
885,000 General Electric Capital Corp.
4.72%, 11/04/94 884,652
------------
ENERGY -- 4.1%
1,415,000 Chevron Oil Finance Co.
4.70%, 11/01/94 1,415,000
------------
MISCELLANEOUS FINANCIAL SERVICES -- 3.4%
1,150,000 Household Finance Corp.
4.77%, 11/08/94 1,148,933
------------
Total Short-Term Corporate Notes
(cost -- $4,597,673) $ 4,597,673
------------
CORPORATE NOTES & BONDS -- 11.2%
CONTAINERS -- 3.0%
$ 1,000,000 Stone Container Corp.
11.875%, 12/01/98 $ 1,030,000
------------
ENERGY -- 3.8%
1,750,000 Triton Energy Corp.
Zero Coupon, 11/01/97 1,279,687
------------
TELECOMMUNICATIONS -- 4.4%
3,000,000 Nextel Communications, Inc.
0.00%/11.50%, 9/01/03** 1,515,000
------------
Total Corporate Notes & Bonds
(cost -- $4,187,052) $ 3,824,687
------------
CONVERTIBLE CORPORATE BONDS -- 6.2%
DRUGS & MEDICAL PRODUCTS -- 1.7%
$ 1,692,000 Alza Corp.
Zero Coupon, 7/14/14 $ 568,935
------------
MEDIA/BROADCASTING -- 4.5%
5,000,000 Time Warner, Inc.
Zero Coupon, 12/17/12 1,525,000
Total Convertible Corporate Bonds
(cost -- $2,173,746) $ 2,093,935
------------
- -------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 12.3%
ENERGY -- 5.4%
130,000 Gerrity Oil & Gas Corp.
$1.50 Conv. Pfd. $ 1,820,000
------------
RETAIL -- 2.2%
20,000 Venture Stores, Inc.
$3.25 Conv. Pfd. 760,000
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 4.7%
80,000 Flagstar Companies, Inc.
$2.25 Conv. Pfd. 1,590,000
------------
Total Convertible Preferred Stocks
(cost -- $4,878,620) $ 4,170,000
------------
COMMON STOCKS -- 52.6%
AEROSPACE -- 6.2%
15,000 McDonnell Douglas Corp. $ 2,115,000
------------
<FN>
* Non-income producing security.
** Represents a step-up floater which will receive 0.00% interest until
9/01/98, then will "step-up"to 11.50% until maturity.
(A) Restricted Securities (the Fund will not bear any costs, including those
involved in registration under the Securities Act of 1933, in connection
with the disposition of these securities.):
AS OF
DATE OF PAR UNIT OCTOBER 31,
DESCRIPTION ACQUISITION AMOUNT SHARES COST 1994
- --------------------------------------------------------------------------------
Security Capital Realty, Inc.
12.00%, 6/30/14 6/16/94 $1,363,500 -- $ .94 $ .86
Security Capital Realty, Inc.
Common Stock 8/02/93 -- 1,800 684 904
</TABLE>
A-6
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------
<S> <C> <C>
AUTOMOTIVE -- 3.2%
27,000 General Motors Corp. $ 1,066,500
------------
BANKING -- 2.7%
7,000 Citicorp 334,250
4,000 Wells Fargo & Co. 594,500
------------
928,750
------------
CONGLOMERATES -- 1.0%
20,000 Canadian Pacific Ltd. 320,000
------------
CONSUMER PRODUCTS -- 0.9%
5,000 Avon Products, Inc. 316,250
------------
ENERGY -- 3.1%
5,000 McMoRan Oil & Gas Corp. 18,750
20,000 Triton Energy Corp.* 710,000
15,000 Union Texas Petroleum
Holdings, Inc. 313,125
------------
1,041,875
------------
INSURANCE -- 7.0%
16,000 Equitable Co. 312,000
10,000 Progressive Corp., Ohio 380,000
35,000 TIG Holdings, Inc. 673,750
20,000 Travelers, Inc. 695,000
7,000 UNUM Corp. 321,125
------------
2,381,875
------------
METALS/MINING -- 4.4%
1,562 Freeport McMoRan, Copper &
Gold (Class A) 35,536
80,000 Freeport McMoRan, Inc. 1,470,000
------------
1,505,536
------------
MISCELLANEOUS FINANCIAL SERVICES -- 9.7%
26,000 American Express Co. 799,500
100,000 Countrywide Credit
Industries, Inc. 1,475,000
17,000 Federal Home Loan Mortgage
Corp. 926,500
5,200 Lehman Brothers Holdings,
Inc. 80,600
------------
3,281,600
------------
RETAIL -- 1.1%
10,000 May Department Stores Co. 376,250
------------
TECHNOLOGY -- 3.7%
20,000 Intel Corp. 1,242,500
------------
TELECOMMUNICATIONS -- 1.9%
20,000 Sprint Corp. 652,500
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 7.7%
45,000 PepsiCo, Inc. $ 1,575,000
17,000 Philip Morris Companies,
Inc. 1,041,250
------------
2,616,250
------------
Total Common Stocks
(cost -- $16,287,790) $ 17,844,886
------------
Total Investments
(cost -- $32,124,881) 95.8% $ 32,531,181
Other Assets in Excess of
Other Liabilities 4.2 1,428,001
----- ------------
TOTAL NET ASSETS 100.0% $ 33,959,182
----- ------------
----- ------------
U.S. GOVERNMENT INCOME FUND
- -------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
REPURCHASE AGREEMENT -- 0.1%
$ 100,000 Prudential Bache, 4.70%,
11/01/94 (proceeds at
maturity: $100,013,
collateralized by $105,000
par, $103,373 value, U.S.
Treasury Notes 4.625%,
2/29/96)
(cost -- $100,000) $ 100,000
------------
FEDERAL HOME LOAN MORTGAGE
CORPORATION -- 0.6%
$ 817,404 9.50%, 12/01/02 - 11/01/03
(cost -- $823,662) $ 846,773
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION I -- 51.6%
$40,573,258 7.00%, 2/15/22 - 11/15/23
(A) $ 36,363,783
16,903,209 7.50%, 2/15/22 - 2/15/24 15,693,446
3,819,011 8.00%, 4/15/02 - 2/15/23 3,711,053
11,354,828 8.50%, 6/15/01 - 9/15/24 (A) 11,222,631
690,831 10.50%, 1/15/98 - 12/15/00 740,481
------------
Total Government National Mortgage
Association I (cost -- $75,692,773) $ 67,731,394
------------
U.S. TREASURY BONDS -- 2.9%
$ 4,000,000 7.625%, 11/15/22
(cost -- $4,740,548) $ 3,804,360
------------
<FN>
* Non-income producing security.
(A) Securities segregated (full or partial) as collateral for written options
outstanding. The aggregate market value of such segregated securities is
$20,087,482.
</TABLE>
A-7
<PAGE>
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
U.S. GOVERNMENT INCOME FUND (cont'd)
<TABLE>
<CAPTION>
- -------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
<C> <C> <C>
U.S. Treasury Notes -- 44.6%
$60,000,000 6.875%, 8/31/99
(cost -- $58,889,522) $ 58,565,400
------------
Total Investments
(cost -- $140,246,505) 99.8% $131,047,927
----- ------------
- -------------------------------------------------------
PRINCIPAL
AMOUNT
SUBJECT
TO CALL VALUE
- ------------------------------------------------------
WRITTEN CALL OPTIONS OUTSTANDING -- (0.1%)
$10,000,000 Government National
Mortgage Association I,
7.00%, expiring Dec. '94,
strike @ 89.22 $ (115,625)
10,000,000 Government National
Mortgage Association I,
8.50%, expiring Dec. '94,
strike @ 98.78 (75,000)
------------
Total Written Call Options
Outstanding (premiums
received: $142,188) $ (190,625)
------------
Other Assets in Excess of
Other Liabilities 0.3 436,494
----- ------------
Total Net Assets 100.0% $131,293,796
----- ------------
----- ------------
INVESTMENT QUALITY INCOME FUND
- -----------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------
SHORT-TERM CORPORATE NOTES -- 9.4%
CONGLOMERATES -- 3.7%
$ 2,075,000 General Electric Capital Corp.
4.72%, 11/14/94 $ 2,071,463
------------
MISCELLANEOUS FINANCIAL SERVICES -- 5.7%
2,075,000 Amercian Express Credit Corp.
4.75%, 11/07/94 2,073,357
1,150,000 Household Finance Corp.
4.68%, 11/02/94 1,149,851
------------
3,223,208
------------
Total Short-Term Corporate Notes
(cost -- $5,294,671) $ 5,294,671
------------
- -------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
CORPORATE NOTES & BONDS -- 88.2%
AEROSPACE -- 3.6%
$ 2,000,000 United Technologies Corp.
8.875%, 11/15/19 $ 2,007,420
------------
AIRLINES -- 2.6%
1,000,000 American Airlines
9.73%, 9/29/14 916,910
550,000 Delta Air Lines, Inc.
10.375%, 2/01/11 538,351
------------
1,455,261
------------
BANKING -- 6.4%
70,000 NatWest Bancorp, Inc.
9.375%, 11/15/03 74,378
1,300,000 NCNB Corp.
10.20%, 7/15/15 1,439,139
500,000 RBSG Capital Corp.
10.125%, 3/01/04 547,640
1,500,000 Westpac Banking Corp.
9.125%, 8/15/01 1,555,020
------------
3,616,177
------------
CHEMICALS -- 0.9%
500,000 Rohm & Haas Co.
9.50%, 4/01/21 521,470
------------
CONGLOMERATES -- 5.1%
2,000,000 Canadian Pacific Ltd.
9.45%, 8/01/21 2,082,160
1,000,000 ITT Financial Corp.
6.50%, 5/01/11 786,860
------------
2,869,020
------------
ENERGY -- 5.9%
3,000,000 Occidental Petroleum Corp.
11.125%, 6/01/19 3,312,990
------------
ENTERTAINMENT -- 4.8%
3,000,000 Time Warner, Inc.
9.15%, 2/01/23 2,670,390
------------
EQUIPMENT LEASING -- 2.7%
1,600,000 Ryder Systems, Inc.
8.75%, 3/15/17 1,522,832
------------
INSURANCE -- 11.1%
1,000,000 Aetna Life & Casualty Co.
8.00%, 1/15/17 879,780
1,200,000 Capital Holding Corp.
8.75%, 1/15/17 1,172,700
2,000,000 CNA Financial Corp.
7.25%, 11/15/23 1,595,120
3,000,000 Torchmark, Inc.
7.875%, 5/15/23 2,606,610
------------
6,254,210
------------
</TABLE>
A-8
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
<C> <S> <C>
MACHINERY & ENGINEERING -- 3.3%
$ 1,750,000 Caterpillar, Inc.
9.75%, 6/01/19 $ 1,825,810
------------
MISCELLANEOUS FINANCIAL SERVICES -- 12.6%
20,000 Beneficial Corp.
12.875%, 8/01/13 23,754
1,500,000 BHP Finance USA Ltd.
8.50%, 12/01/12 1,467,105
Lehman Brothers, Inc.
865,000 9.875%, 10/15/00 910,732
115,000 10.00%, 5/15/99 121,464
205,000 Midland American
Capital Corp.
12.75%, 11/15/03 237,845
800,000 Paine Webber Group, Inc.
9.25%, 12/15/01 816,216
3,000,000 Prudential Funding Corp.
6.75%, 9/15/23 2,274,780
1,250,000 Source One Mortgage Services
Corp.
9.00%, 6/01/12 1,233,887
------------
7,085,783
------------
PAPER PRODUCTS -- 0.2%
100,000 Union Camp Corp.
10.00%, 5/01/19 109,261
------------
RETAIL -- 1.3%
May Department Stores Co.
250,000 9.875%, 6/01/17 246,032
405,000 10.625%, 11/01/10 465,957
------------
711,989
------------
TELECOMMUNICATIONS -- 12.2%
$ 420,000 GTE Corp.
10.25%, 11/01/20 $ 464,386
2,500,000 New York Telephone Co.
9.375%, 7/15/31 2,532,600
2,000,000 Pacific Bell
8.50%, 8/15/31 1,894,220
2,000,000 Southern New England
Telephone Co.
8.70%, 8/15/31 1,978,300
------------
6,869,506
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 3.2%
2,000,000 American Brands, Inc.
7.875%, 1/15/23 1,779,260
------------
UTILITIES -- 9.7%
2,000,000 Hydro-Quebec
8.50%, 12/01/29 1,862,400
2,000,000 Southern California Edison
Co.
8.875%, 6/01/24 1,915,060
1,500,000 TransCanada Pipelines Ltd.
9.875%, 1/01/21 1,642,635
------------
5,420,095
------------
OTHER -- 2.6%
1,500,000 Nova Scotia (Province of)
8.875%, 7/01/19 1,431,825
------------
Total Corporate Notes & Bonds
(cost -- $53,153,893) $ 49,463,299
------------
Total Investments
(cost -- $58,448,564) 97.6% $ 54,757,970
Other Assets in Excess of
Other Liabilities 2.4 1,352,181
----- ------------
Total Net Assets 100.0% $ 56,110,151
----- ------------
----- ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
A-9
<PAGE>
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
QUEST FOR SMALL GROWTH U.S.
INVESTMENT
VALUE FUND, OPPORTUNITY CAPITALIZATION AND
GOVERNMENT QUALITY
INC. FUND FUND INCOME FUND INCOME FUND
INCOME FUND
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
<C>
ASSETS
Investments, at value (cost --
$225,068,235, $198,905,860,
$129,355,879, $32,124,881,
$140,246,505 and $58,448,564,
respectively)........................ $257,920,150 $213,286,283 $134,902,255 $32,531,181 $131,047,927
$54,757,970
Cash.................................. 490,615 495,564 347,062 8,772 14,763 25,873
Receivable for investments sold....... 3,452,070 -- 1,212,440 1,339,806 168,384 --
Receivable for investments sold to
affiliates........................... -- -- 3,506,625 -- -- --
Receivable for fund shares sold....... 482,019 2,000,491 516,512 637,310 163,696
113,417
Dividends receivable.................. 387,321 470,950 90,453 65,264 -- --
Interest receivable................... 7,084 80,497 103,317 49,276 1,314,298 1,455,316
Deferred organization expenses........ -- -- -- 38,509 -- 13,971
Other assets.......................... 42,588 18,959 16,622 24,165 34,935 19,197
------------ ------------ ------------ ------------ ------------ ------------
Total Assets........................ 262,781,847 216,352,744 140,695,286 34,694,283 132,744,003
56,385,744
------------ ------------ ------------ ------------ ------------ ------------
LIABILITIES
Written options outstanding, at value
(premiums received: $142,188)........ -- -- -- -- 190,625 --
Payable for investments purchased..... 6,159,929 2,049,446 676,409 648,600 6,250
--
Payable for fund shares redeemed...... 414,843 207,962 298,489 25,979 1,007,182
108,561
Investment advisory fee payable....... 41,691 34,437 22,858 4,563 12,963 632
Distribution fee payable.............. 22,304 21,278 13,023 2,509 7,401 4,568
Dividends payable..................... -- 7,778 -- -- 117,133 108,198
Other payables and accrued expenses... 103,945 86,098 94,707 53,450 108,653
53,634
------------ ------------ ------------ ------------ ------------ ------------
Total Liabilities................... 6,742,712 2,406,999 1,105,486 735,101 1,450,207 275,593
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS
Par value............................. 20,348,156 108,790 85,536 33,650 121,636 58,013
Paid-in-surplus....................... 184,710,613 191,026,174 130,829,389 31,830,359 145,717,507
60,695,612
Accumulated undistributed net
investment income (loss)............. 1,464,120 1,291,867 (238,336) 127,460 -- --
Accumulated undistributed net realized
gain (loss) on investments........... 16,664,331 7,139,720 3,366,835 1,768,686 (5,000,871)
(952,880)
Distributions in excess of net
realized gains....................... -- (1,229) -- (207,273) (297,461) --
Net unrealized appreciation
(depreciation) on investments........ 32,851,915 14,380,423 5,546,376 406,300 (9,247,015)
(3,690,594)
------------ ------------ ------------ ------------ ------------ ------------
4 Total Net Assets.................... $256,039,135 $213,945,745 $139,589,800 $33,959,182 $131,293,796
$56,110,151
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
CLASS A:
Fund shares outstanding............... 18,914,850 8,295,463 7,353,210 3,029,071 11,418,654
4,851,201
------------ ------------ ------------ ------------ ------------ ------------
Net asset value per share............. $ 12.59 $ 19.69 $ 16.33 $ 10.09 $ 10.79 $ 9.67
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
Maximum offering price per share*..... $ 13.32 $ 20.84 $ 17.28 $ 10.59 $ 11.33 $
10.15
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
CLASS B:
Fund shares outstanding............... 1,147,382 2,211,377 994,342 290,685 631,471
682,943
------------ ------------ ------------ ------------ ------------ ------------
Net asset value and offering price per
share................................ $ 12.53 $ 19.59 $ 16.24 $ 10.07 $ 10.79 $ 9.67
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
CLASS C:
Fund shares outstanding............... 285,924 372,202 206,006 45,206 113,464 267,089
------------ ------------ ------------ ------------ ------------ ------------
Net asset value and offering price per
share................................ $ 12.52 $ 19.58 $ 16.23 $ 10.07 $ 10.79 $ 9.67
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
<FN>
*Sales charges decrease on purchases of $50,000 or higher.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
A-10
<PAGE>
YEAR ENDED OCTOBER 31, 1994
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
QUEST FOR SMALL GROWTH U.S.
INVESTMENT
VALUE OPPORTUNITY CAPITALIZATION AND
GOVERNMENT QUALITY
FUND, INC. FUND FUND INCOME FUND INCOME
FUND INCOME FUND
----------- ----------- -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
<C>
INVESTMENT INCOME
Dividends.................................. $4,621,105 $3,199,658 $ 1,319,209 $ 845,665 $ -- $
- --
Interest................................... 1,393,271 1,078,724 874,396 709,375 10,262,496 4,659,644
----------- ----------- -------------- ----------- ----------- -----------
Total investment income.................. 6,014,376 4,278,382 2,193,605 1,555,040 10,262,496
4,659,644
----------- ----------- -------------- ----------- ----------- -----------
OPERATING EXPENSES
Investment advisory fee (note 2a).......... 2,479,887 1,555,477 1,260,578 263,469 962,940
359,792
Distribution fee -- Class A (note 2c)...... 1,189,613 683,116 576,382 116,449 465,840
215,221
Distribution fee -- Class B (note 2c)...... 83,411 162,157 94,008 15,858 43,485 41,770
Distribution fee -- Class C (note 2c)...... 17,249 27,089 13,806 2,983 8,616 19,831
Transfer and dividend disbursing agent fees
-- Class A................................ 247,831 117,250 133,738 41,065 130,793 50,526
Transfer and dividend disbursing agent fees
-- Class B................................ 12,766 23,295 20,668 2,659 4,321 4,992
Transfer and dividend disbursing agent fees
-- Class C................................ 3,313 4,335 4,637 1,253 1,658 2,288
Accounting services fee (note 2b).......... -- 108,245 122,578 123,117 135,876
119,080
Registration fees.......................... 84,876 79,103 75,433 66,221 67,461 65,474
Reports and notices to shareholders........ 60,447 37,637 45,104 27,802 39,689
31,342
Custodian fees............................. 42,485 31,578 32,790 17,672 74,885 27,532
Auditing, consulting and tax return
preparation fees.......................... 23,051 18,100 18,101 14,600 38,501 17,100
Directors' (Trustees') fees and expenses... 17,200 17,200 17,200 8,810 17,200
17,200
Legal fees................................. 11,120 6,829 7,410 5,355 7,021 5,752
Amortization of deferred organization
expenses (note 1c)........................ -- 2,461 2,394 19,148 -- 12,374
Miscellaneous.............................. 14,902 7,146 7,114 5,243 10,727 3,951
----------- ----------- -------------- ----------- ----------- -----------
Total operating expenses................. 4,288,151 2,881,018 2,431,941 731,704 2,009,013
994,225
Less: Investment advisory fees waived
(note 2a)............................... -- -- -- (142,772) (38,486) (180,934)
----------- ----------- -------------- ----------- ----------- -----------
Net operating expenses................. 4,288,151 2,881,018 2,431,941 588,932 1,970,527
813,291
----------- ----------- -------------- ----------- ----------- -----------
Net investment income (loss)........... 1,726,225 1,397,364 (238,336) 966,108 8,291,969
3,846,353
----------- ----------- -------------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS -- NET
Net realized gain (loss) on security
transactions.............................. 16,722,091 7,139,720 3,506,967 1,768,686 (6,439,027)
(1,053,662)
Net realized gain on option transactions
(note 1f)................................. -- -- 38,999 -- 2,072,188 264,063
Net realized loss on futures transactions
(note 1g)................................. (57,760) -- (179,131) -- -- (163,281)
----------- ----------- -------------- ----------- ----------- -----------
Net realized gain (loss) on
investments............................. 16,664,331 7,139,720 3,366,835 1,768,686 (4,366,839)
(952,880)
Net change in unrealized appreciation
(depreciation) on investments............. (6,250,090) 4,721,481 (3,118,979) (189,442) (11,007,688)
(9,068,979)
----------- ----------- -------------- ----------- ----------- -----------
Net realized gain (loss) and change in
unrealized appreciation (depreciation)
on investments.......................... 10,414,241 11,861,201 247,856 1,579,244 (15,374,527)
(10,021,859)
----------- ----------- -------------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations................. $12,140,466 $13,258,565 $ 9,520 $2,545,352 $(7,082,558)
$(6,175,506)
----------- ----------- -------------- ----------- ----------- -----------
----------- ----------- -------------- ----------- ----------- -----------
<FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
A-11
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
QUEST FOR VALUE FUND,
INC. OPPORTUNITY FUND
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
-------------------------- --------------------------
1994 1993 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss)............... $ 1,726,225 $ 815,957 $ 1,397,364 $ 2,369,084
Net realized gain (loss) on investments.... 16,664,331 9,419,025 7,139,720 1,539,178
Net change in unrealized appreciation
(depreciation) on investments............. (6,250,090) 11,586,419 4,721,481 6,462,200
------------ ------------ ------------ ------------
Net increase (decrease) in net assets.... 12,140,466 21,821,401 13,258,565 10,370,462
------------ ------------ ------------ ------------
Dividends and Distributions to Shareholders
Net investment income -- Class A........... (819,873) (608,320) (2,269,483) (220,172)
Net investment income -- Class B........... (11,801) -- (98,258) --
Net investment income -- Class C........... (2,040) -- (21,098) --
Net realized gains -- Class A.............. (9,227,704) (6,984,843) (1,497,052) (945,122)
Net realized gains -- Class B.............. (115,604) -- (30,460) --
Net realized gains -- Class C.............. (11,081) -- (11,467) --
Distributions in excess of net realized
gains -- Class A.......................... -- -- (1,196) --
Distributions in excess of net realized
gains -- Class B.......................... -- -- (24) --
Distributions in excess of net realized
gains -- Class C.......................... -- -- (9) --
------------ ------------ ------------ ------------
Total dividends and distributions to
shareholders............................ (10,188,103) (7,593,163) (3,929,047) (1,165,294)
------------ ------------ ------------ ------------
FUND SHARE TRANSACTIONS
CLASS A
Net proceeds from sales.................... 61,908,256 115,189,954 90,332,759 92,938,735
Net proceeds from Fund acquisitions (note
9)........................................ -- 8,793,860 -- --
Reinvestment of dividends and
distributions............................. 9,385,655 7,044,627 3,405,284 1,050,792
Cost of shares redeemed.................... (80,014,950) (42,885,888) (65,200,453) (16,545,512)
------------ ------------ ------------ ------------
Net increase (decrease) -- Class A....... (8,721,039) 88,142,553 28,537,590 77,444,015
------------ ------------ ------------ ------------
CLASS B
Net proceeds from sales.................... 12,409,864 2,121,588 40,604,196 2,225,538
Reinvestment of dividends and
distributions............................. 123,599 -- 124,021 --
Cost of shares redeemed.................... (544,061) (97,971) (1,026,439) (99,998)
------------ ------------ ------------ ------------
Net increase -- Class B.................. 11,989,402 2,023,617 39,701,778 2,125,540
------------ ------------ ------------ ------------
CLASS C
Net proceeds from sales.................... 3,521,667 222,635 6,945,412 315,179
Reinvestment of dividends and
distributions............................. 13,020 -- 32,567 --
Cost of shares redeemed.................... (271,901) -- (254,081) --
------------ ------------ ------------ ------------
Net increase -- Class C.................. 3,262,786 222,635 6,723,898 315,179
------------ ------------ ------------ ------------
Total net increase (decrease) in net assets
from fund share transactions.............. 6,531,149 90,388,805 74,963,266 79,884,734
------------ ------------ ------------ ------------
Total increase (decrease) in net
assets.................................. 8,483,512 104,617,043 84,292,784 89,089,902
NET ASSETS
Beginning of year.......................... 247,555,623 142,938,580 129,652,961 40,563,059
------------ ------------ ------------ ------------
End of year (including undistributed net
investment income (loss) of $1,464,120,
$549,014; $1,291,867, $2,283,342;
($238,336); ($315,524); $127,460, $99,804;
$0, ($242,693) and $0, $0; respectively... $256,039,135 $247,555,623 $213,945,745 $129,652,961
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
<FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
A-12
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAPITALIZATION U.S. GOVERNMENT INCOME
FUND GROWTH AND INCOME FUND FUND INVESTMENT
QUALITY INCOME
FUND
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
YEAR ENDED OCTOBER 31,
-------------------------- -------------------------- -------------------------- --------------------------
1994 1993 1994 1993 1994 1993 1994 1993
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (238,336) $ (271,130) $ 966,108 $ 633,084 $ 8,291,969 $ 9,429,304 $ 3,846,353 $ 2,883,555
3,366,835 8,302,299 1,768,686 4,437,702 (4,366,839) 4,231,587 (952,880) 376,772
(3,118,979) 8,854,657 (189,442) (2,998,170) (11,007,688) 520,464 (9,068,979) 4,549,804
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
9,520 16,885,826 2,545,352 2,072,616 (7,082,558) 14,181,355 (6,175,506) 7,810,131
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-- -- (936,128) (536,051) (8,071,564) (9,762,803) (3,482,793) (2,877,023)
-- -- (41,545) (1,573) (196,735) (3,601) (244,424) (5,737)
-- -- (7,305) (631) (39,362) (769) (119,136) (795)
(8,036,736) (3,584,330) (4,079,198) (245,866) (2,925,946) (2,276,286) (367,910) (163,898)
(160,831) -- (145,217) -- (38,935) (956) (10,112) --
(19,543) -- (18,475) -- (6,494) (105) (637) --
-- -- (199,276) -- (292,913) -- -- --
-- -- (7,094) -- (3,898) -- -- --
-- -- (903) -- (650) -- -- --
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(8,217,110) (3,584,330) (5,435,141) (784,121) (11,576,497) (12,044,520) (4,225,012) (3,047,453)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
127,081,752 71,051,819 5,937,491 9,582,299 17,007,814 95,566,875 12,621,718 36,729,933
-- -- -- 16,543,558 -- -- -- --
7,215,556 3,294,382 5,008,623 741,804 9,588,703 10,124,750 2,758,350 2,116,388
(111,134,238) (22,419,670) (6,040,040) (7,744,229) (74,313,512) (69,938,914) (20,364,228) (12,033,169)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
23,163,070 51,926,531 4,906,074 19,123,432 (47,716,995) 35,752,711 (4,984,160) 26,813,152
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
15,275,222 1,837,990 2,763,975 319,565 6,748,251 1,386,323 6,440,954 1,582,773
148,570 -- 188,513 1,383 187,137 3,658 185,172 3,747
(811,203) (104,955) (260,750) (4,377) (964,994) (99,835) (800,932) (107,360)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
14,612,589 1,733,035 2,691,738 316,571 5,970,394 1,290,146 5,825,194 1,479,160
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
3,345,761 233,009 341,819 101,192 1,424,484 140,626 3,141,700 100,200
18,810 -- 26,593 631 46,127 866 93,436 786
(229,505) -- (4,696) -- (289,465) -- (422,838) --
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
3,135,066 233,009 363,716 101,823 1,181,146 141,492 2,812,298 100,986
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
40,910,725 53,892,575 7,961,528 19,541,826 (40,565,455) 37,184,349 3,653,332 28,393,298
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
32,703,135 67,194,071 5,071,739 20,830,321 (59,224,510) 39,321,184 (6,747,186) 33,155,976
106,886,665 39,692,594 28,887,443 8,057,122 190,518,306 151,197,122 62,857,337 29,701,361
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$139,589,800 $106,886,665 $ 33,959,182 $ 28,887,443 $131,293,796 $190,518,306 $ 56,110,151 $
62,857,337
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
A-13
<PAGE>
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Quest for Value Funds are registered under the Investment Company Act of
1940, as diversified, open-end management investment companies. Quest for Value
Fund, Inc. ("Quest for Value") is a Maryland Corporation. Opportunity Fund
("Opportunity"), Small Capitalization Fund ("Small Capitalization"), Growth and
Income Fund ("Growth and Income"), U.S. Government Income Fund ("U.S.
Government") and Investment Quality Income Fund ("Investment Quality") are five
of eight funds currently offered in the Quest for Value Family of Funds, a
Massachusetts business trust. Quest for Value Advisors (the "Adviser") serves as
investment adviser and provides accounting and administrative services to each
fund. Quest for Value Distributors (the "Distributor") serves as each fund's
distributor. Both the Advisor and Distributor are majority-owned (99%)
subsidiaries of Oppenheimer Capital.
Prior to September 1, 1993, the funds only issued one class of shares which
were redesignated Class A shares. Subsequent to that date all funds were
authorized to issue Class A, Class B and Class C shares. Shares of each Class
represent an identical interest in the investment portfolio of their respective
fund and generally have the same rights, but are offered under different sales
charge and distribution fee arrangements. Furthermore, Class B shares will
automatically convert to Class A shares of the same fund eight years after their
respective purchase.
The following is a summary of significant accounting policies consistently
followed by each fund in the preparation of its financial statements:
(A) VALUATION OF INVESTMENTS
Investment securities listed on a national securities exchange and
securities traded in the over-the-counter National Market System are valued at
the last reported sale price on the valuation date; if there are no such
reported sales, the securites are valued at the last quoted bid price. Other
securities traded over-the-counter and not part of the National Market System
are valued at the last quoted bid price. Investment debt securities (other than
short-term obligations) are valued each day by an independent pricing service
approved by the Board of Directors (Trustees) using methods which include
current market quotations from a major market maker in the securities and
trader-reviewed "matrix" prices. Futures contracts are valued based upon their
daily settlement value as of the close of the exchange upon which they trade.
OTC options are valued based upon a formula which utilizes the market value of
the underlying securities, strike prices and expiration of the options.
Short-term debt securities having a remaining maturity of sixty days or less are
valued at amortized cost or amortized value, which approximates market value.
Any securities or other assets for which market quotations are not readily
available are valued at their fair value as determined in good faith under
procedures established by each fund's Board of Directors (Trustees). The ability
of issuers of debt securities held by the funds to meet their obligations may be
affected by economic or political developments in a specific state, industry or
region.
(B) FEDERAL INCOME TAXES
It is each fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to its shareholders; accordingly, no
Federal income tax provision is required.
(C) DEFERRED ORGANIZATION EXPENSES
In connection with each fund's organization, the following approximate costs
were incurred: Opportunity -- $74,000, Small Capitalization -- $72,000, Growth
and Income -- $96,000 and Investment Quality -- $62,000. These costs have been
deferred and are being amortized to expense on a straight-line basis over sixty
months from commencements of each fund's operations.
(D) SECURITY TRANSACTIONS AND OTHER INCOME
Security transactions are accounted for on the trade date. In determining
the gain or loss from the sale of securities, the cost of securities sold is
determined on the basis of identified cost. Dividend income is recorded on the
ex-dividend date and interest income is accrued as earned. Discounts or premiums
on debt securities purchased are accreted or
A-14
<PAGE>
- --------------------------------------------------------------------------------
amortized to interest income over the lives of the respective securities. Net
investment income, other than class specific expenses and unrealized gains and
losses are allocated daily to each class of shares based upon the relative
proportion of net assets, as defined, of each class.
(E) DIVIDENDS AND DISTRIBUTIONS
The following table summarizes each fund's dividend and capital gain
declaration policy:
<TABLE>
<CAPTION>
SHORT-TERM LONG-TERM
INCOME CAPITAL CAPITAL
DIVIDENDS GAINS GAINS
--------- ------------ ------------
<S> <C> <C> <C>
Quest for Value annually annually annually
Opportunity annually annually annually
Small Capitalization annually annually annually
Growth and Income quarterly annually annually
U.S. Government daily * quarterly annually
Investment Quality daily * annually annually
* paid monthly.
</TABLE>
Each fund records dividends and distributions to its shareholders on the
ex-dividend date. The amount of dividends and distributions from net investment
income and net realized capital gains are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. These "book-tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net realized
capital gains for financial reporting purposes but not for tax purposes are
reported as dividends in excess of net investment income or distributions in
excess of net realized capital gains, respectively. To the extent distributions
exceed current and accumulated earnings and profits for federal income tax
purposes, they are reported as distributions of paid-in-surplus or tax return of
capital. Accordingly, permanent book-tax differences relating to shareholder
distributions have been reclassified to paid-in-surplus. Net investment
income(loss), net realized gain(loss) and net assets were not affected by this
change.
During the fiscal year ended October 31, 1994, the Funds adopted Statement
of Position 93-2 Determination, Disclosure, and Financial Statement Presentation
of Income, Capital Gain, and Return of Capital Distributions by Investment
Companies. The following table discloses the cumulative effect of such
differences reclassified from undistributed accumulated net investment
income(loss) and accumulated undistributed capital gain(loss) on investments to
paid-in-surplus:
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED UNDISTRIBUTED PAID
NET INVESTMENT NET REALIZED IN
INCOME (LOSS) GAIN (LOSS) SURPLUS
-------------- ------------ ---------
<S> <C> <C> <C>
Quest for Value $ 22,595 $ (50,380) $ 27,785
Opportunity -- 4,061 (4,061)
Small Capitalization 315,524 7,934 (323,458)
Growth and Income 46,526 (198,668) 152,142
U.S. Government 258,385 102,016 (360,401)
Investment Quality -- 3,929 (3,929)
</TABLE>
(F) OPTIONS ACCOUNTING POLICIES
When a fund writes a call option or a put option, an amount equal to the
premium received by the fund is included in the fund's Statement of Assets and
Liabilities as an asset and an equivalent liability. The amount of the liability
is subsequently marked-to-market to reflect the current market value of the
option written. If the option expires on its
A-15
<PAGE>
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
stipulated expiration date or if a fund enters into a closing purchase
transaction, the fund will realize a gain (or loss if the cost of a closing
purchase transaction exceeds the premium received when the option was written)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option will be extinguished. If a call option
which a fund has written is exercised, the fund realizes a gain or loss from the
sale of the underlying security and the proceeds from such sale are increased by
the premium originally received. If a put option which a fund has written is
exercised, the amount of the premium originally received will reduce the cost of
the security which the fund purchases upon exercise of the option.
(G) FUTURES ACCOUNTING POLICIES
Futures contracts are agreements between two parties to buy and sell a
financial instrument at a set price on a future date. Upon entering into such a
contract, a fund is required to pledge to the broker an amount of cash or U.S.
Government securities equal to the minimum "initial margin" requirements of the
exchange. Pursuant to the contract, a fund agrees to receive from or pay to the
broker an amount of cash equal to the daily fluctuation in the value of the
contract. Such receipts or payments are known as "variation margin" and are
recorded by the fund as unrealized appreciation or depreciation. When a contract
is closed, the fund records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at the
time it was closed and reverses any unrealized appreciation or depreciation
previously recorded.
(H) REPURCHASE AGREEMENTS
U.S. Government enters into repurchase agreements as part of its investment
program. The fund's custodian takes possession of collateral pledged by the
counterparty. The collateral is marked-to-market daily to ensure that the value,
plus accrued interest, is at least equal to the repurchase price. In the event
of default by the obligor to repurchase, the fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. Under
certain circumstances, in the event of default or bankruptcy by the other party
to the agreement, realization and/or retention of the collateral or proceeds may
be subject to legal proceedings.
(I) EXPENSES
Expenses specifically identifiable to a particular fund or class are borne
by that fund or class. Other expenses are allocated to each fund or class based
on its net assets in relation to the total net assets of all applicable funds or
classes or on another reasonable basis.
2. INVESTMENT ADVISORY FEE, ACCOUNTING SERVICES FEE, DISTRIBUTION FEE AND OTHER
TRANSACTIONS WITH AFFILIATES
(a) The investment advisory fee is payable monthly to the Adviser, and is
computed as a percentage of each fund's net assets as of the close of business
each day at the following annual rates: 1.00% for Quest for Value, Opportunity
and Small Capitalization, respectively; .85% for Growth and Income and .60% for
U.S. Government and Investment Quality, respectively. For the year ended October
31, 1994, the Adviser voluntarily waived $142,772, $38,486 and $180,934 in
investment advisory fees for Growth and Income, U.S. Government and Investment
Quality, respectively.
(b) A portion of the accounting services fee for Opportunity, Small
Capitalization, Growth and Income, U.S. Government and Investment Quality is
payable monthly to the Adviser. Each fund reimburses the Adviser for a portion
of the salaries of officers and employees of Oppenheimer Capital based upon the
amount of time such persons spend in providing services to each fund in
accordance with the provisions of the Investment Advisory Agreement. For the
year ended October 31, 1994, the Adviser received $53,245, $67,578, $68,117,
$70,876 and $64,080, respectively.
(c) The funds have adopted a Plan and Agreement of Distribution (the
"Plan") pursuant to which each fund is permitted to compensate the Distributor
in connection with the distribution of fund shares. Under the Plan, the
A-16
<PAGE>
- --------------------------------------------------------------------------------
Distributor has entered into agreements with securities dealers and other
financial institutions and organizations to obtain various sales-related
services in rendering distribution assistance. To compensate the Distributor for
the services it and other dealers under the Plan provide and for the expenses
they bear under the Plan, the funds pay the Distributor compensation, accrued
daily and payable monthly on each fund's average daily net assets for Class A
shares at the following annual rates: .25% for Quest for Value, Opportunity and
Small Capitalization, respectively; .05% for U.S. Government and .15% for
Investment Quality and Growth and Income, respectively. Each fund's Class A
shares also pay a service fee at the annual rate of .25%. Compensation for Class
B and Class C shares of each fund is at an annual rate of .75% of average daily
net assets. Each fund's Class B and Class C shares also pay a service fee at the
annual rate of .25%. Distribution and service fees may be paid by the
Distributor to broker dealers or others for providing personal service,
maintenance of accounts and ongoing sales or shareholder support functions in
connection with the distribution of fund shares. While payments under the Plan
may not exceed the stated percentage of average daily net assets on an annual
basis, the payments are not limited to the amounts actually incurred by the
Distributor.
(d) Total brokerage commissions paid by Quest for Value, Opportunity, Small
Capitalization and Growth and Income were $318,014, $189,860, $300,037 and
$74,334, respectively, of which Oppenheimer & Co., Inc., an affiliate of the
Adviser, received $162,914, $94,589, $143,991 and $55,911, respectively, for the
year ended October 31, 1994.
(e) Oppenheimer & Co., Inc. has informed the funds that it received
approximately $344,000, $441,000, $353,000, $43,000, $237,000 and $114,000 in
connection with the sale of Class A shares for Quest for Value, Opportunity,
Small Capitalization, Growth and Income, U.S. Government and Investment Quality,
respectively, for the year ended October 31, 1994.
The Distributor has informed the funds that it received contingent deferred
sales charges on the redemption of Class B and Class C shares of approximately
$10,000, $21,000, $10,000, $1,000, $10,000, and $18,000 for Quest for Value,
Opportunity, Small Capitalization, Growth and Income, U.S. Government and
Investment Quality, respectively, for the year ended October 31, 1994.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1994, purchases and sales of investment
securities, other than short-term securities, were as follows:
<TABLE>
<CAPTION>
QUEST FOR SMALL GROWTH AND U.S. INVESTMENT
VALUE OPPORTUNITY CAPITALIZATION INCOME GOVERNMENT QUALITY
----------- ----------- -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Purchases $124,679,001 $96,908,415 $ 101,529,934 $32,706,665 $197,990,061 $26,304,890
Sales 104,609,292 57,124,087 72,829,845 35,060,309 213,763,796 17,448,246
</TABLE>
The following table summarizes activity in written option transactions for
Small Capitalization and U.S. Government for the year ended October 31, 1994:
<TABLE>
<CAPTION>
SMALL CAPITALIZATION U.S. GOVERNMENT
-------------------- -----------------------
CONTRACTS PREMIUMS CONTRACTS PREMIUMS
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
Option contracts written: Outstanding beginning of year 400 $ 38,999 5 $ 263,438
Options written 450 113,460 51 3,941,836
Options terminated in closing purchase transactions -- -- (22) (1,991,406)
Options exercised (450) (113,460) (6) (245,000)
Options expired (400) (38,999) (26) (1,826,680)
--
--------- --------- ------------
Options contracts written: Outstanding end of year 0 $ 0 2 $ 142,188
--
--
--------- --------- ------------
--------- --------- ------------
</TABLE>
A-17
<PAGE>
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
4. FUND SHARE TRANSACTIONS
The following tables summarize the fund share activity for the two years
ended October 31, 1994.
<TABLE>
<CAPTION>
QUEST FOR VALUE OPPORTUNITY SMALL
CAPITALIZATION
------------------------- ------------------------- -------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
YEAR ENDED OCTOBER 31,
------------------------- ------------------------- -------------------------
1994 1993 1994 1993 1994 1993
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
<C>
CLASS A
Issued..................................... 5,077,999 9,558,313 4,781,210 5,232,397 7,804,081
4,355,629
Fund acquisitions*......................... -- 754,190 -- -- -- --
Dividends and distributions reinvested..... 797,941 605,158 186,714 60,873 450,409
218,171
Redeemed................................... (6,566,112) (3,516,427) (3,470,990) (919,793) (6,835,042)
(1,357,953)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease).................. (690,172) 7,401,234 1,496,934 4,373,477 1,419,448
3,215,847
----------- ----------- ----------- ----------- ----------- -----------
CLASS B**
Issued..................................... 1,020,362 168,973 2,145,988 118,495 936,328
105,179
Dividends and distributions reinvested..... 10,514 -- 6,821 -- 9,286 --
Redeemed................................... (44,566) (7,901) (54,500) (5,427) (50,575) (5,876)
----------- ----------- ----------- ----------- ----------- -----------
Net increase............................. 986,310 161,072 2,098,309 113,068 895,039
99,303
----------- ----------- ----------- ----------- ----------- -----------
CLASS C**
Issued..................................... 289,679 17,648 367,367 16,726 205,454 13,299
Dividends and distributions reinvested..... 1,106 -- 1,789 -- 1,176 --
Redeemed................................... (22,509) -- (13,680) -- (13,923) --
----------- ----------- ----------- ----------- ----------- -----------
Net increase............................. 268,276 17,648 355,476 16,726 192,707
13,299
----------- ----------- ----------- ----------- ----------- -----------
Total net increase..................... 564,414 7,579,954 3,950,719 4,503,271 2,507,194
3,328,449
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
GROWTH AND INCOME U.S. GOVERNMENT
INVESTMENT QUALITY
------------------------- ------------------------- -------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
YEAR ENDED OCTOBER 31,
------------------------- ------------------------- -------------------------
1994 1993 1994 1993 1994 1993
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
<C>
Class A
Issued..................................... 591,037 877,614 1,484,549 7,920,117 1,194,443
3,363,019
Fund acquisitions*......................... -- 1,549,022 -- -- -- --
Dividends and distributions reinvested..... 506,743 68,314 839,276 840,464 263,168
192,408
Redeemed................................... (600,435) (709,066) (6,552,668) (5,796,668) (1,940,417)
(1,087,300)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease).................. 497,345 1,785,884 (4,228,843) 2,963,913 (482,806)
2,468,127
----------- ----------- ----------- ----------- ----------- -----------
CLASS B**
Issued..................................... 269,571 28,678 594,901 114,413 614,495 136,798
Dividends and distributions reinvested..... 19,104 125 16,698 302 18,150
327
Redeemed................................... (26,407) (386) (86,599) (8,244) (77,488) (9,339)
----------- ----------- ----------- ----------- ----------- -----------
Net increase............................. 262,268 28,417 525,000 106,471 555,157
127,786
----------- ----------- ----------- ----------- ----------- -----------
CLASS C**
Issued..................................... 33,894 9,027 123,553 11,593 290,357 8,698
Dividends and distributions reinvested..... 2,697 57 4,123 72 9,047
68
Redeemed................................... (469) -- (25,877) -- (41,081) --
----------- ----------- ----------- ----------- ----------- -----------
Net increase............................. 36,122 9,084 101,799 11,665 258,323 8,766
----------- ----------- ----------- ----------- ----------- -----------
Total net increase (decrease).......... 795,735 1,823,385 (3,602,044) 3,082,049 330,674
2,604,679
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
<FN>
*See note 9
**Initial offering September 2, 1993.
</TABLE>
A-18
<PAGE>
- --------------------------------------------------------------------------------
5. UNREALIZED APPRECIATION (DEPRECIATION) AND COST OF INVESTMENTS FOR FEDERAL
INCOME TAX PURPOSES
At October 31, 1994, the composition of unrealized appreciation
(depreciation) of investment securities and the cost of investments for Federal
income tax purposes were as follows:
<TABLE>
<CAPTION>
APPRECIATION (DEPRECIATION) NET TAX COST
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Quest for Value $34,762,698 $(2,034,414) $32,728,284 $225,191,866
Opportunity 16,932,676 (2,553,482) 14,379,194 198,907,089
Small Capitalization 11,588,568 (6,208,644) 5,379,924 129,522,331
Growth and Income 1,808,807 (1,464,506) 344,301 32,186,880
U.S. Government 72,722 (14,977,671) (14,904,949) 145,952,876
Investment Quality 330,434 (4,021,028) (3,690,594) 58,448,564
</TABLE>
6. AUTHORIZED FUND SHARES AND PAR VALUE PER SHARE
<TABLE>
<CAPTION>
QUEST SMALL GROWTH U.S. INVESTMENT
FOR VALUE OPPORTUNITY CAPITALIZATION AND INCOME GOVERNMENT
QUALITY
---------- ----------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Authorized fund shares 35,000,000 unlimited unlimited unlimited unlimited unlimited
Par value per share $1.00 $.01 $.01 $.01 $.01 $.01
</TABLE>
7. DIVIDENDS AND DISTRIBUTIONS
The following tables summarize the per share dividends and distributions
made for the two years ended October 31, 1994:
<TABLE>
<CAPTION>
QUEST FOR SMALL
VALUE OPPORTUNITY CAPITALIZATION
-------------- -------------- --------------
YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31,
-------------- -------------- --------------
1994 1993 1994 1993 1994 1993
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net investment income:
Class A $ 0.040 $ 0.047 $ 0.326 $ 0.069 -- --
Class B* 0.031 -- 0.313 -- -- --
Class C* 0.033 -- 0.312 -- -- --
Net realized gains:
Class A $ 0.469 $ 0.545 $ 0.219 $ 0.317 $ 1.331 $ 1.137
Class B* 0.469 -- 0.219 -- 1.331 --
Class C* 0.469 -- 0.219 -- 1.331 --
</TABLE>
<TABLE>
<CAPTION>
GROWTH AND U.S. INVESTMENT
INCOME GOVERNMENT QUALITY
-------------- -------------- --------------
YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31,
-------------- -------------- --------------
1994 1993 1994 1993 1994 1993
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net investment income:
Class A $ 0.319 $ 0.264 $ 0.593 $ 0.676 $ 0.680 $ 0.683
Class B* 0.265 0.070 0.510 0.076 0.609 0.081
Class C* 0.261 0.070 0.509 0.082 0.608 0.092
Net realized gains:
Class A $ 1.669 $ 0.333 $ 0.213 $ 0.155 $ 0.069 $ 0.056
Class B* 1.669 -- 0.213 0.009 0.069 --
Class C* 1.669 -- 0.213 0.009 0.069 --
<FN>
*Initial offering September 2, 1993.
</TABLE>
A-19
<PAGE>
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
8. FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS
At October 31, 1994, U.S. Government had written options outstanding.
Written options have elements of risk in excess of the amounts reflected in the
Statement of Assets and Liabilities. The fund, as a writer of an option, has no
control over whether the option is exercised. The underlying security may be
sold and, as a result, the fund bears the market risk of an unfavorable change
in the price of the security underlying the written option.
9. FUND ACQUISITIONS
On December 21, 1992, Growth and Income acquired, in a tax free
reorganization, the net assets of the Unified Income Fund and Unified Mutual
Shares Fund in exchange for 289,151 and 1,259,871 shares, respectively. At that
date, net assets for the Unified Income Fund and Unified Mutual Shares Fund
amounted to $3,088,136 and $13,455,422, respectively, which included $211,357
and $2,822,919, respectively, in unrealized appreciation. These assets were
combined with the net assets of Growth and Income which were $7,881,811,
immediately prior to reorganization. Expenses incurred in connection with this
acquisition approximated $34,000 which include legal costs and independent
accountants' fees. Growth and Income also received $1,168,033 in capital loss
carryovers which can be used as a reduction against future net capital gains.
These carryovers are limited by Section 382 of the Internal Revenue Code to
$188,067 annually as a result of the reorganization.
On December 28, 1992, Quest for Value acquired the net assets of the Unified
Growth Fund in exchange for 754,190 shares. At that date, net assets for Unified
Growth Fund amounted to $8,793,860, which included $486,279 in unrealized
appreciation. These assets were combined with the assets of Quest for Value
which were $157,183,979, immediately prior to reorganization. Expenses incurred
in connection with the acquisition approximated $17,000 which include legal
costs and independent auditors' fees. Quest for Value also received and used
$82,350 in capital loss carryovers to be used as a reduction against future net
capital gains realized before the fiscal year ended 2000.
10. NET CAPITAL LOSS CARRYOVER
For the fiscal year ended October 31, 1994, Growth and Income will utilize
$188,067 of net capital loss carryovers. Growth and Income has net capital loss
carryovers of $791,899 of which $558,150, $177,811 and $55,938 will be available
through the fiscal years ending 1995, 1996 and 2000, respectively, to offset net
capital gains, to the extent provided by regulations. However, due to the
reorganization described in Note 9, the loss carryovers are further limited by
IRC Section 382 to $188,067 annually. To the extent that the capital loss
carryovers are used to offset net capital gains, it is probable that the gains
so offset will not be distributed to shareholders. Also, at October 31, 1994,
Investment Quality had a net capital loss carryover of $952,880 available as a
reduction against future net capital gains realized before the end of fiscal
2002 to the extent provided by regulations.
11. SUBSEQUENT EVENTS
On December 5, 1994, the following funds declared net realized short-term
and long-term capital gain distributions, payable December 5, 1994 to
shareholders of record on the opening of business December 5, 1994 at the
following rates per share, per class:
<TABLE>
<CAPTION>
SHORT-TERM GAIN LONG-TERM GAIN
--------------- ---------------
<S> <C> <C>
Quest for Value $ 0.0924 $ 0.7355
Opportunity 0.2077 0.4058
Small Capitalization 0.3195 0.0959
Growth and Income 0.2351 0.1864
U.S. Government -- 0.0126
</TABLE>
A-20
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND
DISTRIBUTIONS
---------------------------------------- ---------------------------
Dividends to Distributions to
Net Asset Net Net Realized Shareholders Shareholders
Value, Investment and Unrealized Total from from Net from Net
Total
Beginning Income Gain (Loss) on Investment Investment Realized Gain on
Dividends and
of Period (Loss) Investments Operations Income Investments
Distributions
<S> <C> <C> <C> <C> <C> <C>
<C>
QUEST FOR VALUE FUND, INC.
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 12.51 $ 0.09 $ 0.50 $ 0.59 $ (0.04) $ (0.47) $
(0.51)
1993 11.71 0.05 1.34 1.39 (0.05) (0.54) (0.59)
1992 10.61 0.04 1.77 1.81 (0.07) (0.64) (0.71)
1991 7.84 0.09 2.84 2.93 (0.16) -- (0.16)
1990(2) 9.85 0.18 (1.38) (1.20) (0.26) (0.55) (0.81)
Class B,
YEAR ENDED OCTOBER 31, 1994 12.51 0.02 0.50 0.52 (0.03) (0.47)
(0.50)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.66(3) (0.01) (0.14) (0.15) -- --
--
Class C,
YEAR ENDED OCTOBER 31, 1994 12.50 0.01 0.51 0.52 (0.03) (0.47)
(0.50)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.66(3) (0.01) (0.15) (0.16) -- --
- --
<CAPTION>
RATIOS
---------------------------------------
Ratio of Net Ratio of Net
Net Asset Net Assets Operating Investment
Value, End of Expenses Income (Loss) Portfolio
End of Total Period to Average to Average Turnover
Period Return* (000's) Net Assets Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
QUEST FOR VALUE FUND, INC.
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 12.59 5.01% $ 238,085 1.71%(1) 0.72%(1) 49%
1993 12.51 12.27% 245,320 1.75% 0.40% 27%
1992 11.71 18.45% 142,939 1.75% 0.53% 41%
1991 10.61 37.94% 79,914 1.83% 1.06% 48%
1990(2) 7.84 (13.43%) 49,740 1.82% 1.71% 51%
Class B,
YEAR ENDED OCTOBER 31, 1994 12.53 4.43% 14,373 2.24%(1) 0.14%(1) 49%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.51 (1.19%) 2,015 2.27%(5) (1.19%)(5) 27%
Class C,
YEAR ENDED OCTOBER 31, 1994 12.52 4.45% 3,581 2.28%(1) 0.09%(1) 49%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.50 (1.26%) 221 2.27%(5) (0.90%)(5) 27%
<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1994, FOR CLASSES A, B,
AND C WERE $237,922,657, $8,341,111, AND $1,724,870, RESPECTIVELY.
(2) SHARE AND PER SHARE DATA HAVE BEEN RETROACTIVELY RESTATED TO REFLECT A 200%
STOCK DIVIDEND AS OF JULY 1, 1991.
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
</TABLE>
OPPORTUNITY FUND
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
<C>
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 18.71 $ 0.18 $ 1.35 $ 1.53 $ (0.33) $ (0.22) $
(0.55)
1993 16.73 0.35 2.02 2.37 (0.07) (0.32) (0.39)
1992 14.29 0.09 2.93 3.02 (0.03) (0.55) (0.58)
1991 9.74 0.03 4.78 4.81 (0.23) (0.03) (0.26)
1990 11.59 0.25 (1.64) (1.39) (0.22) (0.24) (0.46)
Class B,
YEAR ENDED OCTOBER 31, 1994 18.70 0.08 1.34 1.42 (0.31) (0.22)
(0.53)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.73(3) 0.02 (0.05) (0.03) -- --
--
Class C,
YEAR ENDED OCTOBER 31, 1994 18.70 0.08 1.33 1.41 (0.31) (0.22)
(0.53)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.73(3) 0.02 (0.05) (0.03) -- --
--
<CAPTION>
Class A,
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
1994 $ 19.69 8.41% $ 163,340 1.78%(1) 0.96%(1) 42%
1993 18.71 14.34% 127,225 1.83% 2.69% 24%
1992 16.73 21.93% 40,563 2.27% 0.72% 32%
1991 14.29 50.44% 8,446 2.35%(2) 0.30%(2) 88%
1990 9.74 (12.62%) 4,570 2.00%(2) 2.30%(2) 206%
Class B,
YEAR ENDED OCTOBER 31, 1994 19.59 7.84% 43,317 2.34%(1) 0.43%(1) 42%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.70 (0.16%) 2,115 2.52%(5) 1.32%(5) 24%
Class C,
YEAR ENDED OCTOBER 31, 1994 19.58 7.78% 7,289 2.35%(1) 0.43%(1) 42%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.70 (0.16%) 313 2.52%(5) 1.13%(5) 24%
<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1994, FOR CLASSES A, B,
AND C WERE $136,623,124, $16,215,716, AND $2,708,865, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED ITS FEES
AND REIMBURSED THE FUND FOR A PORTION OF ITS OPERATING EXPENSES. IF SUCH
WAIVERS AND REIMBURSEMENTS HAD NOT BEEN IN EFFECT, THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 3.33% AND (0.68%),
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1991 AND 3.69% AND 0.61%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1990.
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
- ------------------------------
* ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT
REFLECT DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL
RETURN IS SHOWN FOR ANY PERIOD SHORTER THAN ONE YEAR.
</TABLE>
A-21
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD--CONTINUED)
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND
DISTRIBUTIONS
---------------------------------------- ---------------------------
Dividends to Distributions to
Net Asset Net Net Realized Shareholders Shareholders
Value, Investment and Unrealized Total from from Net from Net
Total
Beginning Income Gain (Loss) on Investment Investment Realized Gain on
Dividends and
of Period (Loss) Investments Operations Income Investments
Distributions
<S> <C> <C> <C> <C> <C> <C>
<C>
SMALL CAPITALIZATION FUND
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 17.68 $ (0.03) $ 0.01 $ (0.02) $ -- $ (1.33) $ (1.33)
1993 14.60 (0.04) 4.26 4.22 -- (1.14) (1.14)
1992 13.52 0.00 1.50 1.50 -- (0.42) (0.42)
1991 8.80 (0.05) 4.85 4.80 (0.08) -- (0.08)
1990 10.91 0.07 (2.04) (1.97) (0.08) (0.06) (0.14)
Class B,
YEAR ENDED OCTOBER 31, 1994 17.66 (0.11) 0.02 (0.09) -- (1.33)
(1.33)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 17.19(3) (0.02) 0.49 0.47 -- --
--
Class C,
YEAR ENDED OCTOBER 31, 1994 17.67 (0.13) 0.02 (0.11) -- (1.33)
(1.33)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 17.19(3) (0.02) 0.50 0.48 -- --
--
<CAPTION>
RATIOS
---------------------------------------
Ratio of Net Ratio of Net
Net Asset Net Assets Operating Investment
Value, End of Expenses Income (Loss) Portfolio
End of Total Period to Average to Average Turnover
Period Return* (000's) Net Assets Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
SMALL CAPITALIZATION FUND
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 16.33 0.04% $ 120,102 1.88%(1) (0.14%)(1) 67%
1993 17.68 30.21% 104,898 1.89% (0.36%) 74%
1992 14.60 11.60% 39,693 2.11% (0.04%) 95%
1991 13.52 55.01% 20,686 2.25%(2) (0.41%)(2) 103%
1990 8.80 (18.33%) 1,880 2.00%(2) 0.71% (2) 18%
Class B,
YEAR ENDED OCTOBER 31, 1994 16.24 (0.39%) 16,144 2.48%(1) (0.70%)(1) 67%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 17.66 2.73% 1,754 2.57%(5) (1.15%)(5) 74%
Class C,
YEAR ENDED OCTOBER 31, 1994 16.23 (0.51%) 3,344 2.59%(1) (0.81%)(1) 67%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 17.67 2.79% 235 2.57%(5) (1.20%)(5) 74%
<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1994, FOR CLASSES A, B,
AND C WERE $115,276,454, $9,400,776, AND $1,380,547, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED ITS FEES
AND REIMBURSED THE FUND FOR A PORTION OF ITS OPERATING EXPENSES. IF SUCH
WAIVERS AND REIMBURSEMENTS HAD NOT BEEN IN EFFECT, THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME (LOSS) TO AVERAGE NET ASSETS WOULD HAVE BEEN 3.27% AND (1.43%),
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1991 AND 5.82% AND (3.11%),
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1990.
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
</TABLE>
GROWTH AND INCOME FUND
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
<C>
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 11.24 $ 0.32 $ 0.55 $ 0.87 $ (0.32) $ (1.70) $
(2.02)
1993 10.80 0.30 0.73 1.03 (0.26) (0.33) (0.59)
NOVEMBER 4, 1991 (3)
TO OCTOBER 31, 1992 10.00(4) 0.28 0.80 1.08 (0.28) --
(0.28)
Class B,
YEAR ENDED OCTOBER 31, 1994 11.23 0.25 0.56 0.81 (0.27) (1.70)
(1.97)
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.21(4) 0.04 0.05 0.09 (0.07) --
(0.07)
Class C,
YEAR ENDED OCTOBER 31, 1994 11.23 0.24 0.56 0.80 (0.26) (1.70)
(1.96)
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.21(4) 0.04 0.05 0.09 (0.07) --
(0.07)
<CAPTION>
Class A,
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
1994 $ 10.09 8.64% $ 30,576 1.86%(1,2) 3.16%(1,2) 113%
1993 11.24 9.93% 28,466 1.90%(2) 2.66%(2) 192%
NOVEMBER 4, 1991 (3)
TO OCTOBER 31, 1992 10.80 10.84% 8,057 2.23%(2,6) 2.73%(2,6) 77%
Class B,
YEAR ENDED OCTOBER 31, 1994 10.07 7.96% 2,928 2.47%(1,2) 2.53%(1,2) 113%
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.23 0.81% 319 2.49%(2,6) 1.83%(2,6) 192%
Class C,
YEAR ENDED OCTOBER 31, 1994 10.07 7.91% 455 2.62%(1,2) 2.39%(1,2) 113%
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.23 0.81% 102 2.49%(2,6) 2.18%(2,6) 192%
<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1994, FOR CLASSES A, B,
AND C WERE $29,112,348, $1,585,755, AND $298,294, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED A PORTION
OF ITS FEE. IF SUCH WAIVER HAD NOT BEEN IN EFFECT, THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN 2.32% AND 2.70%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1994, 2.18% AND 2.38%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993 AND 2.98% AND 1.98%,
ANNUALIZED, RESPECTIVELY, FOR THE PERIOD NOVEMBER 4, 1991 (COMMENCEMENT OF
OPERATIONS) TO OCTOBER 31, 1992. THE RATIOS OF NET OPERATING EXPENSES TO
AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS WOULD HAVE BEEN 2.93% AND 2.07%, RESPECTIVELY, FOR CLASS B AND 3.10%
AND 1.91%, RESPECTIVELY, FOR CLASS C, FOR THE YEAR ENDED OCTOBER 31, 1994
AND 2.88% AND 1.44%, ANNUALIZED, RESPECTIVELY, FOR CLASS B AND 2.87% AND
1.80%, ANNUALIZED, RESPECTIVELY, FOR CLASS C, FOR THE PERIOD SEPTEMBER 2,
1993 (INITIAL OFFERING) TO OCTOBER 31, 1993.
(3) COMMENCEMENT OF OPERATIONS.
(4) OFFERING PRICE.
(5) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(6) ANNUALIZED.
- ------------------------------
* ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT
REFLECT DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL
RETURN IS SHOWN FOR ANY PERIOD SHORTER THAN ONE YEAR.
</TABLE>
A-22
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND
DISTRIBUTIONS
---------------------------------------- ---------------------------
Dividends to Distributions to
Net Asset Net Net Realized Shareholders Shareholders
Value, Investment and Unrealized Total from from Net from Net
Total
Beginning Income Gain (Loss) on Investment Investment Realized Gain on
Dividends and
of Period (Loss) Investments Operations Income Investments
Distributions
<S> <C> <C> <C> <C> <C> <C>
<C>
U.S. GOVERNMENT INCOME FUND
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 12.08 $ 0.59 $ (1.08) $ (0.49) $ (0.59) $ (0.21) $
(0.80)
1993 11.92 0.65 0.35 1.00 (0.68) (0.16) (0.84)
1992 11.80 0.74 0.18 0.92 (0.74) (0.06) (0.80)
1991 11.35 0.85 0.61 1.46 (0.86) (0.15) (1.01)
1990 11.50 0.93 (0.06) 0.87 (0.93) (0.09) (1.02)
Class B,
YEAR ENDED OCTOBER 31, 1994 12.08 0.51 (1.08) (0.57) (0.51) (0.21)
(0.72)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.13(3) 0.08 (0.04) 0.04 (0.08) (0.01)
(0.09)
Class C,
YEAR ENDED OCTOBER 31, 1994 12.08 0.51 (1.08) (0.57) (0.51) (0.21)
(0.72)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.13(3) 0.08 (0.04) 0.04 (0.08) (0.01)
(0.09)
<CAPTION>
RATIOS
---------------------------------------
Ratio of Net Ratio of Net
Net Asset Net Assets Operating Investment
Value, End of Expenses Income (Loss) Portfolio
End of Total Period to Average to Average Turnover
Period Return* (000's) Net Assets Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT INCOME FUND
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 10.79 (4.15%) $123,257 1.20%(1,2) 5.19%(1,2) 126%
1993 12.08 8.55% 189,091 1.15%(2) 5.33%(2) 315%
1992 11.92 7.98% 151,197 1.15%(2) 6.26%(2) 207%
1991 11.80 13.40% 82,400 1.15%(2) 7.24%(2) 309%
1990 11.35 7.98% 52,742 1.15%(2) 8.21%(2) 101%
Class B,
YEAR ENDED OCTOBER 31, 1994 10.79 (4.84%) 6,813 1.92%(1,2) 4.53%(1,2) 126%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.08 0.29% 1,286 1.85%(2,5) 3.07%(2,5) 315%
Class C,
YEAR ENDED OCTOBER 31, 1994 10.79 (4.84%) 1,224 1.94%(1,2) 4.57%(1,2) 126%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.08 0.34% 141 1.85%(2,5) 3.89%(2,5) 315%
<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1994, FOR CLASSES A, B,
AND C WERE $155,279,927, $4,348,538, AND $861,570, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED A PORTION
OF ITS FEES. IF SUCH WAIVERS HAD NOT BEEN IN EFFECT, THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN 1.23% AND 5.16%,
RESEPCTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1994, 1.20% AND 5.28%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993, 1.17% AND 6.24%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1992, 1.46% AND 6.93%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1991 AND 1.44% AND 7.92%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1990. THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 1.93% AND 4.52%, RESPECTIVELY,
FOR CLASS B AND 1.95% AND 4.56%, RESPECTIVELY, FOR CLASS C, FOR THE YEAR
ENDED OCTOBER 31, 1994 AND 1.96% AND 2.96%, ANNUALIZED, RESPECTIVELY, FOR
CLASS B AND 1.96% AND 3.78%, ANNUALIZED, RESPECTIVELY, FOR CLASS C, FOR THE
PERIOD SEPTEMBER 2, 1993 (INITIAL OFFERING) TO OCTOBER 31, 1993.
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
</TABLE>
INVESTMENT QUALITY INCOME FUND
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
<C>
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 11.49 $ 0.68 $ (1.75) $ (1.07) $ (0.68) $ (0.07) $
(0.75)
1993 10.36 0.68 1.19 1.87 (0.68) (0.06) (0.74)
1992 10.06 0.80 0.30 1.10 (0.80) -- (0.80)
DECEMBER 18, 1990 (3)
TO OCTOBER 31, 1991 10.00(4) 0.71 0.06 0.77 (0.71) --
(0.71)
Class B,
YEAR ENDED OCTOBER 31, 1994 11.49 0.61 (1.75) (1.14) (0.61) (0.07)
(0.68)
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.52(4) 0.08 (0.03) 0.05 (0.08) --
(0.08)
Class C,
YEAR ENDED OCTOBER 31, 1994 11.49 0.61 (1.75) (1.14) (0.61) (0.07)
(0.68)
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.52(4) 0.09 (0.03) 0.06 (0.09) --
(0.09)
<CAPTION>
Class A,
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
1994 $ 9.67 (9.61%) $ 46,922 1.29%(1,2) 6.47%(1,2) 33%
1993 11.49 18.64% 61,288 1.20%(2) 6.07%(2) 12%
1992 10.36 11.21% 29,701 0.95%(2) 7.62%(2) 18%
DECEMBER 18, 1990 (3)
TO OCTOBER 31, 1991 10.06 8.11% 17,235 0.82%(2,6) 8.25%(2,6) 19%
Class B,
YEAR ENDED OCTOBER 31, 1994 9.67 (10.22%) 6,605 1.92%(1,2) 5.85%(1,2) 33%
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.49 0.45% 1,468 1.84%(2,6) 3.68%(2,6) 12%
Class C,
YEAR ENDED OCTOBER 31, 1994 9.67 (10.23%) 2,583 1.90%(1,2) 6.01%(1,2) 33%
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.49 0.55% 101 1.84%(2,6) 4.83%(2,6) 12%
<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1994, FOR CLASSES A, B,
AND C WERE $53,805,286, $4,176,936, AND $1,983,143, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED ALL OR A
PORTION OF ITS FEES AND REIMBURSED THE FUND FOR A PORTION OF ITS OPERATING
EXPENSES. IF SUCH WAIVERS AND REIMBURSEMENTS HAD NOT BEEN IN EFFECT, THE
RATIOS OF NET OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET
INVESTMENT INCOME TO AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN 1.59%
AND 6.17%, RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1994, 1.50% AND
5.77%, RESEPCTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993, 1.72% AND 6.85%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1992, AND 2.11% AND 6.96%,
ANNUALIZED, RESPECTIVELY, FOR THE PERIOD DECEMBER 18, 1990 (COMMENCEMENT OF
OPERATIONS) TO OCTOBER 31, 1991. THE RATIOS OF NET OPERATING EXPENSES TO
AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS WOULD HAVE BEEN 2.23% AND 5.54%, RESPECTIVELY, FOR CLASS B AND 2.21%
AND 5.70%, RESPECTIVELY, FOR CLASS C, FOR THE YEAR ENDED OCTOBER 31, 1994
AND 2.07% AND 3.45%, ANNUALIZED, RESPECTIVELY, FOR CLASS B AND 2.06% AND
4.61%, ANNUALIZED, RESPECTIVELY, FOR CLASS C FOR THE PERIOD SEPTEMBER 2,
1993 (INITIAL OFFERING) TO OCTOBER 31, 1993.
(3) COMMENCEMENT OF OPERATIONS.
(4) OFFERING PRICE.
(5) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(6) ANNUALIZED.
- ------------------------------
* ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT
REFLECT DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL
RETURN IS SHOWN FOR ANY PERIOD SHORTER THAN ONE YEAR.
</TABLE>
A-23
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
Quest for Value Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Quest
for Value Fund, Inc. including the schedule of investments as of October 31,
1994 and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two year
period then ended and the financial highlights for each of the years in the
five year period then ended. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1994 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Quest for Value Fund, Inc. as of October 31, 1994, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two year period then ended, and the financial highlights for
each of the years in the five year period then ended in conformity with
genrally accepted accounting principles.
KPMG PEAT Marwick LLP
New York, New York
December 9, 1994
A-24
<PAGE>
APRIL 30, 1995
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED)
QUEST FOR VALUE FUND, INC.
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
SHORT-TERM CORPORATE NOTES -- 12.9%
<C> <S> <C>
AUTOMOTIVE -- 0.7%
Ford Motor Credit Co.
$ 1,300,000 5.98%, 5/01/95 $ 1,300,000
578,000 5.98%, 5/15/95 576,656
------------
1,876,656
------------
BANKING -- 4.6%
13,000,000 Norwest Financial, Inc.
5.94%, 5/30/95 12,937,795
------------
COMPUTERS -- 0.5%
IBM Credit Corp.
800,000 5.95%, 5/30/95 796,165
700,000 5.99%, 5/08/95 699,185
------------
1,495,350
------------
INSURANCE -- 2.1%
6,000,000 Prudential Funding Corp.
5.98%, 5/08/95 5,993,023
------------
MACHINERY & ENGINEERING -- 1.3%
3,800,000 Deere (John) Capital Corp.
5.94%, 5/30/95 3,781,817
------------
MISCELLANEOUS FINANCIAL SERVICES -- 2.9%
4,800,000 Commercial Credit Co. (A)
5.85%, 5/09/95 4,794,447
Household Finance Corp.
487,000 5.97%, 5/15/95 485,869
3,000,000 5.97%, 5/22/95 2,989,553
------------
8,269,869
------------
OIL/GAS -- 0.8%
2,100,000 Chevron Oil Finance Co.
5.97%, 5/01/95 2,100,000
------------
Total Short-Term Corporate Notes
(cost -- $36,454,510) $ 36,454,510
------------
<CAPTION>
<C> <S> <C>
- ------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
<C> <S> <C>
CONVERTIBLE CORPORATE BONDS -- 0.8%
REAL ESTATE
$ 2,314,448 Security Capital Realty, Inc. (B)
12.00%, 6/30/14
(cost -- $2,181,786) $ 2,314,448
------------
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 86.2%
AEROSPACE -- 8.7%
215,000 AlliedSignal, Inc. $ 8,519,375
177,000 McDonnell Douglas Corp. 10,974,000
90,000 Sundstrand Corp. 4,995,000
------------
24,488,375
------------
APPAREL -- 2.3%
372,600 Warnaco Group, Inc. (Class A)* 6,380,775
------------
BANKING -- 2.7%
196,215 Mellon Bank Corp. 7,701,439
------------
CHEMICALS -- 3.3%
81,000 Hercules, Inc. 4,039,875
64,000 Monsanto Co. 5,328,000
------------
9,367,875
------------
CONGLOMERATES -- 1.8%
90,200 General Electric Co. 5,051,200
------------
CONTAINERS -- 1.4%
90,700 Temple-Inland, Inc. 3,990,800
------------
COSMETICS/TOILETRIES -- 1.5%
67,800 Avon Products, Inc. 4,288,350
------------
DRUGS & MEDICAL PRODUCTS -- 4.6%
163,000 Becton, Dickinson & Co. 9,087,250
48,000 Warner-Lambert Co. 3,828,000
------------
12,915,250
------------
ELECTRONICS -- 6.4%
177,000 Arrow Electronics, Inc.* 8,230,500
97,000 Intel Corp. 9,930,375
------------
18,160,875
------------
HOUSEHOLD PRODUCTS -- 0.9%
52,100 Premark International, Inc. 2,513,825
------------
</TABLE>
* Non-income producing security.
A-25
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
INSURANCE -- 16.9%
<C> <S> <C>
66,000 American International Group,
Inc. $ 7,045,500
434,200 EXEL Ltd. 19,756,100
30,000 General Reinsurance Corp. 3,821,250
212,000 Progressive Corp., Ohio 8,003,000
101,000 Transamerica Corp. 5,719,125
76,000 UNUM Corp. 3,258,500
------------
47,603,475
------------
MACHINERY & ENGINEERING -- 1.4%
160,000 Case Corp. 4,060,000
------------
METALS/MINING -- 2.5%
8,518 Freeport McMoRan, Copper &
Gold (Class A) 177,813
398,000 Freeport McMoRan, Inc. 7,014,750
------------
7,192,563
------------
MISCELLANEOUS FINANCIAL SERVICES -- 11.4%
200,000 American Express Co. 6,950,000
110,000 Citicorp 5,101,250
270,000 Countrywide Credit Industries,
Inc. 4,961,250
152,000 Federal Home Loan Mortgage
Corp. 9,918,000
50,200 John Alden Financial Corp. 909,875
60,000 Morgan Stanley Group, Inc. 4,170,000
------------
32,010,375
------------
REAL ESTATE -- 1.0%
3,050 Security Capital Realty, Inc.
(B) 2,689,844
------------
RETAIL -- 10.5%
210,000 J.C. Penney Co. 9,187,500
348,000 May Department Stores Co. 12,615,000
175,000 Mercantile Stores Co., Inc. 7,743,750
------------
29,546,250
------------
TELECOMMUNICATIONS -- 1.7%
344 Bell Atlantic Corp. 18,877
145,200 Sprint Corp. 4,791,600
------------
4,810,477
------------
TEXTILES -- 1.4%
300,000 Shaw Industries, Inc. $ 3,937,500
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 3.2%
116,000 Dole Food Co. 3,465,500
200,000 Sara Lee Corp. 5,575,000
------------
9,040,500
------------
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
<C> <S> <C>
TOYS/GAMES/HOBBY -- 2.6%
232,000 Hasbro, Inc. 7,366,000
------------
Total Common Stocks
(cost -- $193,143,927) $243,115,748
------------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments
(cost -- $231,780,223) 99.9 % $ 281,884,706
Other Assets in Excess of
Other Liabilities 0.1 116,210
--------- -------------
TOTAL NET ASSETS 100.0 % $ 282,000,916
--------- -------------
--------- -------------
OPPORTUNITY FUND
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
U.S. GOVERNMENT AGENCY -- 1.1%
$ 4,020,000 Federal Home Loan Bank
5.93%, 5/01/95
(cost -- $4,020,000) $ 4,020,000
------------
SHORT-TERM CORPORATE NOTES -- 13.8%
AUTOMOTIVE -- 0.4%
$ 1,260,000 Ford Motor Credit Co.
5.96%, 5/01/95 $ 1,260,000
------------
BANKING -- 1.1%
Norwest Financial, Inc.
3,630,000 5.96%, 5/22/95 3,617,380
362,000 5.98%, 5/01/95 362,000
------------
3,979,380
------------
</TABLE>
* Non-income producing security.
(A) Security is segregated as collateral for pending purchase of Security
Capital Realty, Inc.
(B) Restricted Securities (the Fund will not bear any costs, including those
involved in registration under the Securities Act of 1933, in connection
with the disposition of these securities):
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
DATE OF VALUATION AS OF
DESCRIPTION ACQUISITION PAR AMOUNT SHARES UNIT COST APRIL 30, 1995
<CAPTION>
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Security Capital
Realty, Inc.
12.00%, 6/30/14 9/15/94 $2,314,448 -- $ 94 $100
Security Capital
Realty, Inc.
Common Stock 9/15/94 -- 3,050 926 882
</TABLE>
A-26
<PAGE>
APRIL 30, 1995
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
OPPORTUNITY FUND (CONT'D)
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
<C> <S> <C>
COMPUTERS -- 0.1%
$ 445,000 IBM Credit Corp.
5.99%, 5/08/95 $ 444,482
------------
INSURANCE -- 2.3%
Prudential Funding Corp.
970,000 5.97%, 5/01/95 970,000
7,027,000 5.98%, 5/08/95 7,018,829
------------
7,988,829
------------
MACHINERY & ENGINEERING -- 0.4%
1,465,000 Deere (John) Capital Corp.
5.92%, 5/22/95 1,459,941
------------
MISCELLANEOUS FINANCIAL SERVICES -- 8.4%
4,140,000 Beneficial Corp.
5.95%, 5/08/95 4,135,211
13,690,000 Commercial Credit Co.
5.95%, 5/08/95 13,674,161
11,915,000 Household Finance Corp.
5.97%, 5/15/95 11,887,337
------------
29,696,709
------------
OIL/GAS -- 1.1%
990,000 Chevron Oil Finance Co.
5.97%, 5/01/95 990,000
2,960,000 Texaco, Inc.
5.96%, 5/22/95 2,949,709
------------
3,939,709
------------
Total Short-Term Corporate Notes
(cost -- $48,769,050) $ 48,769,050
------------
U.S. TREASURY NOTES -- 0.9%
$ 1,000,000 7.50%, 11/15/01 $ 1,027,810
1,000,000 7.50%, 5/15/02 1,030,160
550,000 7.875%, 4/15/98 566,588
550,000 7.875%, 8/15/01 575,867
------------
Total U.S. Treasury Notes
(cost -- $3,146,446) $ 3,200,425
------------
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 84.1%
AEROSPACE -- 9.6%
400,000 McDonnell Douglas Corp. $ 24,800,000
120,000 Northrop Grumman Corp. 5,955,000
60,000 Sundstrand Corp. 3,330,000
------------
34,085,000
------------
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
<C> <S> <C>
BANKING -- 16.0%
500,000 Citicorp $ 23,187,500
34,000 First Empire State Corp. 5,457,000
420,000 Mellon Bank Corp. 16,485,000
70,000 Wells Fargo & Co. 11,611,250
------------
56,740,750
------------
CASINOS/GAMING -- 1.1%
100,000 Promus Companies, Inc.* 3,850,000
------------
CHEMICALS -- 3.2%
225,000 Hercules, Inc. 11,221,875
------------
CONSUMER PRODUCTS -- 2.6%
300,000 Reebok International Ltd. 9,375,000
------------
COSMETICS/TOILETRIES -- 1.1%
60,000 Avon Products, Inc. 3,795,000
------------
DRUGS & MEDICAL PRODUCTS -- 3.3%
105,000 Becton, Dickinson & Co. 5,853,750
75,000 Warner-Lambert Co. 5,981,250
------------
11,835,000
------------
ELECTRONICS -- 8.6%
190,000 Intel Corp. 19,451,250
50,000 Raychem Corp. 1,781,250
445,000 Unitrode Corp.* 9,233,750
------------
30,466,250
------------
HEALTHCARE SERVICES -- 1.8%
435,000 National Health Laboratories,
Inc.* 6,525,000
------------
INSURANCE -- 5.9%
300,000 EXEL Ltd. 13,650,000
60,000 Transamerica Corp. 3,397,500
90,000 Travelers, Inc. 3,723,750
------------
20,771,250
------------
METALS/MINING -- 2.2%
200,000 Freeport McMoRan, Copper &
Gold (Class A) 4,175,000
202,500 Freeport McMoRan, Inc. 3,569,062
------------
7,744,062
------------
MISCELLANEOUS FINANCIAL SERVICES -- 10.4%
230,000 American Express Co. 7,992,500
480,000 Countrywide Credit Industries,
Inc. 8,820,000
230,000 Federal Home Loan Mortgage
Corp. 15,007,500
55,000 Federal National Mortgage
Assoc. 4,853,750
------------
36,673,750
------------
</TABLE>
* Non-income producing security.
A-27
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
OIL/GAS -- 6.0%
<C> <S> <C>
80,000 Mapco, Inc. $ 4,550,000
240,000 Tenneco, Inc. 11,010,000
149,300 Triton Energy Corp.* 5,748,050
------------
21,308,050
------------
PAPER PRODUCTS -- 4.9%
330,000 Champion International Corp. 14,520,000
30,000 Scott Paper Co. 2,673,750
------------
17,193,750
------------
TELECOMMUNICATIONS -- 2.1%
220,000 Sprint Corp. 7,260,000
------------
TEXTILES -- 2.5%
161,500 Collins & Aikman Corp.* 1,211,250
600,000 Shaw Industries, Inc. 7,875,000
------------
9,086,250
------------
TOYS/GAMES/HOBBY -- 2.3%
350,000 Mattel, Inc. 8,312,500
------------
OTHER -- 0.5%
50,000 Alliant Techsystems, Inc.* 1,843,750
------------
Total Common Stocks
(cost -- $250,665,773) $298,087,237
------------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments
(cost -- $306,601,269) 99.9 % $354,076,712
Other Assets in Excess of
Other Liabilities 0.1 248,508
-------- ------------
TOTAL NET ASSETS 100.0 % $354,325,220
-------- ------------
-------- ------------
</TABLE>
SMALL CAPITALIZATION FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
<C> <S> <C>
SHORT-TERM CORPORATE NOTES -- 18.1%
AUTOMOTIVE -- 0.2%
$ 325,000 Ford Motor Credit Co.
5.96%, 5/01/95 $ 325,000
------------
BANKING -- 1.7%
Norwest Financial, Inc.
1,120,000 5.94%, 5/30/95 1,114,641
1,296,000 5.96%, 5/22/95 1,291,494
------------
2,406,135
------------
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
<C> <S> <C>
COMPUTERS -- 1.2%
IBM Credit Corp.
$ 1,123,000 5.93%, 5/22/95 $ 1,119,115
550,000 5.95%, 5/30/95 547,364
------------
1,666,479
------------
CONGLOMERATES -- 1.6%
2,335,000 General Electric Capital Corp.
5.96%, 5/22/95 2,326,882
------------
INSURANCE -- 3.6%
Prudential Funding Corp.
400,000 5.93%, 5/30/95 398,089
4,852,000 5.98%, 5/08/95 4,846,358
------------
5,244,447
------------
MACHINERY & ENGINEERING -- 4.8%
6,910,000 Deere (John) Capital Corp.
5.94%, 5/30/95 6,876,936
------------
MISCELLANEOUS FINANCIAL SERVICES -- 3.6%
Beneficial Corp.
386,000 5.95%, 5/08/95 385,554
1,373,000 5.95%, 5/15/95 1,369,823
Commercial Credit Co.
475,000 5.95%, 5/08/95 474,451
1,500,000 5.97%, 5/22/95 1,494,776
1,432,000 Household Finance Corp.
5.97%, 5/15/95 1,428,675
------------
5,153,279
------------
OIL/GAS -- 1.4%
Chevron Oil Finance Co.
875,000 5.94%, 5/30/95 870,813
1,190,000 6.00%, 5/08/95 1,188,612
------------
2,059,425
------------
Total Short-Term Corporate Notes
(cost -- $26,058,583) $ 26,058,583
------------
CORPORATE NOTES & BONDS -- 0.4%
AUTOMOTIVE -- 0.0%
$ 62,950 Collins Industries, Inc.
8.75%, 1/11/00 $ 55,363
------------
OIL/GAS -- 0.4%
500,000 Global Marine, Inc.
12.75%, 12/15/99 546,875
------------
Total Corporate Notes & Bonds
(cost -- $587,196) $ 602,238
------------
</TABLE>
* Non-income producing security.
A-28
<PAGE>
APRIL 30, 1995
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
SMALL CAPITALIZATION FUND (CONT'D)
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
CONVERTIBLE CORPORATE BONDS -- 1.0%
<C> <S> <C>
REAL ESTATE
$ 1,385,009 Security Capital Realty, Inc.
(A)
12.00%, 6/30/14
(cost -- $1,306,709) $ 1,385,009
------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
<C> <S> <C>
CONVERTIBLE PREFERRED STOCKS -- 0.1%
RETAIL
36,000 Family Bargain Corp.
$0.95 Conv. Pfd.
(cost -- $360,000) $ 207,000
------------
COMMON STOCKS -- 78.3%
ADVERTISING -- 5.4%
57,600 Katz Media Group, Inc. $ 928,800
39,000 Omnicom Group, Inc. 2,169,375
246,200 True North Communications 4,677,800
------------
7,775,975
------------
AEROSPACE -- 0.6%
130,000 BE Aerospace, Inc.* 926,250
------------
APPAREL -- 1.5%
128,000 Warnaco Group, Inc. (Class A)* 2,192,000
------------
AUTOMOTIVE -- 1.1%
126,000 Collins Industries, Inc.* 267,750
65,100 Masland Corp. 895,125
70,000 Sudbury, Inc.* 476,875
------------
1,639,750
------------
BUILDING & CONSTRUCTION -- 4.3%
145,000 CRSS, Inc. 1,377,500
132,600 D.R. Horton, Inc. 1,292,850
5,500 Insituform Technologies (Class
A)* 70,812
165,000 Martin Marietta Materials,
Inc. 3,423,750
------------
6,164,912
------------
CHEMICALS -- 2.3%
141,400 OM Group, Inc. 3,375,925
------------
COMPUTER SERVICES -- 2.8%
147,700 BancTec, Inc.* 2,510,900
89,000 Exabyte Corp.* 1,123,625
34,600 Globalink, Inc.* 406,550
------------
4,041,075
------------
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
<C> <S> <C>
DRUGS & MEDICAL PRODUCTS -- 3.3%
125,900 Sybron International Corp.* $ 4,674,038
------------
ELECTRONICS -- 6.5%
37,000 Arrow Electronics, Inc.* 1,720,500
37,000 Dionex Corp.* 1,535,500
195,500 Marshall Industries* 5,400,687
35,000 Unitrode Corp.* 726,250
------------
9,382,937
------------
HEALTHCARE SERVICES -- 1.3%
14,000 Community Health Systems,
Inc.* 486,500
54,000 Spacelabs Medical, Inc. 1,323,000
------------
1,809,500
------------
INSURANCE -- 2.1%
55,300 Capsure Holdings Corp. 725,813
23,400 E.W. Blanch Holdings, Inc. 438,750
112,500 Guaranty National Corp. 1,856,250
------------
3,020,813
------------
JEWELRY -- 1.6%
170,000 North American Watch Corp. 2,337,500
------------
LEASING -- 1.3%
121,700 Interpool, Inc.* 1,795,075
------------
MACHINERY & ENGINEERING -- 5.1%
12,700 Baldwin Technologies Co. 74,612
97,100 BWIP Holdings, Inc. (Class A) 1,711,387
160,000 Crane Co. 5,560,000
------------
7,345,999
------------
MANUFACTURING -- 1.4%
50,000 Giddings & Lewis, Inc. 906,250
55,000 Harmon Industries, Inc. 783,750
131,300 Interlake Corp.* 377,488
------------
2,067,488
------------
METALS/MINING -- 0.5%
70,000 Olympic Steel, Inc.* 682,500
------------
MISCELLANEOUS FINANCIAL SERVICES -- 4.2%
150,000 AmeriCredit Corp.* 1,350,000
49,700 John Alden Financial Corp. 900,813
200,000 SafeCard Services, Inc. 3,500,000
24,300 Union Corp.* 337,163
------------
6,087,976
------------
</TABLE>
* Non-income producing security.
A-29
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
<C> <S> <C>
OIL/GAS -- 7.5%
136,800 Aquila Gas Pipeline Corp. $ 1,162,800
300,155 Global Natural Resources,
Inc.* 2,964,031
125,000 Nahama & Weagant Energy Co.* 1,250
137,500 Noble Drilling Corp.* 910,937
165,000 Petroleum Heat & Power, Inc.
(Class A) 1,196,250
74,400 St. Mary Land & Exploration
Co. 948,600
116,200 Tesoro Petroleum Corp. 1,147,475
65,000 Triton Energy Corp.* 2,502,500
------------
10,833,843
------------
PAPER PRODUCTS -- 0.9%
61,500 CSS Industries, Inc.* 1,030,125
40,000 Repap Enterprises, Inc. 281,250
------------
1,311,375
------------
PRINTING/PUBLISHING -- 3.4%
72,000 CCH, Inc. (Class B) 1,161,000
119,100 Nu-Kote Holdings, Inc. (Class
A)* 3,275,250
12,250 Pulitzer Publishing Co. 494,594
------------
4,930,844
------------
REAL ESTATE -- 8.7%
151,800 Cousins Properties, Inc. 2,542,650
44,000 Post Properties, Inc. 1,303,500
231,600 Security Capital Industrial
Trust, Inc. 3,618,750
199,363 Security Capital Pacific Trust 3,488,853
1,800 Security Capital Realty, Inc.
(A) 1,587,600
------------
12,541,353
------------
RETAIL -- 4.0%
18,000 Blair Corp. 623,250
64,700 Brookstone, Inc.* 331,587
304,700 Cash America International,
Inc. 2,323,337
173,700 Fingerhut Companies, Inc. 2,019,262
52,500 Freds, Inc. 511,875
------------
5,809,311
------------
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
<C> <S> <C>
SECURITY/INVESTIGATION SERVICES -- 0.3%
202,910 Automated Security Holdings
PLC ADS $ 380,456
------------
TEXTILES -- 4.0%
89,000 Collins & Aikman Corp.* 667,500
15,700 Culp, Inc. 153,075
40,000 Dyersburg Corp. 215,000
42,700 Fab Industries, Inc. 1,286,338
244,900 Mohawk Industries, Inc.* 3,367,375
------------
5,689,288
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 1.0%
55,900 Morningstar Group, Inc. 447,200
89,700 Sylvan Food Holdings, Inc.* 1,031,550
------------
1,478,750
------------
UTILITIES -- 2.0%
221,200 Sithe Energies, Inc.* 1,935,500
46,000 UGI Corp. 891,250
------------
2,826,750
------------
OTHER -- 1.2%
107,500 McGrath RentCorp. 1,679,688
------------
Total Common Stocks
(cost -- $110,337,018) $112,801,371
------------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments
(cost --
$138,649,506) 97.9 % $141,054,201
Other Assets in
Excess of
Other Liabilities 2.1 3,089,011
--------- -----------
TOTAL NET ASSETS 100.0 % $144,143,212
--------- -----------
--------- -----------
</TABLE>
* Non-income producing security.
(A) Restricted Securities (the Fund will not bear any costs, including those
involved in registration under the Securities Act of 1933, in connection
with the disposition of these securities):
<TABLE>
<CAPTION>
DATE OF VALUATION AS OF
DESCRIPTION ACQUISITION PAR AMOUNT SHARES UNIT COST APRIL 30,
1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Security Capital Realty, Inc.
12.00%, 6/30/14 6/16/94 $1,385,009 -- $ 94 $ 100
Security Capital Realty, Inc.
Common Stock 8/02/93 -- 1,800 684 882
</TABLE>
A-30
<PAGE>
APRIL 30, 1995
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT AGENCY -- 2.0%
$ 755,000 Federal Home Loan Bank
5.93%, 5/01/95
(cost -- $755,000) $ 755,000
------------
SHORT-TERM CORPORATE NOTES -- 27.2%
AUTOMOTIVE -- 3.4%
$ 1,295,000 Ford Motor Credit Co.
5.94%, 5/12/95 $ 1,292,650
------------
COMPUTERS -- 2.6%
1,000,000 IBM Credit Corp.
5.93%, 5/15/95 997,694
------------
CONGLOMERATES -- 4.7%
General Electric Capital Corp.
860,000 5.93%, 5/05/95 859,433
929,000 5.96%, 5/08/95 927,923
------------
1,787,356
------------
MACHINERY/ENGINEERING -- 3.0%
1,133,000 Deere (John) Capital Corp.
5.90%, 5/03/95 1,132,629
------------
MISCELLANEOUS FINANCIAL SERVICES -- 11.6%
1,729,000 American Express Credit Corp.
5.95%, 5/02/95 1,728,714
CIT Group Holdings, Inc.
715,000 5.89%, 5/08/95 714,181
1,134,000 5.92%, 5/03/95 1,133,627
860,000 Household Finance Corp.
5.94%, 5/05/95 859,432
------------
4,435,954
------------
OIL/GAS -- 1.9%
716,000 Chevron Oil Finance Co.
5.90%, 5/08/95 715,179
------------
Total Short-Term Corporate Notes
(cost -- $10,361,462) $ 10,361,462
------------
CORPORATE NOTES & BONDS -- 8.6%
ENTERTAINMENT -- 4.2%
$ 5,000,000 Time Warner, Inc.
Zero Coupon, 12/17/12 $ 1,618,750
------------
TELECOMMUNICATIONS -- 4.4%
3,000,000 Nextel Communications, Inc.
0.00/11.50%, 9/01/03 ** 1,657,500
------------
Total Corporate Notes & Bonds
(cost -- $3,655,626) $ 3,276,250
------------
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
<C> <S> <C>
CONVERTIBLE PREFERRED STOCKS -- 9.9%
OIL/GAS -- 6.0%
180,000 Gerrity Oil & Gas Corp.
$1.50 Conv. Pfd. $ 2,295,000
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 3.9%
80,000 Flagstar Companies, Inc.
$2.25 Conv. Pfd. 1,500,000
------------
Total Convertible Preferred Stocks
(cost -- $4,504,546) $ 3,795,000
------------
COMMON STOCKS -- 53.7%
AEROSPACE -- 7.4%
20,000 Boeing Co. $ 1,100,000
28,000 McDonnell Douglas Corp. 1,736,000
------------
2,836,000
------------
AUTOMOTIVE -- 1.2%
10,000 General Motors Corp. 451,250
------------
BANKING -- 7.4%
35,000 Citicorp 1,623,125
5,000 First Interstate Bancorp 384,375
10,000 Mellon Bank Corp. 392,500
15,000 U.S. Bancorp 414,375
------------
2,814,375
------------
CONGLOMERATES -- 1.6%
40,000 Canadian Pacific Ltd. 610,000
------------
CONTAINERS -- 6.2%
30,000 Stone Container Corp.* 596,250
40,000 Temple-Inland, Inc. 1,760,000
------------
2,356,250
------------
ELECTRONICS -- 4.3%
16,000 Intel Corp. 1,638,000
------------
HEALTHCARE SERVICES -- 1.1%
10,000 Columbia/HCA Healthcare Corp. 420,000
------------
HOUSEHOLD PRODUCTS -- 4.4%
35,000 Premark International, Inc. 1,688,750
------------
</TABLE>
<TABLE>
<C> <S> <C>
INSURANCE -- 4.3%
10,000 AFLAC, Inc. 412,500
10,000 Progressive Corp., Ohio 377,500
20,000 Travelers, Inc. 827,500
------------
1,617,500
------------
METALS/MINING -- 5.1%
93,687 Freeport McMoRan, Copper &
Gold (Class A) 1,955,716
------------
</TABLE>
* Non-income producing security.
** Represents a step-up floater which will receive 0.00% interest until 9/01/98,
then will "step-up" to 11.50% until maturity.
A-31
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------
METALS/MINING (CONT'D)
<C> <S> <C>
MISCELLANEOUS FINANCIAL SERVICES -- 2.0%
20,000 Countrywide Credit Industries,
Inc. $ 367,500
6,000 Federal Home Loan Mortgage
Corp. 391,500
------------
759,000
------------
OIL/GAS -- 1.9%
5,000 McMoRan Oil & Gas Corp. 13,750
10,000 Triton Energy Corp.* 385,000
15,000 Union Texas Petroleum
Holdings, Inc. 320,625
------------
719,375
------------
TELECOMMUNICATIONS -- 4.8%
55,000 Sprint Corp. 1,815,000
------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TEXTILES -- 2.0%
20,000 Shaw Industries, Inc. 262,500
20,000 Unifi, Inc. 502,500
-------------
765,000
-------------
Total Common Stocks
(cost -- $17,690,285) $ 20,446,216
-------------
Total Investments
(cost -- $36,966,919) 101.4% $ 38,633,928
Other Liabilities in Excess of
Other Assets (1.4) (536,829)
------- -------------
TOTAL NET ASSETS 100.0 % $ 38,097,099
------- -------------
------- -------------
</TABLE>
U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT -- 24.1%
$30,850,000 Lehman Brothers, 5.90%,
5/02/95
(proceeds at maturity:
$30,855,056, collateralized
by $19,275,000 and
$10,940,000 par, $20,423,790
and $11,051,588 value, U.S.
Treasury Notes, 7.50%,
10/31/99 and 6.875%,
8/31/99, respectively.)
(cost -- $30,850,000) $ 30,850,000
------------
FEDERAL HOME LOAN MORTGAGE
CORPORATION -- 0.6%
$ 735,108 9.50%, 12/01/02 - 11/01/03
(cost -- $740,736) $ 763,593
------------
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
<C> <S> <C>
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION I -- 47.6%
$20,299,186 7.00%, 10/15/22 - 11/15/23 (A) $ 19,214,398
16,436,078 7.50%, 2/15/22 - 2/15/24 16,030,271
13,594,094 8.00%, 4/15/02 - 2/15/23 (A) 13,617,665
11,189,477 8.50%, 6/15/01 - 9/15/24 (A) 11,412,022
566,178 10.50%, 1/15/98 - 12/15/00 596,961
------------
Total Government National Mortgage
Association I (cost -- $63,765,062) $ 60,871,317
------------
U.S. TREASURY BOND -- 7.8%
$10,000,000 7.50%, 11/15/16 (A)
(cost -- $9,314,127) $ 10,045,300
------------
U.S. TREASURY NOTES -- 26.9%
$20,000,000 6.625%, 3/31/97 (A) $ 20,012,400
14,000,000 7.75%, 11/30/99 14,468,160
------------
(cost -- $34,434,623) $ 34,480,560
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments
(cost -- $139,104,548) 107.0% $137,010,770
----- ------------
- ------------------------------------------------------
PRINCIPAL
AMOUNT
SUBJECT
TO CALL VALUE
- ------------------------------------------------------
WRITTEN CALL OPTIONS OUTSTANDING -- (0.2%)
$10,000,000 Government National
Mortgage Association I,
7.00%, expiring May '95,
strike @ $94.22 $ (68,750)
10,000,000 Government National
Mortgage Association I,
8.00%, expiring May '95,
strike @ $100.06 (31,250)
10,000,000 Government National
Mortgage Association I,
8.50%, expiring May '95,
strike @ $101.56 (59,375)
10,000,000 U.S. Treasury Bonds,
7.50%, expiring May '95,
strike @ $100.67 (78,125)
20,000,000 U.S. Treasury Notes,
6.625%, expiring May '95,
strike @ $100.34 (12,500)
------------
Total Written Call Options
Outstanding (premiums
received: $301,562) $ (250,000)
------------
Other Liabilities in Excess of
Other Assets (6.8 ) (8,710,696)
----- ------------
TOTAL NET ASSETS 100.0 % $128,050,074
----- ------------
----- ------------
</TABLE>
* Non-income producing security.
(A) Securities segregated (full or partial) as collateral for written call
options outstanding. The aggregate market value of such segregated
securities is $60,393,531.
A-32
<PAGE>
APRIL 30, 1995
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
INVESTMENT QUALITY INCOME FUND
<TABLE>
<CAPTION>
<C> <S> <C>
- ------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
<C> <S> <C>
SHORT-TERM CORPORATE NOTES -- 5.8%
AUTOMOTIVE -- 2.4%
$ 1,430,000 Ford Motor Credit Co.
5.92%, 5/09/95 $ 1,428,119
------------
COMPUTERS -- 0.8%
455,000 IBM Credit Corp.
5.93%, 5/15/95 453,951
------------
OIL/GAS -- 2.6%
1,500,000 Chevron Oil Finance Co.
5.96%, 5/02/95 1,499,751
------------
Total Short-Term Corporate Notes
(cost -- $3,381,821) $ 3,381,821
------------
CORPORATE NOTES & BONDS -- 91.5%
AEROSPACE -- 3.1%
$ 2,000,000 Boeing Co.
7.50%, 8/15/42 $ 1,835,260
------------
AIRLINES -- 2.8%
1,000,000 American Airlines
9.73%, 9/29/14 1,028,920
550,000 Delta Air Lines, Inc.
10.375%, 2/01/11 598,812
------------
1,627,732
------------
BANKING -- 6.4%
70,000 NatWest Bancorp, Inc.
9.375%, 11/15/03 77,305
1,300,000 NCNB Corp.
10.20%, 7/15/15 1,510,223
500,000 RBSG Capital Corp.
10.125%, 3/01/04 568,735
1,500,000 Westpac Banking Corp.
9.125%, 8/15/01 1,603,080
------------
3,759,343
------------
CHEMICALS -- 0.9%
500,000 Rohm & Haas Co.
9.50%, 4/01/21 554,480
------------
CONGLOMERATES -- 3.8%
2,000,000 Canadian Pacific Ltd.
9.45%, 8/01/21 2,241,860
------------
ENTERTAINMENT -- 5.0%
3,000,000 Time Warner, Inc.
9.15%, 2/01/23 2,898,900
------------
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
<C> <S> <C>
INSURANCE -- 11.3%
$ 1,000,000 Aetna Life & Casualty Co.
8.00%, 1/15/17 $ 937,090
1,200,000 Capital Holding Corp.
8.75%, 1/15/17 1,247,928
2,000,000 CNA Financial Corp.
7.25%, 11/15/23 1,653,300
3,000,000 Torchmark, Inc.
7.875%, 5/15/23 2,759,130
------------
6,597,448
------------
LEASING -- 2.8%
1,600,000 Ryder Systems, Inc.
8.75%, 3/15/17 1,619,008
------------
MACHINERY & ENGINEERING -- 3.3%
1,750,000 Caterpillar, Inc.
9.75%, 6/01/19 1,940,452
------------
MISCELLANEOUS FINANCIAL SERVICES -- 13.9%
20,000 Beneficial Corp.
12.875%, 8/01/13 23,819
1,500,000 BHP Finance USA Ltd.
8.50%, 12/01/12 1,557,030
1,000,000 ITT Financial Corp.
6.50%, 5/01/11 808,410
Lehman Brothers, Inc.
865,000 9.875%, 10/15/00 919,063
115,000 10.00%, 5/15/99 121,478
205,000 Midland American Capital Corp.
12.75%, 11/15/03 238,251
800,000 Paine Webber Group, Inc.
9.25%, 12/15/01 835,136
3,000,000 Prudential Funding Corp.
6.75%, 9/15/23 2,400,900
1,250,000 Source One Mortgage Services
Corp.
9.00%, 6/01/12 1,212,450
------------
8,116,537
------------
OIL/GAS -- 6.0%
3,000,000 Occidental Petroleum Corp.
11.125%, 6/01/19 3,507,540
------------
PAPER PRODUCTS -- 0.2%
100,000 Union Camp Corp.
10.00%, 5/01/19 111,152
------------
PIPELINES -- 3.0%
1,500,000 TransCanada Pipelines Ltd.
9.875%, 1/01/21 1,747,020
------------
</TABLE>
A-33
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
RETAIL -- 1.3%
<C> <S> <C>
May Department Stores Co.
$ 250,000 9.875%, 6/01/17 $ 272,925
405,000 10.625%, 11/01/10 496,137
------------
769,062
------------
TELECOMMUNICATIONS -- 12.5%
420,000 GTE Corp.
10.25%, 11/01/20 472,492
2,500,000 New York Telephone Co.
9.375%, 7/15/31 2,708,775
2,000,000 Pacific Bell
8.50%, 8/15/31 2,015,700
2,000,000 Southern New England Telephone
Co.
8.70%, 8/15/31 2,123,880
------------
7,320,847
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 3.3%
2,000,000 American Brands, Inc.
7.875%, 1/15/23 1,920,560
------------
<CAPTION>
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
<C> <S> <C>
UTILITIES -- 6.9%
$ 2,000,000 Hydro-Quebec
8.50%, 12/01/29 $ 1,987,680
2,000,000 Southern California Edison Co.
8.875%, 6/01/24 2,039,640
------------
4,027,320
------------
OTHER -- 5.0%
1,468,228 DLJ Mortgage Acceptance Corp.
8.75%, 11/25/24 1,408,122
1,500,000 Nova Scotia (Province of)
8.875%, 7/01/19 1,524,345
------------
2,932,467
------------
Total Corporate Notes & Bonds
(cost -- $53,950,659) $ 53,526,988
------------
Total Investments
(cost -- $57,332,480) 97.3 % $ 56,908,809
Other Assets in Excess of
Other Liabilities 2.7 1,549,987
----- ------------
TOTAL NET ASSETS 100.0 % $ 58,458,796
----- ------------
----- ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
A-34
<PAGE>
APRIL 30, 1995
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
<TABLE>
<CAPTION>
QUEST FOR SMALL GROWTH U.S.
INVESTMENT
VALUE FUND, OPPORTUNITY CAPITALIZATION AND
GOVERNMENT QUALITY
INC. FUND FUND INCOME FUND INCOME FUND
INCOME FUND
------------ ------------ ------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
<C>
ASSETS
Investments, at value (cost --
$231,780,223, $306,601,269,
$138,649,506, $36,966,919,
$108,254,548 and $57,332,480,
respectively)........................ $281,884,706 $354,076,712 $141,054,201 $38,633,928 $106,160,770
$56,908,809
Repurchase agreement (cost --
$30,850,000)......................... -- -- -- -- 30,850,000 --
Cash.................................. 192,917 6,009 7,649 4,785 42,627 7,874
Receivable for investments sold....... 6,121,804 4,960,166 4,386,238 -- -- --
Receivable for fund shares sold....... 1,373,346 7,437,751 530,404 161,403 552,378
344,370
Dividends receivable.................. 490,541 682,550 99,920 106,583 -- --
Interest receivable................... 18,808 80,066 81,628 -- 1,266,952 1,415,841
Receivable for mortgage prepayments... -- -- -- -- 8,659 --
Receivable for options written........ -- -- -- -- 81,250 --
Deferred organization expenses........ -- -- -- 29,014 -- 7,835
Other assets.......................... 43,688 27,106 18,450 22,152 33,006 18,897
------------ ------------ ------------- ----------- ------------ -----------
Total Assets........................ 290,125,810 367,270,360 146,178,490 38,957,865 138,995,642
58,703,626
------------ ------------ ------------- ----------- ------------ -----------
LIABILITIES
Written call options outstanding, at
value (premiums received:
$301,562)............................ -- -- -- -- 250,000 --
Payable for investments purchased..... 7,304,992 11,854,122 1,469,403 773,238 10,006,250
--
Payable for fund shares redeemed...... 637,029 825,136 417,908 19,581 466,636
70,490
Investment advisory fee payable....... 38,549 48,250 19,738 4,507 10,495 4,781
Distribution fee payable.............. 36,734 95,043 24,513 5,223 13,601 10,314
Dividends payable..................... -- -- -- -- 96,618 96,734
Other payables and accrued expenses... 107,590 122,589 103,716 58,217 101,968
62,511
------------ ------------ ------------- ----------- ------------ -----------
Total Liabilities................... 8,124,894 12,945,140 2,035,278 860,766 10,945,568 244,830
------------ ------------ ------------- ----------- ------------ -----------
NET ASSETS
Par value............................. 22,152,829 166,616 89,258 36,874 115,966 57,361
Paid-in-surplus....................... 203,275,875 304,361,426 136,615,872 34,963,133 139,644,958
60,186,256
Accumulated undistributed net
investment income.................... 857,581 1,269,754 89,051 116,490 -- --
Accumulated undistributed net realized
gain (loss) on investments........... 5,610,148 1,053,210 4,944,336 1,520,866 (9,371,173)
(1,361,150 )
Distributions in excess of
undistributed net realized gains..... -- (1,229) -- (207,273 ) (297,461) --
Net unrealized appreciation
(depreciation) on investments........ 50,104,483 47,475,443 2,404,695 1,667,009 (2,042,216)
(423,671 )
------------ ------------ ------------- ----------- ------------ -----------
Total Net Assets.................... $282,000,916 $354,325,220 $144,143,212 $38,097,099 $128,050,074
$58,458,796
------------ ------------ ------------- ----------- ------------ -----------
------------ ------------ ------------- ----------- ------------ -----------
CLASS A:
Fund shares outstanding............... 19,766,758 10,873,320 7,345,404 3,189,862 10,497,081
4,499,943
------------ ------------ ------------- ----------- ------------ -----------
Net asset value per share............. $ 12.74 $ 21.33 $ 16.18 $ 10.34 $ 11.04 $ 10.19
------------ ------------ ------------- ----------- ------------ -----------
------------ ------------ ------------- ----------- ------------ -----------
Maximum offering price per share*..... $ 13.48 $ 22.57 $ 17.12 $ 10.86 $ 11.59 $ 10.70
------------ ------------ ------------- ----------- ------------ -----------
------------ ------------ ------------- ----------- ------------ -----------
CLASS B:
Fund shares outstanding............... 1,881,688 4,838,180 1,225,644 410,588 930,025 911,890
------------ ------------ ------------- ----------- ------------ -----------
Net asset value and offering price per
share................................ $ 12.65 $ 21.16 $ 16.03 $ 10.31 $ 11.04 $ 10.19
------------ ------------ ------------- ----------- ------------ -----------
------------ ------------ ------------- ----------- ------------ -----------
CLASS C:
Fund shares outstanding............... 504,383 950,086 354,729 86,947 169,500 324,279
------------ ------------ ------------- ----------- ------------ -----------
Net asset value and offering price per
share................................ $ 12.64 $ 21.15 $ 16.03 $ 10.32 $ 11.04 $ 10.19
------------ ------------ ------------- ----------- ------------ -----------
------------ ------------ ------------- ----------- ------------ -----------
<FN>
*Sales charges decrease on purchases of $50,000 or higher.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
A-35
<PAGE>
SIX MONTHS ENDED APRIL 30, 1995
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
QUEST FOR SMALL GROWTH U.S.
INVESTMENT
VALUE OPPORTUNITY CAPITALIZATION AND GOVERNMENT
QUALITY
FUND, INC. FUND FUND INCOME FUND INCOME FUND
INCOME FUND
----------- ----------- --------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends................... $2,464,480 $2,280,636 $ 1,042,987 $ 460,092 $ -- $ --
Interest.................... 932,852 1,585,855 590,633 507,119 4,558,825 2,416,775
----------- ----------- --------------- ------------ ------------ ------------
Total investment income... 3,397,332 3,866,491 1,633,620 967,211 4,558,825 2,416,775
----------- ----------- --------------- ------------ ------------ ------------
OPERATING EXPENSES
Investment advisory fees
(note 2a).................. 1,277,397 1,301,376 691,364 143,923 377,214 164,771
Distribution fees (note
2c)........................ 695,255 840,342 400,554 79,492 223,379 141,037
Transfer and dividend
disbursing agent fees (note
1i)........................ 145,940 121,890 93,680 31,356 62,635 29,006
Accounting service fees
(note 2b).................. -- 51,874 54,475 56,400 60,655 52,681
Registration fees........... 24,615 54,230 19,488 15,018 17,130 16,605
Reports and notices to
shareholders............... 18,150 14,988 14,257 9,430 13,141 11,207
Custodian fees.............. 16,433 12,971 8,306 9,529 34,387 11,110
Auditing, consulting and tax
return preparation fees.... 11,800 9,188 9,858 7,939 18,160 8,652
Directors'(Trustees') fees
and expenses............... 8,574 8,535 8,535 4,369 8,534 8,530
Legal fees.................. 5,604 3,720 3,720 2,655 3,490 2,852
Amortization of deferred
organization expenses (note
1c)........................ -- -- -- 9,495 -- 6,136
Miscellaneous............... 12,664 10,106 1,996 9,352 13,715 8,818
----------- ----------- --------------- ------------ ------------ ------------
Total operating
expenses................. 2,216,432 2,429,220 1,306,233 378,958 832,440 461,405
Less: Investment advisory
fees waived (note 2a).... -- -- -- (41,225) -- (42,245)
----------- ----------- --------------- ------------ ------------ ------------
Net operating
expenses............... 2,216,432 2,429,220 1,306,233 337,733 832,440 419,160
----------- ----------- --------------- ------------ ------------ ------------
Net investment income... 1,180,900 1,437,271 327,387 629,478 3,726,385 1,997,615
----------- ----------- --------------- ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS -- NET
Net realized gain (loss) on
security transactions...... 5,717,144 1,058,240 5,111,342 1,177,023 (3,993,026) (299,770)
Net realized loss on option
transactions (note 1f)..... -- -- -- -- (227,109) --
Net realized loss on futures
transactions (note 1g)..... -- -- -- -- -- (108,500)
----------- ----------- --------------- ------------ ------------ ------------
Net realized gain (loss)
on investments........... 5,717,144 1,058,240 5,111,342 1,177,023 (4,220,135) (408,270)
Net change in unrealized
appreciation (depreciation)
on investments............. 17,252,568 33,095,020 (3,141,681) 1,260,709 7,204,799 3,266,923
----------- ----------- --------------- ------------ ------------ ------------
Net realized gain (loss)
and change in unrealized
appreciation
(depreciation) on
investments.............. 22,969,712 34,153,260 1,969,661 2,437,732 2,984,664 2,858,653
----------- ----------- --------------- ------------ ------------ ------------
Net increase in net assets
resulting from
operations................. $24,150,612 $35,590,531 $ 2,297,048 $ 3,067,210 $ 6,711,049 $ 4,856,268
----------- ----------- --------------- ------------ ------------ ------------
----------- ----------- --------------- ------------ ------------ ------------
<FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
A-36
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
QUEST FOR VALUE FUND,
INC. OPPORTUNITY FUND
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
1995* 1994 1995* 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss).......... $ 1,180,900 $ 1,726,225 $ 1,437,271 $ 1,397,364
Net realized gain (loss) on
investments.......................... 5,717,144 16,664,331 1,058,240 7,139,720
Net change in unrealized appreciation
(depreciation) on investments........ 17,252,568 (6,250,090) 33,095,020 4,721,481
------------ ------------ ------------ ------------
Net increase (decrease) in net
assets resulting from operations... 24,150,612 12,140,466 35,590,531 13,258,565
------------ ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS
Net investment income -- Class A...... (1,649,576) (819,873) (1,066,642) (2,269,483)
Net investment income -- Class B...... (108,497) (11,801) (335,822) (98,258)
Net investment income -- Class C...... (29,366) (2,040) (56,920) (21,098)
Net realized gains -- Class A......... (15,501,438) (9,227,704) (5,314,298) (1,497,052)
Net realized gains -- Class B......... (1,014,005) (115,604) (1,562,718) (30,460)
Net realized gains -- Class C......... (255,884) (11,081) (267,734) (11,467)
Distributions in excess of net
realized gains -- Class A............ -- -- -- (1,196)
Distributions in excess of net
realized gains -- Class B............ -- -- -- (24)
Distributions in excess of net
realized gains -- Class C............ -- -- -- (9)
------------ ------------ ------------ ------------
Total dividends and distributions to
shareholders....................... (18,558,766) (10,188,103) (8,604,134) (3,929,047)
------------ ------------ ------------ ------------
FUND SHARE TRANSACTIONS
CLASS A
Net proceeds from sales............... 22,813,206 61,908,256 62,597,373 90,332,759
Reinvestment of dividends and
distributions........................ 16,047,556 9,385,655 6,034,648 3,405,284
Cost of shares redeemed............... (29,730,613) (80,014,950) (18,132,883) (65,200,453)
------------ ------------ ------------ ------------
Net increase (decrease) -- Class
A.................................. 9,130,149 (8,721,039) 50,499,138 28,537,590
------------ ------------ ------------ ------------
CLASS B
Net proceeds from sales............... 8,806,276 12,409,864 53,070,214 40,604,196
Reinvestment of dividends and
distributions........................ 1,045,812 123,599 1,804,130 124,021
Cost of shares redeemed............... (1,208,420) (544,061) (3,356,853) (1,026,439)
------------ ------------ ------------ ------------
Net increase -- Class B............. 8,643,668 11,989,402 51,517,491 39,701,778
------------ ------------ ------------ ------------
CLASS C
Net proceeds from sales............... 2,794,417 3,521,667 11,871,650 6,945,412
Reinvestment of dividends and
distributions........................ 280,898 13,020 314,273 32,567
Cost of shares redeemed............... (479,197) (271,901) (809,474) (254,081)
------------ ------------ ------------ ------------
Net increase -- Class C............. 2,596,118 3,262,786 11,376,449 6,723,898
------------ ------------ ------------ ------------
Total net increase (decrease) in net
assets from fund share
transactions......................... 20,369,935 6,531,149 113,393,078 74,963,266
------------ ------------ ------------ ------------
Total increase (decrease) in net
assets............................. 25,961,781 8,483,512 140,379,475 84,292,784
NET ASSETS
Beginning of period................... 256,039,135 247,555,623 213,945,745 129,652,961
------------ ------------ ------------ ------------
End of period (including undistributed
net investment income (loss) of
$857,581, $1,464,120; $1,269,754,
$1,291,867; $89,051, ($238,336);
$116,490, $127,460; $0, $0 and $0,
$0, respectively..................... $282,000,916 $256,039,135 $354,325,220 $213,945,745
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
<FN>
*Unaudited.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
A-37
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAPITALIZATION FUND GROWTH AND INCOME
FUND
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
1995* 1994 1995* 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net investment income (loss).......... $ 327,387 $ (238,336) $ 629,478 $ 966,108
Net realized gain (loss) on
investments............................. 5,111,342 3,366,835 1,177,023 1,768,686
Net change in unrealized appreciation
(depreciation) on investments........... (3,141,681) (3,118,979) 1,260,709 (189,442)
------------ ------------ ------------ ------------
Net increase (decrease) in net
assets resulting from operations........ 2,297,048 9,520 3,067,210 2,545,352
------------ ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS
Net investment income -- Class A...... -- -- (571,223) (936,128)
Net investment income -- Class B...... -- -- (59,120) (41,545)
Net investment income -- Class C...... -- -- (10,105) (7,305)
Net realized gains -- Class A......... (3,008,172) (8,036,736) (1,274,907) (4,079,198)
Net realized gains -- Class B......... (433,897) (160,831) (129,812) (145,217)
Net realized gains -- Class C......... (91,772) (19,543) (20,124) (18,475)
Distributions in excess of net
realized gains -- Class A............... -- -- -- (199,276)
Distributions in excess of net
realized gains -- Class B............... -- -- -- (7,094)
Distributions in excess of net
realized gains -- Class C............... -- -- -- (903)
------------ ------------ ------------ ------------
Total dividends and distributions to
shareholders............................ (3,533,841) (8,217,110) (2,065,291) (5,435,141)
------------ ------------ ------------ ------------
Fund Share Transactions
CLASS A
Net proceeds from sales............... 18,655,389 127,081,752 2,360,697 5,937,491
Reinvestment of dividends and
distributions........................... 2,840,961 7,215,556 1,765,990 5,008,623
Cost of shares redeemed............... (21,690,503) (111,134,238) (2,560,041) (6,040,040)
------------ ------------ ------------ ------------
Net increase (decrease) -- Class A.. (194,153) 23,163,070 1,566,646 4,906,074
------------ ------------ ------------ ------------
CLASS B
Net proceeds from sales............... 4,874,110 15,275,222 1,175,765 2,763,975
Reinvestment of dividends and
distributions........................ 408,265 148,570 174,643 188,513
Cost of shares redeemed............... (1,631,572) (811,203) (185,264) (260,750)
------------ ------------ ------------ ------------
Net increase -- Class B............... 3,650,803 14,612,589 1,165,144 2,691,738
------------ ------------ ------------ ------------
CLASS C
Net proceeds from sales............... 2,624,975 3,345,761 395,836 341,819
Reinvestment of dividends and
distributions........................... 88,907 18,810 28,952 26,593
Cost of shares redeemed............... (380,327) (229,505) (20,580) (4,696)
------------ ------------ ------------ ------------
Net increase -- Class C............. 2,333,555 3,135,066 404,208 363,716
------------ ------------ ------------ ------------
Total net increase (decrease) in net
assets from fund share transactions..... 5,790,205 40,910,725 3,135,998 7,961,528
------------ ------------ ------------ ------------
Total increase (decrease) in net
assets.................................. 4,553,412 32,703,135 4,137,917 5,071,739
NET ASSETS
Beginning of period................... 139,589,800 106,886,665 33,959,182 28,887,443
------------ ------------ ------------ ------------
End of period (including undistributed
net investment income (loss) of
$857,581, $1,464,120; $1,269,754,
$1,291,867; $89,051, ($238,336);
$116,490, $127,460; $0, $0 and $0, $0,
respectively............................ $144,143,212 $139,589,800 $ 38,097,099 $ 33,959,182
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
<CAPTION>
INVESTMENT QUALITY INCOME
U.S. GOVERNMENT INCOME FUND FUND
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
1995* 1994 1995* 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net investment income (loss).......... $ 3,726,385 $ 8,291,969 $ 1,997,615 $ 3,846,353
Net realized gain (loss) on
investments............................. (4,220,135) (4,366,839) (408,270) (952,880)
Net change in unrealized appreciation
(depreciation) on investments........... 7,204,799 (11,007,688) 3,266,923 (9,068,979)
------------ ------------ ------------ ------------
Net increase (decrease) in net
assets resulting from operations........ 6,711,049 (7,082,558) 4,856,268 (6,175,506)
------------ ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS
Net investment income -- Class A...... (3,470,735) (8,071,564) (1,649,048) (3,482,793)
Net investment income -- Class B...... (220,601) (196,735) (252,908) (244,424)
Net investment income -- Class C...... (36,512) (39,362) (95,659) (119,136)
Net realized gains -- Class A......... (140,061) (2,925,946) -- (367,910)
Net realized gains -- Class B......... (8,675) (38,935) -- (10,112)
Net realized gains -- Class C......... (1,431) (6,494) -- (637)
Distributions in excess of net
realized gains -- Class A............... -- (292,913) -- --
Distributions in excess of net
realized gains -- Class B............... -- (3,898) -- --
Distributions in excess of net
realized gains -- Class C............... -- (650) -- --
------------ ------------ ------------ ------------
Total dividends and distributions to
shareholders............................ (3,878,015) (11,576,497) (1,997,615) (4,225,012)
------------ ------------ ------------ ------------
Fund Share Transactions
CLASS A
Net proceeds from sales............... 8,337,955 17,007,814 3,437,254 12,621,718
Reinvestment of dividends and
distributions........................... 3,118,963 9,588,703 1,160,982 2,758,350
Cost of shares redeemed............... (21,385,264) (74,313,512) (7,963,295) (20,364,228)
------------ ------------ ------------ ------------
Net increase (decrease) -- Class A.. (9,928,346) (47,716,995) (3,365,059) (4,984,160)
------------ ------------ ------------ ------------
CLASS B
Net proceeds from sales............... 3,810,282 6,748,251 2,929,597 6,440,954
Reinvestment of dividends and
distributions........................ 163,256 187,137 203,461 185,172
Cost of shares redeemed............... (734,031) (964,994) (846,378) (800,932)
------------ ------------ ------------ ------------
Net increase -- Class B............... 3,239,507 5,970,394 2,286,680 5,825,194
------------ ------------ ------------ ------------
CLASS C
Net proceeds from sales............... 668,202 1,424,484 576,084 3,141,700
Reinvestment of dividends and
distributions........................... 36,507 46,127 40,824 93,436
Cost of shares redeemed............... (92,626) (289,465) (48,537) (422,838)
------------ ------------ ------------ ------------
Net increase -- Class C............. 612,083 1,181,146 568,371 2,812,298
------------ ------------ ------------ ------------
Total net increase (decrease) in net
assets from fund share transactions..... (6,076,756) (40,565,455) (510,008) 3,653,332
------------ ------------ ------------ ------------
Total increase (decrease) in net
assets.................................. (3,243,722) (59,224,510) 2,348,645 (6,747,186)
NET ASSETS
Beginning of period................... 131,293,796 190,518,306 56,110,151 62,857,337
------------ ------------ ------------ ------------
End of period (including undistributed
net investment income (loss) of
$857,581, $1,464,120; $1,269,754,
$1,291,867; $89,051, ($238,336);
$116,490, $127,460; $0, $0 and $0, $0,
respectively............................ $128,050,074 $131,293,796 $ 58,458,796 $ 56,110,151
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
A-38
<PAGE>
APRIL 30, 1995
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Quest for Value Funds are registered under the Investment Company Act of
1940, as diversified, open-end management investment companies. Quest for Value
Fund, Inc. ("Quest for Value") is a Maryland corporation. Opportunity Fund
("Opportunity"), Small Capitalization Fund ("Small Capitalization"), Growth and
Income Fund ("Growth and Income"), U.S. Government Income Fund ("U.S.
Government") and Investment Quality Income Fund ("Investment Quality") are five
of nine funds currently offered in the Quest for Value Family of Funds, a
Massachusetts business trust. Quest for Value Advisors (the "Adviser") serves as
investment adviser and provides accounting and administrative services to each
fund. Quest for Value Distributors (the "Distributor") serves as each fund's
distributor. Both the Advisor and Distributor are majority-owned (99%)
subsidiaries of Oppenheimer Capital.
Prior to September 1, 1993, the funds issued only one class of shares which
were redesignated Class A shares. Subsequent to that date all funds were
authorized to issue Class A, Class B and Class C shares. Shares of each Class
represent an identical interest in the investment portfolio of their respective
fund and generally have the same rights, but are offered under different sales
charges and distribution fee arrangements. Furthermore, Class B shares will
automatically convert to Class A shares of the same fund eight years after their
respective purchase.
The following is a summary of significant accounting policies consistently
followed by each fund in the preparation of its financial statements:
(A) VALUATION OF INVESTMENTS
Investment securities listed on a national securities exchange and
securities traded in the over-the-counter National Market System are valued at
the last reported sale price on the valuation date; if there are no such
reported sales, the securites are valued at the last quoted bid price. Other
securities traded over-the-counter and not part of the National Market System
are valued at the last quoted bid price. Investment debt securities (other than
short-term obligations) are valued each day by an independent pricing service
approved by the Board of Directors (Trustees) using methods which include
current market quotations from a major market maker in the securities and
trader-reviewed "matrix" prices. Futures contracts are valued based upon their
daily settlement value as of the close of the exchange upon which they trade.
OTC options are valued based upon formulas which utilize the market value of the
underlying securities, strike prices and expiration dates of the options.
Short-term debt securities having a remaining maturity of sixty days or less are
valued at amortized cost or amortized value, which approximates market value.
Any securities or other assets for which market quotations are not readily
available are valued at their fair values as determined in good faith under
procedures established by each fund's Board of Directors (Trustees). The ability
of issuers of debt securities held by the funds to meet their obligations may be
affected by economic or political development in a specific state, industry or
region.
(B) FEDERAL INCOME TAXES
It is each fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to its shareholders; accordingly, no
Federal income tax provision is required.
(C) DEFERRED ORGANIZATION EXPENSES
The following approximate costs were incurred in connection with their
organization: Growth and Income -- $96,000 and Investment Quality -- $62,000.
These costs have been deferred and are being amortized to expense on a
straight-line basis over sixty months from commencement of each fund's
operations.
(D) SECURITY TRANSACTIONS AND OTHER INCOME
Security transactions are accounted for on the trade date. In determining
the gain or loss from the sale of securities, the cost of securities sold is
determined on the basis of identified cost. Dividend income is recorded on the
ex-dividend date and interest income is accrued as earned. Discounts or premiums
on debt securities purchased are accreted or
A-39
<PAGE>
- --------------------------------------------------------------------------------
amortized to interest income over the lives of the respective securities. Net
investment income, other than class specific expenses and unrealized gains and
losses are allocated daily to each class of shares based upon the relative
proportion of net assets, as defined, of each class.
(E) DIVIDENDS AND DISTRIBUTIONS
The following table summarizes each fund's dividend and capital gain
declaration policy:
<TABLE>
<CAPTION>
SHORT-TERM LONG-TERM
INCOME CAPITAL CAPITAL
DIVIDENDS GAINS GAINS
--------- ------------ ------------
<S> <C> <C> <C>
Quest for Value annually annually annually
Opportunity annually annually annually
Small
Capitalization annually annually annually
Growth and
Income quarterly annually annually
U.S. Government daily * quarterly annually
Investment
Quality daily * annually annually
* paid monthly.
</TABLE>
Each fund records dividends and distributions to its shareholders on the
ex-dividend date. The amount of dividends and distributions from net investment
income and net realized capital gains are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. These "book-tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net realized
capital gains for financial reporting purposes but not for tax purposes are
reported as dividends in excess of net investment income or distributions in
excess of net realized capital gains, respectively. To the extent distributions
exceed current and accumulated earnings and profits for federal income tax
purposes, they are reported as distributions of paid-in-surplus or tax return of
capital. Accordingly, permanent book-tax differences relating to shareholder
distributions have been reclassified to paid-in-surplus. Net investment
income(loss), net realized gain(loss) and net assets were not affected by this
change.
(F) WRITTEN OPTIONS ACCOUNTING POLICIES
When a fund writes a call option or a put option, an amount equal to the
premium received by the fund is included in the fund's Statement of Assets and
Liabilities as an asset and an equivalent liability. The amount of the liability
is subsequently marked-to-market to reflect the current market value of the
option written. If the option expires on its stipulated expiration date or if a
fund enters into a closing purchase transaction, the fund will realize a gain
(or loss if the cost of a closing purchase tranaction exceeds the premium
received when the option was written) without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option will
be extinguished. If a call option which a fund has written is exercised, the
fund realizes a gain or loss from the sale of the underlying security and the
proceeds from such sale are increased by the premium originally received. If a
put option which a fund has written is exercised, the amount of the premium
originally received will reduce the cost of the security which the fund
purchases upon exercise of the option.
(G) FUTURES ACCOUNTING POLICIES
Futures contracts are agreements between two parties to buy and sell a
financial instrument at a set price on a future date. Upon entering into such a
contract, a fund is required to pledge to the broker an amount of cash or U.S.
Government securities equal to the minimum "initial margin" requirements of the
exchange. Pursuant to the contract, a fund agrees to receive from or pay to the
broker an amount of cash equal to the daily fluctuation in the value of the
contract. Such receipts or payments are known as "variation margin" and are
recorded by the fund as unrealized appreciation or
A-40
<PAGE>
APRIL 30, 1995
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
depreciation. When a contract is closed, the fund records a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed and reverses any unrealized
appreciation or depreciation previously recorded.
(H) REPURCHASE AGREEMENTS
U.S. Government enters into repurchase agreements as part of its investment
program. The fund's custodian takes possession of collateral pledged by the
counterparty. The collateral is marked-to-market daily to ensure that the value,
plus accrued interest, is at least equal to the repurchase price. In the event
of default by the obligor to repurchase, the fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. Under
certain circumstances, in the event of default or bankruptcy by the other party
to the agreement, realization and/or retention of the collateral or proceeds may
be subject to legal proceedings.
(I) ALLOCATION OF EXPENSES
Expenses specifically identifiable to a particular fund or class are borne
by that fund or class. Other expenses are allocated to each fund or class based
on its net assets in relation to the total net assets of all applicable funds or
classes or on another reasonable basis. For the six months ended April 30, 1995,
transfer and dividend disbursing agent fees accrued to classes A, B and C were
$129,947, $12,171 and $3,822, respectively, for Quest for Value; $75,445,
$38,525 and $7,920, respectively, for Opportunity; $68,052, $19,412 and $6,216,
respectively, for Small Capitalization; $27,244, $3,447 and $665, respectively,
for Growth and Income; $55,832, $4,401 and $2,402, respectively, for U.S.
Government and $22,873, $4,242 and $1,891, respectively, for Investment Quality
Income.
2. INVESTMENT ADVISORY FEE, ACCOUNTING SERVICES FEE, DISTRIBUTION FEE AND OTHER
TRANSACTIONS WITH AFFILIATES
(a) The investment advisory fee is payable monthly to the Adviser, and is
computed as a percentage of each fund's net assets as of the close of business
each day at the following annual rates: 1.00% for Quest for Value, Opportunity
and Small Capitalization, respectively; .85% for Growth and Income and .60% for
U.S. Government and Investment Quality, respectively. For the six months ended
April 30, 1995, the Adviser voluntarily waived $41,225 and $42,245 in investment
advisory fees for Growth and Income and Investment Quality, respectively.
(b) A portion of the accounting services fee for Opportunity, Small
Capitalization, Growth and Income, U.S. Government and Investment Quality is
payable monthly to the Adviser. These funds reimburse the Adviser for a portion
of the salaries of officers and employees of Oppenheimer Capital based upon the
amount of time such persons spend in providing services to each fund in
accordance with the provisions of the Investment Advisory Agreement. For the six
months ended April 30, 1995, the Adviser received $24,374, $26,976, $28,900,
$28,155 and $25,181, respectively.
(c) The funds have adopted a Plan and Agreement of Distribution (the
"Plan") pursuant to which each fund is permitted to compensate the Distributor
in connection with the distribution of fund shares. Under the Plan, the
Distributor has entered into agreements with securities dealers and other
financial institutions and organizations to obtain various sales-related
services in rendering distribution assistance. To compensate the Distributor for
the services it and other dealers under the Plan provide and for the expenses
they bear under the Plan, the funds pay the Distributor compensation, accrued
daily and payable monthly on each fund's average daily net assets for Class A
shares at the following annual rates: .25% for Quest for Value, Opportunity and
Small Capitalization, respectively, .05% for U.S. Government and .15% for
Investment Quality and Growth and Income, respectively. Each fund's Class A
shares also pay a service fee at the annual rate of .25%. Compensation for Class
B and Class C shares of each fund is at an annual rate of .75% of average daily
net assets. Each fund's Class B and Class C shares also pay a service fee at the
annual rate of .25%. Distribution and service fees may be paid by the
Distributor to broker dealers or others for providing personal service,
maintenance of accounts and ongoing sales or shareholder support functions in
connection with the distribution of fund shares. While payments under the plan
may not exceed the stated percentage of average daily net assets on an annual
basis, the payments are not limited to the amounts actually incurred by the
Distributor.
A-41
<PAGE>
- --------------------------------------------------------------------------------
For the six months ended April 30, 1995, distribution and service fees
charged to classes A, B and C were $582,142, $90,112 and $23,001, respectively,
for Quest for Value; $461,034, $320,958 and $58,350, respectively, for
Opportunity; $290,811, $87,657 and $22,086, respectively, for Small
Capitalization; $59,886, $16,582 and $3,024, respectively, for Growth and
Income; $173,704, $42,572 and $7,103, respectively, for for U.S. Government and
$89,054, $37,698 and $14,285, respectively, for Investment Quality Income.
(d) Total brokerage commissions paid by Quest for Value, Opportunity, Small
Capitalization and Growth and Income were $133,585, $220,756, $192,780 and
$56,481, respectively, of which Oppenheimer & Co., Inc., an affiliate of the
Adviser, received $72,545, $95,213, $87,012 and $37,521, respectively, for the
six months ended April 30, 1995.
(e) Oppenheimer & Co., Inc. has informed the funds that it received
approximately $175,000, $324,000, $122,000, $15,000, $88,000 and $39,000 in
connection with the sale of Class A shares for Quest for Value, Opportunity,
Small Capitalization, Growth and Income, U.S. Government and Investment Quality,
respectively, for the six months ended April 30, 1995.
The Distributor has informed the funds that it received contingent deferred
sales charges on the redemption of Class C shares of approximately $200, $1,800,
$700, $200, and $200 for Quest for Value, Opportunity, Small Capitalization,
U.S. Government and Investment Quality, respectively, for the six months ended
April 30, 1995.
(f) The Distributor has assigned the right to receive the compensation and
contingent deferred sales charge on the Class B shares to a bank in return for
the banks reimbursement to the Distributor of commissions paid by the
Distributor to broker/dealers on Class B shares.
3. PURCHASES AND SALES OF SECURITIES
For the six months ended April 30, 1995, purchases and sales of investment
securities, other than short-term securities, were as follows:
<TABLE>
<CAPTION>
QUEST FOR SMALL GROWTH AND U.S. INVESTMENT
VALUE OPPORTUNITY CAPITALIZATION INCOME GOVERNMENT QUALITY
----------- ----------- -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Purchases $38,600,646 $118,902,351 $ 36,306,804 $15,994,318 $220,176,718 $3,096,231
Sales 46,184,287 20,875,977 46,436,460 19,114,061 246,008,186 1,990,980
</TABLE>
The following table summarizes activity in written option transactions for
U.S. Government for the six months ended April 30, 1995:
<TABLE>
<CAPTION>
CONTRACTS PREMIUMS
---------- ------------
<S> <C> <C>
Option contracts written: Outstanding beginning of period 2 $ 142,188
Options written 34 2,465,702
Options terminated in closing purchase transaction (20) (1,501,640)
Options exercised (7) (503,125)
Options expired (4) (301,563)
--
------------
Option contracts written: Outstanding end of period 5 $ 301,562
--
--
------------
------------
</TABLE>
A-42
<PAGE>
APRIL 30, 1995
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
4. FUND SHARE TRANSACTIONS
The following tables summarize the fund share activity for the six months
ended April 30, 1995 and the year ended October 31, 1994:
<TABLE>
<CAPTION>
QUEST FOR VALUE OPPORTUNITY SMALL
CAPITALIZATION
---------------------------- ---------------------------- ----------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED
YEAR ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30,
OCTOBER 31,
1995* 1994 1995* 1994 1995* 1994
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
<C>
CLASS A
Issued.................... 1,887,076 5,077,999 3,177,603 4,781,210 1,168,097 7,804,081
Dividends and
distributions
reinvested............... 1,440,961 797,941 328,864 186,714 181,647 450,409
Redeemed.................. (2,476,129) (6,566,112) (928,610) (3,470,990) (1,357,550) (6,835,042)
------------ ------------ ------------ ------------ ------------ ------------
Net increase
(decrease)............. 851,908 (690,172) 2,577,857 1,496,934 (7,806) 1,419,448
------------ ------------ ------------ ------------ ------------ ------------
CLASS B
Issued.................... 740,489 1,020,362 2,702,721 2,145,988 308,792 936,328
Dividends and
distributions
reinvested............... 94,418 10,514 98,923 6,821 26,272 9,286
Redeemed.................. (100,601) (44,566) (174,841) (54,500) (103,762) (50,575)
------------ ------------ ------------ ------------ ------------ ------------
Net increase............ 734,306 986,310 2,626,803 2,098,309 231,302 895,039
------------ ------------ ------------ ------------ ------------ ------------
CLASS C
Issued.................... 231,783 289,679 600,865 367,367 166,967 205,454
Dividends and
distributions
reinvested............... 25,381 1,106 17,240 1,789 5,721 1,176
Redeemed.................. (38,705) (22,509) (40,221) (13,680) (23,965) (13,923)
------------ ------------ ------------ ------------ ------------ ------------
Net increase............ 218,459 268,276 577,884 355,476 148,723 192,707
------------ ------------ ------------ ------------ ------------ ------------
Total net increase.... 1,804,673 564,414 5,782,544 3,950,719 372,219 2,507,194
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
GROWTH AND INCOME U.S. GOVERNMENT
INVESTMENT QUALITY
---------------------------- ---------------------------- ----------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED
YEAR ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30,
OCTOBER 31,
1995* 1994 1995* 1994 1995* 1994
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
<C>
CLASS A
Issued.................... 240,232 591,037 764,507 1,484,549 347,221 1,194,443
Dividends and
distributions
reinvested............... 186,609 506,743 286,809 839,276 116,979 263,168
Redeemed.................. (266,050) (600,435) (1,972,889) (6,552,668) (815,458) (1,940,417)
------------ ------------ ------------ ------------ ------------ ------------
Net increase
(decrease)............. 160,791 497,345 (921,573) (4,228,843) (351,258) (482,806)
------------ ------------ ------------ ------------ ------------ ------------
CLASS B
Issued.................... 121,157 269,571 350,917 594,901 294,053 614,495
Dividends and
distributions
reinvested............... 18,473 19,104 15,011 16,698 20,468 18,150
Redeemed.................. (19,727) (26,407) (67,374) (86,599) (85,574) (77,488)
------------ ------------ ------------ ------------ ------------ ------------
Net increase............ 119,903 262,268 298,554 525,000 228,947 555,157
------------ ------------ ------------ ------------ ------------ ------------
CLASS C
Issued.................... 40,779 33,894 61,226 123,553 58,013 290,357
Dividends and
distributions
reinvested............... 3,054 2,697 3,354 4,123 4,105 9,047
Redeemed.................. (2,092) (469) (8,544) (25,877) (4,928) (41,081)
------------ ------------ ------------ ------------ ------------ ------------
Net increase............ 41,741 36,122 56,036 101,799 57,190 258,323
------------ ------------ ------------ ------------ ------------ ------------
Total net increase
(decrease)........... 322,435 795,735 (566,983) (3,602,044) (65,121) 330,674
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
<FN>
*Unaudited.
</TABLE>
A-43
<PAGE>
- --------------------------------------------------------------------------------
5. UNREALIZED APPRECIATION (DEPRECIATION) AND COST OF INVESTMENTS FOR FEDERAL
INCOME TAX PURPOSES
At April 30, 1995, the composition of unrealized appreciation (depreciation)
of investment securities and the cost of investments for Federal income tax
purposes were as follows:
<TABLE>
<CAPTION>
APPRECIATION (DEPRECIATION) NET TAX COST
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Quest for Value $51,733,096 $ (1,752,244) $ 49,980,852 $ 231,903,854
Opportunity 49,286,577 (1,812,363) 47,474,214 306,602,498
Small Capitalization 10,004,767 (7,766,524) 2,238,243 138,815,958
Growth and Income 2,889,041 (1,284,031) 1,605,010 37,028,918
U.S. Government 966,818 (8,766,967) (7,800,149) 144,810,919
Investment Quality 1,588,495 (2,012,166) (423,671) 57,332,480
</TABLE>
6. AUTHORIZED FUND SHARES AND PAR VALUE PER SHARE
<TABLE>
<CAPTION>
QUEST SMALL GROWTH U.S. INVESTMENT
FOR VALUE OPPORTUNITY CAPITALIZATION AND INCOME
GOVERNMENT QUALITY
----------- ------------ --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Authorized fund shares 35,000,000 unlimited unlimited unlimited unlimited unlimited
Par value per share $1.00 $.01 $.01 $.01 $.01 $.01
</TABLE>
7. DIVIDENDS AND DISTRIBUTIONS
The following tables summarize the per share dividends and distributions
made for the six months ended April 30, 1995 and the year ended October 31,
1994:
<TABLE>
<CAPTION>
QUEST FOR VALUE OPPORTUNITY SMALL CAPITALIZATION
------------------------- ------------------------- -------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR
ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER
31,
1995* 1994 1995* 1994 1995* 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Class A................... $ 0.083 $ 0.040 $ 0.117 $ 0.326 -- --
Class B................... 0.074 0.031 0.117 0.313 -- --
Class C................... 0.081 0.033 0.117 0.312 -- --
NET REALIZED GAINS:
Class A................... $ 0.828 $ 0.469 $ 0.614 $ 0.219 $ 0.415 $ 1.331
Class B................... 0.828 0.469 0.614 0.219 0.415 1.331
Class C................... 0.828 0.469 0.614 0.219 0.415 1.331
</TABLE>
<TABLE>
<CAPTION>
GROWTH AND INCOME U.S. GOVERNMENT INVESTMENT
QUALITY
------------------------- ------------------------- -------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR
ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER
31,
1995* 1994 1995* 1994 1995* 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Class A................... $ 0.182 $ 0.319 $ 0.322 $ 0.593 $ 0.362 $ 0.680
Class B................... 0.162 0.265 0.284 0.510 0.332 0.609
Class C................... 0.142 0.261 0.279 0.509 0.329 0.608
NET REALIZED GAINS:
Class A................... $ 0.422 $ 1.669 $ 0.013 $ 0.213 -- $ 0.069
Class B................... 0.422 1.669 0.013 0.213 -- 0.069
Class C................... 0.422 1.669 0.013 0.213 -- 0.069
<FN>
*Unaudited.
</TABLE>
8. FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS
At April 30, 1995, U.S. Government had written options outstanding. Written
options have elements of risk in excess of the amounts reflected in the
Statement of Assets and Liabilities. The fund, as a writer of an option, has no
control over whether the option is exercised. The underlying security may be
sold and, as a result, the fund bears the market risk of an unfavorable change
in the price of the security underlying the written option.
A-44
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
----------------------------------- ---------------------------------------
Net Distributions
Realized Dividends to
and to Shareholders Net
Net Asset Net Unrealized Shareholders from Net Total Asset
Value, Investment Gain Total from from Net Realized Dividends Value,
Beginning Income (Loss) on Investment Investment Gain on and End of
Total
of Period (Loss) Investments Operations Income Investments Distributions Period
Return*
Quest for Value Fund, Inc.
<S> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
Class A,
SIX MONTHS ENDED
APRIL 30, 1995
(6) $12.59 $ 0.06 $ 1.00 $ 1.06 $(0.08) $(0.83) $(0.91) $12.74
9.52%
YEAR ENDED
OCTOBER 31,
1994 12.51 0.09 0.50 0.59 (0.04) (0.47) (0.51) 12.59 5.01%
1993 11.71 0.05 1.34 1.39 (0.05) (0.54) (0.59) 12.51 12.27%
1992 10.61 0.04 1.77 1.81 (0.07) (0.64) (0.71) 11.71 18.45%
1991 7.84 0.09 2.84 2.93 (0.16) -- (0.16) 10.61 37.94%
1990 (2) 9.85 0.18 (1.38) (1.20) (0.26) (0.55) (0.81) 7.84 (13.43%)
Class B,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 12.53 0.03 0.99 1.02 (0.07) (0.83) (0.90) 12.65 9.23%
YEAR ENDED
OCTOBER 31, 1994 12.51 0.02 0.50 0.52 (0.03) (0.47) (0.50) 12.53
4.43%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 12.66(3) (0.01) (0.14) (0.15) -- -- -- 12.51 (1.19%)
Class C,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 12.52 0.03 1.00 1.03 (0.08) (0.83) (0.91) 12.64 9.31%
YEAR ENDED
OCTOBER 31, 1994 12.50 0.01 0.51 0.52 (0.03) (0.47) (0.50) 12.52
4.45%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 12.66(3) (0.01) (0.15) (0.16) -- -- -- 12.50 (1.26%)
<CAPTION>
RATIOS
----------------------------------------------
Ratio of Net
Net Ratio of Net Investment
Assets Operating Income
End of Expenses to (Loss) to Portfolio
Period Average Net Average Net Turnover
(000's) Assets Assets Rate
Quest for Value Fund, Inc.
<S> <C> <C> <C> <C>
Class A,
SIX MONTHS ENDED
APRIL 30, 1995
(6) $ 251,821 1.69%(1,5) 0.97%(1,5) 17%
YEAR ENDED
OCTOBER 31,
1994 238,085 1.71% 0.72% 49%
1993 245,320 1.75% 0.40% 27%
1992 142,939 1.75% 0.53% 41%
1991 79,914 1.83% 1.06% 48%
1990 (2) 49,740 1.82% 1.71% 51%
Class B,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 23,805 2.21%(1,5) 0.45%(1,5) 17%
YEAR ENDED
OCTOBER 31, 1994 14,373 2.24% 0.14% 49%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 2,015 2.27%(5) (1.19%)(5) 27%
Class C,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 6,375 2.24%(1,5) 0.43%(1,5) 17%
YEAR ENDED
OCTOBER 31, 1994 3,581 2.28% 0.09% 49%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 221 2.27%(5) (0.90%)(5) 27%
<FN>
(1) AVERAGE NET ASSETS FOR THE SIX MONTHS ENDED APRIL 30, 1995, FOR CLASSES A,
B, AND C WERE $234,786,678, $18,171,756, $4,638,234, RESPECTIVELY.
(2) SHARE AND PER SHARE DATA HAVE BEEN RETROACTIVELY RESTATED TO REFLECT A 200%
STOCK DIVIDEND AS OF JULY 1, 1991.
</TABLE>
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
----------------------------------- DIVIDENDS AND DISTRIBUTIONS
Net ---------------------------------------
Realized Distributions
and Dividends to
Unreal- to Shareholders Net
Net Asset Net In- ized Gain Shareholders from Net Asset
Value, Be- vestment (Loss) on Total from from Net Realized Total Divi- Value,
Total
ginning of Income In- Investment Investment Gain on dends and End of
Re-
Period (Loss) vestments Operations Income Investments Distributions Period
turn*
Opportunity Fund
<S> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
Class A,
SIX MONTHS
ENDED APRIL 30,
1995 (6) $19.69 $ 0.12 $ 2.25 $ 2.37 $(0.12) $(0.61) $(0.73) $ 21.33
12.66%
YEAR ENDED
OCTOBER 31,
1994 18.71 0.18 1.35 1.53 (0.33) (0.22) (0.55) 19.69 8.41%
1993 16.73 0.35 2.02 2.37 (0.07) (0.32) (0.39) 18.71
14.34%
1992 14.29 0.09 2.93 3.02 (0.03) (0.55) (0.58) 16.73
21.93%
1991 9.74 0.03 4.78 4.81 (0.23) (0.03) (0.26) 14.29 50.44%
1990 11.59 0.25 (1.64) (1.39) (0.22) (0.24) (0.46) 9.74
(12.62%)
Class B,
SIX MONTHS
ENDED APRIL 30,
1995 (6) 19.59 0.07 2.23 2.30 (0.12) (0.61) (0.73) 21.16
12.36%
YEAR ENDED
OCTOBER 31,
1994 18.70 0.08 1.34 1.42 (0.31) (0.22) (0.53) 19.59 7.84%
SEPTEMBER 2,
1993 (4) TO
OCTOBER 31,
1993 18.73(3) 0.02 (0.05) (0.03) -- -- -- 18.70 (0.16%)
Class C,
SIX MONTHS
ENDED APRIL 30,
1995 (6) 19.58 0.07 2.23 2.30 (0.12) (0.61) (0.73) 21.15
12.37%
YEAR ENDED
OCTOBER 31,
1994 18.70 0.08 1.33 1.41 (0.31) (0.22) (0.53) 19.58 7.78%
SEPTEMBER 2,
1993 (4) TO
OCTOBER 31,
1993 18.73(3) 0.02 (0.05) (0.03) -- -- -- 18.70 (0.16%)
<CAPTION>
RATIOS
-------------------------------------------
Ratio of
Ratio of Net
Net Net Investment
Assets Operating Income
End of Expenses to (Loss) to Portfolio
Period Average Net Average Net Turnover
Opportunity Fund (000's) Assets Assets Rate
<S> <C> <C> <C> <C>
Class A,
SIX MONTHS
ENDED APRIL 30,
1995 (6) $ 231,881 1.71%(1,5) 1.25%(1,5) 10%
YEAR ENDED
OCTOBER 31,
1994 163,340 1.78% 0.96% 42%
1993 127,225 1.83% 2.69% 24%
1992 40,563 2.27% 0.72% 32%
1991 8,446 2.35%(2) 0.30%(2) 88%
1990 4,570 2.00%(2) 2.30%(2) 206%
Class B,
SIX MONTHS
ENDED APRIL 30,
1995 (6) 102,353 2.24%(1,5) 0.75%(1,5) 10%
YEAR ENDED
OCTOBER 31,
1994 43,317 2.34% 0.43% 42%
SEPTEMBER 2,
1993 (4) TO
OCTOBER 31,
1993 2,115 2.52%(5) 1.32%(5) 24%
Class C,
SIX MONTHS
ENDED APRIL 30,
1995 (6) 20,091 2.26%(1,5) 0.73%(1,5) 10%
YEAR ENDED
OCTOBER 31,
1994 7,289 2.35% 0.43% 42%
SEPTEMBER 2,
1993 (4) TO
OCTOBER 31,
1993 313 2.52%(5) 1.13%(5) 24%
<FN>
(1) AVERAGE NET ASSETS FOR THE SIX MONTHS ENDED APRIL 30, 1995, FOR CLASSES A,
B, AND C WERE $185,941,734, $64,723,666, $11,766,750, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED ITS FEES
AND REIMBURSED THE FUND FOR A PORTION OF ITS OPERATING EXPENSES. IF SUCH
WAIVERS AND REIMBURSEMENTS HAD NOT BEEN IN EFFECT, THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME (LOSS) TO AVERAGE NET ASSETS WOULD HAVE BEEN 3.33% AND (0.68%),
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1991 AND 3.69% AND 0.61%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1990.
- ------------------------------
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
(6) UNAUDITED.
* ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT
REFLECT DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL
RETURN IS SHOWN FOR ANY PERIOD SHORTER THAN ONE YEAR.
</TABLE>
A-45
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
----------------------------------- ---------------------------------------
Net Distributions
Realized to
and Dividends Shareholders
Unrealized to from Net Net
Net Asset Net Gain Shareholders Realized Total Asset
Value, Investment (Loss) Total from from Net Gain Dividends Value,
Beginning Income on Investment Investment on and End of Total
of Period (Loss) Investments Operations Income Investments Distributions Period
Return*
Small Capitalization Fund
<S> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
Class A,
SIX MONTHS ENDED
APRIL 30, 1995
(6) $16.33 $ 0.05 $ 0.22 $ 0.27 $-- $(0.42) $(0.42) $16.18 1.71%
YEAR ENDED
OCTOBER 31,
1994 17.68 (0.03) 0.01 (0.02) -- (1.33) (1.33) 16.33 0.04%
1993 14.60 (0.04) 4.26 4.22 -- (1.14) (1.14) 17.68 30.21%
1992 13.52 0.00 1.50 1.50 -- (0.42) (0.42) 14.60 11.60%
1991 8.80 (0.05) 4.85 4.80 (0.08) -- (0.08) 13.52 55.01%
1990 10.91 0.07 (2.04) (1.97) (0.08) (0.06) (0.14) 8.80 (18.33%)
Class B,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 16.24 (0.01) 0.22 0.21 -- (0.42) (0.42) 16.03 1.35%
YEAR ENDED
OCTOBER 31, 1994 17.66 (0.11) 0.02 (0.09) -- (1.33) (1.33) 16.24
(0.39%)
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 17.19(3) (0.02) 0.49 0.47 -- -- -- 17.66 2.73%
Class C,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 16.23 0.00 0.22 0.22 -- (0.42) (0.42) 16.03 1.41%
YEAR ENDED
OCTOBER 31, 1994 17.67 (0.13) 0.02 (0.11) -- (1.33) (1.33) 16.23
(0.51%)
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 17.19(3) (0.02) 0.50 0.48 -- -- -- 17.67 2.79%
<CAPTION>
RATIOS
----------------------------------------------
Ratio of Net
Net Ratio of Net Investment
Assets Operating Income
End of Expenses (Loss) Portfolio
Period to Average to Average Turnover
(000's) Net Assets Net Assets Rate
Small Capitalization Fund
<S> <C> <C> <C> <C>
Class A,
SIX MONTHS ENDED
APRIL 30, 1995
(6) $ 118,909 1.80%(1,5) 0.56%(1,5) 29%
YEAR ENDED
OCTOBER 31,
1994 120,102 1.88% (0.14%) 67%
1993 104,898 1.89% (0.36%) 74%
1992 39,693 2.11% (0.04%) 95%
1991 20,686 2.25%(2) (0.41%)(2) 103%
1990 1,880 2.00%(2) 0.71%(2) 18%
Class B,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 19,564 2.37%(1,5) (0.01%)(1,5) 29%
YEAR ENDED
OCTOBER 31, 1994 16,144 2.48% (0.70%) 67%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 1,754 2.57%(5) (1.15%)(5) 74%
Class C,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 5,670 2.35%(1,5) (0.01%)(1,5) 29%
YEAR ENDED
OCTOBER 31, 1994 3,344 2.59% (0.81%) 67%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 235 2.57%(5) (1.20%)(5) 74%
<FN>
(1) AVERAGE NET ASSETS FOR THE SIX MONTHS ENDED APRIL 30, 1995, FOR CLASSES A,
B, AND C WERE $117,288,229, $17,676,777, $4,453,700, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED ITS FEES
AND REIMBURSED THE FUND FOR A PORTION OF ITS OPERATING EXPENSES. IF SUCH
WAIVERS AND REIMBURSEMENTS HAD NOT BEEN IN EFFECT, THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME (LOSS) TO AVERAGE NET ASSETS WOULD HAVE BEEN 3.27% AND (1.43%),
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1991 AND 5.82% AND (3.11%),
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1990.
</TABLE>
Growth and Income Fund
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
----------------------------------- ---------------------------------------
Net Distributions
Realized to
and Dividends Shareholders
Unrealized to from Net Net
Net Asset Net Gain Shareholders Realized Total Asset
Value, Investment (Loss) Total from from Net Gain Dividends Value,
Beginning Income on Investment Investment on and End of Total
of Period (Loss) Investments Operations Income Investments Distributions Period
Return*
Growth and Income Fund
<S> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
Class A,
SIX MONTHS ENDED
APRIL 30, 1995
(6) $10.09 $ 0.18 $ 0.67 $ 0.85 $(0.18) $(0.42) $(0.60) $10.34
9.11%
YEAR ENDED
OCTOBER 31,
1994 11.24 0.32 0.55 0.87 (0.32) (1.70) (2.02) 10.09 8.64%
1993 10.80 0.30 0.73 1.03 (0.26) (0.33) (0.59) 11.24 9.93%
NOVEMBER 4, 1991
(7) TO OCTOBER
31, 1992 10.00(3) 0.28 0.80 1.08 (0.28) -- (0.28) 10.80 10.84%
Class B,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 10.07 0.16 0.66 0.82 (0.16) (0.42) (0.58) 10.31 8.79%
YEAR ENDED
OCTOBER 31, 1994 11.23 0.25 0.56 0.81 (0.27) (1.70) (1.97) 10.07
7.96%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 11.21(3) 0.04 0.05 0.09 (0.07) -- (0.07) 11.23 0.81%
Class C,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 10.07 0.14 0.67 0.81 (0.14) (0.42) (0.56) 10.32 8.67%
YEAR ENDED
OCTOBER 31, 1994 11.23 0.24 0.56 0.80 (0.26) (1.70) (1.96) 10.07
7.91%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 11.21(3) 0.04 0.05 0.09 (0.07) -- (0.07) 11.23 0.81%
<CAPTION>
RATIOS
----------------------------------------------
Ratio of Net
Net Ratio of Net Investment
Assets Operating Income
End of Expenses (Loss) Portfolio
Period to Average to Average Turnover
(000's) Net Assets Net Assets Rate
Growth and Income Fund
<S> <C> <C> <C> <C>
Class A,
SIX MONTHS ENDED
APRIL 30, 1995
(6) $ 32,969 1.92%(1,2,5) 3.78%(1,2,5) 63%
YEAR ENDED
OCTOBER 31,
1994 30,576 1.86%(2) 3.16%(2) 113%
1993 28,466 1.90%(2) 2.66%(2) 192%
NOVEMBER 4, 1991
(7) TO OCTOBER
31, 1992 8,057 2.23%(2,5) 2.73%(2,5) 77%
Class B,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 4,231 2.49%(1,2,5) 3.25%(1,2,5) 63%
YEAR ENDED
OCTOBER 31, 1994 2,928 2.47%(2) 2.53%(2) 113%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 319 2.49%(2,5) 1.83%(2,5) 192%
Class C,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 897 2.77%(1,2,5) 3.00%(1,2,5) 63%
YEAR ENDED
OCTOBER 31, 1994 455 2.62%(2) 2.39%(2) 113%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 102 2.49%(2,5) 2.18%(2,5) 192%
<FN>
(1) AVERAGE NET ASSETS FOR THE SIX MONTHS ENDED APRIL 30, 1995, FOR CLASSES A,
B, AND C WERE $30,191,320, $3,343,785, $609,761, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED A
PORTION OF ITS FEES. IF SUCH WAIVER HAD NOT BEEN IN EFFECT, THE RATIOS OF
NET OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET
INVESTMENT INCOME TO AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN 2.17%
AND 3.53%, ANNUALIZED, RESPECTIVELY, FOR THE SIX MONTHS ENDED APRIL 30,
1995, 2.32% AND 2.70%, RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1994
AND 2.18% AND 2.38%, RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993 AND
2.98% AND 1.98%, ANNUALIZED, RESPECTIVELY, FOR THE PERIOD NOVEMBER 4, 1991
(COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1992. THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 2.73% AND 3.01%, ANNUALIZED,
RESPECTIVELY, FOR CLASS B AND 3.00% AND 2.77%, ANNUALIZED, RESPECTIVELY,
FOR CLASS C, FOR THE SIX MONTHS ENDED APRIL 30, 1995, 2.93% AND 2.07%,
RESPECTIVELY, FOR CLASS B AND 3.10% AND 1.91%, RESPECTIVELY, FOR CLASS C,
FOR THE YEAR ENDED OCTOBER 31, 1994 AND 2.88% AND 1.44%, ANNUALIZED,
RESPECTIVELY, FOR CLASS B AND 2.87% AND 1.80%, ANNUALIZED, RESPECTIVELY,
FOR CLASS C, FOR THE PERIOD SEPTEMBER 2, 1993 (INITIAL OFFERING) TO OCTOBER
31, 1993.
- ------------------------------
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
(6) UNAUDITED.
(7) COMMENCEMENT OF OPERATIONS.
* ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT
REFLECT DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL
RETURN IS SHOWN FOR ANY PERIOD SHORTER THAN ONE YEAR.
</TABLE>
A-46
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
----------------------------------- ---------------------------------------
Net Distributions
Realized Dividends to
and to Shareholders Net
Net Asset Net Unrealized Shareholders from Net Total Asset
Value, Investment Gain Total from from Net Realized Dividends Value,
Beginning Income (Loss) on Investment Investment Gain on and End of
Total
of Period (Loss) Investments Operations Income Investments Distributions Period
Return*
U.S. Government Income F und
<S> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
Class A,
SIX MONTHS ENDED
APRIL 30, 1995
(6) $10.79 $ 0.32 $ 0.26 $ 0.58 $(0.32) $(0.01) $(0.33) $11.04
5.50%
YEAR ENDED
OCTOBER 31,
1994 12.08 0.59 (1.08) (0.49) (0.59) (0.21) (0.80) 10.79 (4.15%)
1993 11.92 0.65 0.35 1.00 (0.68) (0.16) (0.84) 12.08 8.55%
1992 11.80 0.74 0.18 0.92 (0.74) (0.06) (0.80) 11.92 7.98%
1991 11.35 0.85 0.61 1.46 (0.86) (0.15) (1.01) 11.80 13.40%
1990 11.50 0.93 (0.06) 0.87 (0.93) (0.09) (1.02) 11.35 7.98%
Class B,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 10.79 0.28 0.26 0.54 (0.28) (0.01) (0.29) 11.04 5.14%
YEAR ENDED
OCTOBER 31, 1994 12.08 0.51 (1.08) (0.57) (0.51) (0.21) (0.72) 10.79
(4.84%)
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 12.13(3) 0.08 (0.04) 0.04 (0.08) (0.01) (0.09) 12.08 0.29%
Class C,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 10.79 0.28 0.26 0.54 (0.28) (0.01) (0.29) 11.04 5.09%
YEAR ENDED
OCTOBER 31, 1994 12.08 0.51 (1.08) (0.57) (0.51) (0.21) (0.72) 10.79
(4.84%)
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 12.13(3) 0.08 (0.04) 0.04 (0.08) (0.01) (0.09) 12.08 0.34%
<CAPTION>
RATIOS
----------------------------------------------
Ratio of Net
Net Ratio of Net Investment
Assets Operating Income
End of Expenses (Loss) Portfolio
Period to Average to Average Turnover
(000's) Net Assets Net Assets Rate
U.S. Government Income Fund
<S> <C> <C> <C> <C>
Class A,
SIX MONTHS ENDED
APRIL 30, 1995
(6) $ 115,898 1.27%(1,5) 5.99%(1,5) 205%
YEAR ENDED
OCTOBER 31,
1994 123,257 1.20%(2) 5.19%(2) 126%
1993 189,091 1.15%(2) 5.33%(2) 315%
1992 151,197 1.15%(2) 6.26%(2) 207%
1991 82,400 1.15%(2) 7.24%(2) 309%
1990 52,742 1.15%(2) 8.21%(2) 101%
Class B,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 10,280 1.93%(1) 5.18%(1) 205%
YEAR ENDED
OCTOBER 31, 1994 6,813 1.92%(2) 4.53%(2) 126%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 1,286 1.85%(2,5) 3.07%(2,5) 315%
Class C,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 1,872 2.05%(1) 5.14%(1) 205%
YEAR ENDED
OCTOBER 31, 1994 1,224 1.94%(2) 4.57%(2) 126%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 141 1.85%(2,5) 3.89%(2,5) 315%
<FN>
(1) AVERAGE NET ASSETS FOR THE SIX MONTHS ENDED APRIL 30, 1995, FOR CLASSES A,
B, AND C WERE $116,762,622, $8,585,009, $1,432,342, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED A
PORTION OF ITS FEES. IF SUCH WAIVERS HAD NOT BEEN IN EFFECT, THE RATIOS OF
NET OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET
INVESTMENT INCOME TO AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN 1.23%
AND 5.16%, RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1994, 1.20% AND
5.28%, RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993, 1.17% AND 6.24%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1992, 1.46% AND 6.93%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1991 AND 1.44% AND 7.92%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1990. THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 1.93% AND 4.52%, RESPECTIVELY,
FOR CLASS B AND 1.95% AND 4.56%, RESPECTIVELY, FOR CLASS C, FOR THE YEAR
ENDED OCTOBER 31, 1994 AND 1.96% AND 2.96%, ANNUALIZED, RESPECTIVELY, FOR
CLASS B AND 1.96% AND 3.78%, ANNUALIZED, RESPECTIVELY, FOR CLASS C, FOR THE
PERIOD SEPTEMBER 2, 1993 (INITIAL OFFERING) TO OCTOBER 31, 1993.
</TABLE>
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
----------------------------------- ---------------------------------------
Net Distributions
Realized Dividends to
and to Shareholders Net
Net Asset Net Unrealized Shareholders from Net Total Asset
Value, Investment Gain Total from from Net Realized Dividends Value,
Beginning Income (Loss) on Investment Investment Gain on and End of
Total
of Period (Loss) Investments Operations Income Investments Distributions Period
Return*
<S> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
Investment Quality Income Fund
Class A,
SIX MONTHS ENDED
APRIL 30, 1995
(6) $ 9.67 $ 0.36 $ 0.52 $ 0.88 $(0.36) $-- $(0.36) $10.19 9.28%
YEAR ENDED
OCTOBER 31,
1994 11.49 0.68 (1.75) (1.07) (0.68) (0.07) (0.75) 9.67 (9.61%)
1993 10.36 0.68 1.19 1.87 (0.68) (0.06) (0.74) 11.49 18.64%
1992 10.06 0.80 0.30 1.10 (0.80) -- (0.80) 10.36 11.21%
DECEMBER 18, 1990
(7) TO OCTOBER
31, 1991 10.00(3) 0.71 0.06 0.77 (0.71) -- (0.71) 10.06 8.11%
Class B,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 9.67 0.33 0.52 0.85 (0.33) -- (0.33) 10.19 8.96%
YEAR ENDED
OCTOBER 31, 1994 11.49 0.61 (1.75) (1.14) (0.61) (0.07) (0.68) 9.67
(10.22%)
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 11.52(3) 0.08 (0.03) 0.05 (0.08) -- (0.08) 11.49 0.45%
Class C,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 9.67 0.33 0.52 0.85 (0.33) -- (0.33) 10.19 8.92%
YEAR ENDED
OCTOBER 31, 1994 11.49 0.61 (1.75) (1.14) (0.61) (0.07) (0.68) 9.67
(10.23%)
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 11.52(3) 0.09 (0.03) 0.06 (0.09) -- (0.09) 11.49 0.55%
<CAPTION>
RATIOS
----------------------------------------------
Ratio of Net
Net Ratio of Net Investment
Assets Operating Income
End of Expenses (Loss) Portfolio
Period to Average to Average Turnover
(000's) Net Assets Net Assets Rate
<S> <C> <C> <C> <C>
Investment Quality Income Fund
Class A,
SIX MONTHS ENDED
APRIL 30, 1995
(6) $ 45,860 1.41%(1,2,5) 7.41%(1,2,5) 4%
YEAR ENDED
OCTOBER 31,
1994 46,922 1.29%(2) 6.47%(2) 33%
1993 61,288 1.20%(2) 6.07%(2) 12%
1992 29,701 0.95%(2) 7.62%(2) 18%
DECEMBER 18, 1990
(7) TO OCTOBER
31, 1991 17,235 0.82%(2,5) 8.25%(2,5) 19%
Class B,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 9,293 2.01%(1,2,5) 6.71%(1,2,5) 4%
YEAR ENDED
OCTOBER 31, 1994 6,605 1.92%(2) 5.85%(2) 33%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 1,468 1.84%(2,5) 3.68%(2,5) 12%
Class C,
SIX MONTHS ENDED
APRIL 30, 1995
(6) 3,306 2.07%(1,2,5) 6.70%(1,2,5) 4%
YEAR ENDED
OCTOBER 31, 1994 2,583 1.90%(2) 6.01%(2) 33%
SEPTEMBER 2, 1993
(4) TO OCTOBER
31, 1993 101 1.84%(2,5) 4.83%(2,5) 12%
<FN>
(1) AVERAGE NET ASSETS FOR THE SIX MONTHS ENDED APRIL 30, 1995, FOR CLASSES A,
B, AND C WERE $44,895,780, $7,602,107, $2,880,817, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED ALL OR A
PORTION OF ITS FEES AND REIMBURSED THE FUND FOR A PORTION OF ITS OPERATING
EXPENSES. IF SUCH WAIVERS AND REIMBURSEMENTS HAD NOT BEEN IN EFFECT, THE
RATIOS OF NET OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF
NET INVESTMENT INCOME TO AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN
1.26% AND 7.56%, ANNUALIZED, RESPECTIVELY, FOR THE SIX MONTHS ENDED APRIL
30, 1995, 1.59% AND 6.17%, RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31,
1994, 1.50% AND 5.77%, RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993,
1.72% AND 6.85%, RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1992, AND
2.11% AND 6.96%, ANNUALIZED, RESPECTIVELY, FOR THE PERIOD DECEMBER 18, 1990
(COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1991. THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 1.86% AND 6.86%, ANNUALIZED,
RESPECTIVELY, FOR CLASS B AND 1.92% AND 6.85%, ANNUALIZED, RESPECTIVELY FOR
CLASS C, FOR THE SIX MONTHS ENDED APRIL 30, 1995, 2.23% AND 5.54%,
RESPECTIVELY, FOR CLASS B AND 2.21% AND 5.70%, RESPECTIVELY, FOR CLASS C,
FOR THE YEAR ENDED OCTOBER 31, 1994 AND 2.07% AND 3.45%, ANNUALIZED,
RESPECTIVELY, FOR CLASS B AND 2.06% AND 4.61%, ANNUALIZED, RESPECTIVELY,
FOR CLASS C FOR THE PERIOD SEPTEMBER 2, 1993 (INITIAL OFFERING) TO OCTOBER
31, 1993.
- ------------------------------
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
(6) UNAUDITED.
(7) COMMENCEMENT OF OPERATIONS.
* ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT
REFLECT DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL
RETURN IS SHOWN FOR ANY PERIOD SHORTER THAN ONE YEAR.
</TABLE>
A-47
<PAGE>
Oppenheimer Quest Value Fund, Inc.
Two World Trade Center
New York, NY 10048-0203
1-800-525-7048
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Sub-Adviser
OpCap Advisors
One World Financial Center
New York, New York 10281
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
State Street Bank and Trust Company
P.O. Box 8505
Boston, Massachusetts 02266-8505
Independent Auditors
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, broker, salesperson or any other person has been authorized to
give any information or to make any representations other than those
contained in this Prospectus or the Additional Statement, and if given or
made, such information and representations must not be relied upon as
having been authorized by the Fund, Oppenheimer Management Corporation,
Oppenheimer Funds Distributor, Inc. or any affiliate thereof. This
Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any state to any
person to whom it is unlawful to make such an offer in such state.
